ANNOUNCEMENT 23 Sep 2018

On 23 September 2018, the President of the United Arab Emirates (UAE) issued Decree No.19 on Foreign Direct Investment (FDI) Law, which provides a framework for foreign investors to own either 100% or up to 100% of companies in the UAE in certain designated sectors.

 

 

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 0 neutral
  • 1 liberalising

SOURCE

Federal Decree No. (19) for the year 2018 on Foreign Direct Investment. Arabic. Available at https://www.adjd.gov.ae/sites/Authoring/AR/ELibrary%20Books/E-Library/PDFs/Law%20-%20investment%20-%20foreign.pdf

Inception date: 23 Sep 2018 | Removal date: open ended

FDI: Entry and ownership rule

On 23 September 2018, the President of the United Arab Emirates (UAE) issued Decree No.19 on Foreign Direct Investment, which provides a framework for foreign investors to own either 100% or up to 100% of companies in the UAE in certain designated sectors.

Positive List 

Article (6.2) of the law sets the legal basis for the foundation of  a foreign direct investment committee (the FDI Committee) that is tasked with the following: 

  • Proposing a "positive list" to the UAE Cabinet which will set out the economic sectors in which greater levels of foreign direct investment will be permitted.
  • Adding activities and sectors to the negative list set in Article (7).
  • Recommending to competent authorities and approving the applications for foreign direct investment projects' licensing in the sectors and activities that are not listed either in the positive list or the negative list.
  • Defining the benefits granted to foreign-invested foreign-invested in UAE.

Article (6.3) of the Law sets the criteria which the FDI Committee should follow to add activities to this positive list. They are as follows:

  • integration with strategic plans of the UAE;
  • achieving the best profit and added value to the UAE economy;
  • raising innovation and providing job opportunities and training for UAE nationals;
  • limiting negative effects on incumbent UAE companies that conduct a similar activity;
  • the foreign investor's level of competency, expertise and international renown;
  • the best use of modern technology; and
  • achieving a positive impact on the environment.

Articles (7.4) authorizes the Cabinet to issue the decree with the positive list upon the approval of the affiliated minister and the committee and Article (7.5) sets some examples of requirements that the cabinet could impose on companies to take advantage of any proposed increase in the levels of foreign ownership: 

  • the form of legal entity that may carry on an activity in the positive list;
  • the level of foreign ownership permitted in the relevant sector which could be 100 percent or any less;
  • a minimum capital requirement of the foreign investment company;
  • a requirement that any such approvals are limited to one or more specific Emirates;
  • an Emiratisation requirement (whereby a minimum percentage of UAE nationals may be required to be employed in the relevant sector/activity)

Article (10) of the FDI Law summarises the conditions and procedures to be followed in order to apply for an increased level of foreign ownership in a sector on the positive list.

Negative List 

Article (7.2) of the law introduces a non-exclusive negative list of sectors within which high levels of foreign investment will not be permitted. These sectors are: 

  • Petroleum exploration and production
  • Fisheries
  • Investigation, security, military sectors, and manufacturing of weaponry, explosives, military equipment and associated devices and uniforms
  • Postal, telecommunications and audio-visual services
  • Banking and financing activities, payments and funds management systems
  • Land and air transport services
  • Insurance services
  • Publishing and printing services
  • Hajj and Umrah services
  • Commercial agencies services
  • Labour and servant services, and recruitment of personnel
  • Medical retail businesses (e.g. privately owned pharmacies)
  • Electricity and water services
  • Poison control centers, blood banks and quarantines

Context of this new law: 

This law comes one year after the amendment of the UAE Commercial Companies Law that used to restrict foreign ownership to 51% or more of the shares in a company established in UAE. The amended version of this Commercial law has set the stage for the new FDI Law and now allows the UAE Cabinet the flexibility to permit increased levels of foreign ownership in certain companies and sectors of the economy.

AFFECTED SECTORS

 
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AFFECTED PRODUCTS

 
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