Inward investment: How to set up shop and carry out business in the emirate

LEGAL FRAMEWORK: Abu Dhabi City is the capital of the UAE, which was founded in December 1971 as a federation between six of its seven constituent Emirates, namely: Abu Dhabi, Dubai, Sharjah, Ajman, Fujairah and Umm Al Quwain. The emirate of Ras Al Khaimah (RAK) joined the federation the following year. The UAE is governed by the UAE Constitution, which permits each Emirate to maintain an independent legislative body and judicial authority. Accordingly, there are both federal courts and local courts in each of the Emirates that can uphold the constitution.

The Abu Dhabi courts apply UAE federal law, which is enacted by the UAE federal legislative body, as well as the laws of the Emirate of Abu Dhabi. Although the legal procedures and laws applied by the courts of the individual emirates are similar, there are differences as a result of the federal system. It is therefore imperative to have regard for the local law, as well as the federal law. It should also be appreciated that the UAE is an Islamic state. This is laid out clearly in Article 7 of the constitution, which states that Islamic sharia law shall be the main source of legislation in the UAE. As a result, there are a number of differences between the emirate’s commercial and legal concepts and those underlying, for example, code developed in the European commercial and legal environment.

THE JUDICIARY: The UAE is, essentially, a civil law jurisdiction that has its roots in the Egyptian, French and Roman legal systems. As a result, common law principles – such as adopting previous court judgments as binding legal precedents – are not generally recognised. When case reports are available, judgments delivered by higher courts do tend to be used as guidance by the lower courts. However, as there is no official system of case reporting, judges have a great deal of flexibility with regard to decision-making. Advocates are required to be locally qualified and they must prove that they have been appointed as their client’s representative by submitting to the court an official power of attorney that has been notarised by a notary public.

The UAE operates two judicial systems, with federal courts established in some emirates, while local courts operate in others. The federal court structure operates on a three-tier basis, providing a Court of First Instance, a Court of Appeal and a Supreme Court. The Supreme Court hears final appeals, conducts judicial review proceedings and presides over disputes between the individual emirates. Whilst this structure applies to the majority of the emirates, the emirates of Dubai and Ras Al Khaimah have not joined the federal court system, and in 2007 the emirate of Abu Dhabi opted to leave the federal structure and return to a local judicial system. In common with most other jurisdictions, the courts are separated into those which rule on civil matters, and those which rule on criminal matters. Matters of personal status are dealt with separately, under sharia law, in the sharia courts.

APPEALS: After judgment has been delivered by the Court of First Instance in Abu Dhabi, a party has the right to appeal to the Civil Court of Appeal on factual and/or legal grounds within 30 days. It is also possible to introduce additional evidence to the Court of Appeal and/or request that additional witnesses be called to testify. Parties may only appeal on specific points of law to the Court of Cassation (the highest court in Abu Dhabi), which is usually composed of a panel five judges. An appeal to the Court of Cassation must be filed within 30 days of the date that the parties were notified of the judgment of the Court of Appeal.

All the decisions made by the Court of Cassation are final. The Court of Cassation does not only act as an appellate court, however. With respect to the decisions of lower courts, the Court of Cassation is able to supervise the lower courts in order to ensure they are applying and interpreting the law correctly.

The sharia courts, meanwhile, work alongside the civil and criminal courts. The Sharia Court is the Islamic court in the UAE and is primarily responsible for civil matters arising between Muslims. The court has exclusive jurisdiction to hear family disputes, for example.

As a result of the emirate’s economic development and expansion, the Abu Dhabi Judicial Department has recently launched a number of “specialised” courts to oversee contract and construction disputes, medical liability and negligence cases, banking and finance issues, insurance claims and compensation demands in the emirate. Litigants involved in such cases should benefit from the focussed judicial expertise of these new courts, which is also expected to improve their ability to resolve these particular disputes efficiently and expeditiously. Furthermore, as such construction and finance-related cases are frequently complex in nature, in addition to often being time-consuming, their removal from the currently overrun system should be welcomed by the existing courts.

JURISDICTION OF THE COURTS: It is common for foreign parties contracting with Abu Dhabi entities to propose that foreign law should apply to their agreements and that foreign courts should have jurisdiction to hear any dispute arising from the resultant contractual relationship. The Abu Dhabi courts will only recognise a choice of foreign law, however, where they are satisfied that there is a sufficiently close relationship between the subject matter of the contract and the foreign law chosen, and where the clause is properly incorporated into the relevant contract and pleaded by the defendant at the first official hearing.

Additionally, a foreign jurisdiction clause will not be recognised by an Abu Dhabi court, where the court considers itself to have jurisdiction under the UAE rules of jurisdiction as provided for in Federal Law No. 11 of 1992 (the Law of Civil Procedure). This provides, for example, that the courts shall have jurisdiction to hear an action lodged against a foreign party who has no place of residence in the state if the action involves monies in the state or a contract to be performed in the state. Furthermore, the Abu Dhabi courts will not honour any provision of foreign law, even where validly chosen, that is contrary to Islamic sharia, public order or morals, or to any law of or applicable in Abu Dhabi.

ARBITRATION: While Abu Dhabi has an established legal system and court structure that deals with both civil and criminal matters, arbitration has emerged as a popular means of alternative commercial dispute resolution. Indeed, arbitration is specifically recognised under the Law of Civil Procedure, which deals specifically with arbitration, including factors affecting the appointment of the arbitral tribunal and the actual validity of the arbitration award. While there is no restriction on the subject matter of arbitration, it may in practice be very difficult to arbitrate on, for example, employment and commercial agency matters. It is important to be aware that it will not be possible for any Abu Dhabi/UAE government department to enter into any agreement to arbitrate unless special consent is provided by the government. The Abu Dhabi Commercial Conciliation and Arbitration Centre offers arbitration services under its own rules, but arbitration is also conducted under the rules of bodies such as the International Chamber of Commerce, the London Court of International Arbitration and other international arbitration bodies.

While the ambition of arbitration is generally to remove the determination of a dispute from the courts, there are certain functions that the Abu Dhabi/UAE courts will need to perform in relation to arbitrations conducted in Abu Dhabi, such as making orders to assist the arbitral process, dealing with any challenges to an arbitral award once issued and, most importantly, ratifying the award so that it is capable of being enforced against the losing party’s assets. The latter does, however, mean that a final resolution of a dispute cannot be achieved without the involvement of the UAE courts. Pursuant to UAE Federal Decree No. 43 of 2006, issued on June 13, 2006, the UAE acceded to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which is the leading commercial law treaty on the enforcement of foreign arbitral awards. As a result, arbitral awards issued in the UAE should enjoy automatic recognition across the other 143 member states to the convention, and therefore be enforced outside the UAE on a reciprocal basis without a re-examination of the facts behind the dispute. Being a member state further augments the country’s efforts to attract foreign investors, for whom the ability to arbitrate (and have foreign arbitral awards recognised and enforced) is an important factor when considering doing business in this region. To further supplement the available dispute resolution procedures, the Ministry of Economy has drafted a federal Arbitration Law, which is still under discussion. The new law aims to ensure that the practical needs of arbitrating parties, their lawyers and arbitrators are met, and a number of provisions have been included with the aim of facilitating the procedure for enforcing both domestic and foreign arbitral awards. Under the new law, there will also be an arbitration office established in the Ministry of Economy to monitor international developments in arbitration.

BUSINESS VEHICLES: In other jurisdictions, the fastest and easiest way that an investor can establish a business in a foreign country is often by purchasing a “shelf” company. No such concept currently exists in the UAE but there are essentially four options available to the inward investor to carry on business in Abu Dhabi:

• Participation in a local corporate entity;

• Establishment of a branch or representative office;

• Establishment in a free zone; and

• Appointment of a commercial agent or distributor.

The scope and nature of the intended business relationship, and the type of proposed activities, will generally determine which vehicle is the most appropriate for the foreign investor. In Abu Dhabi there are seven types of commercial entities, as recognised by Federal Law 8 of 1984 (the Commercial Companies Law):

• Limited liability company;

• Private joint stock company;

• Public joint stock company;

• Joint participation;

• Partnership limited by shares;

• Simple limited partnership; and

• General partnership.

It is important to note that only UAE nationals are permitted to be partners in any of the last three entities. In determining which of the above commercial entities is most appropriate, an inward investor should consider, inter alia, the nature of its proposed activities (this will be relevant with regard to licensing requirements), how much control is desired to be maintained by the foreign investor, and the time and expense that is likely to be involved in setting up the chosen entity. In Abu Dhabi the most commonly used commercial entity for entities making an inward investment is the limited liability company (LLC).

LLC: The essential characteristics of a LLC are: • There must be two to 50 partners (shareholders) and at least 51% of the shares must be held by UAE nationals or by firms wholly owned by nationals;

• Shares in an LLC may not be publicly traded and existing partners are given a “first option” to purchase shares being offered by another partner to a third party (in reality this only works to the advantage of the local shareholder as a foreign partner holding 49% may not increase his stake beyond that 49%);

• It is possible under the Commercial Companies Law for profits to be distributed other than in proportion to shareholdings, for example, where one of the parties provides particular know-how or assumes responsibility for the management of the LLC;

• There is no minimum share capital requirement. However, local authorities may still impose minimum capital requirements for specific types of business. The share capital must be fully paid up;

• Generally, the liability of a partner is limited to the extent of his holding, but additional liability may accrue (for example, if a resolution contravening the Commercial Companies Law is passed);

• The LLC is not permitted to engage in certain types of financial business, in essence banking, insurance or investment for others;

• There is no board of directors as such, rather, the partners are entitled to appoint a manager or a board of managers (up to five members) to administer the LLC;

• The manager or members of the board of managers may be partners and they can be appointed for a fixed or unlimited term. Unless restricted by the LLC’s constitution, they have full power and authority to conduct the LLC’s business;

• 10% of the LLC’s net profits must be retained annually until half of the paid-up capital has accrued to a retention fund; and

• LLCs are licensed by local authorities and are often categorised as trading, contracting or service firms.

In recognition of the majority local ownership, LLCs are regarded for many purposes as local companies in Abu Dhabi. Certain fields of activity (e.g. those falling within what the authorities regard as “industrial”) are open only to local companies. In certain sectors preferences operate in favour of local companies, and indeed some contracts are open only to local companies. These preferences make the LLC an attractive option for an investor whose business is in a particularly competitive sector of the market.

NEW LEGISLATION: A new Companies Law has been under discussion for some time, and in December 2011 it was reported that the draft new legislation had been approved by the UAE Council of Ministers. The law is now awaiting ratification by the Supreme Council. The final text of the new law has not been released by it. It is understood that it will include changes to the foreign shareholding limits. The current 49% restriction is often the main concern for an inward investor and so any change in the law which relaxes or removes this limitation should be warmly received by foreign businesses. It has been reported that, under the new law, foreigners may be able to own up to 100% of companies involved in certain sectors where there is a genuine demand for the particular services, where local investment is lacking and where additional foreign knowledge and expertise is required.

The draft law includes an enabling provision whereby foreign ownership in excess of 49% may be approved on a case-by-case basis. It is expected that key sectors such as education, health care and the professions will likely be open to such approval.

It is also reported that companies in some parts of the financial sector may also be allowed majority foreign ownership. Certain economic activities may only be carried out by UAE nationals, including services related to the hajj, commercial agents, various social services including special houses of care for the disabled, the establishment of publications, and carrying out activities as a recruitment agency.

While there has been no formal amendment to the Commercial Companies Law, it appears that GCC nationals (and companies wholly owned by GCC nationals) will be permitted to own local corporate entities without the need for equity participation on the part of a UAE national. However, where there is any kind of equity participation by a non-GCC national, then a minimum of 51% must be still held by UAE nationals.

BRANCH OFFICES: This option involves the establishment of an independently licensed branch office and it is the foreign company which is registered with the authorities. Although this arrangement is recognised in the Commercial Companies Law, it is not covered in any detail. To establish a branch, a foreign company must appoint a local service agent, colloquially referred to as a “sponsor”. It is possible for sponsors to be active (for example, by providing promotional services), but more often than not the role is limited to assisting in and facilitating the required registration and administration formalities. Once a branch office is registered, it may carry on business in its own name. It is permitted, for example, to enter into contracts in its own name, sponsor and employ its own personnel and to obtain visas for them. Certain matters, however, in particular the import of goods, plant and equipment, may require the assistance of the sponsor.

Regardless of the level of activity employed, the sponsor is entitled to receive a fee. The amount of the fee and method by which it is to be calculated depends upon the type of business carried on by the branch. The fee is negotiable, however, for a foreign company licensed in the trading category, it is usual for the sponsor’s remuneration to be calculated as a percentage of net profit, usually in the region of 25%. For a foreign company licensed as a contractor, the usual scale of fees is between 1% and 2% of gross contract values. A higher fee is likely to be sought by the sponsor in circumstances where additional services are provided (i.e. services beyond basic assistance with registration).

The fee rates are fairly clearly established and the authorities have been known to query rates which do not comply with the norm, although there is still considerable scope for negotiation of the same, increasingly including fixed fees. A sponsor should not play any role in the management of a branch and should not be involved in negotiating contracts on behalf of the branch office. It must be appreciated that branches are not regarded as local companies. As such, the local preferences mentioned above (in relation to LLCs) are not available to them and some branches can be specifically excluded from some fields of activity. The name of the branch must be that of its parent company with the addition of “Abu Dhabi”.

Although a branch office is able to enter into contracts in its own right, it is nevertheless not considered to be separate from its parent company. The parent company is required, as part of the registration process, to guarantee the liabilities of the branch office. The termination of a sponsorship generally involves a negotiated settlement between the foreign company and the sponsor culminating in the payment of compensation. As of March 2011 it appears that there is a freeze on licensing new branches of foreign firms that carry out accounting and auditing services.

Representative offices, as an alternative, are established in a similar manner to branch offices, albeit that these are prevented from contracting in their own right and hence fulfil more of an advertising, or promotional function for the parent entity.

PUBLIC & PRIVATE JOINT STOCK COMPANIES: The key characteristics of a PJSC include having a minimum share capital of Dh10m ($2.72m), which is divided into equal negotiable shares. A shareholder is only liable to the extent of his shareholding. There must be a minimum of 10 founding members, and the board of directors must contain at least three (but no more than 12) members. Founding members must subscribe to 20-45% of the share capital. In 2007 the UAE government approved an amendment to the CCL that allows family businesses to retain as much as 70% (previously this figure stood at 45%) of their shares when converting their firms to public companies. The amendment means that family businesses can raise public money without losing control of their companies.

Under the amendment, family businesses are defined as enterprises fully owned by members of one family extending up to the fourth generation. A private joint stock company must have a minimum share capital of Dh2m ($544,400), and the nominal share value is to be paid up on incorporation. There must be a minimum of three founders and no more than 50 shareholders.

As with LLCs, if there is any equity held by a foreigner then UAE nationals (or companies wholly owned by UAE nationals) must hold at least 51% of the shares of a private joint stock company; but again, as with LLCs, it appears the authorities will permit a private joint stock company to be wholly owned by GCC nationals (or companies wholly owned by GCC nationals), provided all other application and registration criteria are met. A foreign investor’s choice to incorporate a joint stock company is likely to revolve around the proposed company’s activities. For example, an entity wishing to engage in investment banking must be a joint stock company. Also, private joint stock companies may invest funds on behalf of third parties, whereas LLCs are prohibited from doing so under the Commercial Companies Law. Investors may also wish to have flexibility regarding a future stock market listing, and the conversion process to a PJSC is much simpler for an existing private joint stock company than for an LLC.

FREE ZONE ENTITIES: While some of the UAE’s best-known free zones are in Dubai, Abu Dhabi officially launched its first free zone, “twofour54”, named after the global coordinates of the city of Abu Dhabi, on October 12, 2008. The benefits of establishing a presence in a free zone are, as a generalisation:

• Unlike companies or branch offices established under the CCL, free zones permit 100% foreign ownership.

This obviates the need for overseas companies to have a local sponsor, enabling them to retain full control of their investments and returns;

• Unrestricted repatriation of profits and capital; and

• A number of free zones provide renewable exemptions from corporate taxation for up to 50 years.

The procedure for setting up a presence, obtaining a business licence and procuring visas for a workforce is generally quicker and more streamlined. Each free zone caters to the specific needs of a particular industry. In many instances a free zone presence entitles a firm to carry on business only within that free zone, so the option requires very careful consideration.

IN THE ZONE: The twofour54 free zone was established pursuant to Law No. 12 of 2007 (concerning the establishment of the Abu Dhabi Media Zone Authority). Film, television, broadcasting, music, digital media, gaming and publishing businesses can create international-standard content in a creative, purpose-built environment. Twofour54 has already licensed more than 60 firms, among which are some of the world’s most renowned content creation companies.

Masdar City will be an integrated “green community”. Masdar City has been designed to be the pinnacle of sustainable urban development and upon completion will be the world’s first carbon-neutral, zero-waste city. It is the first special economic zone to be established for clean technology and renewable energy companies. Masdar City is a purpose-built city focusing on academic research, development and operations for companies, entrepreneurs and financiers based in renewable energy and related technologies. The city’s latest timeline is to be fully operational by 2020.

The Khalifa Port and Industrial Zone (KPIZ) is situated between Abu Dhabi and Jebel Ali. It is contemplated that KPIZ will be similar to the Jebel Ali Free Zone in that it is expected to offer 100% foreign ownership, no duties on imports/exports and is likely to have guaranteed zero tax going forward. When fully operational, KPIZ will include a container and industrial port, along with more than 100 sq km of special economic and free zone space dedicated to logistics, industrial, commercial, educational and residential facilities. KPIZ is aiming to attract companies requiring a lot of land area. The port is under construction and is expected to be operational by late-2012 and completed in 2030.

The Higher Corporation for Specialised Economic Zones (known as ZonesCorp) was established in 2004 to provide integrated infrastructure, environment and professional services in Abu Dhabi through the creation of specialised economic zones focusing on the industrial sector. ZonesCorp promotes investment by offering tax exemptions; duty-free access to GCC countries, as well as to signatory countries of the Greater Arab Free Trade Agreement; prompt issuance of government permits, licences and Customs exemptions; free repatriation of profit and capital; and some duty-free imports.

Several free trade zones are planned in Abu Dhabi: the Abu Dhabi Airport Free Zone, Khalifa Port and Industrial Zone, and the Industrial City of Abu Dhabi. The Abu Dhabi Airport Free Zone (ADAFZ) is to be established by Skycity LLC, a subsidiary of the Abu Dhabi Airports Company. Situated within the boundaries of the capital city’s international airport, ADAFZ will allow a broad spectrum of business sectors to operate, subject to compliance with health and environmental standards. It is proposed that, in line with other free zones in the UAE, the benefits of operating within ADAFZ will include 100% foreign ownership, 100% corporate tax exemption, 100% import and export exemption, and one-stop administration services. In addition to these, ADAFZ will offer fast and efficient cargo clearance services, international freight forwarding and logistics services, and on-site Customs inspection. Registration should only take two to five working days after submission of all documents and settlement of required payments (e.g. for lease of rented facilities).

COMMERCIAL AGENCY: Perhaps the simplest way for a foreign company to carry on business within Abu Dhabi is by the appointment of a registered trade agent. This type of appointment is regulated by Federal Law No. 18 of 1981, as amended, regarding commercial agencies, known as the Trade Agencies Law (TAL). No real distinction is made between a commercial representative and a distributor, so the expression “agent” is interpreted to apply equally to a main distributor and to a representative, as well as to a commercial “agent”. The expression “agent” is therefore used below in this broader sense. The trade agency is primarily intended for foreign companies wishing simply to sell their products or services in the UAE without active local operations of their own. The trade agency route may initially be cheaper for foreign companies wishing to test the market because it avoids the need to establish a physical presence in the emirate, thereby avoiding the need to procure any separate registrations because the business will be carried on under the agent’s trade licence.

Other than any initial costs, the principal’s only recurring expense will be the commission payable to the trade agent (the official agent is entitled to commission on all transactions in its territory, even if those transactions have not been concluded as a result of the efforts or involvement of the agent). A foreign principal may appoint an official agent for the UAE as a whole, or appoint agents for each emirate. In either case the agent’s appointment is generally an exclusive one.

Parties are not free to contract out of the TAL, and its requirements are locally regarded as overriding conflicting principles of foreign law, notwithstanding any agreement to the contrary. The registered agent has the right to prevent goods which bear the relevant trademark from being brought through Customs into Abu Dhabi. This can be of benefit to the principal, but it also provides the agent with considerable power to restrict and prevent trade in the Emirate in the event of a dispute. Recent amendments to the TAL prevent a foreign principal from terminating or refusing to renew the agency unless they can show “a material reason justifying its termination or nonrenewal”. If the principal is unable to display a “material reason” justifying the termination or non-renewal the principal may well be required to pay compensation to the agent on termination of the agreement. In the event of a dispute, either the principal or the agent may approach the committee appointed for dispute resolution.

An agency agreement cannot be re-entered in the Commercial Agents Register in the name of another agent unless the previous agency agreement has expired, the parties have mutually agreed to abrogate it or a court verdict has been issued terminating the agreement. If the agreement’s termination prejudices either party, the aggrieved party may claim compensation. Goods subject to a registered agency agreement may not be imported except via the registered agent. If such goods are brought in by another agent, they may be seized and can only be released with the approval of the Ministry of Economy or the registered agent.

In addition, the seizure will remain in force pending the settlement of any dispute. This will not apply to certain “exempt” goods, whose trading is licensed by virtue of a Cabinet resolution, and which may therefore be traded and imported into the UAE regardless of the existence of a registered agency. That Cabinet resolution contains a list of foodstuffs which, the Cabinet has decided, may be unconditionally imported into the UAE The Ministry is to strike the agencies pertaining to such materials from the Commercial Agencies Register.

ABU DHABI EXCHANGE: As of August 2012 the ADX had 67 listed companies with a market capitalisation of some $62bn. The ADX has different listing conditions for locally incorporated PJSCs and for foreign companies wishing to list their respective securities on the exchange. For a local PJSC to list on the ADX, it must have been incorporated for at least two years with financial statements issued for each year. It must have a paid up capital of at least Dh20m ($5.44m), and this amount must account for at least 50% of the total capital. All shares must be equal, and the firm must have held an ordinary general meeting at least once a year.

For a foreign company wishing to list its securities on the ADX, its capital must exceed Dh40m ($10.89m) and it must have at least 100 shareholders. The company’s net assets must be at least 20% of its paid-up capital, and it should have realised net profits at a minimum of 5% of the paid-up capital during the two years prior to application. The company must appoint a local representative in the UAE to handle matters related to share registry. There are rules regarding the ongoing compliance for companies listed on the ADX. These include, inter alia, disseminating certain financial information to shareholders, the general public and to the ADX; giving notice of changes to previously published information; disclosing to members (and giving notice to the ADX of) certain price sensitive information; and giving notice of any changes to the board of directors or executive management. Listing is not restricted to equity securities of public companies but includes the listing of Islamic bonds and debt securities. The National Bank of Abu Dhabi listed the country’s first publicly traded convertible bond (notes) on the ADX in 2006.

CORPORATE GOVERNANCE: In April 2007 the Securities and Commodities Authority (SCA) issued the Corporate Governance Code for Joint Stock Companies and Institutional Discipline Criteria (the Code). The Code contained binding new corporate governance rules to be applied by listed companies. These companies had a three-year window within which to comply with the Code. In 2009 the Code was superseded by a Ministerial Resolution (the Resolution).

The Resolution does not apply to private joint stock companies or entities wholly owned by the federal or local government, but requires all other companies whose securities are listed on a UAE on-shore stock exchange (i.e. the ADX or the Dubai Financial Market) to adopt good corporate governance rules to create an internal control system, to adopt principles of quality corporate governance, and establish an effective framework for the protection of shareholder rights, the strengthening of transparency within the company and specifying the duties of the board.

The SCA also issued a circular, ancillary to the Resolution, regarding corporate governance, which introduces requirements for listed companies. Listed firms must submit an annual corporate governance report to the SCA that includes the following:

• Requirements and principles of completion of a corporate governance system and the approach to their application;

• Any violations committed by the firm in the financial year, reflecting their causes as well as the method of remedy and avoidance of future occurrences; and

• Method of formation of the board in terms of member classes, term of membership, means of remuneration fixation, as well as the remuneration of the general manager, executive director or CEO. This corporate governance report must be available to all shareholders in sufficient time prior to the date of the general meeting.

There must be a balance on the board between executive, non-executive and independent directors (with a majority of the board being non-executives and one-third being independent). The board must establish two permanent committees: an audit committee (which must consist of at least three non-executive directors, the majority of whom must be independent and must include a financial and accounting expert), and a nomination and remuneration committee. It must also perform an annual review to ensure efficiency, disclosing its findings in an annual governance report.

PROPERTY: Under Abu Dhabi’s property ownership laws (Law No. 19 of 2005 as amended by Law No. 2 of 2007), UAE nationals (and legal entities wholly owned by them) can own freehold property anywhere within the emirate. GCC nationals (and legal entities wholly owned by them) may also own freehold property, but only within specifically designated investment zones, such as Al Raha Beach, Al Reem Island, Lulu Island and Al Reef Villas. GCC nationals and non-GCC nationals have the right to own flats in buildings in the investment zones but not the rights to the actual underlying land. GCC and foreign nationals are also entitled to the right of usufruct for up to 99 years (this is similar to a lease, being the right to use and exploit property belonging to another) and the right of musataha for a maximum term of 50 years (being the right to build and develop on land belonging to another), with both these rights being renewable by mutual consent.

LABOUR LAW: Labour matters in Abu Dhabi are governed by Federal Law No. 8 of 1980, which covers all aspects of the employment relationship, including those relating to labour contracts, working hours, wages, holiday, work safety, discipline, terminating employment contracts (although there are no specific provisions dealing with redundancy), end of service benefits, compensation for occupational diseases, labour inspections and penalties. The law applies to all employees in the UAE – nationals and expatriates – but certain categories of individuals are exempt from the law, for example, those employed by public bodies. The Labour Law sets out the minimum standard of protection which must be provided to employees in the UAE. Thus if the provisions in a contract are less favourable than those in the Labour Law, the former will not be enforceable.

Foreign nationals working in Abu Dhabi must hold work and residence permits. A work permit will be issued on the basis of (among other matters) a contract of employment with a locally licensed entity in local form issued by the Ministry of Labour covering the basic provisions of the Labour Law. In most instances, expatriate employees will also be issued with significantly more detailed employment contracts and, to the extent that employee has greater benefits under the long-form contract, then the latter will prevail.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Abu Dhabi 2013

Legal Framework chapter from The Report: Abu Dhabi 2013

Cover of The Report: Abu Dhabi 2013

The Report

This article is from the Legal Framework chapter of The Report: Abu Dhabi 2013. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart