1 A guide to doing business in the UAE
A guide to doing business
in the UAE
2 A guide to doing business in the UAE
Clifford Chance Middle East 3
Introduction 4
Political environment 5
Financial and tax regime 7
Trade environment 11
Employment 13
Land/real estate 21
Legal environment 24
Product liability 29
Intellectual property rights 31
Investment policies 35
Company law and corporate governance 39
Contacts 45
conte
nts
A guide to doing business in the UAE 3
Clifford Chance Middle East
Clifford Chance is one of the longest established international law firms in the
Middle East
Our team of over 120 lawyers advises clients on domestic, regional and international matters and has delivered many first-
of-a-kind deals. We opened our first UAE office in 1975 and are well known for innovative, market-leading work. We
specialise in:
Banking, Finance and Projects
Corporate, M&A and Equity Capital Markets
Financial Services Regulatory
Debt Capital Markets and Structured Products
Litigation & Dispute Resolution and Arbitration
Real Estate and Construction.
Our lawyers combine international experience and capability with an intimate and detailed knowledge of local requirements
in the region and advise on international, regional and domestic matters. In particular, we:
have over 120 lawyers, fully integrated into the firm's international network, serving the Middle East region
have been present in the Middle East for almost 40 years with offices today in Abu Dhabi, Dubai, Doha and Riyadh
are able to coordinate legal advice and services throughout the Middle East through our close contacts with leading
independent firms
have valuable Arabic language skills within the practice, at both associate and partner level, enabling us to work with
Arabic documentation.
4 A guide to doing business in the UAE
Introduction
The purpose of this guide
This guide is designed to provide an overview of key considerations for doing business in the United Arab Emirates (UAE)
outside of the various free zones. It has been limited to a general description of areas that are of most interest.
The legal environment in the UAE is complex and rarely static. As the pace of development of domestic law continues
unabated, this publication cannot serve as a substitute for current and necessarily detailed advice on particular problems
that may arise. However, it is hoped that it will provide a valuable and informative outline of the relevant law for our clients.
Unless the context otherwise requires, references in this publication to the masculine include the feminine.
This publication is designed to provide a general summary of the key considerations as at March 2014 (unless otherwise
stated). It does not purport to be comprehensive or to render legal advice and, consequently, no responsibility can be
accepted for loss occasioned by any person acting or refraining from acting as a result of any statement in this publication.
Certain statistical information in this guide originates from third-party sources which are publically available. We do not take
any responsibility for the accuracy or completeness of such information and it has not been independently verified by us.
Further information
Online services: The Clifford Chance online services are useful know-how resources that can keep you up to date with
industry and market developments, provide a useful overview of the issues that affect the structuring or financing of cross-
border transactions and help you assess and manage risk more effectively. Should you wish to have access we can set up
an account for you, please follow the link to select your preferences www.cliffordchance.com/preferences, after which you
will receive an email with login details and instructions on how to log into the service for the first time.
A guide to doing business in the UAE 5
Political environment The UAE is a federation of seven Emirates (Abu Dhabi,
Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and
Umm Al Quwain) (the Federation). Formerly known as
the Trucial States, they were a British protectorate until
they achieved independence in December 1971 and
merged to form the UAE. Each Emirate has a local
government headed by the Ruler of the Emirate. The
UAE has a Federal Government which is currently
headed by His Highness Sheikh Khalifa bin Zayed Al
Nahyan, the President of the UAE and Ruler of Abu
Dhabi.
There are a number of free zones established within the
UAE, including the Jebel Ali Free Zone and the Dubai
International Financial Centre (DIFC). Laws, regulations
and insolvency regimes applicable within the various free
zones can be different to those that apply in the remainder
of the UAE. Unless otherwise specified, the information in
this Guide does not apply to the individual free zones. For
further information with regards to free zones, please see
our guide 'Overview of Selected UAE Free Zones' available
on the Clifford Chance online services.
Structure of government
Constitution
In establishing the UAE, the rulers of the seven Emirates
issued a provisional constitution in 1971, which became
final in December 1996 (the Constitution).
The Constitution provides the legal framework for the
Federation and expresses Islamic Shari'a jurisprudence to
be the main source of legislation. The Constitution
apportions powers between the Federal Government
(based in Abu Dhabi) and the governments of the
constituent Emirates. The Federal Government is entrusted
with the task of issuing substantive legislation concerning
and regulating the principal and central aspects of the
Federation. The municipal governments of each Emirate
are authorised to regulate local matters not confined to the
Federal Government. Some areas are therefore regulated
only at the Federal level, although local interpretations and
practices sometimes differ from one Emirate to another. In
the event of a conflict between the Federal law and local
laws, the Federal law will supersede the local law of an
Emirate.
The Constitution grants sovereignty to the individual
Emirates over their own territories and territorial waters in
all matters which are not within the jurisdiction of the
Federation, such as foreign affairs, defence, justice and
public health. It provides for the Federation to form a single
economic and customs area with free movement of capital
and goods between the Emirates.
The natural resources and wealth in each Emirate are
considered to be the public property of that Emirate, which
is responsible for the protection and exploitation of its
natural resources and wealth for the benefit of the national
economy.
Framework of the Federation
The framework of the Federation consists of: (i) the
Supreme Council; (ii) the President and Vice President; (iii)
the Council of Ministers; (iv) the Federal National Council;
and (v) the Judiciary.
Supreme Council
The Supreme Council is the highest decision-making
authority of the Federation and consists of the Rulers of
each of the Emirates. Each Ruler (or his deputy) has a
single, equal vote on Supreme Council deliberations. The
Supreme Council has broad authority over Federal policy
and legislative matters within the jurisdiction of the
Federation.
The decisions of the Supreme Council must be approved: (i)
by a majority of five member Emirates (which must include
Abu Dhabi and Dubai) with respect to substantive matters;
or (ii) by a simple majority vote on procedural matters.
While the deliberations of the Supreme Council are
declared to be secret by the Constitution, it is believed that,
in practice, laws, decrees or executive orders of the
Supreme Council are effected with the unanimous consent
of each of the member Emirates (although the political and
economic influence of Abu Dhabi and Dubai may play a
role in ensuring the support of the other Emirates).
President and Vice President
A President and Vice President of the Federation are
elected from among the members of the Supreme Council
for terms of five years, with eligibility for re-election without
restriction.
The current President of the Supreme Council, His
Highness Sheikh Khalifa bin Zayed Al Nahyan, the Ruler of
Abu Dhabi, has served as President of the Supreme
Council since 2004. The current Vice President of the
Supreme Council is His Highness Sheikh Mohammad bin
Rashid Al-Maktoum, the Ruler of Dubai.
6 A guide to doing business in the UAE
The primary role of the President of the Supreme Council,
and the Vice President in his absence, is to preside over
the actions of the Supreme Council, including the
enactment of legislation within the jurisdiction of the
Supreme Council and the appointment of the Council of
Ministers and other officers or representatives of the
Federation.
Council of Ministers
The Council of Ministers (otherwise known as the 'UAE
Cabinet') acts as the advisory cabinet of the UAE. The
Council of Ministers consists of the Prime Minister of the
UAE as its chairman (currently His Highness Sheikh
Mohammad bin Rashid Al-Maktoum, the Ruler of Dubai and
Vice President of the UAE, as described above), his deputy,
and other Ministers.
The Council of Ministers is responsible for the various
Federal Ministries of the UAE, most importantly the
Ministries of: (i) foreign affairs; (ii) interior; (iii) defence; (iv)
finance; (v) economy; (vi) justice; (vii) education; (viii)
health; (ix) public works; (x) foreign trade; (xi) labour; (xii)
social affairs; (xiii) culture, youth and community
development; and (xiv) environment and water.
In practice, the primary role of the Council of Ministers is
the implementation of Federal policy and the development
of Federal laws, decrees and budgets for consideration by
the Federal National Council (where necessary or
appropriate) and, ultimately, enactment by the Supreme
Council. The Council of Ministers also independently issues
implementing regulations for many of the UAE's Federal
laws. Like the Supreme Council, the Council of Ministers
has governing by-laws, and its deliberations generally are
not a matter of public record. Decisions of the Council of
Ministers are by a majority vote, with a casting vote
retained by the Prime Minister.
Federal National Council
The Federal National Council comprises 40 members
allocated between the Emirates as follows: (i) Abu Dhabi –
eight members; (ii) Dubai – eight members; (iii) Sharjah –
six members; (iv) Ras Al-Khaimah – six members; (v)
Ajman – four members; (vi) Umm Al-Quwain – four
members; and (vii) Fujairah – four members.
Half of the 40 members of the Federal National Council are
elected by electoral colleges while the other half are
appointed by the Rulers of the seven Emirates. The
electoral college is comprised of a group of people selected
by the Rulers of the Emirates numbering at least 300 times
the number of seats allocated. Each member may only vote
for a candidate in his/her Emirate. This mechanism was
implemented in 2006.
The members of the Federal National Council are private
citizens (public officials, including ministerial officials,
cannot be members of the Federal National Council). As
such, it is intended that the Federal National Council
members provide a broad representation of the UAE
citizens as a whole.
While the Federal National Council acts as an advisory
body to the Council of Ministers and, ultimately, the
Supreme Council, it does not have independent
discretionary executive or legislative authority.
Judiciary
The judiciary of the Federation is discussed in detail in the
Legal Environment section of this guide.
Key policies of government
Economic
The UAE's economy has, historically, been reliant on crude
oil revenues. However, the UAE government has
consistently promoted the creation of new business
opportunities and the diversification of the economy to
decrease the UAE's reliance on one source of income.
During the last 15 years the UAE has actively promoted
investment in infrastructure (for example the Dubai Metro)
and industrial diversification. Private sector investment has
been encouraged in a number of different fields, including
energy, communications, telecommunications, transport
and ports.
Social
The UAE government is keen to develop social and human
resources in the UAE. A large percentage of the 2013 UAE
budget has been allocated to social spending (51%) and
education (22%). Emphasis is placed on creating
world-class healthcare and education systems.
A guide to doing business in the UAE 7
Financial and tax regime The system of financial regulation in the UAE is well
established and constantly evolving. The UAE banking
sector was heavily impacted by the financial crisis of
2008 with real estate and equity prices being the key
concerns. However, signs of recovery are appearing.
Financial authorities and regulators
Securities laws and the regime of financial regulation are
still evolving in the UAE. Historically, the regulation of
trading and securities and transactions involving investment
products were regulated solely by the UAE Central Bank. In
2000, the Securities and Commodities Authority (SCA) was
created and together the UAE Central Bank and the SCA
regulate the current UAE Federal financial landscape.
Under the law, the division of responsibilities between the
SCA and the UAE Central Bank remains unclear and it is
anticipated that some of this uncertainty will be resolved by
the implementation of a new financial services law in the
coming months. A separate regulatory regime exists in the
DIFC and the regulator in the DIFC is the Dubai Financial
Services Authority. A separate regulatory regime will also
apply in the new Abu Dhabi Global Market Free Zone, once
fully established.
UAE Central Bank
The UAE Central Bank, established in 1980, is the
governing body that regulates and supervises all banks
operating in the UAE. The UAE Central Bank monitors
banks through its Banking Supervision and Examination
Department which conducts reviews of banks periodically
based on the risk profile of each bank. It also reviews all of
the returns submitted by the banks to the UAE Central
Bank.
Historically, the UAE Central Bank does not act as a
"lender of last resort" and instead this role tends to fall on
the individual Emirates.
The UAE Central Bank is regulated primarily by UAE
Federal Law No. 10 of 1980, which grants the UAE Central
Bank powers to:
exercise currency issue, stabilisation, valuation and
free convertibility
direct credit policy for balanced growth of the economy
organise and promote an effective banking system with
private banks and institutions
advise the Federal Government on financial and
monetary issues
maintain the Federal Government's reserves of gold
and foreign currencies
act as a bank for the Federal Government and other
banks operating in the UAE
act as the Federal Government's financial agent with
the International Monetary Fund (the IMF), the World
Bank and other international financial organisations.
Although the UAE Central Bank is responsible for
regulating all banks, exchange houses, investment
companies and other financial institutions in the UAE, the
Dubai Financial Services Authority regulates all banking
and financial services activities in the DIFC.
The SCA
The SCA regulates listed public companies in the UAE.
There are three public exchanges in the UAE (outside of
the free zones) the Dubai Financial Market, the Abu Dhabi
Stock Exchange and the Dubai Gold and Commodities
Exchange. In addition, over the last few years, the SCA has
taken a more active role in the regulation of other matters,
for example, with regards to investment funds. The role of
the SCA is expected to evolve further with the
implementation of a new financial services law.
Availability of finance
Finance is readily available within the UAE from both
foreign and local banks.
Banks operating in the UAE often lend to large borrowers
who are well known and low risk. Often this is accompanied
by limited disclosure from the borrower.
Effective security is generally available, but for certain
assets the law is unclear (eg security over ownership
interests in limited liability companies (LLC), intellectual
property, bank accounts and contractual rights).
Enforcement of security can be time consuming and difficult,
although steps have been taken to improve the situation for
land and building mortgages.
Major banks and financial institutions
The list below sets out the foreign and local commercial
banks licensed by the UAE Central Bank as at 30 June
2013:
8 A guide to doing business in the UAE
As at June 2013, the UAE Central Bank licenses 51
different commercial banks (comprising 23 locally
incorporated banks and 28 foreign banks), two investment
banks (Emirates Invest Bank – P.J.S.C. and HSBC
Financial Services (Middle East) Limited), four wholesale
banks (Deutsche Bank AG, Industrial & Commercial Bank
of China, The Bank of Tokyo – Mitsubishi UFI, Ltd. and
Korea Exchange Bank) and one company conducting
finance and investment activities (Mubadala GE Capital –
P.J.S.C.) to operate inside the UAE (excluding the DIFC).
In addition, the UAE Central Bank also licenses a number
of financial institutions and representative offices of foreign
banks and financial institutions.
The Dubai Financial Services Authority licenses a number
of banks in the DIFC.
Tax
The following is merely an overview of the general tax
regime in the UAE. UAE tax advice should be sought from
specialist tax advisers or consultants who maintain up-to-
date information on any changes to the tax regime. Clifford
Chance does not provide tax advice in the UAE.
Under existing UAE law, an income tax decree has been
enacted in Abu Dhabi and in Dubai (the Abu Dhabi Income
Tax Decree 1965 (as amended) and the Dubai Income Tax
Decree 1969 (as amended)) which provides for tax to be
imposed on the taxable income of all bodies corporate
which carry on a trade or business. In practice, however,
the regime is not currently enforced and only companies
engaged in the production of oil or gas, some service
industries and branches of foreign banks have been
required to pay tax.
There is currently no withholding tax on interest or
dividends in the UAE.
The Constitution of the UAE gives the Federal Government
exclusive legislative and executive authority in relation to
taxes, duties and fees and provides that the payment of
taxes is a duty of all citizens. It is not known whether these
provisions will be exercised and further taxation
implemented in the jurisdiction in the future.
Local Banks Foreign Banks
Abu Dhabi Commercial
Bank
Al Ahli Bank of Kuwait
Abu Dhabi Islamic Bank Al Khaliji (France)
Ajman Bank Arab African International
Bank
Al Hilal Bank Arab Bank
ARBIFT (Al Masraf) Bank Meli Iran
Bank of Sharjah Bank of Baroda
Commercial Bank
International
Bank Saderat Iran
Commercial Bank of Dubai Banque Misr
Dubai Bank Barclays Bank
Dubai Islamic Bank Blom Bank France
Emirates Islamic Bank BNP Paribas
Emirates NBD Bank CitiBank
First Gulf Bank Crédit Agricole –
Corporate and Investment
Bank
InvestBank Doha Bank
Mashreq Bank El Nilein Bank
National Bank of Abu
Dhabi
Habib Bank A.G. Zurich
National Bank of Fujairah Habib Bank Ltd.
National Bank of U.A.Q. HSBC Bank Middle East
Limited
Noor Islamic Bank Janata Bank Limited
Sharjah Islamic Bank Lloyds TSB Bank
The National Bank of
R.A.K. (RAKBANK)
National Bank of Bahrain
Union National Bank National Bank of Kuwait
United Arab Bank National Bank of Oman
Rafidain Bank
Samba Financial Group
Standard Chartered Bank
The Royal Bank of
Scotland
United Bank Ltd.
A guide to doing business in the UAE 9
The UAE has entered into double taxation arrangements
with certain other countries, but these are not extensive in
number. The table below sets out the list maintained by the
Ministry of Finance:
Country Final signature Effective date
Egypt 12 April 1994 26 March 1995
Algeria 24 April 2001 28 November 2001
Yemen 13 February 2001 25 August 2001
Tunisia 10 April 1996 24 February 1997
Morocco 9 February 1999 26 September 1999
Sudan 15 March 2001 28 November 2001
Syria 26 January 2000 11 June 2000
Lebanon 17 May 1998 25 October 1998
Mozambique 24 September 2003 4 May 2004
Pakistan 7 February 1993 29 January 1994
India 29 April 1992 21 August 1993
India (Amendment Protocol)
27 March 2007 3 October 2007
Sri Lanka 7 July 1992 4 May 2004
Philippines 22 September 2003 29 December 2004
Korea 22 September 2003 4 May 2004
Singapore 1 December 1995 17 June 1996
Indonesia 30 November 1995 17 June 1996
Thailand 1 March 2000 12 November 2000
Malaysia 28 November 1995 17 June 1996
China 1 July 1993 5 June 1994
New Zealand 24 September 2003 4 May 2004
Ukraine 2003 28 February 2004
Belarus 27 February 2000 2 January 2001
Turkmenistan 9 June 1998 24 November 1999
Armenia 22 April 2002 29 December 2004
Tajikistan 17 December 1995 29 January 2000
Mongolia 21 February 2001 29 November 2002
Azerbaijan 20 November 2006 30 April 2007
Austria 23 September 2003 27 April 2004
Poland 31 January 1993 29 January 1994
Germany 9 April 1995 18 March 1996
Finland 12 March 1996 24 February 1997
Italy 22 January 1995 20 November 1995
Czech Republic
30 September 1996 26 June 1997
Country Final signature Effective date
France 19 July 1989 15 November 1989
Belgium 30 September 1996 26 June 1997
Romania 11 April 1993 9 January 1996
Turkey 1993 29 January 1994
Luxembourg 20 November 2005 7 May 2006
Spain 5 March 2006 13 August 2006
Malta 13 March 2006 13 August 2006
Bosnia and Herzegovina
18 September 2006 30 April 2007
Seychelles 19 September 2006 6 February 2007
Mauritius 18 September 2006 20 June 2007
Canada 9 June 2002 7 January 2004
Netherlands 8 May 2007 29 November 2007
Bulgaria 26 June 2007 ...
Uzbekistan 26 October 2007 ...
The position in the free zones is different as free zones
have their own rules and regulations. Typically free zones
offer guaranteed tax holidays for businesses which
establish a presence in the free zones.
10 A guide to doing business in the UAE
Transfer pricing
Currently, there are no regulations relating to transfer
pricing in the UAE.
Transfer taxes
Notary fees are payable in connection with the execution of
agreements to transfer shares, real estate and certain other
assets.
Currently there are no property taxes in the UAE; however,
a fee is payable to the relevant Emirate's lands department
when registering dealings relating to real estate. The
registration fees applicable in Abu Dhabi and Dubai for the
most common dealings (indicative only) are set out below:
Registration Fee
Dealing Abu Dhabi Dubai
Transfer 2% of property value, up to a maximum of AED1 million.
4% of the consideration paid. There is no cap on the fee payable.
Mortgage 0.1% of amount secured, up to a maximum of AED1 million.
0.25% of the amount secured.
Lease 1% of annual rent. 4% of total rent under the lease, if the lease is for a term of 10 years or greater, otherwise a nominal fee applies.
A guide to doing business in the UAE 11
Trade environment The UAE is a member of the World Trade Organisation
as well as the GCC Customs Union, which applies
uniform custom tariffs across the Gulf Co-operation
Council (GCC). The UAE is also a member of the
Greater Arab Free Trade Area. The UAE's membership
of the Greater Arab Free Trade Area provides for the
duty-free trade of certain goods between signatory
states to the agreement.
The UAE imposes a boycott on trade with Israel.
GCC Standardization Organisation (GSO)
The GSO publishes GCC Standards and Technical
Regulations for products and services, including motor
vehicles, tyres and toys, which are designed to be applied
in substantially the same form in each member state of the
GCC.
The GSO issues certificates for particular products. This
ensures that manufacturers comply with certain health and
safety standards.
The first step in the GSO process is to register with the
GSO. To obtain a registration the GSO team will visit all
manufacturing sites to ensure conformity with the GCC
Standards and thereafter will work with companies to
achieve compliance.
The UAE's Membership of the Greater Arab Free Trade
Area provides for the duty free trade of certain goods
between signatory states to the agreement.
The GSO will also carry out tests on the relevant product
during the manufacturing process to ensure compliance.
The GCC Standards are not applicable in the free zones;
however, for the purposes of importing into the UAE,
companies will require a certificate showing compliance
with the GCC Standards. If the company does not obtain
the GSO certificate, the customs authorities will not clear
the products.
Foreign exchange regulations
Currently, there are no foreign exchange control regulations
in the UAE. The only exception is transactions involving
Israeli parties.
Bilateral investment agreements
Country Date of Signature Date of Entry into Force
Algeria 24 April 2001 3 June 2002
Austria 17 June 2001 1 December 2003
Azerbaijan 1 November 2006 24 August 2007
Bangladesh 17 January 2011 ---
Belarus 27 March 2000 16 February 2001
Belgium and Luxembourg
5 March 2004 10 November 2007
China 1 July 1993 28 September 1994
Czech Republic
23 November 1994 25 December 1995
Egypt 11 May 1997 11 January 1999
Finland 12 March 1996 15 March 1997
France 9 September 1991 10 January 1995
Germany 21 June 1997 2 July 1999
Italy 22 January 1995 29 April 1997
Jordan 15 April 2009 12 February 2010
Korea, Republic of
9 June 2002 5 June 2004
Kuwait 12 February 1966 ---
Import and export regime (including the GCC
Customs Union)
A unified customs tariff is applied throughout the GCC.
Most goods are taxed at 5%. Duty is charged on the CIF
(cost, insurance, freight) value of the goods at the port
of entry.
As a result of the UAE's membership of the GCC
Customs Union, once a product has been imported into
the UAE, it should be able to move freely within the
GCC and no further custom duties should be imposed.
There are no local export restrictions and no local export
duties.
The UAE's membership of the Greater Arab Free Trade
Area will also mean that it should be easier to move
goods into certain other Middle Eastern countries
including: Egypt, Iraq, Jordan, Kuwait, Libya, Palestine,
Saudi Arabia, Sudan, Syria, Tunisia, and Yemen.
12 A guide to doing business in the UAE
Country Date of Signature Date of Entry into Force
Lebanon 17 May 1998 14 July 1999
Malaysia 11 October 1991 22 May 1992
Mongolia 21 February 2001 ---
Montenegro 26 March 2012 ---
Morocco 9 February 1999 1 April 2002
Mozambique 24 September 2003
---
Pakistan 5 November 1995 ---
Poland 31 January 1993 9 April 1994
Portugal 19 November 2011 ---
Romania 11 April 1993 7 April 1996
Russian Federation
28 June 2010 ---
Sudan 4 April 2011 ---
Sweden 10 November 1999 6 May 2000
Switzerland 3 November 1998 16 August 1999
Syrian Arab Republic
26 November 1997 10 January 2001
Tajikistan 17 December 1995 ---
Tunisia 10 April 1996 24 February 1997
Turkey 28 September 2005
24 July 2011
Turkmenistan 9 June 1998 24 November 1999
Ukraine 21 January 2003 28 February 2004
United Kingdom
8 December 1992 15 December 1993
Uzbekistan 26 October 2007 22 April 2008
Vietnam 16 February 2009 ---
Yemen 13 February 2001 25 August 2001
Source: United Nations Conference on Trade and
Development
A guide to doing business in the UAE 13
Employment Employment matters in the UAE are governed by
Federal Law No. 8 of 1980 regulating Labour Relations,
as amended, together with various supplementary
Ministerial Decrees and Resolutions (the Labour Law).
Categories of employees
The Labour Law applies to employees working in the UAE
(except for certain free zones) whether they are nationals or
non-nationals. Certain categories of employees are
exempted from the Labour Law, such as domestic servants,
staff and workers employed by the Federal Government
and members of the armed forces and police.
No distinction is drawn between white-collar and blue-collar
employees in terms of the rights conferred by the Labour
Law.
The Labour Law does not deal specifically with employees
who are also directors. The position of directors (or
managers) of companies incorporated in the UAE is
regulated to a certain extent by Federal Law No. 8 of 1984
(as amended) (the Commercial Companies Law).
Hiring
Employers recruit through a variety of sources, including via
the internet and by advertising in newspapers and journals.
Recruitment agencies are commonly used for the
recruitment of professionals. A state-run agency assists in
the recruitment of UAE nationals.
Emiratisation is a programme which was introduced in 2004
by the UAE Government to encourage employment for its
citizens in both public and private sectors.
In order to live and work legally in the UAE, work permits
and residence visas are required for all nationals who are
not from the UAE or any of the other GCC states. The
residence visa is issued under the sponsorship of the
employer (except in cases where a married woman is
sponsored by her husband, or a child by its father).
A labour card is usually issued for one year at a time, while
a residence visa is usually valid for two years.
Discrimination
The Labour Law does not expressly outlaw discrimination.
UAE nationals, followed by other Arab nationals, have a
right to employment over the right of people of other
nationalities. The UAE government is pursuing a policy of
"emiratisation", pursuant to which certain professions have
quotas of UAE nationals that must be employed. Generally,
for every establishment that employs over 50 employees, at
least 2% should be UAE nationals. (The quota is much
higher in the financial and insurance sectors.)
Contracts of employment
The parties to the employment contract are free to contract
on whatever terms they choose provided always that they
are not less favourable than the provisions of the Labour
Law. Under the Labour Law, only two types of contract are
recognised. These are "Fixed Term Contracts" or "Indefinite
Term Contracts". Fixed term contracts have a specified
commencement and termination date and must not exceed
four years, but are thereafter renewable by mutual consent
of the parties. Indefinite term contracts have a
commencement date, but do not specify a termination date
and can be terminated by either party by giving at least 30
days' prior written notice.
The employment contract must be in writing. In order to
obtain a labour card, the Standard Form Contract must be
filed with the Ministry of Labour. While the standard form
may suffice for unskilled labourers, it is usually not sufficient
for other categories of employees, and employers often
make use of their own contracts which are usually far more
detailed than the Standard Form Contract.
In the event of a dispute, the Labour Department is likely to
consider (at first instance) both contracts (if there are two)
regardless of the different entities concerned and
regardless of whether only one contract is registered, and is
likely to uphold the provisions out of both contracts that are
most beneficial to the employee. It is not possible to
enforce an employment contract in the UAE where it does
not comply with the provisions of the Labour Law (except to
the extent that it is more beneficial to the employee).
Trial periods are common in the UAE. The Labour Law
provides that the maximum trial period shall be six months,
and that a person may only be placed on probation once
during the course of employment with the same employer.
During the trial period the employee may be dismissed
without notice, except where the employment contract
provides for a longer notice period to be given.
Under the Labour Law, it is possible for an employee to
agree that, after termination of his employment, he shall
refrain from competing with the employer or participating in
any enterprise which competes with that of the employer.
Such agreement will only be valid if it is limited as to the
14 A guide to doing business in the UAE
time, place and nature of business, to the extent necessary
to protect the employer's lawful interests.
The UAE Civil Code (Federal Law No. 5 of 1985, as
amended by Federal Law No. 1 of 1987) (the Civil Code)
imposes an obligation on the employee to keep confidential
the industrial secrets of the employer, including on
termination of the contract as required by agreement or
custom, and to preserve the things entrusted to him
(whether tangible, such as company property, or intangible,
such as intellectual property or confidential information) for
the performance of his work.
The UAE Federal Penal Code (Law No. 3 of 1987) imposes
criminal liability on anyone who, by reason of his profession
or employment, is entrusted with confidential information,
and who discloses it in circumstances other than those
permitted by law, or who uses it for his own advantage
without the consent of the person to whom the confidential
information relates.
Generally, if intellectual property is created by an employee
during the course of employment, it will belong to the
employer and compensation is only payable to the
employee in limited circumstances.
Pay and benefits
Basic pay
There is no minimum salary under the Labour Law.
With effect from 1 September 2009, a "Wages Protection
System" was implemented in the UAE, which applies to all
employers that are registered with the Ministry of Labour.
(The Wages Protection System currently does not apply to
entities registered within any of the UAE free zones,
although this position is likely to change in the future. The
Jebel Ali Free Zone, for instance, applies the Wages
Protection System). Employers are now required to pay
their employees' salaries into accounts held at banks or
other institutions that have been approved by the Ministry of
Labour, and which appear on its "Agents List".
The Ministry of Labour will maintain a database of all salary
payments in the private sector, to ensure that the full
salaries are paid on time.
Employers are required to complete and submit a
prescribed form declaration within two weeks of the salary
payment becoming due. For most employers, this will mean
submitting the declarations on a monthly basis.
Companies which fail to comply with the provisions of the
Wages Protection System will be denied the right to obtain
new work permits for employees. The authorised signatory
of the company will be held responsible for the information
contained in the declarations, and may be subject to civil
and criminal liability for any violations.
Each company will need to have a bank account at one of
the Ministry-approved banks, and will need to enter into a
contract with such bank to provide the required service.
Each employee will need to open an account at one of the
approved banks, into which the salary will be paid. (Some
banks have a higher minimum balance/salary requirement
than other banks, so, depending on the salary levels of
employees, different banks may need to be used). The
employer is responsible for all costs involved in joining the
Wages Protection System, including bank charges, service
provider fees and all other costs, and employers may not
deduct any such charges from their employees' salaries,
whether directly or indirectly.
As part of the administration of the Wages Protection
System, information will be shared between the banks, the
UAE Central Bank and the Ministry of Labour to ensure that
the salaries paid match with the details registered at the
Ministry of Labour. (There would be no problem if the actual
salary paid exceeded the amount reflected on the contract
filed with the Ministry of Labour – such as in the case of a
salary increase – but the amount paid should not be less
than that registered at the Ministry of Labour).
Up until now, in the case of expatriate employees, a portion
of salary was frequently paid in the home country to meet
the employee's ongoing financial commitments in the home
country. In the past, the full salary would be reflected in the
Ministry of Labour official contract, but there was no
requirement for the full sum to be paid in the UAE.
With the introduction of the Wages Protection System, the
full salary as reflected in the contract filed with the Ministry
of Labour will need to be paid in the UAE, so any transfer to
the employee's home country bank account would need to
take place after the full salary has been paid locally.
Although the Decree implementing the Wages Protection
System is not clear, it is likely that the definition of "wages",
as used in the UAE Federal Labour Law will apply. This
includes all the employee's contractual entitlements, such
as basic salary, commission, and allowances. Discretionary
bonuses that are not contractual entitlements would be
excluded, which means that discretionary bonuses do not
need to be paid in accordance with the Wages Protection
A guide to doing business in the UAE 15
System, and could, in theory, be paid outside the UAE, in
cash, or into any other bank account.
The Wages Protection System is aimed at salary and
benefits that are paid as "cash" to employees. Where the
employer pays a benefit other than in cash or to another
party (eg pension contributions directly to the pension fund,
life assurance premiums paid directly to the assurance
provider, etc), because the employee would never have
received the cash amount (or payment into a bank account)
anyway, there is no need for these amounts to be paid
under the Wages Protection Scheme.
As the Wages Protection System legislation does not
specifically address the issue of discretionary bonuses and
non-cash benefits such as pension contributions the
position will need to be monitored in case any policy or
guidance notes are issued.
Pensions
The statutory end of service gratuity is usually given to
employees in lieu of benefits under a pension scheme for
employees who have more than one year's service. The
end of service gratuity is calculated on the basis of 21 days'
basic pay per year of service for each of the first five years,
and 30 days' basic pay for each additional year. Where an
employer provides a pension or similar scheme for
employees, it is possible for the employee to choose in
writing between the pension scheme and the statutory end
of service gratuity. International companies which have a
pension scheme in place, and who set up in the UAE,
typically offer benefits under the pension scheme in lieu of
the statutory end of service gratuity.
There is no entitlement to an end of service payment if the
employee is terminated for one of the reasons set out in
Article 120 of the Labour Law (which include failing to carry
out basic duties under the employment contract or being
found drunk or intoxicated by drugs during working hours.
Incentive schemes
Share incentive schemes are not mandatory in the UAE,
but are fairly common in the case of very senior executives.
Fringe benefits
Common fringe benefits typically include private medical
insurance, accommodation allowance and an annual air
ticket allowance. In some cases, an education allowance or
company car will also be provided. There are indications
that mandatory private health insurance to be provided by
employers in respect of all employees will be introduced
throughout the UAE within the next couple of years. (It is
already mandatory within the Emirate of Abu Dhabi for
employers to provide private health insurance for
employees).
Deductions
There is currently no personal income tax levied in the UAE.
Generally, deductions from salary are prohibited, except in
certain limited circumstances provided in the Labour Law
(eg for the recovery of advances made by the employer, or
employee's contributions to a savings fund). The
deductions generally must not exceed one quarter of the
employee's remuneration.
Social security
There is no state-administered social security scheme for
non-UAE nationals. UAE national employees are obliged to
participate in the state-administered General Pensions and
Social Securities Scheme under Federal Law No. 7 of 1999
(the Pensions Law).
UAE national employees are obliged to contribute to the
General Pensions and Social Securities Scheme 5% of
their salary (by way of salary deduction), while employers
are obliged to contribute an amount equivalent to 15% of
the UAE national employee's salary, of which the State will
contribute 2.5%. Employees who are nationals of the other
GCC states must be enrolled in the pension scheme
applicable in their home country. Employees who are
enrolled in the statutory pension scheme will not be entitled
to receive an end of service gratuity under the Labour Law.
Hours of work
The maximum normal working hours are 48 per week, and
no employee should work for more than five consecutive
hours without breaks for rest, meals and prayer, amounting
in aggregate to at least one hour. The one-hour break is not
counted as part of the working hours. The maximum normal
daily working hours are eight, but may be increased to nine
in commercial establishments, hotels, restaurants, guard
duties, and other operations where the Ministry of Labour
so authorises.
During the Holy Month of Ramadan, the normal working
hours are reduced by two per day. This applies to all
employees, irrespective of whether they are Muslim or
observing the fast.
16 A guide to doing business in the UAE
Holidays and time off
Holidays
In addition to published official holidays (with full pay) that
are declared by the Ministry of Labour and Social Affairs for
the sector in which they are working (public or private), an
employee is entitled to minimum annual leave with full pay
in each year of service as follows:
two days for every month, if service is more than six
months but less than one year
30 days if service exceeds one year
pro rata for any fraction of the final year of service.
Family leave
After one year of continuous service, a working woman is
entitled to a total of 45 days' maternity leave with full pay.
(This would be "calendar" days, rather than "working days".)
This leave includes the period before and after delivery.
If the woman has not completed one year's service, the
maternity leave above will be granted with half pay.
In either of the above cases, maternity leave may not be
deducted from any other leave to which a working woman
is entitled.
At the end of the maternity leave, a woman has the right to
extend the leave for a maximum period of 100 days without
pay if this absence is caused by illness. This illness can be
continuous or interrupted, but in either case the employee
must provide a medical certificate that she is unable to work.
The illness must have been caused by the nature of the
employee's work or prior confinement.
During the 18 months following delivery, a working woman
who is nursing her child has a right to two daily breaks not
exceeding half an hour each for this purpose. These two
intervals are classified as part of the working hours and no
deduction in wages may be made in this respect.
Illness
An employee who is absent through illness (other than an
injury caused by his employment) must report it to his
employer within two days. After two days, the employer
may have the employee medically examined to verify the
cause of illness.
An employee is not entitled to any paid sick leave during his
probationary period.
Where an employee has completed more than three
months' continuous service following the end of his
probationary period (if any is stipulated in the contract of
employment) he is entitled to a maximum period of 90 days'
sick leave, which may be either continuous or cumulative in
respect of every year of service.
Payment during any sick leave taken by the employee is
calculated as follows:
the first 15 days with full pay
the following 30 days with half pay
any subsequent periods, without pay.
No remuneration is payable during sick leave if the
employee's illness is the direct result of the employee's
misconduct; for example, illness that is attributable to the
consumption of alcohol or narcotic drugs.
An employer may not terminate an employee's contract
during sick leave. Any such notice will be considered invalid.
Other time off
A Muslim employee is entitled once during his contract of
service to leave without pay for up to 30 days for
performing the Hajj pilgrimage (pilgrimage leave). Such
period does not count as part of annual leave or any other
leave to which the employee is entitled.
Health and safety
Accidents
An employer is obliged to provide adequate preventive
equipment to protect employees against the danger of
employment accidents and occupational diseases that may
occur during employment, as well as against fire and other
hazards that may result from the use of machines and other
machinery. Although employers are not obliged by law to
provide any form of insurance in this regard, as a matter of
practice, many of the larger employers, especially the
international companies, do so.
Health and safety consultation
An employer is obliged to inform each employee at the time
of recruitment of any dangers connected with the
employment and of the protective measures the employee
must take. While employers are not obliged to consult with
employees on health and safety issues, they are obliged to
display detailed instructions in a conspicuous position at the
workplace indicating the measures to be taken to prevent
fire and to protect the employees against hazards to which
they may be exposed while performing their work.
A guide to doing business in the UAE 17
Industrial relations and trade unions
Trade unions are not recognised nor are they
permissible in the UAE.
The Labour Law does not recognise collective
agreements.
There is no right to strike under UAE law.
There are no formalised requirements for employee
participation in the UAE, nor are there any works
councils.
Disputes relating to employment or termination of
employment should be referred to the Ministry of
Labour.
Acquisitions and mergers
General
There is no specific legislation that addresses the obligation
to inform and consult with employees in the event of any
business or share sale.
The Ministry of Labour and the Immigration authorities
should be notified where the business or share sale is to
have an effect on the employee's residence visa (eg if the
employer entity is changing, thereby resulting in a change
of sponsor for immigration purposes).
Information and consultation requirements
There are no information or consultation requirements
under UAE law.
Notification of authorities
If the business or share sale results in a change of
employer (whether by transfer of employment, or as a result
of merger), the Ministry of Labour and Immigration
authorities should be notified, as it would be necessary to
transfer the sponsorship of the employee to the new
employer.
Termination
Individual termination
A contract under the Labour Law may be terminated:
by mutual consent, provided that the employee
consents in writing
where a contract is for a fixed term, upon its expiry,
unless it is expressly or impliedly renewed
where a contract is for an unlimited period, by at least
30 days' notice of either party given for a valid reason
in accordance with the Labour Law.
Provided that certain conditions apply, the Labour Law
provides for a one-off payment to be made to an employee
on the expiry or termination of an employment contract. An
employee completing one year or more of continuous
service is entitled to end of service benefits to be calculated
as follows:
21 days' wages for each year completed for the first
five years of service
30 days' wages for each year thereafter,
provided that the total end of service benefits shall not
exceed a total of two years' wages. This gratuity payment is
calculated by reference to the last basic wage earned
(basic wage for these purposes does not include any
allowances or discretionary bonuses). The Labour Law
provides that the remuneration used as a basis for the
purpose of calculating the severance pay shall not include
what is given to the employee in kind, including housing
allowance, transport, travel allowance etc. Further, the
employer is entitled to deduct any amounts owed to him by
the employee from the latter's severance pay.
The prevailing opinion is that any amount payable to an
employee as wages, including wages paid by commission
or payment by percentage, may fall within the definition of
wages and be taken into consideration in calculating
gratuity payable.
Where an employee under a fixed-term contract resigns
before the end of his contract, he will not be entitled to the
full amount of gratuity unless his continuous service has
exceeded five years.
An employee under an indefinite term contract who resigns
after continuous service of:
between one and three years, is entitled to one third of
the gratuity provided for in the Labour Law
between three and five years, is entitled to two thirds of
the stipulated gratuity
more than five years, is entitled to the full gratuity.
However, where an employer terminates an employee's
indefinite term contract, the full gratuity will generally be
payable.
The Labour Law states that where the employer has
provided accommodation to the employee, the employee is
obliged to vacate the premises within 30 days of the date of
termination of employment. Where the employee disputes
the amount of his end of service entitlements, these shall
be determined by the Labour Department, and, in this case,
the 30-day period for vacating the accommodation shall
18 A guide to doing business in the UAE
commence from the date that the employer deposits the
value of the expenses and entitlements as determined by
the Labour Department concerned (such as the requisite
gratuity).
Where an employee is a UAE national, termination of
employment may only be done in accordance with the
provisions of Ministerial Resolution No. 176 of 2009.
Notice
The Labour Law requires the employer to give a minimum
of 30 days' notice for terminating an employment contract,
although it is open to the employer to extend this period,
and the court will uphold the notice period most beneficial
to the employee. Payment in lieu of notice is permissible
and should be calculated on the basis of the last
remuneration received.
In addition, where the contract provides for a longer notice
period, that longer period of notice should be given to the
employee.
An employer may dismiss an employee without notice, and
with forfeiture of the statutory end of service gratuity, for
one of the reasons set out in Article 120 of the Labour Law,
namely:
if the employee adopts a false identity or nationality or
submits forged certificates or documents
if the employee is engaged on probation and is
dismissed during the probationary period or on its
expiry
if the employee makes a mistake resulting in
substantial material loss for the employer, provided
that the employer notifies the Labour Department of
the incident within 48 hours of its becoming aware of
its occurrence
if the employee disobeys instructions regarding
industrial safety or the safety of the workplace,
provided that such instructions are in writing and have
been posted in a conspicuous place and, in the case of
illiterate employees, such instructions have been
explained to them verbally
if the employee does not perform his basic duties
under the employment contract and persists in violating
them despite the fact that he has been the subject of a
written investigation for this reason and that he has
been warned that he will be dismissed if such
behaviour continues
if the employee reveals any secret of the establishment
in which he is employed
if the employee is finally sentenced by a competent
court for an offence involving honour, honesty or public
morals
if the employee is found in a state of drunkenness or
under the influence of a drug during working hours
if, while working, the employee assaults the employer,
the responsible manager or any of his colleagues
if the employee is absent from work without a valid
reason for more than 20 non-consecutive days, or for
more than seven consecutive days.
Reasons for dismissal
In the event that the employee's contract cannot be
severed by mutual agreement, the Labour Law provides
that an employee's contract may only be cancelled for a
"valid reason". In essence, dismissal of an employee for
reasons relating to his work performance will generally
constitute a valid reason. In the case of redundancy, where
the underlying reason has nothing to do with the
employee's performance, it is unlikely to be considered a
valid reason for termination. Where, however, the employee
is dismissed for reasons other than his work performance,
he is deemed to be "arbitrarily dismissed". In this regard,
Article 123 of the Labour Law provides that the employer
may be ordered by the court to pay compensation to the
employee. In assessing the relevant quantum of
compensation, the court is likely to look at the nature of the
employee's job, what damage has been caused to him, the
duration of his service and the reason for termination of his
employment. Such compensation is subject to a maximum
of three months' remuneration. Accordingly, employers are
advised to make the reasons for dismissal clear in any
letter of termination, and to ensure that they comply with
the concept of "valid reason" under UAE law.
In a 2012 Dubai Court of Cassation case, the court
recognised that where an employer changes the terms and
conditions of employment to the detriment of the employee,
such that the employee is forced to resign, this may amount
to arbitrary dismissal. Although the concept of "constructive
dismissal" is not expressly recognised in UAE law, this
case brings under the scope of "arbitrary dismissal"
circumstances which may be akin to constructive dismissal
in other jurisdictions.
If the employer terminates a fixed term contract for reasons
other than those specified in Article 120 of the Labour Law,
he will be liable to pay compensation to the employee. The
compensation shall be determined on the basis of the
A guide to doing business in the UAE 19
wages due for a period of three months or for the remaining
period of the contract, whichever is less.
If an employee under a fixed term contract resigns before
the end of his contract, he will be required to pay
compensation to his employer for any prejudice that the
employer suffers as a result of the early termination. The
maximum amount of such compensation is limited to the
lesser of one and a half months' remuneration or the
remuneration for the rest of the contract period.
As a starting point, in order to ensure that the Standard
Form Contract in the UAE is terminated officially in the eyes
of the Labour Department, the standard Arabic release form
should be signed. In addition, a compromise agreement
may be a good idea for additional protection in relation to
confidentiality etc. From a UAE law perspective, the
compromise agreement should be drafted in such a way
that the employee acknowledges that the amount he
receives under the agreement is in full and final settlement
of all amounts having arisen or accrued by virtue of the
Standard Form Contract. Such acknowledgement should
expressly include all of his employment rights in the form of
salary, benefits, annual vacation, settlement of account,
expenses and end of service gratuity due to him under the
laws of the UAE and the terms of his contracts.
Special protection
An employer cannot terminate an employee's contract
during annual leave. The Labour Law does not expressly
include any protection against dismissing employees on
maternity leave.
In the event of an employment dispute, the aggrieved party
should file a complaint with the Labour Department. The
Labour Department will summon both parties to a hearing,
and shall endeavour to ensure that the dispute is resolved
amicably. Neither party is permitted to have legal
representation at this hearing.
If the parties are not able to reach an amicable settlement,
the Labour Department shall refer the dispute to the Court.
No claim based on an employment dispute may be heard if
brought to court after one year from the date on which the
entitlement became due.
There are no provisions in the Labour Law addressing
redundancy dismissals.
Closures and collective dismissals
The Labour Law does not address the procedure for and/or
gratuity payments applicable in the context of an individual
or collective redundancy exercise.
Data protection
Employment records
There are no comprehensive data protection laws in the
UAE (outside of the free zones), although it is anticipated
that a Federal law on data protection will be issued in the
near future. There are also various pieces of legislation that
may have an impact on the security and processing of
personal data in certain circumstances including employee
records.
The Labour Law obliges an employer, who employs five or
more employees, to collect and maintain certain personal
information in respect of each employee. This information
includes the employee's name, address, marital status,
nationality, remuneration, date of recruitment, any penalties
imposed on him, any employment injuries or occupational
diseases, and the date of and reasons for the termination of
employment. The Penal Code prohibits the publication of a
person's private affairs. In Dubai only, the Transactions and
Electronic Trade Law (Dubai Law No. 2 of 2002) makes it a
criminal offence for any person "enabled by powers granted
to him by this law" to access information contained in
electronic registers or documents or correspondence
deliberately or negligently to disclose such information. It
seems that this provision is primarily aimed at persons who
provide electronic authentication certificates or other
verification services, but there is the possibility that it might
be construed more widely to include other persons who are
entrusted with electronic data, such as employers.
Employee access to data
There are no specific provisions in UAE law entitling an
employee to request copies of, or access, to data held
about them.
20 A guide to doing business in the UAE
Monitoring
There are no specific provisions in UAE law entitling an
employer to monitor employee email, internet and
telephone usage and use CCTV within the workplace.
The UAE Constitution states that freedom of
communication by post, telegraph or other means of
communication and secrecy shall be guaranteed in
accordance with the law. In addition, the UAE Penal Code
establishes criminal offences in relation to the disclosure or
use of "secrets" (including the inception or disclosure of
correspondence or telephone conversations).
Transmission of data to third parties
There are no specific provisions in UAE law dealing with
the transmission of personal data to third parties either
within the UAE or elsewhere. However, circumstances in
which electronic personal information may be accessed or
disclosed are also restricted by a number of laws in the
UAE.
A guide to doing business in the UAE 21
Land/real estate The basis of UAE real estate law and the real estate
rights available within the UAE is found in the Civil
Code. The Civil Code does not address important areas
such as the registration of the transfer of land or
property rights and other interests. Accordingly, the
majority of the Emirates have passed their own local
laws in relation to these (and other) areas, in order to
supplement the Federal law. Although it is not always
apparent where the distinction between Federal and
Emirate law lies, these local laws have had an
important role in developing the regulation of real
estate in the UAE.
In a real estate context it is therefore important to consider
not only the applicable Federal laws, but also the specific
laws that will apply at the Emirate level (which will depend
on the location of the real estate). It is also important to
note that certain free zones in the UAE, such as the DIFC
and to a certain extent the Jebel Ali Free Zone, have
bespoke laws which apply to real estate situated within
those free zones.
Real estate rights
As noted above, the Civil Code sets out and describes the
types of real estate rights that are available in the UAE.
These are:
Absolute ownership
This is the right to own real estate outright, without
restriction as to time, and is akin to the common law
concept of "freehold" title. An absolute owner of land will
own the area of land, together with the rights benefiting the
land and any improvements constructed upon such land,
but will be subject to matters affecting the land, such as
easements.
Musataha
A right of musataha confers both a right to occupy another
person's land for a period (under the Civil Code the
maximum period is 50 years but under some Emirate laws
this term is renewable), as well as a right to build on or alter
the land that is the subject of the right. Any improvements
erected by the musateh (the grantee) will legally be owned
by the musateh during the term of the musataha and
ownership of the land interest is bifurcated from the right to
build on or alter the land. A right of musataha is sometimes
described in the UAE as a "development lease". In common
law jurisdictions a musataha is similar to a "ground lease"
or a "bare lease".
Usufruct (Intifa)
This is the right to use and occupy real estate belonging to
another person for a period (under Emirate laws the
maximum term is 99 years, which is renewable). The right
needs to be exercised in accordance with the terms of the
instrument granting the right, therefore there may be
restrictions on how the real estate may be used.
Accordingly, a right of usufruct shares a number of
characteristics with a long-term lease.
Each of the Emirates has passed its own laws restricting, to
varying extents, the ability of "foreigners" to obtain the
above rights over real estate within those Emirates.
Leases
The above three rights are all rights in rem, ie they confer
upon the holder a right in the relevant property, and this
right "runs with" or attaches to the property. Under the Civil
Code, leases (which are described in the Civil Code as
"hire contracts") only confer upon tenants a personal
contractual right, as opposed to granting any actual right in
the relevant property. Consequently, as a lease is a
personal contract, the rights under it are only enforceable
against the counterparty and are not directly enforceable
against third parties. This is in marked contrast to other
jurisdictions where a lease is itself a property right.
Notwithstanding the position under the Civil Code, changes
to the law and policy in Abu Dhabi and Dubai, respectively,
have resulted in leases over a certain duration being
treated as rights in rem – 25 years in Abu Dhabi and 10
years in Dubai.
Registration of rights and interests
Registration
Generally speaking, under Abu Dhabi law, any title to or
right in real estate must be registered at the Abu Dhabi
Land Registration Department (the LRD).1 An unregistered
dealing with any such title or right will be binding and
enforceable as between the contracting parties but not
enforceable against third parties. The position in Dubai is
stricter in that unless such dealing is registered at the Dubai
Land Department (the DLD) it is invalid.
1 There is an on-line tenancy registration system called "Tawtheeq"
which is now increasingly being used by landlords and tenants but
this system is only intended for leases of four years or less.
22 A guide to doing business in the UAE
In Abu Dhabi, recent changes to the law appear to now
require that all leases must be registered, whereas
previously only leases over four years in length needed to
be registered. In Dubai, leases over 10 years in length must
be registered at the DLD and leases of less than 10 years
need to be registered with the Real Estate Regulatory
Authority.
The information on the registers maintained at the various
land departments is not publically searchable. Generally,
only interested parties and judicial authorities have access
to this information.
Dubai's interim register
In 2008, the DLD established an interim real estate register
(Interim Register) for Dubai property developers to record
all "off-plan" sales of real estate. An "off-plan" sale is one
where the property has yet to be built, so the buyer is
purchasing on the basis of the plans of the property. The
applicable law states that any "off-plan" sale which is not
recorded on the Interim Register will be void. A registered
"off-plan" contract can be mortgaged, despite only being a
personal contract. Once construction of the property is
complete and the transaction has been concluded,
application must be made to "transfer" the registration to
the DLD's "full" Real Estate Register. The fees to register
dealings with "off-plan" property on the Interim Register are
generally the same as those applicable in respect of the
Real Estate Register and purchasers should not be
expected to pay twice.
Foreign ownership restrictions
Abu Dhabi
UAE nationals
UAE nationals and companies wholly-owned by them are
permitted to own (as well as obtain inferior usufruct or
musataha rights in) all types of real estate anywhere in Abu
Dhabi. Certain Abu Dhabi entities which have an element of
foreign shareholding may, by special exemption from the
Abu Dhabi government, be granted "UAE national status"
for this purpose. These exempted entities are therefore also
permitted to own real estate throughout Abu Dhabi. As far
as we are aware, only Aldar Properties PJSC (which has
recently merged with Sorouh Real Estate PJSC), which is
Abu Dhabi's largest listed property developer, currently
holds such an exemption. We understand that certain utility
companies have also been granted exemptions, but the
extent of those are unclear. The exemptions have largely
not been published.
GCC nationals
The ability of GCC nationals (and companies wholly-owned
by them) to acquire real estate rights is limited to certain
designated areas, known as "Investment Zones", which
include the following developments: Al Reem Island, Al
Maryah Island, Saadiyat Island, Yas Island, Al Raha Beach
and Masdar City. In these zones, GCC nationals may own
land outright and may also be granted usufruct and
musataha rights over land and usufruct rights in buildings
and apartments.
Foreign nationals
"Foreign" nationals (ie individuals not falling into the above
categories) and companies owned in any part by them are
not permitted to own land in Abu Dhabi. They may own
apartments or "floors" within buildings in "Investment
Zones", but not the land that those buildings are situated on.
They may, however, be granted usufruct, musataha and
long-term lease rights over land in "Investment Zones". In
addition, a foreign national may, for a term of less than 25
years, lease anywhere in Abu Dhabi (ie not a "long-term
lease").
A company with any foreign shareholding will be
considered a foreign national, and will therefore be subject
to these restrictions, unless it receives an exemption as
outlined above. In determining the eligibility of a company
to acquire a right over real estate in Abu Dhabi, the LRD
will look through the ownership chain to determine the
nationality of the ultimate shareholders of that company.
According to a recent announcement by the Abu Dhabi
Municipality, foreigners will now be permitted to own land in
the Investment Zones in Abu Dhabi but this has not yet
been implemented in any legislation and further details are
required.
Dubai
The law relating to foreign ownership of property is less
restrictive in Dubai than it is in Abu Dhabi. There are only
two tiers of property ownership in Dubai (in contrast to Abu
Dhabi's three), which are:
UAE nationals, GCC nationals and PJSCs
These parties are permitted to own land and obtain real
estate rights in property anywhere in Dubai.
Foreign nationals
Foreign nationals (and companies with any shareholding)
are permitted to own real estate or acquire usufruct rights in
A guide to doing business in the UAE 23
real estate, but only within certain "Designated Areas".
There are currently over 20 "Designated Areas" in Dubai,
which include most Nakheel and Emaar master
communities (eg the Palm Jumeirah and Downtown Dubai),
as well as most (but not all) of Dubai's free zones.
The DLD implemented a new policy with effect from 1
January 2011 concerning the types of foreign national
entities which are permitted to hold title to land in Dubai's
"Designated Areas". Previously, entities incorporated
offshore, in jurisdictions such as the Cayman Islands, the
British Virgin Islands, etc., were able to hold title to land in
these areas. However, the policy now provides that
offshore companies may only hold real estate through a
Jebel Ali Free Zone entity or registered branch. Verbally,
the DLD has also confirmed that offshore companies could
also hold interests through the Dubai International Financial
Centre and the Dubai Technology and Media Free Zone
(TECOM) entities. Companies registered in free zones
outside Dubai would not be able to hold real estate in Dubai
directly.
Other Emirates
The restrictions on foreign ownership of real estate vary in
the other five Emirates. There are generally no restrictions
on the ownership of real estate by UAE nationals. GCC
nationals are also typically unrestricted; however, in some
Emirates, the Ruler's consent is required. Foreign nationals
are usually either prohibited from owning real estate or
limited to owning buildings and apartments or real estate
within designated areas. In Fujairah there is no applicable
law pertaining to ownership, while in the other four Emirates
the position is usually based on a mixture of law and policy.
Ownership structures that comply with the foreign
ownership restrictions
A long-term lease is one of the methods that is used in
the UAE to ensure compliance with the foreign
ownership restrictions. Foreign entities wishing to obtain
an interest in real estate in a restricted area (ie an area
which does not permit foreign ownership) sometimes do
so by way of long-term lease. However, changes to the
law and policy in Abu Dhabi and Dubai have meant that
leases over a certain length of term are now considered
property rights (which foreign nationals are prohibited
from obtaining outside of certain designated areas).
These changes are designed to prevent foreign entities
from circumventing the restrictions in this way.
Accordingly, consideration must be given as to the
length of the term of a long-term lease granted for this
purpose, in order to avoid potential breaches of the
restrictions.
An Islamic structure known as a mudaraba arrangement
is another method which is sometimes employed by
foreign national entities wishing to invest in real estate in
the UAE. Broadly speaking, this arrangement involves
the foreign entity "partnering" with a UAE company
whose shareholding permits it to acquire ownership of
the relevant real estate. The foreign entity provides
funds to the UAE company for investment in accordance
with an agreed investment plan, and the revenues
derived from the assets purchased are split in
accordance with a pre-agreed profit sharing ratio.
24 A guide to doing business in the UAE
Legal environment The UAE has a civil law system and its laws draw
heavily on the laws of other Arab countries, in
particular Egypt.
Federal court system
The Constitution provides for a Federal court system, but
acknowledges the right of each constituent Emirate to
maintain an independent legislative body and judicial
authority. Currently, the Emirates of Ajman, Fujairah,
Sharjah and Umm Al Quwain have joined the Federal court
system. The Emirates of Dubai, Ras Al Khaimah and (since
2007) Abu Dhabi maintain separate court systems. Federal
laws that apply to all seven Emirates govern rules of
evidence and court procedure.
The Federal court system comprises a Court of First
Instance in each Emirate and a two-tier appeal system. The
Federal Courts of First Instance are trial courts and located
in each major city. Decisions of one of the Federal Courts
of First Instance may be appealed to one of the Courts of
Appeal in the Emirate in question, and a further appeal on
matters of law can then be made to the Court of Cassation
in Abu Dhabi (known as the Court of Cassation, Federal
Supreme Court or, on occasion, Union Supreme Court).
The Federal Supreme Court hears any dispute between the
individual Emirates, as well as disputes between the
Emirates and the Federal Government. It is also ultimately
responsible for the interpretation of the Constitution and of
the constitutionality of all legislation issued at either Federal
or Emirate level.
The types of courts, which make up the legal framework for
each Emirate within the Federal Court system, are: (i) the
civil courts; (ii) the Shari'a courts; and (iii) the criminal
courts. Generally, the civil courts have exclusive jurisdiction
over civil, commercial, company, insurance, banking and
maritime matters. The Shari'a courts on the other hand
have exclusive jurisdiction in connection with all family law
matters. Both courts have non-exclusive jurisdiction in
respect of criminal proceedings; although in practice, civil
courts usually hear most criminal matters.
Other domestic court systems
The Emirates of Dubai and Abu Dhabi have their own
Courts of Cassation that operate independently from the
Federal Supreme Court (as mentioned above, in all
Emirates other than Dubai, Abu Dhabi and Ras Al Khaimah,
the final appeal will be to the Federal Supreme Court also
located in Abu Dhabi).
In addition, in a number of the Emirates there are quasi-
judicial bodies dealing with the resolution of disputes in
specified areas of law or in relation to specific entities (such
as rental disputes and commercial agency disputes and
special committees for Dubai World and Zabeel
Investments). The DIFC also has an independent court
system based on an international model to hear civil cases,
which are subject to separate laws and procedural rules.
The judgments of the local courts have no binding or
persuasive effect on the Federal courts of the UAE and
their persuasive effect is normally limited to their own
jurisdiction (for example, decisions of the Dubai Court of
Cassation may be persuasive on the Dubai Court of Appeal
and the Dubai Court of First Instance). Likewise, the
decisions of the Federal Supreme Court are not usually
persuasive in the local courts.
Precedent and interpretation of UAE
legislation
There is no concept of binding judicial precedent or formal
system of court reporting in the UAE, although an informal
system of precedent does operate in the Federal Supreme
Court (which covers Ajman, Fujairah, Sharjah and Umm Al
Quwain), the Dubai Court of Cassation (which covers
Dubai), the Ras Al Khaimah Court of Cassation (which
covers Ras Al Khaimah) and the Abu Dhabi Court System
(which covers Abu Dhabi). Therefore, the decisions of a
court in one case will have no binding authority in respect of
another case. Such decisions may, however, be persuasive
and indicative of how the courts may react in cases with
similar issues and disputes. Accordingly, given that each
case is fact dependent, it is difficult to reach a conclusive
interpretation on the laws of the UAE or to predict how the
UAE courts would view a specific project or any of its
transactional agreements and their particular provisions.
The courts should, in theory, follow a set pattern when
interpreting the laws of the UAE. Federal Law No. 18 of
1993 (as amended) (Commercial Code) governs
commercial transactions and further provides that in the
absence of a provision (ie of a specific law) regarding a
specific matter, the following sources in the following order
may be referred to:
other laws and regulations relating to commercial
matters (especially local custom)
A guide to doing business in the UAE 25
if there is no specific law or relevant local commercial
custom, the provisions pertaining to civil matters in
general (as set out in the Civil Code) shall apply to the
extent that they are not in conflict with the general
principles of the commercial activity in question
the Civil Code in turn provides that Islamic Shari'a is a
reference source in the absence of a provision in the
Civil Code in respect of any particular matter.
The Civil Code exists alongside the Commercial Code. The
Commercial Code provides that the Civil Code will apply to
commercial as well as civil transactions other than insofar
as it contradicts the provisions of other laws and
commercial practices.
Arbitration in the UAE
Overview
At present, there is no law in the UAE (outside the DIFC)
that deals exclusively with arbitration or alternative dispute
resolution in the UAE. Rather, arbitration in onshore UAE is
governed by Articles 203 to 218 of the UAE Civil Procedure
Law.
There are three prominent domestic arbitration centres
within the UAE. They are the Dubai International Arbitration
Centre (DIAC), the Dubai International Financial Centre –
London Court of International Arbitration Centre
(DIFC-LCIA) and the Abu Dhabi Commercial Conciliation
and Arbitration Centre (ADCCAC). There are other centres
for arbitration in the Emirates, such as in Ras Al Khaimah
and Sharjah, but these centres are of lesser prominence.
The DIAC is based in Dubai and administers arbitrations
under the DIAC Arbitration Rules 2007. The DIAC also
serves as an appointment or challenging authority in ad hoc
arbitral proceedings. The default seat of arbitration under
the DIAC Rules is Dubai, although the parties are of course
free to determine the seat in their arbitration agreement.
With respect to the language, unless otherwise agreed by
the parties the initial language will be that of the arbitration
agreement. The Tribunal then enjoys the power to
determine the language(s) of the arbitration having regard
to the observations of the parties and all relevant
circumstances of the case.
The DIFC-LCIA Arbitration Centre is based in the DIFC and
administers arbitrations under the DIFC-LCIA International
Rules of Arbitration 2008 (in association with the London
based LCIA). It also serves as an appointment or
challenging authority in ad hoc arbitral proceedings. Absent
a choice from the parties, the default seat of arbitration is
the DIFC. Like the DIAC Rules, absent party choice, the
initial language of the arbitration will be that of the
arbitration agreement. The Tribunal may then determine the
language(s) of the arbitration after taking into account the
initial language of the arbitration and any other matter it
considers appropriate in the circumstances of the case.
ADCCAC administers arbitrations under the ADCCAC
Procedural Regulations of Arbitration, which came into
force on 1 October 2013. The place of the arbitration will be
Abu Dhabi and the language will be Arabic unless
otherwise specified by the parties.
Choice of arbitration
The parties to an agreement may agree to refer a dispute
relating to that agreement to arbitration. Such an
agreement must be clear and in writing. Best practice
dictates that the arbitration agreement should specify a
particular arbitral institution (unless the parties wish for the
arbitration to be ad hoc), a place or "legal seat" of the
arbitration, the number of arbitrators, the language of the
arbitration and the governing law which will apply to the
merits of the dispute being referred to arbitration. Evidence
must be provided that the parties have knowledge of the
arbitration clause which is normally implied when a party
has signed an agreement. Accordingly, a court may not
uphold an arbitration clause which is printed as a standard
clause in fine print in terms and conditions or at the back of
an invoice or delivery note unless specific attention is
drawn to that clause, and the terms and conditions are
signed.
UAE
Joint stock companies are prohibited from entering into an
arbitration agreement without express power in their articles
of association or a resolution of the shareholders.
No contract entered into with the Government of Dubai, its
departments or corporations, may stipulate arbitration
outside Dubai, or the application of any laws or procedures
other than those of Dubai. Any provision to the contrary is
void and shall not be binding on the Government. It is
possible for His Highness Sheikh Mohammad bin Rashid
Al-Maktoum to disapply the aforementioned restrictions.
There is also an Executive Council Resolution from 1985
which, on the face of it, provides that no foreign arbitration
provisions will be enforceable in any contracts with Abu
Dhabi government departments and that any dispute
should be referred to the UAE courts.
26 A guide to doing business in the UAE
Procedure
If no particular arbitration procedure has been specified in
the contract, then the rules followed by arbitrators tend to
be a combination of local practice, standard principles and,
possibly, the rules of a well-known institution. Where the
parties agree to arbitrate under the rules of a particular
institution, then those rules will be adopted and followed.
There are no requirements for the arbitrators to be UAE
nationals or that the proceedings must be conducted in
Arabic. These aspects will therefore depend on the
agreement entered into between the parties.
Jurisdiction
UAE courts will not hear an action if the parties have
agreed to refer it to arbitration in the UAE or abroad.
Generally, any agreement to refer a dispute to arbitration
must be brought to the court's attention at the first hearing
of the case. If the court's jurisdiction is not challenged at
this first hearing, the courts will assume that the parties
have waived their rights to refer the matter to arbitration. If
the litigation proceedings are challenged, the court will stay
the proceedings unless there is a reason for the court to
invalidate the arbitration clause. An arbitrator must deliver
the award within six months of the first hearing; otherwise
the parties may ask the court to deal with the dispute. It is
open to the parties to agree to extend the six-month period.
The arbitration award
The arbitral award once it is passed will become binding on
the parties and will not be subject to appeal.
In the UAE, an arbitral award must be ratified by the court
before enforcement. This normally will be made by an
application to the court by way of an action requesting the
court to ratify the award for the purpose of enforcing the
same. Typical of most jurisdictions, the UAE courts cannot
consider the merits of the arbitrator's findings and an
application to nullify an award must be on purely procedural
grounds which are outlined in Article 216 of the UAE Civil
Procedure Law.
A party may apply to the court to nullify an award at the
same time as the court is looking into validating an award.
Therefore, in the UAE (in contrast to other jurisdictions) the
validation or nullification of an arbitral award becomes
effectively the subject of a separate legal action. This is an
often-practised tactic by defendants who wish to nullify an
award on the basis of procedural errors. The claimant will
not be able to enforce the arbitral award until it is converted
into a final judgment confirming the validity of the original
award. This process can often delay the enforcement of an
award anywhere between six months to several years.
However, this may now only apply to domestic arbitration
awards (ie arbitration awards issued in the UAE) as
ratification of non-UAE arbitral awards are likely to be dealt
with under the New York Convention.
Recognition and enforcement of non-UAE arbitral
awards (other than the DIFC)
In July 2006, the UAE ratified its accession to the New
York Convention. By this ratification, the UAE joined its
GCC neighbours Oman, Bahrain, Qatar and Saudi Arabia
who have already ratified the New York Convention. It
entered into force in the UAE on 19 November 2006.
The New York Convention provides for the recognition and
enforcement of non-UAE arbitral awards in over 135
countries worldwide, subject to a limited number of
defences.
It applies to "non-UAE" arbitral awards, which are defined
as "arbitral awards made in the territory of a State other
than the State where the recognition and enforcement of
such awards are sought", as well as those that are "not
considered as domestic awards" in the State where
enforcement is sought.
The New York Convention is based on two important
principles; first, that of recognising the importance of
arbitral agreements, and second, any review of the arbitral
award is limited to specified grounds only. It is hoped that
this will substantially simplify the "validation" of arbitral
awards by the UAE Courts, but it remains to be seen how
the New York Convention provisions will be interpreted
and applied in practice.
The New York Convention sets out limited grounds on
which recognition and enforcement of an arbitral award
may be refused. It provides, for example, that recognition
and enforcement of a non-UAE award may be refused by
the court of its own motion in the country where
enforcement is sought where the court finds that the
subject matter of the dispute is not capable of being
settled by arbitration or recognition and enforcement would
be contrary to public policy.
The New York Convention specifically prohibits the
imposition of substantially more onerous conditions on the
recognition and enforcement of non-UAE arbitral awards
than are imposed on the enforcement of domestic arbitral
awards. It does not affect the validity of any multilateral or
bilateral agreement on enforcement of awards, or the
rights available to an enforcing party, under local law in the
country of enforcement.
A guide to doing business in the UAE 27
Enforcement in the UAE
The key issue in determining whether a foreign judgment
will be enforced in the UAE is reciprocity. In order to
enforce the foreign judgment, it is necessary to
demonstrate to the UAE court that a judgment from the
UAE would be enforced by the foreign court. Such
reciprocity is most easily demonstrated where a treaty or
convention on enforcement exists between the UAE and
the foreign jurisdiction.
The UAE is a party to a number of bilateral and multilateral
treaties/conventions. The UAE has reciprocal enforcement
agreements in place with the GCC States on the
recognition and on the enforcement of judgments and
arbitral awards, France and India and co-operative
arrangements with other countries, including Syria, Egypt,
Jordan, Tunisia, Algeria, Sudan, Somalia, Djibouti,
Palestine, Lebanon, Libya, Morocco, Mauritania and
Yemen.
Generally, in the absence of a bilateral treaty/other
convention, non-UAE judgments are not automatically
enforced, as the procedure for enforcement of non-UAE
judgments is restrictive and heavily qualified. Even in cases
where a treaty/convention is in existence, enforcement
difficulties are likely to arise because of conditions
contained therein and powers given to judicial authorities to
look into conditions and evaluate them, although the
provisions of the treaty will be applied before local law.
In circumstances where there is no treaty/convention, for
UAE courts to enforce a non-UAE judgment it is not
sufficient that the non-UAE court had jurisdiction in
accordance with its own jurisdictional criteria. The following
terms and conditions for the enforcement and
implementation of non-UAE judgments (and arbitral awards)
must be met:
there is an overriding requirement to show reciprocity
of enforcement between the UAE and the country in
which the non-UAE judgment or order has been
granted
the UAE courts themselves must not have jurisdiction
in the proceedings in which the non-UAE judgment has
been issued and the relevant court issuing the
judgment had jurisdiction according to the law
governing that court. If both the non-UAE and the UAE
courts would have had jurisdiction in accordance with
each court's respective jurisdictional criteria, then the
UAE courts will not enforce the non-UAE judgment
the non-UAE courts must have had the requisite
jurisdiction under the applicable international rules
prescribed by the law governing any relevant court to
hear the dispute
the judgment or order must have been issued by a
competent court under the laws of the court in which it
was issued
the parties to the proceedings in relation to which the
judgment was issued gave due notice of the
proceedings, were properly summoned to appear and
did duly appear before the non-UAE court
the judgment is final under the law governing the
relevant court
the judgment does not conflict with any existing UAE
judgment
the judgment does not breach UAE public policy, order,
morals, or Islamic Shari'a.
If the above conditions have been satisfied, the non-UAE
judgment may be enforced directly by court order in the
UAE. In the event that the relevant UAE court is not
satisfied with any matter listed above, then it is likely that
the unsuccessful party will file a fresh claim.
The procedure for enforcement is the same as that for an
ordinary court action; an enforcement order application is
brought before the Court of First Instance within whose
jurisdiction enforcement is required. The application must
be accompanied by the non-UAE judgment (duly notarised,
legalised and consularised before the UAE embassy or
While the ratification of the New York Convention is to be
welcomed, it still remains to be seen how easy it will be in
practice to enforce non-UAE arbitral awards in the UAE.
As a note of caution, in some of the other Gulf countries
(eg Saudi Arabia), where the New York Convention does
apply in theory, it is still very difficult to enforce foreign
arbitral awards in practice. However, this important
development should be considered when drafting dispute
resolution mechanisms in contracts.
The uncertainty regarding the interpretation and
application of the New York Convention provisions by the
UAE courts is further reinforced by the lack of a system of
binding judicial precedent in the UAE and the
independent existence of different Emirates within the
UAE, some with their own court systems, whose rulings
may have no more than persuasive force cross border.
There is therefore no guarantee that the UAE courts will
take the same approach in similar proceedings in the
future.
28 A guide to doing business in the UAE
consulate in the country where it was issued). Reciprocity
of enforcement evidence is usually provided in the form of
an affidavit from an independent lawyer in the relevant
country. A hearing date is then fixed at which both parties
will be summoned before the court to hear the objection.
Any objection suspends enforcement proceedings until the
court either dismisses the objection or terminates the
enforcement process.
Practical implications of pursuing an
action/enforcing a foreign award or
judgment in the UAE
It is very difficult to predict the time it will take in practice to
bring successfully an action/enforce a foreign arbitral award
or foreign judgment in the UAE courts. The complexity of
the case, the level of engagement of the courts and the
other party will, in practice, determine the time taken.
Requirements for documents to be translated into Arabic
also add to time (and cost). In this respect, UAE law does
not mandate a standard disclosure and inspection process.
Therefore each party is only required to produce the
documentary evidence upon which it seeks to rely. For
evidence to be admissible within the UAE courts, all
documentation must be in Arabic and/or duly translated.
The Arabic translation, if submitted, is deemed to be the
definitive and binding version for the purposes of all
proceedings before such courts. Equally, foreign judgments
must be translated into Arabic, legalised and ratified by the
relevant UAE court before being enforced. All translations
carried out for the purpose of submission before the UAE
courts must be prepared and certified by a translator
suitably licensed by the UAE Ministry of Justice (who, in
addition, may be required to affix his official stamp, which
will require notarisation). In addition, certain documents
may need to be notarised, legalised and authenticated
before they can be enforceable or admissible in evidence
before a UAE court.
If a substantive action (ie a case) is brought in the UAE, or
if a party seeks to enforce a foreign arbitral award or
judgment, the action will proceed via a series of
documentary pleadings. Only once the judge considers he
has enough information before him will the case be
reserved for judgment – this means that there may be
upwards of five or six rounds of pleadings prior to judgment.
The same process is followed at Court of Appeal level
(where new evidence can be introduced and the basis of an
appeal can be law or fact) and the Court of Cassation level
(no new evidence and appeals restricted to points of law).
In all but the simplest of cases, the Court of First Instance
(and possibly the Court of Appeal) will appoint an expert to
review the pleadings and evidence submitted by the parties.
The expert will then produce a report outlining his
conclusions. The report is not binding on the Court of First
Instance, but in practice it is highly persuasive. This
process can be intensive, often taking months.
If any document is executed in the UAE pursuant to a
power of attorney, to be valid and enforceable in the UAE,
the power of attorney must be notarised (no document can
be notarised unless it is in Arabic whether or not there is
also text in another language) and, if executed outside the
UAE, must be legalised and authenticated.
Only UAE lawyers (that is, UAE national lawyers and
lawyers from certain other GCC countries who must satisfy
specified criteria before a licence is issued) have rights of
audience in the UAE. There will therefore be a need to
appoint a local law firm in order to bring an action/seek
enforcement of a foreign judgment.
A guide to doing business in the UAE 29
Product liability
The UAE has not enacted specific product liability
legislation; however, relevant provisions are contained
in various Federal laws and regulations, in particular:
Federal Law No. 24 of 2006 concerning Consumer
Protection (Consumer Protection Law)
Cabinet Resolution No. 12 of 2007 concerning the
Executive Regulation of Federal Law No. 24 of 2006
concerning Consumer Protection (Consumer
Protection Regulations)
the Civil Code
the Commercial Transactions Code
Suppression of Fraud Regulations – 4 of 1979 –
has provisions relating to false adversting.
The Consumer Protection regime is administered by
the Consumer Protection Directorate at the Ministry of
Economy (Directorate).
Product liability
The Consumer Protection Regulations protect consumers
from damage or harm arising from the use of a "commodity"
which is defective. A defect can be caused by the design or
manufacturing process of the product or as a result of not
warning the consumer about inherent dangers in the
product. Suppliers (which would include the manufacturer)
must ensure that consumers are properly educated in how
to use the products and are aware of any inherent or latent
dangers.
Under the product liability regime, a supplier may be liable
for any damage or harm resulting from use of a defective
product, providing spare parts in relation to the defective
product and providing any guarantees which have been
agreed or advertised.
Risks related to defective products
Recall
When?
The Consumer Protection Regulations contain "recovery"
provisions which require a supplier to issue a recall of the
product in the following circumstances:
discovery of a defect in the product (this is a very wide
definition which includes design and manufacturing
faults, non-compliance with standards, guarantee or
the specifications that are advertised by the supplier)
existence of reports or studies proving the existence of
a defect in the product
complaints received from consumers in relation to the
existence of a defect in the product
issuance of a notice from the Ministry of Economy
existence of recovery operations of the same product
abroad (ie a global recall of the product)
non-compliance of the product with adopted standards
in the UAE.
The recall provisions contained in the Consumer Protection
Regulations are very wide and, on a strict reading, would
appear to capture customer complaints, warranty claims
and minor defects in just one product, rather than a major
design fault which impacts the majority of products.
However, based on our understanding of product recalls
which have taken place in the UAE, the approach adopted
in practice in determining whether to institute a recall is
likely to be based on the following considerations:
the reasonable likelihood that the defect will affect all
or a material proportion of the products (ie the fault is
Repair, replace and refund
If a product or its spare parts are found to be defective,
the supplier will be held liable and will be required to
take one of the following actions (taking into account the
nature of the defect and the period for remedying such
defect):
repair the defective product
replace the defective product
refund the defective product.
Provided that the consumer takes into account the
nature of the defect and the period for remedying such
defect, the consumer has the right to select the action to
be taken to remedy such defect.
The supplier is also required to provide a substitute
product while any defect is being remedied.
In addition to the costs of remedying the defect, the
supplier is liable to a minimum fine of AED1,000 in
relation to the defective product and if the supplier fails
to indicate the hazards of using the product to the
consumer, thereby causing harm, he will be liable to a
minimum fine of AED10,000.
30 A guide to doing business in the UAE
either inherent in the products or there is a reasonable
chance that it will appear in all the products)
the defects would put the health and safety of
consumers at risk.
Procedure
The supplier must announce the recall in two daily
newspapers at least twice (one of which must be in Arabic)
and on the Ministry of Economy website within a period of
24 hours from issuing the recall. The advertisement must
measure not less than 15cm by 15cm and must include the
following information:
name and address of supplier
description of product, including trademark and country
of origin
description of the defect
instructions for consumers on how to minimise the risk
of harm occurring
instructions for consumers to be followed to repair and
replace the product or to receive a refund.
The Directorate reserves the right to specify further
measures in relation to advertising the recall.
The supplier must notify the Directorate within 14 days of
any recall being initiated and provide the following details:
details of the product, including supplier and country of
origin
a colour photo of the product and defective part
an accurate description of the defective product and
cause(s) of such defect
quantity sold and quantity recalled
description of the harm which could be caused to
consumers
the procedures which will be taken to recall the product
the means for announcing the recall, including period
and times for such announcement
procedures to be taken by the supplier in relation to the
defective product
expected period for remedying the defect of each
product.
We understand that the Ministry of Economy has issued a
policy statement in relation to motor vehicle recalls
requiring all notifications to the Directorate to be made
within 24 hours of a recall being issued.
While the regulations provide for the timeframe for the
notification to the Directorate, they do not provide a
timeframe for the recall itself to be initiated following
discovery of a defect. It would, however, be prudent to take
action as soon as practicable following discovery of the
defect as the Ministry of Economy does have authority to
initiate a recall on behalf of the supplier. In this instance all
costs of the procedures will be met by the supplier.
In the case of a recall the supplier must replace, repair or
refund the cost of the product or defective part of the
product for free, regardless of any guarantee or warranty
period. In addition, the supplier must cover all costs relating
to transporting the product or sending technicians to
replace or repair the product.
The Abu Dhabi Quality and Conformity Council has
launched a public portal, "Manaa", to promote, control and
monitor consumer safety in Abu Dhabi (website:
www.qcc.abudhabi.ae/English/MediaCenter/News/Pages/M
anaa.aspx). The Manaa portal is an interactive product
recall and incident reporting system which identifies
products that have been recalled.
We also understand that the Dubai Department of
Economic Development is in the process of launching a
similar website.
Penalties
If the supplier fails to recall a product while knowing there is
a defect in the product, it will be deemed to have committed
commercial fraud under the Suppression of Cheating and
Fraudulence in Commercial Transactions Law and will be
liable to a prison sentence of up to two years and a
maximum fine of AED10,000.
The supplier will also be liable under the Consumer
Protection Law for a minimum fine of AED1,000 in relation
to the defective product and if the supplier fails to indicate
the hazards of using the product to the consumer, thereby
causing harm, he will liable for a minimum fine of
AED10,000.
In addition, the Ministry has the authority to suspend the
trading of the business for up to a week if it does not
comply with the Consumer Protection Law and may refer
the issue to the courts to impose a permanent closure of
the business.
Other product liability matters
The Dubai Department of Economic Development has
published policies relating to consumer protection. Such
policies require suppliers to provide spare parts for a period
of five years from the date of purchase.
The supplier must also clarify the replacement policy in the
outlet by prominently displaying it in Arabic and in any other
foreign language.
A guide to doing business in the UAE 31
Intellectual property rights Since the initial adoption of laws relating to intellectual
property rights in 1992, the UAE has adopted laws
regulating trademarks, patents and industrial designs
and copyrights. The legal framework is developing and
the relevant government departments can take a long
time to process applications to register intellectual
property rights.
The Emirates Intellectual Property Association was
established to provide information and awareness to
the public about intellectual property rights. The offices
for regulating intellectual property rights in the UAE
include:
the Ministry of Information and Culture (Copyright
Department)
the Ministry of Economy (the Industrial Property
Authority deals with patents and the Trademark
Department deals with trademarks) (IP Authority).
Key legislation
Federal Law No. 37 of 1992 concerning Trademarks
(amended by Federal Law No. 19 of 2000 and Federal
Law No. 8 of 2002) (UAE Trademarks Law)
Ministerial Decision No. 6 of 1993 issuing the
Executive Regulations for Federal Law No. 37 of 1992
concerning Trademarks (amended by Ministerial
Decision No. 165 of 2001) (UAE Trademarks
Regulations)
Federal Law No. 17 of 2002 Regulating and Protecting
Industrial Property Rights For Patents and Industrial
Designs & Models (amended by Federal Law No. 31 of
2006) (UAE Patent Law)
Federal Law No. 7 of 2002 in Respect of Author
Copyrights & Parallel Rights (amended by Federal Law
No. 32 of 2006) (UAE Copyright Law).
International treaties
There is no requirement to register intellectual property
rights in the UAE if such rights have already been
registered in another country. Enforcement of such rights
may be obtained where the country in question has
acceded to treaties or conventions to which the UAE is an
intellectual property party. However, by registering such
rights in the UAE an intellectual property owner can ease
the manner in which enforcement is conducted.
The UAE is a member of, or has acceded to, the following
treaties and conventions which relate to intellectual
property rights:
WIPO Convention
Convention Establishing the World Intellectual Property
Organisation
Paris Convention for the Protection of Industrial
Property
Berne Convention for the Protection of Literary and
Artistic Works
Patent Cooperation Treaty (PCT)
Agreement establishing the WTO
WTO – Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement)
Convention for the Safeguarding of the Intangible
Cultural Heritage
Convention on the Protection and Promotion of the
Diversity of Cultural Expressions 2005
WIPO Copyright Treaty
WIPO Performances and Phonograms Treaty.
Trademarks
Overview
Under the UAE Trademarks Law, a trademark is anything
which takes a distinctive form, whether names, words,
signatures, letters, figures, drawings, symbols, titles, tax
stamps, seals, pictures, inscriptions, advertisements or
packs or any other mark or a combination thereof, which is
used or is intended to be used, either in distinguishing
goods, products or services. A number of symbols such as
public emblems, flags, official symbols, symbols of the Red
Crescent or the Red Cross and marks that mislead or
contain false information cannot be registered.
Registration and protection
Trademarks must be registered in the publicly accessible
Trademark Register at the Trademark Department of the
Ministry of Economy. The UAE laws do not provide
protection for unregistered trademarks.
A trademark may be registered in more than one class of
product or products in accordance with the International
Classification of Goods and Services under the Nice
Agreement. However, to register a trademark in more than
one class, separate applications must be submitted for
each class.
32 A guide to doing business in the UAE
The Trademark Department can restrict or amend a
registration application in order to prevent confusion with a
previously registered trademark. The Ministry of Economy
will consider and make a decision on a trademark
application within 30 days of submission.
If an application is suspended or rejected, the applicant can
lodge an appeal with the Trademark Department within 30
days from such suspension or notification.
If the Trademark Department accepts the application, it will
publish a circular relating to the trademark before
completing the registration. Any objections to a registration
will be heard by the Trademark Department.
A party that has registered a trademark is considered the
exclusive owner of such mark. The ownership of the
trademark cannot be disputed if it has been in continuous
use by the owner for at least five years after its registration
date with no party challenging the validity of registration.
The owner of a registered trademark will be able to prevent
third parties from using identical or similar marks. A
registration is valid for 10 years and may be renewed for
further periods of 10 years.
Transfer of ownership and licensing
The owner of a registered trademark may, in accordance
with a written and attested agreement, give a licence to one
or more persons to use the trademark for all or some of the
products or services.
An assignment, mortgage or licence agreement shall not be
binding unless it is entered in the Trademark Register and
published.
Infringement and penalties
Imprisonment and a fine of up to AED5,000 can be
imposed for counterfeiting or imitating a registered
trademark to mislead the public, make fraudulent use,
register a trademark belonging to another person knowingly
or misusing it or selling or distributing knowingly products
bearing a counterfeit trademark. Further, imprisonment and
a minimum fine of AED5,000 (not to exceed AED10,000)
can be imposed for using trademarks without consent or
falsely indicating a mark to be registered.
A second time offender will, in addition to the above, also
risk closure of its business for a period ranging from 15
days to six months.
A party suffering damage can bring a civil action against the
infringing party to seek compensation. Before initiating a
claim, the owner of the trademark can seek the following
preventive measures from the court:
the preparation by the defendant of a detailed
descriptive inventory of the articles and tools intended
to be used or actually used in committing a violation of
the Trademark Law
the seizure of the relevant goods after the claimant
submits a financial deposit to indemnify the defendant
for the value of the goods.
Patents and utility certificates
Overview
Patentable material may be protected by filing a patent
application with the IP Authority which will issue a
protection document in the form of either a patent or a utility
certificate.
The material must have a degree of novelty and
inventiveness, scientific basis and industrial application.
Patents are not issued for research, biological methods of
production of plants or animals, methods of diagnosis,
theories and hypotheses, plans or rules applicable to
authentic intellectual activities or material prejudicial to
public order if exploited.
Utility certificates are issued for industrially exploitable
inventions which do not have adequate inventive qualities
to be granted a patent.
If all other requirements of registration are met, a party that
files an application for a patent or utility certificate will have
priority over those who follow.
If patentable material is created on a contractual basis or
pursuant to an employment agreement, any rights to such
patentable material shall devolve to the employer unless
otherwise agreed.
The rights to patentable material devolve to the inventor
and their legal successors.
Registration
The name of the creator of the patentable material must be
mentioned in the patent or utility certificate unless otherwise
stated. An application may include a demand to consider
priority of entrustment to another application previously
submitted in a state that is a party to an agreement or
convention with the UAE. If an application is dismissed, a
period of 60 days will be granted during which the applicant
can file an objection to the dismissal with the Complaints
Committee of the Ministry of Economy. The patent
A guide to doing business in the UAE 33
certificate will be handed over to the applicant after 60 days
if no objection is filed.
The UAE is a signatory to the PCT, which allows a patent
registered in the UAE to be registered in other member
countries of the PCT. Protection is given to patents that are
registered in member countries of the PCT.
Transfer of ownership and licensing
A party can transfer a patent or a utility certificate before
the patent or utility certificate is granted. The transfer of a
patent or a utility certificate must be made in writing and be
signed by the contracting parties before the IP Authority
and then must be attested before the notary public. Any
assignment must be registered in the designated register.
Term and enforcement
The term of a patent is 20 years from the date of filing the
application and 10 years from the date of filing an
application in relation to a utility certificate. The holder of a
patent or utility certificate will be required to pay any annual
fee to register the patent or utility certificate. If a party fails
to pay the registration fee within six months from the initial
due date, the patent certificate will be rendered void.
The owner of the patent is entitled to prevent third parties
from using the process or any product generated as a result
of the use of the patent, and from using, retaining or
importing any resultant product without permission from the
patent owner.
In the UAE, if a party has, in good faith, manufactured or
utilised a patented product or process at the time another
party has lodged the protection application, such party shall
have the right to continue manufacturing regardless of
whether the third party has been granted a patent or utility
certificate.
Know-how
Practical know-how is statutorily protected against
unauthorised utilisation, disclosure and publication by third
parties so long as it is not placed in the public domain. To
receive the benefit of protection, measures should be taken
by the owner to keep the know-how confidential.
Although it is unlawful to use, disclose or publish know-how
without consent of the owner, if identical or similar
know-how is obtained by a person by lawful means it can
be used or disclosed to others without any consent from its
owner.
Industrial designs and industrial
drawings
Industrial designs or models (IDM) will not be subject to
protection unless registered with the IP Authority for which
it should be novel and innovative, capable of being used as
an industrial product and not cause prejudice to public
order or violate morals.
Protection is provided for 10 years from the date of
submission of protection application. Protection provides
the right to prevent third parties from using the IDM for
manufacturing or importing a related product or its use or
sale.
Copyright
Overview
Items can be copyrighted and protected by depositing such
copyrighted material with the Ministry of Economy but
failure to deposit does not prejudice protection. The items
which are subject to copyright include printed works,
computer software and its applications, databases and
similar works, lectures, musical works, audio-visual works
of art, architectural works, works of fine art, photographic
works, applied or plastic arts, diagrams, geographical maps
and derivative works of art.
Concepts, procedures, techniques, mathematical theories,
or abstract principles and facts will not be subject to
protection. Protection will not cover official documents,
news bulletins and similar work and works of art in the
public domain.
Only the author and his successor or the copyright holder
may authorise the exploitation of the copyrighted work in
any manner whatsoever. The author and his successors
may assign to a third party all or part of their rights to
exploit commercially the copyright provided that the
assignment is in writing and its purpose, duration and
territory are set out in the agreement.
Term of protection
An author's rights to commercial exploitation shall be
protected during the author's lifetime and extend for 50
years commencing on the first day of the calendar year
following the author's demise or the demise of the last
surviving joint-author in the case of joint authors.
Protection relating to applied works of art lapses after 25
years and for broadcasting authorities after 20 years,
34 A guide to doing business in the UAE
commencing on the first day of the calendar year following
the year of first publication.
Any person can apply to the Copyright Department of the
Ministry of Economy for a mandatory licence for copying or
translating, or both, any work protected under the UAE
Copyright Law after the lapse of three years from the date
of publication in the case of an application for translation.
Copyright holders may assign their respective rights to
commercial exploitation to specialised professional
associations which undertake the management of such
rights.
Penalties and enforcement
An aggrieved party can petition the court to suspend the
publication, attach or seize copies and seize the proceeds
of any unlawful use of a copyright.
Parties that infringe copyright or other rights to commercial
exploitation or sell, rent-out or deal in any work of art,
performance, audio-record, or broadcast programmes shall
be subject to imprisonment of not less than two months and
the payment of a fine of not less than AED10,000.
Parties that unlawfully produce or import any work,
unlawfully obstruct or impede any protection to technology,
download or save any software without a licence, shall be
subject to imprisonment of not less than three months and
the payment of a fine of not less than AED50,000 and not
more than AED500,000.
If a party committing an offence is a corporate person, a
court can order its closure for not more than three months.
A court can take the following actions:
order the seizure and destruction of goods which
infringe a copyright
order the seizure of equipment and tools which are
used exclusively in committing an infringement
order the closure of the establishment where the
infringement took place.
Trade secrets
There is no dedicated regime protecting trade secrets in the
UAE.
The Civil Code imposes an obligation on employees to
keep industrial secrets of the employer, including upon
termination of such employment, confidential. Further,
criminal liability would be imposed on such employee if he
causes the information to be disclosed.
A guide to doing business in the UAE 35
Investment policies The UAE is keen to promote foreign investment and
has established numerous free zones to facilitate this.
Foreign direct investment
The Commercial Companies Law requires at least 51% of
the shares in a UAE company to be owned by UAE
nationals or companies owned by UAE nationals. In some
circumstances some or all of the UAE ownership
requirement may be satisfied by nationals of other GCC
countries (or companies owned by them).
It is anticipated that a new Foreign Investment Law may be
issued which may provide a framework for relaxing the
foreign ownership restrictions in certain market sectors. The
timing for publication is currently unclear.
Free zone entities are generally not subject to the foreign
ownership restrictions.
As noted earlier, non-GCC nationals or companies partly or
wholly-owned by non-GCC nationals are not permitted to
own real property in the UAE outside of certain areas
designated for foreign ownership by a decree of the Ruler
of the relevant Emirate. Most foreign residents and foreign
businesses lease their homes and office spaces. Entities
operating outside the free zones are permitted to lease
space in the UAE upon registration as a locally
incorporated entity or as a branch or representative office.
For entities operating within the free zones, registration as
a free zone entity requires, in most cases, a lease or
purchase of freehold from the free zone's real estate
authority.
Commercial agencies
If a foreign entity wishes to carry out business in the UAE
without establishing a physical presence, it may enter into a
distribution or agency relationship with a licensed UAE
national or company wholly owned by a UAE national.
In the UAE, commercial agency and distribution
arrangements are governed by the Commercial Agencies
Law (Federal Law No. 18 of 1981) as amended (CAL).
The rights of the parties to a distribution/agency agreement
will depend upon whether the agreement is registered as a
commercial agency with the Ministry of Economy pursuant
to the CAL. In order to be registered:
the agent/distributor should be a UAE national or a
company wholly-owned by UAE nationals
the agreement should state that it is given to the
agent/distributor on an exclusive basis
the agreement should be governed by UAE law and
should be subject to the jurisdiction of the UAE courts
the agreement should be prepared in Arabic (or in
English/Arabic dual format) and notarised
the agreement should provide for registration, or the
consent of the principal to registration should be
obtained in a separate letter.
UAE free zones
Free zones are geographical areas in the UAE that are
intended to promote inward investment and provide a
market-oriented legal and regulatory alternative to the
non-free zone regime that exists elsewhere in the UAE.
Free zones may adopt their own rules and regulations,
although, with the exception of the DIFC, they generally
remain subject to UAE Federal laws. The free zones
are, however, able to exclude provisions of the UAE
Commercial Companies Law (in particular, the
restrictions on foreign ownership of companies) and
offer investors a single point of contact for establishment
and licensing.
The main benefits of free zones include 100% foreign
ownership and exemptions from taxes and custom
duties. Land and property may be leased for a specified
period of time under fully transferable renewable leases
and ownership of land is possible for a 99-year period.
The free zones also facilitate speed and ease of
establishing a presence.
The principal disadvantage of free zones is that
companies established in a free zone are unable to
conduct business outside the relevant free zone in the
UAE other than through a registered commercial agent,
representative or distributor licensed by the relevant UAE
authorities or without a licence from the relevant UAE
authorities.
Examples of some of the larger free zones include the
DIFC, the Jebel Ali Free Zone, Dubai Internet City, Dubai
Media City, Dubai Healthcare City and the Dubai Airport
Free Zone (all of which are located in Dubai) and Masdar
Free Zone, Abu Dhabi Global Market and Abu Dhabi
Airports Free Zone (all of which are located in Abu
Dhabi).
36 A guide to doing business in the UAE
On a strict interpretation of the CAL it could be argued that
unregistered distribution agency agreements are not valid.
However, from our experience of practice in the UAE,
unregistered agreements are regarded as valid even if they
are not registered with the Ministry of Economy, and the
usual principles of UAE contract law would be applied to
them.
Registration provides the agent with certain statutory
protections, making it extremely difficult, in practice, for the
principal to terminate or fail to renew a registered
agreement without the payment of compensation. Even if a
material reason exists for termination, the Commercial
Agency Committee is still likely to award compensation to
the agent.
The CAL also provides that a principal may not import any
products into the territory covered by the agency agreement
either directly or indirectly if the agreement is registered
with the Ministry of Economy.
Preferential policies and incentives for
foreign investment
While the UAE has pursued an open and progressive
economic agenda aimed at attracting foreign investment
and reducing reliance on oil resources and income, there
remain a number of restrictions on foreign investment as
discussed more fully in other sections of this guide.
The establishment of free zones and ongoing discussions
relating to possible relaxation of the foreign ownership
restrictions do point towards more economic freedom for
foreign investors wishing to establish themselves in the
UAE, although the timing of this remains uncertain.
Anti-trust
The UAE enacted a Competition Law (Federal Law No. 4 of
2012 concerning the regulation of Competition (Competition
Law)) in December 2012, which came into force on 23
February 2013. Prior to the Competition Law there were no
specific laws or provisions in existing laws that dealt
comprehensively with the issue of anti-competitive
behaviour in the UAE.
While the UAE Competition Law is now in effect, the key
implementing regulations (which, among other matters,
establish the UAE's competition regulator and set the
relevant thresholds) have not yet been introduced. In
practice, this means that it is not currently possible for a
party, or its advisers, to state with certainty the impact of
the Competition Law.
The Competition Law applies to enterprises, being any
natural or legal person or consortium of such persons,
engaging in economic activity or holding intellectual
property rights in the UAE. Where economic activity occurs
outside the UAE but has the ability to affect competition in
the UAE, these practices and agreements will also be
subject to the Competition Law.
The Competition Law prohibits activity constituting an
abuse of dominant market position and restrictive
agreements above a certain de minimis threshold and
regulates economic activity (including mergers and
acquisitions) which will result in an enterprise attaining a
dominant market position.
Dominant position
An enterprise will be considered to have a dominant
position in a market where its total number of transactions
in that market exceeds a certain percentage of all
transactions undertaken in that market. The UAE
Competition Law does not indicate what that percentage
threshold is and this is expected to be communicated by
the Cabinet in due course. The Cabinet is also empowered
to reduce or increase this percentage threshold depending
on prevailing economic circumstances.
The Competition Law does not prohibit an enterprise from
occupying a dominant market position – this may be
achieved legitimately by having a superior product or
providing a superior customer service. What is prohibited is
using market dominance to act independently of
competitors, customers, suppliers and, ultimately, the final
consumer in a way that prejudices, limits or prevents
competition.
Where a firm having a dominant position in the market acts
in a manner which is anti-competitive to maintain or
increase its market share, then it will be considered to be
abusing its dominant market position. The UAE Competition
Law prohibits such behaviour as it damages true
competition between firms, exploits consumers, and makes
it unnecessary for the dominant firm to compete with other
firms on merit. Activity that may be considered abuse of a
dominant market position can include:
Predatory pricing: where a firm deliberately drives
down the prices of products and services to below
market costs to drive competitors out of the market or
restrict competitors from entering a market. Where
prices are set below average variable costs, this is
likely to indicate predatory pricing.
A guide to doing business in the UAE 37
Indirect resale price maintenance: where a firm
indirectly fixes the resale price of products and
services to the dealer's consumers including, for
example, by setting a fixed distribution margin or
maximum level of rebate. The supplier is imposing
conditions on the buying and selling of products and
services.
Trade restraints: obliging a dealer or customer not to
deal with a competitor, denying a dealer or customer
access to products and services or not permitting
access on standard commercial terms and
discriminating between different types of clients as to
the prices of products and services.
Ancillary restraints: restraints imposed on a
legitimate trade activity. An ancillary restraint does not
constitute the primary obligations of an agreement (eg
exclusive geographical distribution) but is directly
related to the functioning of the objectives of the
agreement (eg conditions of sale in those exclusive
geographical territories).
Price manipulation: removing, decreasing or
increasing the supply of products and services or
disseminating incorrect price information to maintain an
artificial price for products and services.
Restrictive agreements
The Competition Law provides examples of what may be
considered a restrictive agreement:
Direct resale price maintenance: agreements
between the supplier and dealer which directly fix the
resale price of products and services to the dealer's
consumers.
Collusion in bids: agreements with other firms which
can prejudice the outcome of a process whereby bids
are submitted. This may include agreeing in advance
the value of bids to be submitted, or the lowest bid to
be submitted. Agreements between firms as to which
tenders are bid for with a view to allocating value
contracts between them will also fall under this head.
Essential facilities: agreements which limit the
availability of a facility or infrastructure which is
necessary to reach customers and/or required to
enable competitors to carry on their business. Where
such facilities are difficult or prohibitively costly to
reproduce and agreements limit the availability of such
facilities and infrastructure, such agreements are likely
to be considered anti-competitive.
Exclusive distribution: agreements whereby one firm
grants exclusive rights to another firm in respect of its
products and services. This may include exclusive
geographical distribution rights. Typically, competition
in this regard is maintained by inter-product
competition as opposed to competition between
suppliers. However, it may be worth reviewing these
agreements to ensure that they do not contain any
ancillary restraints.
Other distribution agreements: agreements which
prescribe the level of products and services offered in
a particular market. Where the oversupply or
undersupply of products or services to a market is
done with a view to affecting the price of the products
or services, then this is likely to be considered
anti-competitive.
Barriers to entry: factors which prevent or hinder
companies from entering a specific market. Entry
barriers may result, for instance, from a particular
market structure or the behaviour of incumbent firms
(eg prohibiting new entrants from engaging in existing
trade organisations or coalitions).
Merger and acquisition control
The Competition Law requires any activity which will result
in an enterprise attaining a dominant market position (such
as a merger or acquisition) to obtain the prior approval of
the Ministry of Economy. Again, what will be considered a
dominant market position will be determined by the Cabinet
and subject to change. If approval is not sought, an
enterprise may be subject to a fine representing between 2%
and 5% of annual revenues of the business undertaken in
the resultant dominant position. If annual revenues cannot
be determined, a financial penalty of between AED5,000
and AED5 million may be imposed.
As mentioned above, the key implementing regulations
have not yet been introduced. Accordingly, when
considering whether to notify or not it is not currently
possible, for a party to a transaction, or its advisors, to state
with certainty that a notification requirement arises. Under
such circumstances, companies will regularly pursue one of
two options:
take the view that the law is not yet in force, and
decide not to contact the authorities or otherwise
request an informal assessment of the deal
approach relevant governmental ministries (most likely
the UAE Ministry of Economy) to seek an informal
review process.
The merits of the latter option lie primarily in maintaining a
reputation as a good corporate citizen and in building
38 A guide to doing business in the UAE
relationships with governmental contacts who will later be
responsible for the formal notification process, once
implemented. The downsides are uncertainty as to process
and timing, the scope of information that might need to be
provided, and the inevitable difficulties of trying to manage
a review that is not subject to any statutory timeframe or
agreed boundaries.
As to potential jurisdictional thresholds that might be
adopted, the UAE, like the Saudi Arabian regime, includes
a market share-based threshold. It is conceivable that the
UAE may adopt the same approach as Saudi Arabia, using
a market share threshold of 50%.
Penalties
If an enterprise continues to engage in anti-competitive
activity or be a party to restrictive agreements then it may
be subject to a fine of between AED5,000 and AED5 million.
Where an enterprise continues to violate the provisions of
the Competition Law then the fine can be doubled. In the
severest cases, the court may order the enterprise to shut
down operations for a period of between three and six
months and cause notice of such to be published in two
local newspapers. The penalties are therefore severe and
have the potential to inflict severe reputational damage.
Anti-dumping
The UAE acceded to the World Trade Organisation (WTO)
in 1997 and signed an agreement on anti-dumping, which
was adopted in the Uruguay Round. The GCC has since
developed a unified anti-dumping law to protect against
dumping of products by all other non-GCC nations which
are members of the WTO. The UAE ratified this agreement
in Federal Decree No. (7) of 2005 concerning the GCC
Unified Law on Anti-dumping, Countervailing Measures and
Safeguards (Anti-dumping Law).
Application
The Anti-dumping Law is intended to combat practices
which cause or threaten to cause damage to the market in
the GCC and targets the following three practices:
dumping: the exportation of products into the GCC at
an export price lower than their value on the
international markets
subsidising: direct or indirect financial contributions to
the exporter from the government in the country of
origin or from a public authority therein
unjustifiable increase of imports: the importation of
non-dumped and non-subsidised products to GCC
countries at increasing quantities absolutely or relative
to local production which causes gross damage to the
market in the GCC.
The Anti-dumping Law applies to countries other than
members of the GCC.
Complaints
Complaints may only be filed by a representative of the
relevant industry, the relevant GCC state's Chamber of
Commerce or Industry or relevant Ministry and any
producer's union or interest group. Complaints should be
lodged with the Technical Secretariat of the Permanent
Committee. The Permanent Committee is composed of
representatives of the governments of each GCC Country.
The Permanent Committee is responsible for determining
when to initiate or terminate an investigation, implement
provisional measures and advise on penalties. The
Technical Secretariat performs the administrative functions
of the Permanent Committee.
In order for the Permanent Committee to undertake an
investigation, the complaint must be supported by domestic
producers whose output constitutes 50% of the total
production of the product or similar products.
Provisional measures
Provisional measures may be imposed against the products
of the country in question. These measures can take the
form of provisional customs duties being imposed on the
relevant product. These measures will not prevent the
importation of the product in question into the GCC.
Provisional measures are restricted to a period of four
months, which may be extended for a further two months in
the case of dumping and subsidising breaches.
Penalties
An infringement of the Anti-dumping Law will result in the
relevant state imposing punitive charges or customs duties
against the products being imported from the state in
question. The actual amounts will depend on the
circumstances.
The Ministry of Economy in the UAE currently administers
the rules and regulations relating to anti-dumping at UAE
level.
A guide to doing business in the UAE 39
Company law and corporate
governance Companies incorporated or established in the UAE are
subject to the Commercial Companies Law other than
the following, which can be partially or fully exempted:
companies incorporated in any of the UAE's free
zones, if the free zone has special provisions
regulating these companies (otherwise the
Commercial Companies Law prevails)
companies operating in the exploration, extraction,
marketing and transportation of oil, or in producing
electricity, gas, water, desalination and related
activities
any company excluded from the provisions of the
Commercial Companies Law by resolutions of the
Council of Ministers.
Licensing
In order to commence (and continue) trading in the UAE,
every legal entity or business must be licensed to conduct
the relevant trading activity or activities by the appropriate
authorities. In general, the licence is renewable annually.
Generally speaking, companies and businesses operating
"onshore" in the UAE (ie not in a free zone) will need to be
licensed by the Municipality and/or Economic Department
of the Emirate in which they are established. In Dubai, the
competent authority is the Dubai Department of Economic
Development, and in Abu Dhabi it is the Abu Dhabi
Department of Economic Development.
A trade licence (usually designated as either a commercial,
industrial or professional licence, depending on the nature
of the activity) may permit the licensee, to a limited extent
and depending on the nature of the business, to conduct
business activities in other Emirates but it will not generally
permit a licensee to establish a place of business in another
Emirate (which requires a separate licence).
If a company is seeking to tender for government contracts
in a particular Emirate, it may be necessary to have
established a legal entity in that Emirate, which is duly
licensed to conduct the relevant activity.
Certain activities are reserved solely for UAE nationals or
nationals of other GCC countries.
In some sectors (for example, construction), trade licences
will only be issued if it can be shown that the company or its
shareholders have the requisite experience of operating in
the relevant sector. In addition, for some activities, such as
financial services, education, healthcare and utilities,
consents may need to be obtained from Federal institutions.
An entity licensed to conduct business in a free zone by the
relevant free zone authority may, generally speaking, only
conduct business in the free zone or outside the UAE.
As a general rule, all entities in the UAE (other than
offshore companies within certain free zones) are required
to have a physical place of business within the Emirate in
which they are licensed and, in the case of entities
established in free zones, physically within the relevant free
zone.
Forms of entity
Common forms
It is possible to establish a place of business in the UAE
either "onshore" in an Emirate under the Commercial
Companies Law or in one of the free zones within an
Emirate.
The most common forms of entities incorporated under the
Commercial Companies Law are limited liability companies,
public joint stock companies and private joint stock
companies.
Free zones are regulated by the relevant free zone
authority and generally have their own company laws.
Consequently, foreign companies seeking to establish a
presence in a free zone do not, generally speaking, need to
comply with the restrictions on foreign ownership in the
Commercial Companies Law and may establish wholly-
owned companies.
Limited liability company
An LLC is generally the preferred vehicle for foreign
investors seeking to establish a presence in the UAE.
A new Commercial Companies Law for
the UAE
A new Commercial Companies Law is expected to be
published in the federal official gazette later this year
and come into force three months after publication. The
current draft of the new Commercial Companies Law
(New CCL) contains certain provisions that will have an
impact on the subject matter of this guide if fully
enacted. This guide addresses relevant anticipated
changes which may alter the current position.
40 A guide to doing business in the UAE
An LLC may not carry out insurance, banking or
investment management activities.
An LLC is a separate legal entity, distinct from its
shareholders. It enters into contracts in its own name
and is responsible for the performance of the legal
obligations in these contracts.
Shares in an LLC may not be issued or offered to the
public without first converting the company into a public
joint stock company.
Shares in an LLC must be fully paid up on issue and
must have a nominal value of at least AED1,000.
There is no specific minimum share capital
requirement. An LLC must have sufficient share capital
to achieve its purposes, as determined by its
shareholders, although the competent authority in each
Emirate retains the discretion to prescribe a higher
minimum capital threshold for specific types of
activities.
An LLC must have not less than two and not more than
50 shareholders (75 shareholders under the New CCL)
(referred to as "partners" in the Commercial
Companies Law, although in practice the terms
"partner" and "shareholder" are used interchangeably).
Shareholders have statutory rights of pre-emption on
any transfer of shares by another shareholder (which
cannot be waived in advance).
An LLC is not permitted to issue share certificates and
it is the entry on the register maintained by the
competent authority in the relevant Emirate that
evidences legal ownership.
There is currently no clear legal mechanism by which a
shareholder in an LLC may create a pledge over its
shares. Under the New CCL, a shareholder in an LLC
may pledge its shares; however, there is some
uncertainty as to how this will work in practice given
that LLCs do not issue share certificates.
The constitutional documents of the LLC may give its
shareholders mutual blocking rights by increasing the
thresholds at which resolutions may be passed.
Management rights may be vested in a particular
shareholder (which may be a foreign shareholder).
Entitlements to distributions can be allocated
disproportionately to the shareholdings in the LLC by
including a different ratio in the Memorandum of
Association (MoA). In Dubai, the authorities have
historically permitted a ratio of 80:20 in favour of a
minority shareholder, and in Abu Dhabi a ratio of 90:10
has been permissible.
An LLC must allocate 10% of its net profits each year
to create a statutory non-distributable reserve until the
reserve equals half the company's capital.
Public and private joint stock companies
Public and private joint stock companies are essentially
the same form of legal entity, with the principal
exception that only a public joint stock company can
apply to have its shares listed on a UAE stock
exchange and issue shares or debt securities to the
public.
A joint stock company is a separate legal entity distinct
from its shareholders. It enters into contracts in its own
name and is responsible for the performance of the
legal obligations in those contracts.
Joint stock companies must have a minimum share
capital of AED10 million (AED30 million under the New
CCL) for a public joint stock company and AED2
million (AED5 million under the New CCL) for a private
joint stock company.
Shares in joint stock companies must be of an equal
nominal value between AED1 and AED100.
A private joint stock company must have at least three
shareholders (two shareholders under the New CCL)
and a public joint stock company must have at least 10
shareholders (five shareholders under the New CCL).
The liability of shareholders is limited to the amount
unpaid on shares held by them (if any).
There are no statutory rights of pre-emption on a
transfer in shares in a public joint stock company
(PJSC), although pre-emption rights exist in favour of
existing shareholders on an issue of new shares.
Under the New CCL it will be possible to sell such
pre-emption rights to a third party.
A PJSC must allocate 10% of its net profits each year
to create a statutory non-distributable reserve until the
reserve equals half the company's capital.
Regulations issued by SCA require public joint stock
companies to list their shares on a UAE stock
exchange within one year of their establishment.
The table below provides a brief overview of the
advantages and disadvantages associated with an LLC and
a private joint stock company:
A guide to doing business in the UAE 41
Branches of foreign companies
Branches of foreign companies are permitted under the
Commercial Companies Law.
The ability to obtain a licence to establish a branch of a
foreign company is at the discretion of the authorities in
the relevant Emirate and, generally, branches are not
permitted to carry out commercial trading (as opposed
to professional) activities in the UAE. It is also possible
to obtain a more restrictive form of licence to establish
a representative office to perform marketing and
administrative functions on behalf of a foreign parent.
A branch of a foreign company is currently required to
appoint a UAE national (or a company wholly-owned
by UAE nationals) as its service agent or sponsor. The
sponsor will normally be paid an annual fixed fee for
his/her services and, except for this fee, is not entitled
to share in the profits or to own any assets of the
branch or to receive any fees or commissions. This
requirement is likely to be removed in the New CCL.
Branches/representative offices are not separate legal
entities.
Sole proprietorships
A substantial amount of business in the UAE is conducted
through sole proprietorships. Generally speaking, only UAE
nationals are permitted to obtain a trade licence to conduct
commercial (as opposed to professional) activities as a sole
proprietor, but in some Emirates this right may be extended
to GCC nationals.
Entities established in free zones
Entities established in free zones may be treated as being
"offshore" or outside of the UAE for certain legal purposes.
Free zones may adopt their own rules and regulations and
can elect to disapply the provisions of the Commercial
Companies Law but, with the exception of financial free
zones, are otherwise subject to the provisions of UAE
Federal law.
Entities established in free zones usually take the form of
either: (i) a branch of a foreign company; (ii) a sole or
multi-shareholder limited liability company more commonly
known as a free zone establishment (FZE) or a free zone
company (FZCo); or (iii) an offshore company.
FZEs and FZCos are generally required to have a minimum
share capital of between AED500,000 and AED1 million,
although the precise requirements vary from free zone to
free zone.
ADVANTAGES
Private Joint Stock
Company
Limited Liability
Company
Commercial banks in the
UAE accept pledges over
shares in respect of
financings
One month to three
months for incorporation
Public offerings of shares
are permitted if approved
by the Emirates Securities
and Commodities
Authority (following
conversion to a public joint
stock company)
Less initial capital required
and flexible management
of the company
Less cumbersome share
transfer process – no
requirement to attend a
notary
No statutory lock-up
period on transfers of
shares
Wider permissible
activities (eg banking and
insurance)
Only two shareholders
required
DISADVANTAGES
Joint Stock Company Limited Liability
Company
At least four to six months
for incorporation
No clear legal route to
pledge shares
Minimum of three
shareholders, three board
members and minimum
capital of AED2 million2
required. Shareholder
meetings must be
convened on notice and
publically advertised
Pre-emption rights over
existing shares under the
Commercial Companies
Law mean that a transfer
of shares requires the
cooperation of all
shareholders
A majority of the board
(including the Chairman)
must be UAE nationals
Cannot carry out certain
activities (eg banking and
insurance)
Statutory lock-up period of
two years from
incorporation on transfer
of shares
Maximum of five directors
currently permitted
___________________________ 2 A public joint stock company must have a minimum share
capital of AED10 million.
42 A guide to doing business in the UAE
An offshore company may generally conduct any business
(other than insurance or banking) provided that it does not
trade or carry out business in the UAE or with persons
resident in the UAE. Certain property purchases and other
activities are not regarded as prohibited onshore activities.
Less common forms
Civil companies
In addition to companies that may be incorporated under
the Commercial Companies Law, there are three types of
civil company that may be established under the Civil Code:
service/professional companies (similar to English
partnership arrangements)
speculative venture partnerships (a contract between
two or more persons to purchase property on credit, to
sell it and to subsequently share in the profits as
agreed between them)
"mudaraba" arrangements (a contract whereby one
partner contributes capital/property and the other its
effort or work in order to make a profit).
Decree companies
Decree companies are established by a decree of the Ruler
of the relevant Emirate.
Following the implementation of the Commercial
Companies Law, existing decree companies were required
to convert to one of the types of companies permitted under
the Commercial Companies Law. The legal status of
companies which have not regularised their positions is a
matter of some uncertainty (particularly as many of the
remaining decree companies have some element of
government shareholding).
Partnership companies
Partnership companies are split into general and limited
partnerships.
In a general partnership the partners (who must be UAE
nationals) are liable jointly and severally to the extent of all
their assets for the liabilities of the partnership.
A limited partnership consists of one or more general
partners (who must be UAE nationals), each of whom is
liable for the obligations of the partnership to the full extent
of his or their assets, and one or more limited partners
liable only to the extent of his or their respective share in
the partnership.
The limited partners may be foreigners but they are not
entitled to have their name incorporated into the name of
the partnership.
Incorporation of commonly used
corporate entities
Shelf company procedure
Due to the nature of the incorporation process,
there is no shelf company conversion procedure
available by which a previously incorporated
company with no previous trading history can be
transferred to a client.
Process and documentation required for
incorporation
The following formalities must be completed in
order to register a new LLC with the UAE
authorities:
Approval of the LLC's name and activity must
first be obtained from the competent authority
in the Emirate in which the LLC is to be
established (the Competent Authority). In
Dubai, the Competent Authority is the
Department of Economic Development and in
Abu Dhabi it is the Abu Dhabi Department of
Planning & Economy.
The establishment of an LLC carrying out
certain types of activity may require the
approval of one or more local or Federal
Government departments in the form of a
"no-objection" confirmation. For example,
companies carrying out industrial activities
require the approval of the Minister of Industry
and construction activities require the approval
of the Municipality in the relevant Emirate.
The MoA, which is a standard form document
but can be amended to a limited extent, must
be prepared in Arabic or dual language
English/Arabic.
Once agreed the MoA must be signed by duly
authorised representatives of the initial
shareholders in the presence of the Court
Notary.
A guide to doing business in the UAE 43
Management structure
LLCs
Management of an LLC is carried out by a single board of
between one and five directors which has the authority to
exercise all powers of the company that are not specifically
reserved for the shareholders.
Directors may be removed by the shareholders in
accordance with an LLC's MoA, by unanimous shareholder
resolution or court order.
There is no general requirement that directors should be
UAE nationals, although certain companies carrying out
industrial activities require a majority of the directors to be
UAE nationals.
There is no statutory requirement that directors be
shareholders.
An LLC with more than seven shareholders must form a
supervisory board containing at least three shareholders,
appointed by the general assembly of shareholders for
renewable periods.
An LLC is required to have a general manager, who is
named on the trade licence and may be one of the directors.
The manager may have powers delegated to him/her by the
board of directors and/or specified in the company's MoA.
The general manager must be a UAE resident or GCC
national.
Once a management structure has been chosen, a great
degree of flexibility can be given to the management under
the MoA, including the ability to change the management,
alter procedures and delegate responsibility.
Free zone companies
Free zone companies are generally managed by a board of
directors consisting of at least two directors.
There is no general requirement that directors of free zone
companies should be UAE nationals. However, for some
free zones, at least two of the directors and the secretary
must be resident in the relevant Emirate.
Directors generally have the authority to exercise all the
powers of the company that are not specifically reserved to
the shareholders.
Directors' duties
Duty to company
Although not explicitly stated in the Commercial Companies
Law, the directors are generally considered to owe duties to
the company, not directly to the company's members
(ie shareholders). Only the company can enforce these
duties in the event of a breach but shareholders can bring
derivative claims in the name of the company against
directors in certain circumstances.
A director must avoid actual or potential conflicts of interest
and may not participate in any competing business without
shareholder approval (renewable annually).
A director must declare to the other directors any interest in
conflict with that of the company in respect of a proposed
transaction or arrangement with the company, and is not
permitted to vote on a resolution concerning the relevant
transaction or arrangement.
A director who accepts a bribe from a third party commits a
criminal offence punishable by imprisonment for up to five
years. No de minimis threshold applies and the offence is
committed whether or not the director intended to be
influenced by the bribe.
The notarised MoA, together with certain supporting
documents, must be submitted to the Competent
Authority. The supporting documentation required
can change from time to time but will generally
include:
– a bank certificate and auditors' certificate
confirming deposit of the initial share capital
– constitutional documents of the shareholders
and resolutions authorising the establishment
of the LLC (notarised in the country of origin in
the case of non-UAE shareholders)
– a lease in relation to the LLC's office premises
– any requisite "no-objection" confirmations.
The LLC must then apply to the Competent
Authority for a trade licence by submitting the
following documents, together with the applicable
fees:
– a prescribed application form
– the original lease of the LLC's premises
– a prescribed form for obtaining the requisite
Municipality approval of the premises.
Once the trade licence is obtained, the LLC should
be registered with the Chamber of Commerce and
Industry in the relevant Emirate.
44 A guide to doing business in the UAE
Duty to shareholders
Any shareholder may bring a derivative action in respect of
alleged breaches of duty by directors. A shareholder is not
required to hold any minimum number of shares in order to
have standing to bring a claim but must notify the company
of the intention to initiate proceedings in advance.
Duty to creditors
There is no specific requirement for directors to have
regard to the interests of the company's creditors, whether
in times of financial difficulties or otherwise.
If a company has suspended payment of its debts, the
directors must apply to a UAE court for a declaration of
bankruptcy within 30 days of the suspension. If the
company fails to file within the 30-day period, the directors
can be found guilty of the criminal offence of negligent
bankruptcy.
Liability of directors
A director may be personally liable to the company,
shareholders and third parties for acts of fraud, power
abuse, violations of the Commercial Companies Law or the
company's constitutional documents and/or
mismanagement.
A director may be personally liable for misstatements or
information disclosed to licensing and regulatory authorities
or otherwise published (such as in offer documents) which
cause loss or damage to third parties. Such loss or damage
can encompass a broad range of harm, considered by the
courts on a case-by-case basis.
In the event that the assets of a bankrupt company are
insufficient to meet at least 20% of the company's debts,
the court overseeing the bankruptcy may direct some or all
of the directors to pay some or all of the company's debts
where the directors are held to be responsible.
Continuing obligations
Once the company has been incorporated it is necessary to
comply with certain ongoing requirements, including the
following in relation to an LLC (which is the most common
form of company):
an LLC needs to renew its trade licence annually,
although for some industry sectors licences of three
years may be obtained
the manager(s) of an LLC must prepare annual
accounts. The accounts should be audited by a locally
registered auditor (appointed by the shareholders),
ratified by the general assembly at its annual meeting
and filed with the Competent Authority and the Ministry
of Economy
the manager(s) of an LLC must convene a general meeting of the shareholders annually within four months of the end of the LLC's financial year; and an LLC must contribute 10% of its annual net profits towards a statutory reserve until such reserve is equivalent to half of the LLC's share capital.
Statutory reserved matters
The Commercial Companies Law sets out a number of
matters that require a certain percentage of shareholders
voting in the affirmative to be validly passed. These are
set out below. It is permissible for the shareholders to
agree to increase the percentage thresholds in the MoA.
100%
Shareholders representing 100% of an LLC's share
capital must vote in the affirmative in order to:
increase the financial obligations of the shareholders
dissolve the company.
75%
Shareholders representing at least 75% of an LLC's
share capital must vote in the affirmative in order to:
amend the MoA (including changes to its objects)
increase or decrease the share capital
convert the company to another type or approve the
merger or amalgamation with another company.
In practice, these matters require the unanimous
approval of all shareholders as the Court Notary requires
all shareholders to sign any amendment to the MoA
(which is a necessary part of the process to complete the
other matters).
50%
Shares representing at least 50% of an LLC's share
capital must vote in the affirmative in order to:
appoint auditors
approve balance sheets, profit and loss statements,
and distribution of net profits (if any).
A guide to doing business in the UAE 45
Contacts
Dubai
James Abbott
Partner, Litigation, Dispute & Resolution T: +971 43620 608 [email protected]
Tim Plews
Partner, Banking & Finance T: +971 4362 0689 [email protected]
Robin Abraham
Partner, Banking & Finance T: +971 43620 609 [email protected]
Mike Taylor
Partner, Corporate T: +971 50559 5371 [email protected]
Mohammed Al-Shukairy
Partner, Corporate T: +971 50708 6365 [email protected]
Stuart Ure
Partner, Capital Markets T: +971 43620 659 [email protected]
Peter Avery
Partner, Banking & Finance T: +971 4362 0682 [email protected]
Debbie Walker
Partner, Banking & Finance T: +971 43620 691 [email protected]
Debashis Dey
Partner, Head of Capital Markets, Middle East T: +971 43620 624 [email protected]
Nigel Wellings
Partner, Head of Corporate, Middle East T: +971 43620 676 [email protected]
Abu Dhabi
Qudeer Latif
Partner, Head of Islamic Finance T: +971 43620 675 [email protected]
Sandy Hall
Partner, Construction T: +971 2613 2343 [email protected]
Graham Lovett
Office Managing Partner, Middle East, Litigation & Dispute Resolution T: +971 43620 625 [email protected]
Mohamed Hamra-Krouha
Partner, Banking & Finance T: +971 2613 2370 [email protected]
James McCarthy
Partner, Corporate T: +971 43620 628 [email protected]
Rupert Harper
Partner, Corporate T: +971 2613 2360 [email protected]
46 A guide to doing business in the UAE
This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.
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© Clifford Chance 2014
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