The United Arab Emirates has taken another step along the path towards becoming one of the most friendly jurisdictions for foreign investment. On July 2, 2019, the UAE Council of Ministers announced that it had approved a list of sectors and economic activities eligible for up to 100% foreign ownership in the UAE. The Cabinet Decision was finally issued on March 17, 2020 and published in the UAE Official Gazette on March 31, 2020.
The Cabinet Decision follows the adoption of the Foreign Direct Investment Law in September 2018 through Federal Legislative Decree No. 19 of 2018. The FDI Law set forth a framework enabling foreign investors to apply for a special status for their UAE-based investment vehicles that would grant them certain derogations from the provisions of the federal Commercial Companies Law No. 2 of 2015, including in relation to the restrictions on foreign ownership. The Cabinet Decision provided long-awaited details that the FDI Law intended to be determined at a later stage, but the picture still needs to be completed by a series of decisions at the level of each Emirate, the timing of which is unclear.
The FDI Law and, more recently, Cabinet Decision are the latest in a series of legislative initiatives aimed at realizing the UAE Vision 2021 and boosting investments as well as economic diversification into the non-oil sector. The publication of the 2015 Commercial Companies Law, the 2016 Pledge Law, the 2016 Bankruptcy Law and the 2018 Arbitration Law are further examples of the UAE’s commitment to creating a modern, robust and investor-friendly legislative framework as the foundation of wider efforts towards economic diversification.
Here, we summarize the legal framework for foreign investors in the UAE prior to the adoption of the FDI Law and the key provisions introduced by the FDI Law and the Cabinet Decision. We also analyse the potential impact of this new regime on the investment landscape in the UAE and compare it with the equivalent rules adopted in neighbouring members of the Gulf Cooperation Council.