Out-Law / Your Daily Need-To-Know

Doing business in the UAE: an introduction

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19 Apr 2023, 2:33 pm

The United Arab Emirates (UAE) is often used as a base for Middle East and North African operations by companies attracted by efficient air and sea connections, developed infrastructure and a tax-friendly environment.

The UAE is an oil-rich country producing around three million barrels per day but has diversified its economy, becoming a regional and global centre for business, trade and finance. Its population has tripled since 2000 to over 10 million, 90% of whom are expats employed across a wide range of industries.

The UAE is a federation of seven emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al-Khaimah, Shajah and Umm Al Quwain. Abu Dhabi and Dubai are of most interest to foreign investors due to their established infrastructure and business environments. The Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) are among the top financial centres in the region. They have a legislative framework and court system based on the English common law, which makes them appealing to foreign businesses which are comfortable operating in this type of legal environment. However, all Emirates offer opportunities and all have established economic free zones allowing 100% foreign ownership of local business entities.

Dubai has the largest population in the UAE and is the main driver of its economic diversity. Although Dubai’s economy was initially built on oil and gas revenue, this now accounts for less than 5% of GDP. With high growth between 2000 and 2008, Dubai established itself as the Gulf’s exhibition, financial, trade and tourism hub. It hosts the majority of the UAE’s economic free trade zones and has excellent connectivity to the wider region through two international airports and the largest cargo port in the Middle East.

Islamic culture and customs

Although the local business environment has become much westernised, businesses seeking to operate in the UAE must pay attention to Islamic culture and customs, including:

the importance of ‘face time’ in a business context;
conservative dress standards – although a more relaxed approach can be taken within hotels and restaurants;
different, and limited, working hours during Ramadan and public festivals such as Eid;
alcohol – although widely available in hotels, the purchase of alcohol for consumption at home in the UAE generally requires a licence;
handshakes – a common form of greeting in the Middle East, and shaking hands at the beginning and end of a meeting is usual. However, some Arab men and women will have reservations about shaking hands with people of a different gender, as contact between men and women who are not married or related is forbidden by Islam. Non-Muslims should not be offended by this, and should simply wait until a handshake is offered by someone of a different gender;
hospitality – very important in Islamic culture, and it can be considered impolite to decline offers of refreshments when they are made. It is customary to treat strangers with the same level of respect as one would treat a friend, as kindness is considered a virtue in Islam.

The UAE’s legal and regulatory framework

The UAE is growing and developing at a fast pace, which means that there is often rapid change in the regulatory regime that underpins business.

The legal system in the UAE is based on both civil code principles and the Islamic sharia law, although the latter is less important in relation to day-to-day commercial matters. The sources of law for civil matters in the UAE are the constitution; federal laws and regulations; emirate-specific laws and regulations; laws and regulations applicable to free zones; sharia law; and custom and practice.

The main sources of law governing day to day commercial matters in the UAE are the federal and local emirate laws and regulations. Some legislative and executive authority is reserved exclusively to the federal level, including matters of substantive legislation related to civil, commercial, corporate and penal matters. The UAE constitution reserves to the individual emirates sovereignty over matters within their respective territorial borders which are not exclusively reserved to the jurisdiction of the federal government.

The UAE is governed by a civil law system that relies on codified laws rather than precedent created by past legal decisions, as is the case in common law jurisdictions. The UAE onshore courts consist of four levels: the Court of First Instance; Court of Appeal; Court of Cassation and Federal Supreme Court. All court proceedings are conducted in Arabic, and parties must be represented by qualified local advocates with special licences.

Alternatively, parties to a contract can agree on arbitration, which has long been a popular method of dispute resolution in the UAE.

For more on dispute resolution in the UAE, see our separate Out-Law guide.

Ways of conducting business in the UAE

Foreign investors are free to invest in the UAE and profits can be repatriated, together with the proceeds of sale and capital on liquidation.

With some exceptions, a foreign entity will be required to establish an entity in the UAE if it wishes to carry on business.

Various options are available to set up a business, with the most appropriate dependent on proposed activities, expected duration, any need for location in mainland UAE rather than a free zone, licensing requirements and costs, and tax impact. These range from setting up a local entity to joint ventures, mergers with or acquisitions of a local entity, or appointing a local agent or distributor.

Download our guide for German businesses doing business in the UAE (20-page / 5.5MB PDF)

Download our guide for US businesses doing businesses in the UAE (20-page / 34MB PDF)