UAE Law and Practice Contributed by: Amir Alkhaja, Gerry Rogers, Daria Selivanova and Danila Kriuchkov, Habib Al Mulla & Partners
enforceable in local UAE courts via co-operation treaties. Additionally, the UAE has specialised federal courts for matters like personal status (Sharia courts) handling family law. 2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments The UAE has significantly liberalised foreign investment in recent years. No general pre- approval is required for foreign investors to own and operate companies in most sectors, except in certain strategic or regulated industries. In 2021, the UAE abolished its long-standing 49% foreign ownership cap for onshore companies. The Commercial Companies Law now allows 100% foreign ownership of UAE mainland com - panies, eliminating the requirement for a UAE national shareholder or agent in most cases. As a result, foreign investors can directly incorpo - rate limited liability companies or other entities without a local partner, except if the activity is deemed to have a “strategic impact”. The UAE has designated under Federal Decree- Law No 32 of 2021 (the “Commercial Companies Law”) the following strategic sectors where for - eign ownership is restricted or subject to special conditions. These include: • security and defence (military-related activi - ties); • upstream oil and gas operations; • utilities (such as water and electricity distribu - tion); • banks, finance and insurance; • currency printing; • telecommunications; • Hajj and Umrah (pilgrimage) services; • Holy Quran memorisation centres; and
• fisheries-related services (which require 100% UAE ownership). Outside these strategic sectors, foreign inves - tors can freely invest without undergoing special government review beyond the standard busi - ness licensing process. As a result, the invest - ment environment remains largely open and welcoming. In addition to federal rules, each Emirate may maintain its own list of partially restricted busi - ness activities. In practice, the Department of Economic Development (DED) in each Emirate issues guidance on activities open to 100% for - eign ownership. Regulated sectors such as banking, insurance, aviation, real estate development and higher education may impose additional licensing requirements or ownership restrictions under sector-specific laws. Foreign companies seeking to operate in the UAE without incorporating a local entity, such as through a branch or representative office, must appoint a Local Service Agent (LSA). This agent, who must be either a UAE national or a company wholly owned by UAE nationals, does not hold any ownership or management stake in the branch. Free zones also come with regulatory distinc - tions that affect how and where businesses can operate. Historically, companies established in free zones enjoyed significant benefits, such as 100% foreign ownership, customs and tax exemptions and streamlined regulatory envi - ronments, but were generally not permitted to conduct business directly in the UAE mainland unless they established an onshore presence or
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