Foreign Direct Investment in the United Arab Emirates
- On 23 September 2018, the President of the U.A.E., his Highness Sheikh Khalifa bin Zayed Al Nahyan issued Federal Law No. 19 of 2018 regarding Foreign Direct Investment (the “New FDI Law”), which went into force in November.
- The New FDI Law loosens existing regulations of onshore companies with an aim to enhance the investment climate in the U.A.E. and attract additional foreign investment in certain specified business sectors to be tentatively identified in early 2019 (the “Positive List”).
- Inclusion in the Positive List will be based on the U.A.E. Vision 2021 policy as well as the U.A.E.’s overall innovation strategy, potentially attracting companies onshore that would otherwise have incorporated in one of the country’s many free zones. Management of the New FDI Law and related activities will be overseen by a new Foreign Direct Investment Committee and a Foreign Direct Investment Unit.
The New FDI Law partially overturns the existing requirement in the U.A.E. that foreign companies established in the U.A.E. maintain at least 51% ownership by a U.A.E. national, permitting certain companies operating in Positive List industries to maintain ownership by a foreign national of 50% or more. While the companies affected may be determined only when the Positive List is issued (tentatively scheduled for early 2019), inclusion on the Positive List will likely be driven by the U.A.E.’s goals to raise the level of innovation in the national economy, create job opportunities and training for U.A.E. nationals, and incorporate and use the latest modern technology in the U.A.E. economy. Companies considering establishing in the U.A.E. might prefer to wait for issuance of the Positive List if they intend to market products or services directly in the U.A.E. and would therefore benefit from being located onshore. Companies working in knowledge-based industries such as legal services or consulting or companies otherwise preferring the ease and efficiency of setting up in a free zone might prefer instead to establish in a suitable existing free zone regardless of the nature of the Positive List. This paper provides a more in-depth overview of the New FDI Law and raises and addresses various questions that a prospective U.A.E. company might have regarding the New FDI Law and its implications with respect to timing of establishment and other substantive issues.
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