The UAE does not have a process for reviewing foreign direct investment or a law that restricts foreign investment. However, the UAE’s regulatory framework favours domestic over foreign investment.
Currently, there are four major laws regulating foreign investment in the UAE:
- The Federal Companies Law
- The Commercial Agencies Law
- The Federal Industry Law
- The Government Tenders Law
The Federal Companies Law:
The Commercial Companies Law (Federal Law No. 2 of 2015) applies to all commercial companies established in the UAE as well as branch offices of foreign companies operating in the UAE. Companies established in the UAE are required to have a minimum of 51 percent UAE national ownership. However, profits may be apportioned differently. Branch offices of foreign companies are required to have a national agent unless the foreign company has established its office pursuant to an agreement with the federal or an emirate government. All general partnership interest must be owned by UAE nationals. Foreign investors may purchase 108 of the 135 issues on the UAE stock markets, Abu Dhabi Securities Market (ADX) and Dubai Financial Market (DFM). Under UAE law, foreign investors are allowed to own up to 49 percent of a company.
The Commercial Agencies Law:
The provisions relating to commercial agencies are collectively set out in Federal Law No. 18 of 1981 on the Organization of Commercial Agencies as amended by Federal Law No. 14 of 1988 (the Agency Law) and applies to all registered commercial agents. Federal Law No. 18 of 1993 (Commercial) and Federal Law No. 5 of 1985 (Civil Code) govern unregistered commercial agencies. The Commercial Agencies Law requires that foreign principals distribute their products in the UAE only through exclusive commercial agents that are either UAE nationals or companies wholly owned by UAE nationals. The foreign principal can appoint one agent for the entire UAE or for a particular emirate or group of emirates. The Ministry of Economy handles registration of commercial agents. It remains difficult, if not impossible, to sell in UAE markets without a local agent. Only UAE nationals or companies wholly owned by UAE nationals can register with the Ministry of Economy as local agents.
The Federal Industry Law:
- Federal Law No. (1) of 1979 on Industrial Affairs stipulates that industrial projects must have 51 percent UAE national ownership. The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals. Activities exempted from the Industries Law are projects related to extraction and refining of oil, natural gas, and other raw materials and projects with a small capital investment or projects governed by special laws or agreements.
The Government Tenders Law:
- Federal Regulation of Conditions of Purchases, Tenders and Contracts, Financial Order No. 16 of 1975 (the Public Tenders Law) regulates all contracts of public works, services and supplies, and Dubai Law No. 6 of 1997 regulates government tender contracts in the emirate of Dubai.
- According to Law No. 16 of 1975 only UAE nationals, foreign entities represented by a UAE agent or foreign entities with UAE partners who hold at least 51% ownership are allowed to bid for public sector tenders for supply of goods and public works projects.
- In view of the economic diversification process taking place with considerable pace in United Arab Emirates (UAE), the question of attracting foreign direct investment (FDI) has come into sharper focus. Even though there are ownership restrictions in U.A.E they can be easily overcome through legally structuring of the business. There exists no restriction on the conversion of the UAE Dirham or any other foreign currency and its imports or export. The UAE has bilateral investment protection agreements with a more than 30 countries and double taxation avoidance agreements (DTAA) with over 40 countries. Since February 2002, the Dirham has been officially fixed to the U.S. Dollar. The exchange rate is 3.67 UAE Dirhams per one U.S. Dollar. Every bank transaction in U.S. dollars is subject to a 1 percent fee. In 2009, UAE withdrew from the planned GCC monetary union.