In the case of a typical fiduciary transaction, the company has little or no of its own assets invested in the financed products. The bank bears most of the credit risk that prevails in the transaction. The company retains all the profits from the resale of the goods, but also bears the commercial risk. The United Arab Emirates is a civil jurisdiction and does not recognize common law trusts. However, trust receipts are often used in the United Arab Emirates and are recognized under VaE law, provided that ownership of the goods is clearly owned by the financier and that the bank`s proof of trust clearly allows the customer to handle the goods as the financial officer. Note that in a trust structure, it would be essential for the client (as an agent) to be obliged to comply with the bank`s mandatory and explicit instructions (as a client`s client) and that if the customer violates these instructions without acceptable excuses, the bank may refuse the agreement. The customer is also responsible for the loss of the goods or a deterioration of the goods and other goods held by the customer, unless the damage or deterioration is due to a foreign cause beyond the customer`s control or an inherent defect of the goods. Trust Receipts are not defined by the VaE Act. In practice, trust receipts are receipts issued by the owner of the merchandise, which allow another party to process the goods on behalf of the owner. The UNITED Arab Emirates Code of Commerce and the United Arab Emirates Maritime Code recognize bill of lading as titles and transport documents for the transport and shipping of goods. In practice, most commercial financing (including documentary credits) is based either on bill of lading on behalf of the importer (customer) or on car letters “in order” of the financier. We find that financiers in the United Arab Emirates often require that bill of lading be made on the orders of the financier.
In the event that the bill of lading is issued “in order” of the financier, then the property and title in relation to such a bill of lading would be transferred as soon as the financier. When bill of lading is issued on behalf of the client, it is essential (for the purpose of concluding a valid trust structure) that ownership of the bill of lading and the underlying assets be transferred to the financier.