Problems relating to Trade and Investment on United Arab Emirates
1. Restrictions on entry of foreign capitals |
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Issue |
Issue details |
Requests |
Reference |
| (1) Restricted Majority Foreign Ownership | - As foreign investment is restricted the majority foreign ownership is disallowed in the United Arab Emirates (UAE). - UAE enterprises' capital contribution of 51% or more (60% or more for energy related industries such as petroleum and gas etc.) is necessary for foreign funded enterprises (FFEs) to establish a local legal entity outside the free zone in UAE. In addition, UAE nationals' or UAE enterprises' sponsorship is required for establishment of a representative office in UAE. Legislative overhaul is under way with the view to enable FFEs to establish local legal entity with 100% foreign ownership in UAE. Its development is keenly watched. - Incorporation of a company by more than 51% of foreign fund ownership is prohibited in UAE. (A member firm considers setting up a company in free zone, where the prohibition does not apply.) - An Abu Dhabi local influencial person's guarantee is necessary for license to open an office, renew licence and acquisition of entry visa for expatriates. |
- It is requested that GOU repeals the restrictions on the majority foreign ownership. - It is requested that Government of UAE (UAEG) repeals the prohibition foreign fund enterprises (FFEs) entry into UAE. - In the Mid-East Gulf Area this kind of sponsorship has existed from a long past. However, there has been a move toward its discontinuation in some areas. It is requested that Abu Dhabi also follows suit. |
- UAE Company Act, Article 22, Ministerial Decision 1989 (No.71) |
| (Action) - The foreign ownership is restricted to 49% in establishment of foreign funded enterprises locally in UAE. While the requirement for 51% or more of local ownership remains in principle, it is possible to establish 100% foreign owned enterprises in the Free Zones (FZs), should any of the followings applies: -- Branch Office or Resident Representative Office (RRO) (Requiring, however, "Service Agent", an UAE individual or an enterprise with 100% UAE capitalisation, generally called "Sponsor". Sometimes, petroleum related enterprises are allowed to establish RRO without a Sponsor.) -- Sole Proprietorship in Specialist Work (Medical service, Legal consultant, etc.), provided, however, that a Sponsor is required. -- In the case of FZs: --- Where 100% UAE capitalisation is legally compelled, --- Where the business is in the sector in which 100% GCC capitalisation is authorised, --- In the business sector where a 100% GCC capitalised enterprise enters into partnership with UAE nationals. |
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| (2) Restricted Participation in Service Business Sector | - Due to the Regulation that restricts provision of service / maintenance on machineries and equipment only to joint venture company (JVC), a firm's subsidiary in Dubai is unable to provide such service from Dubai. | - It is requested that GOU repeals the Regulation. | |
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