Legal Framework

Government-backed reform efforts have ensured the UAE has the best possible protections for investments – whether they be for large multinationals, SMEs or individual investors. Most prominently, the Foreign Direct Investments Law (Federal Law 19 of 2018) was passed. This legislation sets out clear definitions, regulations, incentives, and obligations with the aim of developing the investment environment and promoting attracting FDI into the UAE. The Foreign Direct Investments Law was followed by the 2019 announcement of the relaxation of foreign ownership restrictions for 122 business activities, specifically in the manufacturing, agricultural and services categories. These legal developments were further consolidated on 17 March 2020, with the UAE Cabinet issuing Cabinet Resolution No. 16 of 2020 containing the full FDI Positive List and the requirements for establishing companies on the UAE mainland.

Regulatory Framework

The Government has modernized the country’s Bankruptcy Law (Federal Law 9 of 2016), streamlining the bankruptcy procedures in line with international best practices. Alongside this, investors can also now draw on a new Arbitration Law (Federal Law 6 of 2018). This law brings the UAE into line with international best practices set out by the United Nations Commission on International Trade. It is designed to promote efficiency in arbitration and to prevent significant delays in the conduct of arbitration. There are also avenues for foreign investors to assign their disputes to external arbitration committees. However, arbitration might not be needed; on average, 57 percent of arbitration cases are settled through alternative methods.

Regulations pertaining to employment of skilled and unskilled workers is also easy and efficient, with UAE labor laws allowing flexible employment contracts to ensure optimal productivity. In fact, according to the 2019 Global Competitiveness Index, the UAE was ranked fifth globally for the ease of hiring foreign labor, and eighth globally for the ease of finding skilled employees.

In Focus: 2018 FDI Law

The groundbreaking FDI Law, passed in 2018, has resulted in three major changes that will offer unprecedented opportunities to foreign investors.

Foreign Ownership

  • The UAE Companies Law used to limit a foreign shareholders to a maximum of 49 percent of the shares in an onshore UAE company.
  • The new law provides a framework for the UAE Cabinet to permit foreign shareholders to own up to 100 percent of companies in designated sectors.
  • These designated sectors are placed on "the Positive List".

Cabinet Powers

Under the law, the Cabinet has the authority to move sectors and economic activities from the negative to the positive list, meaning more sectors will open to foreign investment in the future.

New Federal Body

The FDI Law provides for the UAE Cabinet to form an FDI Committee, tasked with studying and proposing the positive and negative list to the Cabinet, as well as incentives granted to FDI projects. While not yet finalized, the FDI Committee is likely to continue cutting red tape and boosting incentives.

Positive Investment List

  • Transport and storage
  • Agriculture
  • Space
  • Manufacturing industry
  • Renewable energy
  • Hospitality and food services
  • Information and communication
  • Professional, scientific and technical activities
  • Administrative and support services
  • Educational activities
  • Healthcare
  • Art and entertainment
  • Construction

Free Zone Regulatory Frameworks

Entities established in free zones shall be subject to the laws and regulations governing the respective free zone authorities. This means investors can reach out to the concerned body in the management of each free zone for further information on the overarching legal framework used within that free zone.

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