New Foreign Direct Investment Law in Force

Posted By Emma Cronin   -   Posted On November 05, 2018

The UAE Commercial Companies Law at present requires that for certain UAE company structures and sectors, 51% or more of the company shares must be owned by a UAE national.

However, several announcements have recently been issued by the UAE government regarding 100% foreign ownership and the Federal Law by Decree No. 19 of 2018 Regarding Foreign Direct Investment is now in force after being published in the country’s Official Gazette.

The new Decree states that the objective of this law is to promote and develop the investment environment and to attract foreign direct investment.

Two government bodies will be established by this Decree, known as the ‘Foreign Direct Investment Unit’ and the ‘Foreign Direct Investment Committee’ with both government bodies’ jurisdictions and roles set out in the Decree, including policy proposal, database creation for investment data and submission for recommendations toward inclusion on the ‘Positive List’ or addition to the ‘Negative List’ as the case may be.

The ‘Negative List’ published within the Decree sets out certain sectors and activities that are not available for foreign investment and is as follows.

  • A) Exploration and production of petroleum materials.
  • B) Investigations, security, military sectors, manufacturing of arms, explosives and military equipment, devices and clothing.
  • C) Banking and financing activities, payment systems and dealing with cash.
  • D) Insurance services.
  • E) Hajj (pilgrimage) and Umrah services, providing employment and recruitment services for staff and servants.
  • F) Water and electricity services.
  • G) Services related to fisheries.
  • H) Postal services, telecommunications services and audio and video services.
  • I) Land and air transport services.
  • J) Printing and publishing services.
  • K) Commercial agents’ services.
  • L) Medical retail such as private pharmacies.
  • M) Blood banks, venom and quarantine centres.

The Council of Ministers is empowered to add or remove sectors from the Negative List by way of a resolution.

A foreign investor is permitted to submit a request to be licensed in a sector listed on the Negative List, however, the request shall be considered by the competent authority and may be refused or accepted at their discretion.

The sectors where foreign investment, either 100% or any lower, is available for foreign investors is called the ‘Positive List’, however these sectors are not yet mentioned in the legislation. A resolution is expected to be issued by specifying the sectors that are to be added to the Positive List in due course.

The resolution is anticipated to include detail as to the type of legal entity permitted under foreign investment, percentage of ownership (100% or lower), minimum share capital requirements, any restrictions and conditions relating to the percentage of nationals employed as well as other incentives available.

The conditions and procedure for obtaining a license for a Foreign Direct Investment Project are also mentioned. An application along with supporting documentation should be submitted to the competent authorities for approval. Following receipt of approval, the Foreign Investment Company will be registered in the register of Foreign Direct Investment and Foreign Investment Companies. Where an application is rejected, the applicant is invited to appeal to the competent Court.

The authorities may also reject a Project which it considers to be a threat to national security; would have a negative impact on the strategic sector; impact on the defense sector; influence foreign policy; and influence public health or morals and the values of the society. According to the Decree, existing Foreign Investment Companies can benefit from the incentives and guarantees provided they reconcile their positions and obligations in accordance with the new legislation.

We will provide updates on this matter when more information becomes available. Please contact us if you would like to know more.

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