MP logo Meyer-Reumann & Partners
German Legal Expertise in the Middle East since 1981

The Legal Leap of Summer 2019 – New Investment Laws in the Region include the UAE positive list

Heinrich Köllisch

Author: Heinrich Köllisch

Guiding Principle
July 2019 has brought about several core changes and reforms in States of the GCC regarding particularly the materia of foreign direct investment (FDI).

A. UAE – The Positive List is out

The detailed list can be seen here
The enactment of the Foreign Direct Investment Law (FDIL-AE) in the UAE has resonated far beyond the borders of the GCCs main investment hubs.
The core of the law was to enable 100% foreign ownership in UAE companies.
These companies will be designated specially as companies under the FDIL-AE. Until now, the large secret has been for what activities will such companies be licensed and under what individual conditions.

The FDIL-AE itself already set out a so called “negative list” (NL) of activities.
Companies pursuing this kind of activities will not be licensed under the FDIL-AE.

Examples from the NL include exploration and production of petroleum products, Banking and finance, insurance, retail medicine (pharmacies) and commercial agency (c.f. Art. 7 Para. 2 FDIL-AE). Furthermore, the FDIL-AE provides for a so called “positive list” (PL).

The activities listed therein shall be approved by default by the administrations as long as all other legal conditions including those ones in the PL itself are satisfied.

The actual PL is left to be issued by cabinet decision (Art. 7 Para. 3 FDIL-AE).
Any activity not enlisted in the NL or the PL shall be approvable on a case-to-case basis by the authorities leaving them considerable discretionary authority.

As per the beginning of July 2019, the UAE Cabinet under Sheikh Mohammed bin Rashid Al Maktoum Vice President and Prime Minister of the United Arab Emirates, Ruler of the Emirate of Dubai has issued the long-awaited PL.

As firstly only Arabic full copies of the PL were available, Meyer-Reumann & Partners (M&P) would like to present an English translation of the Arabic version of the PL in full in this article.

The list includes 122 activities spread across the agricultural (19) industrial (51) and services (52) sectors. For each of these activities it states the minimum capital needed to invest, the requirements for Emiratization and further terms and regulations.
Some of the above-mentioned requirements are the same throughout the entire list or large parts thereof like the requirement to join the Tawteen Partners Club (an Emiratization support initiative) of the Ministry of Human Resources and Emiratization (MOHRE), some others might be more differentiated.

In the area of services, the required capital is in many cases set at the level of capital required by applicable legislation.
This means that the establishment of 100% owned foreign companies seems to be likely and very probable.

In many cases however (e.g. legal services) professional companies with a 100% foreign ownership were already permitted subject to the engagement of a local service agent. Thus, in the area of free professions a quantitatively large base for the establishment of FDI companies can be anticipated.

In other fields of services, the choice of activities and conditions seems to be in line with development strategies of the country: e.g. Medical practices, and educational establishments are subject of favorable conditions and would contribute to the UAE’s development perspectives in these fields.
Notable is that holding companies for intellectual property (IP) can be set up with the legally required capital now.
This gives more flexibility to those wanting to have their IP directly in the UAE.

Until now IP not being brought into a 51 / 49 % joint venture with a local partner could only be held in offshore or limitedly in free zone companies, whereas now it could be held in mainland. An astonishing feature seems to be the allowance of retail in unspecialized stores, which however requires the maximum of 100 mio AED as capital under the PL.
Aside services the industrial production do make up the major portion of activities under the PL.

Here throughout the activities, the PL demands the use of advanced technology in the production process, achieve high (domestic) value add and to contribute to research and development in the country.

A number of production and manufacturing activities can be exercised with a minimum capital of 15 – 20 mio AED.
Though a number of activities involving e.g. manufacture of electrical equipment requires a minimum capital of 100 mio AED.
In between manufacturing and services (though classified as services) construction activities can be found.

Here capital as per the applicable regulations is required, however their licensing will be limited to wide scale infra-structure projects such as airports, highways sports facilities and projects with a value higher than 450 mio AED.

To sum it up, the list of activities seems to have been chosen motivated to establish an equilibrium between foreign investors, who would like to have a wider access to UAE market, in respect of acquired rights of UAE citizens and the strategic development goals of the country.
Investors should firstly carefully check, if their perspectives and aims align with the partly ambitious capital amounts to invest.

Secondly, due to long term commitment to the UAE as theplace of investment their strategies would have to conform to the countries strategic perspectives in order to partner up therefor together in the future.

B. Oman – A Whole Bundle of New Laws

In the slipstream of the aforementioned UAE development, its eastern neighbor also enhanced its legislation with regards to foreign direct investment.

Oman hereby covers in one step a number of legislative areas regarding FDI that have been subject to more gradual reform in its neighbors over the recent past. At the start of the year, the country reformed its Company’s law (c.f. lex arabiae Vol. XXIII – 2nd Issue April 2019).

As mentioned in this article many reforms therein would appear in an entirely new light if Oman would submit its Foreign Direct Investment Legislation to major changes.

At the beginning of July, exactly this was published in the Official Gazette. However, the laws published in there did not limit itself to a new FDI law only, but covered a whole bundle of new economic legislations that could turn out to be a game changer in Oman:
  • The new Foreign Investment Law (FIL-OM) enacted by Sultani Decree 50/2019
  • The Privatization Law (PL-OM) enacted by Sultani Decree 51/2019
  • The Law on Public Private Partnerships (PPPL-OM) enacted by Sultani Decree 52/2019
  • The Bankruptcy Law (BL-OM) enacted by Sultani Decree 53/2019
  • The Law on Information and Statistics enacted by Sultani Decree 55/2019

  • As well as Sultani Decree 54/2019 concerning the Authority responsible for Privatization.
    This complete bundle of law is of large importance for any foreign economic activity in Oman, as it does seem to channel foreign direct investment in a more favourable way for investors then the prior one.

    It also provides improved legislation for companies in rough times by the new bankruptcy law and offers better facilities for foreign companies by contribution in contexts of privatisation and public private partnerships (PPP), where Oman seems to provide and enlarge space for private initiative inside the Sultanate.

    In comparison to the UAE, where the PL has given a clearer outline to legislation enacted before, Oman still depends to issue its executive regulations to the aforementioned legislations and the whole picture might only be available after weeks / months, last but not least since the executive regulations for the new companies law still await their publishing.

C. The new Foreign Investment Law (FIL-OM)

The FIL-OM replaces the old Foreign Investment Law that in fact limited engagement of foreign investors to Omani corporations and requiring a minimum shareholder ship of 30% nationals and a minimum capital of RO 125 000/-.

Under exceptional circumstances, a holding of 100% in foreign hands was possible for an enlarged capital and when national goals were achieved by such a kind of project. A major exception to this essential pattern was in place for certain nationalities such as GCC and US nationals due to international treaties.
These privileges will remain and continue under the new legislation. However, the FIL-OM has stopped to mention stare quotas for shareholders in Oman in total.
Details for approval of foreign direct investment in Oman are now left to the executive regulations to be issued within 6 months.
The law however states relative clear competences of the Ministry of Commerce and Industry and the Public Authority for Investment Promotion & Export Development.

FDI disputes are subject to Omani courts on fast track procedures or arbitration.
Vehicles for approved investment can be corporate vehicles approved by Omani legislation i.e., in core Omani companies.
It remains interesting to what extend branches of foreign companies will be recognized.

Until now, those were only allowed temporarily in cases of government projects.
The issue will be clearer once the executive regulations to the Companies Law and the FIL-OM have been issued.
On the other hand, the trend towards allowing more foreign ownership in Oman seems to be obvious. Everywhere, where 100% would be permitted, branches would not be of major interest, because a company in most cases would provide a safer liability structure for its parent then a branch of the same.

Aside the actual establishment proceedings that will be outlined in its full clarity, once the executive regulations have been approved, the law gives a number of incentives and guarantees to foreign investors.
This particularly entrenches to repatriation of capital and profits, fund and subsidies in Oman as companies approved under the FIL-OM would be treated the same as locally owned companies.

This is e.g. a major difference to the situation in the UAE, where companies under the FDIL-AE are even easily recognizable as the have to use another company abbreviation then local companies. What will in general apply further to any Omani company, are the very developed Omanization requirements concerning labor force.
The nationalization programs in Oman are one of the oldest in the region and seen as a success in the country.

All in all Oman seems to have made a large leap forward for enhancing its foreign direct investment structure and once its conditions are available to the public, should be considered in the scope of further developments for companies in the Middle East.

 D. The Bankruptcy Law (BL-OM)

Until now Oman used to have one generally bankruptcy law as part of its Commercial Code. It generally aimed at winding up companies when finding themselves in financially troubled conditions.

This has been overcome by the new BL-OM.
The new legislation aims and provides for a more complex and differentiated structure by providing options for restructuring, preventive settlements and a coordinated bankruptcy procedure not only for companies but also for single merchants.

E. The Laws on PPP and Privatization

As already mentioned, the further laws open perspectives to find flexible and more encouraging solutions for private companies and investors to cooperate and engage in fields and ways that have been subject to state engagement only during past times in Oman.

F. Final Remarks on Oman

Oman has enacted a bundle of very interesting measures that look promising to be a further game changer for foreign direct investment and economic engagement in the country.
A further close monitoring of the details as to be spelled out by the executive regulations remains however necessary.

G. Conclusion

The reforms enacted during the usual holiday season in the UAE and Oman seem to be substantial though more for some foreign investors than for others.
A final picture has yet to be assembled in the next weeks and months.
Interested investors should consider consulting legal and other consultants in the near future for checking their options and evaluating them once the picture has become clear enough.

This should be done by obtaining professional advice, as rumors are quickly spread and unprofessional advice might give raise to unreasonable dreams or cut off promising chances.

Press here for printing

For free subscription send us your contact details to