UAE Foreign Direct Investment Law

Middle East Publication September 2018

A new law, number 19 of 2018, called the Foreign Direct Investment Law (the FDI Law), was issued by His Highness the President of the UAE on September 23, 2018. The FDI Law is meant to develop, foster and nurture foreign investment in accordance with the policies of the UAE.

Key features of the FDI Law

The FDI Law tasks a committee known as the Foreign Direct Investment Committee (the Committee) with studying and proposing to the Council of Minister, after consulting with local government and the competent authorities, the following:

  • A list of activities that foreign investors may wholly own (the Permitted List)
  • Approving foreign investment projects that are not set forth in the Permitted List based on the recommendation of the competent authorities.
  • Determining benefits granted to foreign investment projects.
  • Any additional task assigned to it from the Council of Ministers.

The Council of Ministers may issue a decision based on a request from a local government, recommendation from the Committee or proposal by the Minister of Economy to approve a foreign direct investment not listed on the Permitted List.

Subject to the restrictions set forth in the Companies Law and other federal laws relating to foreign investment, foreign direct investment is permitted in all sectors and economic activities in the UAE. It should be noted that foreign investment in certain sectors or economic activities of the economy will remain partially or entirely restricted to foreign investment (the Negative List). Generally such sectors include, but are not limited to, oil exploration, drilling and production, the defense sector and the manufacturing of arms and equipment, insurance, financial institutions, haj and ummrah, postal services, telecommunications, ground and air transportation and blood and poison centers.

Upon the issuance of the Permitted List, the licensing department(s) and competent authorities are tasked with setting forth the conditions and procedures for establishment and licensing foreign direct investments as well as clarifying the required documents in accordance with the FDI Law, applicable laws in the UAE, and applicable laws in the relevant emirate.

A foreign investor is required to obtain a preliminary approval the relevant licensing authority. Thereafter, it applies for an approval for a license for the foreign direct investment from the competent authorities. The competent authorities shall approve an application for a license upon the fulfillment of the conditions and procedures with five (5) business days from the date of application or the fulfillment of the documents and information.

The legal name of the foreign direct investment is required to contain “foreign direct investment”

Penalties for breaching obligations under the FDI Law, or conditions or the activities of the license, or if the foreign direct investment project is stopped without reason, the licensing authorities or competent authorities may take one or more of the following options:

  • Issue a warning.
  • Withdrawing, partially or entirely, any benefits.
  • A fine not exceed one (1) million AED.
  • Stopping the project until the breach is cured or stopping the project for a period of time determined by the licensing authorities and/or competent authorities.

The competent authorities, upon coordinating with the licensing authorities, and upon notifying the foreign investor, may cancel the license if (i) the FDI failing to cure the breach it was notified upon in writing or (ii) the recurrence of the breach by the FDI.

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