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Tips on new Foreign Direct Investment Law

On 23 September 2018, HH the president of UAE issued Federal Law Number 19 of 2018 the Foreign Direct Investment Law or the Law moderating the constraints imposed on foreign ownership within UAE. Lawyers of Dubai believe that the right step in a positive direction to enhance UAE's economy in the international market. The introduction of 100% ownership in several business sectors for on-shore entities is a significant decision to stride towards positioning UAE as the hub for international investors.

Understanding the Law
According to Article 6 of the Law, the Cabinet of UAE will establish a Foreign Direct Investment Committee (FDI Committee) who will draft a list of areas wherein the Cabinet can approve a higher level of FDI. Subsequently, the Committee shall consider the following notable points prior to elucidating the areas:
  • Profit maximization to the UAE economy;
  • Enhancing job opportunities;
  • Investors; competency requirements;
  • Strategic planning;
  • Optimal usage of modern technology;
  • Prerequisites for a foreign investor to claim a higher level of ownership;
  • Minimum shareholding of UAE nationals.
  • Capital requirements;

Nonetheless, the freedom of 100% ownership or high level of shareholding will not be granted to foreigners in certain restricted sectors which forms the part of the negative list as follows:
  • Banking sectors;
  • Insurance service providers;
  • Oil and gas exploration or production;
  • Specific recruitment sectors;
  • Transportation by land or air;
  • Military, investigation or security;
  • Printing or publishing;
  • Agencies;
  • Services for pilgrimage;
  • Water and electricity.

How to apply?
The Law under Article 10 provides for the procedures and guidelines needs to be followed to apply for increasing the foreign ownership under the permitted sectors. Upon submitting the application offered by the authority, the committee shall review the same within 5 working days from the date of submission. If approved, the Department of Economic Development will issue the appropriate license and will record the application in the FDI registry. However, if rejected, the applicant has the authority to raise an objection before dispute resolution established by the FDI Committee.

Activities not in the List
Another significant provision in the Law is for the activities which are not mentioned in the list. Any prospective FDI project is not mentioned in the positive list, the applicant may submit an application post receiving the support of Local government, to the FDI Committee and Ministry of Economy.

The wave of significant amendments and introduction of New Law is plausible to increase foreign direct investment within the UAE considering the forthcoming expo 2020. The possibility of holding 100% ownership within UAE mainland companies will increase the number of on-shore companies and will remove the primary backdrop of ownership in onshore companies. The new Law is in harmony with the UAE Companies Law.

Moreover, it is a step further sets out the legalities of higher ownership. UAE's FDI is advancing to cultivate a progressively favourable environment which entices international investors and the new FDI Law further portrays the effort of the UAE government to strive towards the goal of enhancing economic position. Law No. 19 of 2018 will support speculator certainty and thus allure FDI development in specific divisions explicitly focused on.  

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