Bianca Gracias gives us a break down on Powers of Attorney including how to issue and terminate a POA, the obligations of an attorney and fundamentals to consider before issuing a POA.

What is a Power of Attorney?

A Power of Attorney, or POA as it is commonly referred to, is a form of authorization from a person or entity for a third party to act on their behalf. POAs can be exercised for a variety of reasons ranging from sales and purchases of assets, undertaking administrative tasks, executing contracts, finalizing financial transactions or representations made in the course of running a business.

How do I ensure a Power of Attorney works?

The Federal Law No (5) of 1985 – The Civil Transactions Law (as amended) (UAE Civil Code) sets out various criteria that determine whether a POA will be valid. These include:

  • the principal (person issuing the POA) must have the right to act by himself in the matters entrusted to the attorney (i.e. the person to whom the POA is granted);
  • the attorney must not be prohibited from acting in the matters entrusted to him; and
  • it must be possible to delegate the matters that are the subject of the POA.

A public notary will check the validity of the powers of a person granting a POA and therefore to ensure use in the UAE, it should be notarized by a UAE public notary so that the person using and/or accepting the POA knows it has been correctly granted. If issued outside the UAE, it must be notarized or apostilled first in the country of issue and at the UAE Embassy in that country; subsequently legalized at the Ministry of Foreign Affairs in the UAE and then translated by a certified translator into Arabic (if not already translated in the notarized copy).

It is always recommended that correct advice is sought on the wording of a POA, especially if it is issued outside the UAE, to ensure it will suitable for use in the UAE.

What are the different kinds of POAs?

There are various types of POAs recognised in the UAE including general or absolute POAs, special or restricted POAs and conditional POAs. In certain matters a specific POA is mandatory and a general POA will not be acceptable. Examples of specific POAs include where an attorney is required to sell a property to himself, engage in donations or contract with himself. It is also common practice with banks, financial institutions and government departments that they request specific powers to be included within the POA in certain cases. In all cases however, the principal is always obligated to pay for all costs related to an attorney exercising his rights under a POA, provided these costs are reasonable.

At his sole discretion, a principal can remove or limit the powers of his attorney unless there is a third party right involved in the POA. If the POA is issued in favour of the attorney (i.e. it provides the attorney with some beneficial rights), the principal must not terminate or limit the POA without the consent of the attorney. A principal may remain liable for any harm or damage caused to the attorney as a result of termination/revocation of the POA at an inappropriate time without an acceptable reason.

How is a Power of Attorney terminated?

A POA expires and is deemed ineffective in the following circumstances:

  • upon completion of the assigned work;
  • upon expiry of the fixed period of the POA as stated therein;
  • upon death or legal disqualification of the principal;
  • upon death of the attorney; and
  • upon revocation of the POA by the principal.

What are the obligations of an attorney?

An attorney has obligations under a POA and as such, agreeing to be an attorney under a POA should not be taken lightly. In exercising rights under a POA, an attorney is obligated to exercise his rights in a prudent manner within the limits of the POA in a manner beneficial to the principal. If an attorney is unable to carry out the activities under a POA, he is able to delegate his powers under a POA to a third party provided he is validly authorized to do so through the POA. In doing so, the attorney will always remain responsible towards the principal for any mistakes that may occur in delegating such powers.

An attorney is free to resign from his obligations under a POA by providing notice to the principal however any work being undertaken under a POA by the attorney must be continued in a manner not to cause risk to the principal. An attorney may be liable for any damage sustained by a principal arising out of the resignation of the attorney at an inappropriate time or without justification, if the attorney is being paid for his services. If the POA involves a third party right then the attorney must complete his obligations under a POA unless there is a justified and valid reason for him to resign as an attorney.

Considerations when granting a POA

Whilst preparing a POA, there are some fundamentals which should be considered. These include:

  • Why is a POA being issued?
  • What type of POA needs to be granted?
  • Can the principal grant the POA? and, can the subject matter be lawfully dealt with through the POA?
  • Who will act as the attorney?
  • If there is more than one attorney, will the powers be joint and several?
  • When will the POA become effective?
  • Will there be any limitations in the POA?
  • How will the POA be notarized/legalised?
  • How will the POA be revoked upon completion of the tasks required.

Another concern we have experienced with POAs, is that if an attorney exercises his rights under a POA, and the principal is dissatisfied with the manner in which the attorney has exercised his rights, it may be difficult for the principal to bring legal action or claim against the attorney, since it is arguable the attorney's actions were performed under the mandate of the POA granted by the principal. It is therefore very important that the drafting of POAs are carefully considered before being granted.

We always recommend appropriate advice is taken prior to granting or accepting powers of attorney to ensure rights as a principal and/or attorney are protected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.