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In a landmark decision, the Dubai Court of First Instance has made a significant ruling on the payment of salaries in cryptocurrency. This ruling as reported by Lexology , made in 2024, marks a pivotal shift in the UAE's judicial approach to digital currencies in employment contracts. It sets a new precedent by recognizing the validity of cryptocurrency as a form of remuneration, a notable departure from previous judgments.
The case in question involved a plaintiff employee who filed a lawsuit for unpaid wages and wrongful termination. The employment contract stipulated a monthly salary in fiat currency and an additional 5,250 EcoWatt tokens, a form of cryptocurrency. The dispute arose when the defendant failed to pay the EcoWatt token portion of the salary for six months, along with allegations of wrongful termination. The court's decision to uphold the payment in cryptocurrency underscores a significant evolution in the UAE’s approach to digital currencies in employment agreements.
In a similar case from 2023, the court had taken a more cautious approach. The previous ruling (Judgment No. 6947 of 2023) involved an employment dispute where part of the employee’s remuneration was to be paid in EcoWatt tokens. Despite acknowledging the inclusion of tokens in the contract, the court refused to award the amount in EcoWatt tokens due to the employee’s failure to provide a clear valuation of the digital currency. This traditional stance reflected a requirement for concrete evidence of financial obligations, particularly when dealing with unconventional payment methods like cryptocurrencies.
The 2023 judgment emphasized: “It is established according to the Court of Cassation that determining the employment relationship, its start, duration, and the resulting effects falls under the authority of the trial court. As the claimant did not provide evidence of the value of the digital currency, the court disregards it.”
In a notable shift, the 2024 ruling demonstrated the Dubai Court’s progressive stance on cryptocurrency. This time, the court ruled in favor of the employee, not only recognizing the validity of cryptocurrency as a form of payment but also mandating that the payment be made in EcoWatt tokens. The court’s decision was based on the principle that wages are a right of the employee for the agreed work, regardless of the currency used.
The court noted: “Regarding the request for the monthly salary, it is established according to Article 912 of the Civil Transactions Law that wages are a right of the worker against the employer. The employer must pay wages on due dates, and if not, the court shall determine it. As the respondent did not provide evidence of payment in EcoWatt tokens, the court orders the respondent to pay the claimant the value of her wages in EcoWatt tokens.”
This ruling marks a significant development in the UAE’s legal landscape, reflecting a broader acceptance of digital currencies. The court’s application of Article 912 of the UAE Civil Transactions Law and the Federal Decree-Law No. (33) of 2021 illustrates a shift from traditional views towards a more progressive stance on cryptocurrency. The decision signals a readiness to integrate digital currencies into legal frameworks, providing a robust precedent for future cases.
Irina Heaver, a prominent crypto lawyer and partner at NeosLegal, shared her perspective on the ruling: “I applaud the recent ruling from the Dubai Court of First Instance that validates the payment of salaries in cryptocurrencies under employment contracts. This decision recognizes the evolving economic realities of employment in the Web3 economy in Dubai.
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The ruling is grounded in a clear understanding of how modern employment relationships function within this innovative space. In Web3, it's common for employees to be compensated either fully in cryptocurrencies like USDT or through a combination of fiat currencies and project token awards. This practice reflects the nature of Web3 projects, where employees are often incentivized to contribute to the project's success with the promise of potentially substantial upside as the project grows and its tokens increase in value.
It's essential to acknowledge that these arrangements are about aligning the interests of the employees with the long-term success of the project. By receiving tokens, employees are motivated to work harder, knowing they stand to gain from the project's future success. Why should only venture capitalists benefit from the upside of a successful project? Employees, who are the backbone of these projects, deserve to share in that success as well.
This ruling affirms that if an employment contract includes such terms, both the company and the employee must honor them. It is reassuring to see the court recognize that wages—whether paid in fiat or cryptocurrency—are the rightful entitlement of the employee for their agreed-upon work. Specifically, the inclusion of project tokens in these wages is a critical acknowledgment of how value is created and shared in the Web3 space.
I am particularly pleased to see that the Dubai courts are willing to embrace and understand the Web3 realities that are shaping employment relationships today. With over 3,000 cryptocurrency companies operating in the UAE, employing tens of thousands of people, this ruling offers a much-needed layer of protection for employees.
This decision is not only a win for employees but also a testament to the UAE's commitment to fostering a business environment that supports innovation while ensuring that the rights of employees are upheld. This court decision stands in contrast to recent legislative actions that may not have fully appreciated the realities of the UAE digital economy. I applaud the wisdom and foresight of the judge in this case.”
Kokila Alagh, founder of Karm Legal Consultants, also provided valuable insights into the implications of this landmark ruling:
“The Dubai Court of First Instance’s ruling recognizing cryptocurrency as a valid and enforceable form of remuneration under employment contracts signals a pivotal shift in the treatment of digital currencies in the context of UAE labour law. Cryptocurrency as a form of payment has been growing, and the UAE’s legal landscape is beginning to reflect this transformation. This decision fosters the use of cryptocurrencies and could act as a potential catalyst for the acceptance of cryptocurrency as a form of consideration in other sectors. The court’s forward-thinking approach aligns with the UAE’s strategy of becoming the hub for virtual assets.”
The Dubai Court's 2024 ruling represents a significant step forward in the integration of digital currencies into employment practices. It highlights the UAE’s progressive approach to modern financial practices and sets a positive precedent for the use of cryptocurrencies in various sectors. The ruling not only upholds contractual agreements but also reflects the UAE's willingness to adapt to the evolving financial landscape.
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