2023 Investment Climate Statements: United Arab Emirates

Policies Towards Foreign Direct Investment

The UAE actively seeks FDI. In 2021, as part of the series of reforms to commemorate the UAE’s 50th anniversary, the government announced a series of programs with the goal of attracting $150 billion in foreign investment in the coming decade.

Under Federal Decree Law No (26) of 2020, the “Commercial Companies Law,” onshore UAE companies are no longer required to have a UAE national or a Gulf Cooperation Council (GCC) national as a majority shareholder. In March 2021, an intra-emirate committee recommended a list of strategically important sectors requiring additional licensing restrictions. UAE joint stock companies no longer must be chaired by an Emirati citizen or have Emirati citizens comprise the majority of its board. Local branches of foreign companies no longer must have a UAE national, or a UAE-owned company, act as an agent. The Abu Dhabi Department of Economic Development (ADDED) published in May 2021 a list of 1,105 commercial and industrial business activities that are eligible for 100 percent foreign ownership, effective June 2021.

In August 2021, ADDED introduced the “Reduction Program” to facilitate investment and ease of doing business in Abu Dhabi emirate by reducing requirements and cutting fees. As part of the program, Abu Dhabi cut business startup fees by 94 percent in 2021. In June 2021, the Dubai government published guidelines for full ownership procedures for more than 1,000 commercial and industrial activities.

The UAE introduced Federal Law No (3) of 2022 on regulating commercial agencies, replacing the 1981 law which generally required foreign companies to partner with an Emirati local agent to establish business operations in the country. Under the new law, which will come into effect in June 2023, acting as a commercial agency is generally exclusive to UAE citizens, but with an exception for public joint-stock companies with 51 percent or more of national capital. In addition, the law will allow any international companies to act as agents for their own products in new commercial endeavors. Commercial arrangements predating 2013 remain subject to legacy arrangements with local UAE citizen commercial agents.

Federal Law No (32) of 2021 introduced two new types of companies: the special purpose acquisition company, or “SPAC,” and the special purpose vehicle, or “SPV.” The law also amended certain provisions related to Limited Liability Companies and public joint stock companies and introduced a regime to allow for the division of Joint Stock Companies.

Non-tariff barriers to investment persist in the form of visa sponsorship and distributorship requirements. Several constituent emirates have introduced new long-term residency visas and land ownership rights to attract and retain expatriates with sought-after skills in the UAE.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Federal Decree Law No (26) of 2020, outlined above, reduced limits on foreign control and right to private ownership of companies. Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged relative to other non-GCC investors.

Business Facilitation

UAE officials emphasize the importance of facilitating business investment and tout the broad network of free trade zones as attractive to foreign investors. The UAE’s business registration process varies by emirate, but generally happens through an emirate’s Department of Economic Development. The UAE issued Federal Law No (37) of 2021 on commercial registry law to make the Economic Register a comprehensive reference for economic activities in the country and enable use of the unified economic register number as a digital identity for establishments. Dubai waived and reduced fees for a total of 88 services provided by various Dubai Government entities in July 2021.

In April 2022, the UAE approved the executive regulations of the decree law on entry and residence of foreigners, to amend the ten-year “Golden Visa” program, first introduced in 2019, to expand the categories of beneficiaries to include scientists and professionals with certain educational qualifications. Real estate investors purchasing a property of no less than $540,000, outstanding students, exceptional talents, and entrepreneurs generating annual revenues of no less than $270,000 are eligible for the Golden Visa.

The amendment also expanded the five-year residence track, introduced in 2021, for skilled employees with a minimum educational level of a bachelor’s degree or equivalent and a monthly salary of no less than $4,083, and for freelancers and self-employed with proof of financial solvency. To attract various types of talent, the new regulations also offer an entry visa for the purpose of job exploration, a five-year multi-entry tourist visa, and a study and training entry permit.

The UAE introduced in September 2021 a single online platform to present all foreign investment opportunities in the UAE: https://www.investemirates.ae/en.

Dubai launched the Invest in Dubai platform, a “single window” service in February 2021 to enable investors to obtain trade licenses and launch their business quickly. In August 2020, the Dubai International Financial Center (DIFC) introduced a new license for startups, entrepreneurs, and technology firms, starting at a cost of $1,500 per year. In January 2022, ADDED announced it had removed more than 20,000 requirements to set up businesses in the emirate as part of an ongoing overhaul of procedures. Twenty-six local and federal partner entities participated in the reductions program.

As part of Dubai Multi Commodities Center’s (DMCC) broader environmental, social, and governance strategy, the DMCC announced in February 2022 that it will bring 20 social and environmental impact-driven businesses into its community through an Impact Scale-Up program. Accordingly, the DMCC will provide qualifying companies with substantial discounts on business setup costs for five years.

The Abu Dhabi Department of Culture and Tourism launched a Creative Visa in February 2021 for individuals working in cultural and creative industries, including heritage, performing arts, visual arts, design and crafts, gaming and e-sports, media, and publishing.

In July 2022, ADDED issued a one-year exemption from the lease contract requirement to investors in wholesale and retail trade, cafeterias, rental and installation activities, contracting and maintenance, consulting and services, sewing, transport, salons and beauty centers, management offices, and investment companies. In August 2022, ADDED launched a discounted land purchase program to incentivize manufacturing, allowing for the sale of deeply discounted land for as little as $0.13 per square foot, compared to the typical cost of $27.23 to $95.35 per square foot. The sectors covered under the program include logistics, food, energy, heavy industry, health care and biopharmaceuticals, and ICT. Companies applying for the program must meet criteria that contribute to Abu Dhabi’s macroeconomic road map.

Effective January 2023, Law No (25) of 2022 encourages both domestic and foreign investment in food processing, steel, aluminum, plastics, hydrogen, aerospace, petrochemicals, pharmaceuticals, medical technology, and agricultural technology. This industrial sector law seeks to support manufacturers by facilitating feasibility studies, streamlining industrial licensing procedures, and offering financial incentives to promote advanced manufacturing technology as part of the UAE Ministry of Industry’s Technological Transformation Program (TTP).

Outward Investment

The UAE manages extensive investments abroad totaling well over one trillion dollars through multiple sovereign wealth funds, as well as through several emirate-level, government-related investment corporations.

Transparency of the Regulatory System

The onshore regulatory and legal framework in the UAE continues to generally favor local Emirati investors over foreign investors.

The Trade Companies Law requires all companies to apply international accounting standards and practices, generally the International Financial Reporting Standards (IFRS).

The Securities and Commodities Authority (SCA) Board Decision issued a decision in 2020 that public joint stock companies listed on the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) must publish a sustainability report. In March 2021, the SCA made it mandatory for listed companies to have at least one female representative on their board.

Generally, legislation is only published after it has been enacted into law and is not formally available for public comment beforehand. Government-friendly press occasionally reports details of high-profile legislation. The government may consult with large private sector stakeholders on draft legislation on an ad hoc basis. Final versions of federal laws are published in Arabic in an official register “The Official Gazette;” private companies then translate laws into English. The UAE Ministry of Justice (MoJ) maintains a partial library of translated laws on its website. Other ministries and departments inconsistently offer official English translations via their websites. The emirates of Abu Dhabi, Dubai, and Sharjah publish official gazettes online in Arabic. Regulators are not required to publish proposed regulations before enactment.

International Regulatory Considerations

As a GCC member, the UAE maintains regulatory autonomy, but coordinates efforts with other GCC members through the GCC Standardization Organization (GSO). In 2022, the UAE submitted 125 notifications to the WTO committee, including notifications on issues relating to Intellectual Property Rights.

Legal System and Judicial Independence

Islam is identified as the state religion in the UAE constitution and serves as the principal source of domestic law. Common law principles, such as following legal precedents, are generally not recognized in the UAE, although lower courts commonly follow higher court judgments. Judgments of foreign civil courts are typically recognized and enforceable under local courts. Domestic law is a dual legal system of civil and Sharia laws – the majority of which have been codified. Most codified legislation in the UAE is a mixture of Islamic law and other civil laws.

The legal system of the country is generally divided between a British-based system of common law used in offshore financial freezones (FFZs) and onshore domestic law. The United States District Court for the Southern District of New York signed a memorandum with the DIFC courts providing companies operating in Dubai and New York with procedures for the mutual enforcement of financial judgments. The Abu Dhabi-based financial free zone hub Abu Dhabi Global Market (ADGM) signed an MoU with the Abu Dhabi Judicial Department in February 2018 allowing reciprocal enforcement of judgments, decisions, orders, and arbitral awards between ADGM and Abu Dhabi courts.

The UAE constitution stipulates each emirate can set up a local emirate-level judicial system (local courts) or rely exclusively on federal courts. The Federal Judicial Authority has jurisdiction over all cases involving a “federal entity.” The Federal Supreme Court in Abu Dhabi is the highest federal court. Federal courts have exclusive jurisdiction in seven categories of cases: disputes between emirates; disputes between an emirate and the federal government; cases involving national security; interpretation of the constitution; questions over the constitutionality of a law; and cases involving the actions of appointed ministers and senior officials while performing their official duties. The federal government administers the courts in Ajman, Fujairah, Umm al Quwain, and Sharjah, including vetting, appointing, and paying judges. Judges in these courts apply both local and federal law, as appropriate. Dubai, Ras Al Khaimah, and Abu Dhabi administer their own local courts, hiring, vetting, and paying local judges and attorneys. Abu Dhabi operates both local (the Abu Dhabi Judicial Department) and federal courts in parallel.

Employment Law: In September 2021, the UAE issued Federal Law No (33) of 2021, which took effect on February 2, 2022, and repealed UAE Federal Law No (8) of 1980. The new labor law defines contracts, working hours, leave entitlements, safety, and healthcare regulations. The new labor law also sets a minimum wage for employees in the private sector to be determined by the UAE Cabinet.

Trade unions and strikes are prohibited. As of June 2022, groups of 50 or more private-sector employees may file collective employment dispute complaints with the UAE Ministry of Human Resources and Emiratization (MOHRE), which by law acts as mediator between the parties. Expatriates’ legal residence in the UAE is usually tied to their employer, but skilled laborers usually have more flexibility in transferring their residency visa or obtaining a Golden Visa. In February 2022, MOHRE issued Ministerial Resolution No (43) of 2022 regarding the Wages Protection System (WPS), a platform introduced in 2009 to ensure workers were paid according to the terms of their employment agreement. The decree mandates all registered establishments to pay the wages on time through the WPS. However, most domestic workers are not covered by the WPS.

The constitution prohibits discrimination based on religion, race, and national origin. The new labor law protects UAE government efforts to enhance the participation of Emirati citizens and notes that such efforts do not constitute discrimination. Federal Law No (06) of 2020 stipulates equal wages for women and men in the private sector.

The DIFC issued amendments in September 2021 to The DIFC Employment Law No (2) of 2019, addressing issues such as paternity leave, sick pay, and end-of-service settlements. ADGM also issued new employment regulations with effect in January 2020, which allowed employers and employees more flexibility in negotiating notice periods and introduced protective provisions for employees ages 15-18.

Laws and Regulations on Foreign Direct Investment

The UAE signaled throughout 2021 its intention to develop a more commercially friendly legislative environment to strengthen foreign investment. In March 2021, the UAE government announced it would allow full foreign investments in the industrial investments as part of its ten-year comprehensive industrial strategy, the so called “Operation 300 Billion,” by updating the industrial law to support local entrepreneurs and attract foreign direct investment. It said the new industrial law would include flexible conditions to provide opportunities to small- and medium-sized companies and allow 100 percent foreign ownership. To support entrepreneurship in the industrial sector, the Ministry of Industry and Advanced Technology (MoIAT) reduced the fees for 14 services, effectively from January 2023. To support entrepreneurship in the industrial sector, the Ministry of Industry and Advanced Technology (MoIAT) reduced the fees for 14 services, effective from January 2023. The scheme includes decreasing the cost of the product conformity certificate, the Emirates quality mark, and the national halal mark. In November 2022, the UAE issued Federal Decree law No (25) of 2022 regarding the regulation and development of industry, to be effective from January 2023. The law established a national industry registry with a database to help investors evaluate investment opportunities.

Law No (26) of 2020, the “Commercial Companies Law removes the restriction that the nominal value of a share in a joint stock company must be no less than $272,000. The new law also makes certain changes to the provisions regulating limited liability companies and public joint stock companies. It abolishes the maximum and minimum percentage of the founders’ contribution to the company’s capital and cancels the legal limitation of the subscription period. The law eliminates the requirement for the nationality of the members of the board of directors and allows companies to transform into a public joint stock company and offer new shares without being restricted to a certain percentage. It allows companies to divide and create legal rules governing division operations. Branches of foreign companies licensed in the UAE would be also allowed to transform into a commercial company with UAE citizenship.

Competition and Antitrust Laws

The Ministry of Economy’s Competition Regulation Committee reviews transactions for competition-related concerns.

Expropriation and Compensation

Mission UAE is not aware of foreign investors subjected to any expropriation in the UAE in the recent past. There are no federal rules governing compensation if expropriations were to occur. Individual emirates would likely treat expropriations differently. In practice, authorities would be unlikely to expropriate, unless there were a compelling development or public interest need to do so.

Dispute Settlement

ICSID Convention and New York Convention

The UAE is a contracting state to the International Center for the Settlement of Investment Disputes (ICSID) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral awards (1958 New York Convention).

Investor-State Dispute Settlement

Foreign investors continued to raise concerns regarding the resolution of investment disputes and the difficulty of enforcing arbitration awards. Onshore dispute resolution can be difficult and uncertain, particularly when involving politically connected local parties, and payment following settlements is often slow. Disputes are generally resolved by direct negotiation and settlement between the parties themselves, arbitration, or recourse within the legal system. In September 2021, Sheikh Mohammed bin Rashid, Ruler of Dubai, issued Decree No (34) of 2021 to dissolve the Emirates Maritime Arbitration Centre and the Dubai International Financial Centre Arbitration Institute and merge their operations and assets into the Dubai International Arbitration Centre (DIAC). Dubai issued the new DIAC Arbitrations Rules 2022, issued in March 2022, to update the DIAC Arbitration Rules of 2007 in an attempt to improve efficiency, responsiveness, and convenience. The new DIAC rules create a paperless process, permit virtual hearings, and make DIAC the default for disputes in the DIFC, rather than the onshore courts.

International Commercial Arbitration and Foreign Courts

Mission UAE is not aware of any U.S. firm attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards. The Federal Law on Arbitration is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.

Bankruptcy Regulations

The bankruptcy law for companies, Federal Decree Law No (9) of 2016, came into effect in February 2019. The law covers companies governed by the Commercial Companies Law, Foreign Trade Zone (FTZ) companies (with a few exceptions for free zones with their own bankruptcy and insolvency regime, such as the DIFC and ADGM), sole proprietorships, and companies conducting professional business. It allows creditors owed $27,225 or more to file insolvency proceedings against a debtor 30 business days after written notification to the debtor. The law decriminalized “bankruptcy by default,” ending a system in which out-of-cash businesspeople faced potential criminal liability, including fines and potential imprisonment, if they did not initiate insolvency procedures within 30 days. In October 2020, the UAE Cabinet approved amendments to the law and added provisions regarding “Emergency Situations” that impinge on trade or investment, to enable individuals and business to overcome credit challenges during extraordinary circumstances such as pandemics, natural and environmental disasters, and wars. Under the amendments, a debtor may request a grace period from creditors, or negotiate a debt settlement for a period up to 12 months.

The bankruptcy law for individuals, Insolvency Law No (19) of 2019, came into effect in November 2019. It applies only to natural persons and estates of the deceased. The law allows a debtor to seek court assistance for debt settlement or to enter liquidation proceedings as a result of the inability to pay for an extended period of time. Under this law, a debtor facing financial difficulties may apply to the court for assistance and guidance in the settlement of his financial commitments through one or more court-appointed experts, or through a court-supervised binding settlement plan.

Investment Incentives

Each FTZ offer distinct incentives to foreign investors. The UAE does not offer incentives to underrepresented investor groups, nor does it yet offer green investment incentives.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are numerous FTZs throughout the UAE. Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens. All FTZs provide 100 percent import and export tax exemptions, 100 percent exemptions from commercial levies, 100 percent repatriation of capital and multi-year leases, easy access to ports and airports, buildings for lease, energy connections (often at subsidized rates), and assistance in labor recruitment. In addition, FTZ authorities provide extensive support services, such as visa sponsorship, worker housing, dining facilities, and physical security. Free zone businesses which conduct business with mainland UAE will be subject to corporate tax from June 1, 2023.

FTZs have their own independent authorities with responsibility for licensing and helping companies establish their businesses. Investors can register new companies in an FTZ, or license branch or representative offices. All Abu Dhabi FTZs as well as several Dubai FTZs offer dual licensing in cooperation with the local Department of Economic Development. A dual license enables an LLC established in an FTZ to obtain an onshore license, allowing the company to conduct onshore business in that emirate without partnering with an Emirati national, recruiting extra staff using the services of an onshore labor office, or to rent extra office space onshore.

Performance and Data Localization Requirements

The cabinet published Federal Decree Law No (45) of 2021 in November 2021 regarding personal data protection (the Data Protection Law). The law technically came into effect in January 2022, but the executive regulations have not been issued as of April 12, 2023. The law indicates that personal data may be transferred outside the UAE, if the country or territory to which the personal data is to be transferred has adequate protection of personal data, or if the UAE accedes to bilateral or multilateral agreements related to personal data protection with the countries to which the personal data is to be transferred. The UAE Data Office, established under a separate law (Federal Decree Law No (44) of 2021), is the single national data privacy regulator.

All foreign defense contractors with over $10 million in contract value over a five-year period must participate in the Tawazun Economic Program, previously known as the UAE Offset Program. This program also requires defense contractors that are awarded contracts valued at more than $10 million to establish commercially viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value.

The UAE does not require foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code, but it strongly encourages companies to utilize local content. In February 2018, the Abu Dhabi National Oil Company (ADNOC) launched the In-Country Value (ICV) strategy, which gives preference in awarding contracts to foreign companies that use local content and employ Emiratis. In February 2020, the Abu Dhabi Department of Economic Development and ADNOC signed an agreement to standardize ADNOC’s ICV certification program across the Abu Dhabi Government’s procurement process.

Real Property

The federal government allows emirates to decide the mechanisms through which ownership of land may be transferred within their borders. Abu Dhabi has generally limited land ownership to Emiratis or other GCC citizens, who may then lease the land to foreigners; the property reverts to the owner at the conclusion of the lease. However, in 2019, the Abu Dhabi Government issued Law No (13) of 2019 amending the rules on foreign ownership of real estate in the Emirate of Abu Dhabi. Under the law, foreign individuals and companies wholly or partially owned by foreigners are allowed to own freehold interests in land located within certain investment areas of Abu Dhabi for an unrestricted period. In October 2022, the ruler of Sharjah issued Law No (2) of 2022 on the amendment of Law No (5) of 2010 on real estate registration in the emirate. The amendment expands the ability of non-UAE citizens to purchase property in the emirate.

Although Dubai has restricted ownership to UAE nationals in certain older, more established neighborhoods, traditional freeholds, also known as outright ownership, are widely available, particularly in newer developments. Freehold owners own the land and may sell it on the open market. The contract rights of lienholders, as well as ownership rights of freeholders, are generally respected and enforced throughout the UAE.

Mortgages and liens are permitted with restrictions, and each emirate has its own system of recordkeeping. In Dubai, for example, the system is centralized within the Dubai Land Department, and is considered extremely reliable.

In January 2022, the ruler of Dubai issued Law No (2) of 2022 on the expropriation of property for public use in the Emirate of Dubai. The new Law regulates the terms and conditions under which buildings and facilities can be expropriated and sets out the terms for providing compensation to the owners whose properties are expropriated. In July 2021, Dubai issued Resolution No (25) of 2021 to add some lands to the areas for ownership by non-UAE nationals of real property in the Emirate of Dubai.

Intellectual Property Rights

The UAE has an established legal and regulatory framework for intellectual property (IP) rights protection. In recent years IP rights (IPR) holders have seen marked improvement in the protection and enforcement of IPR. In April 2021, the UAE was removed from the U.S. Trade Representative’s Special 301 Report Watch List. However, UAE appears in USTR’s 2022 Notorious Markets List for markets in the Deira District reportedly selling IP-infringing goods. Recent UAE government changes include enhancing IP protections for the pharmaceutical and biotechnology industries; transforming legislation surrounding patents, industrial design, trade secrets, copyrights and trademarks; acceding to the Madrid Protocol; lowering previously prohibitive trademark fees; increasing transparency in the outcomes of counterfeit seizures; increasing notifications, seizures, and public destructions by Dubai Customs; creating intergovernmental and quasi-governmental groups responsive to USG and U.S. industry concerns; and licensing music at Expo 2020 Dubai. While additional steps are needed to remedy problems with music licensing and IPR enforcement in FTZs, the UAE government has taken action to address several concerns of rights holders.

Emirate-level authorities, such as economic development authorities, police forces, and customs authorities, enforce IPR-related issues, while federal authorities manage IPR policy.

Before 2021, inventors could receive patent protection in the UAE through either the UAE national patent office or the regional GCC Patent Office. On January 5, 2021, the GCC Patent Office stopped accepting new patent applications as the regional patent system undergoes significant reforms. While GCC patent applications filed before January 5, 2021, will continue to be processed, inventors will need to rely on the national UAE patent office to seek patent rights until the new regional GCC system is established.

Resources for Intellectual Property Rights Holders:

Rasha Abdel Magid
Intellectual Property Specialist for the Middle East and North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +971 50 891 4306 Rasha.AbdelMagid@trade.gov 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

Capital Markets and Portfolio Investment

The UAE adopted a regulatory framework designed to govern the marketing of investment funds established outside the UAE to domestic investors and the establishment of local funds domiciled inside the UAE. The Securities and Commodities Authority (SCA) licenses and regulates, investment funds. The marketing of foreign funds, including offshore UAE-based funds such as those domiciled in the DIFC, requires the appointment of a locally licensed placement agent. The UAE government has also encouraged certain high-profile projects to be undertaken via a public joint stock company to allow the issuance of shares to the public. The UAE government requires any company carrying out banking, insurance, or investment services for a third party to be a public joint stock company.

In January 2023, Cabinet Decision No (111) of 2022 came into force, prohibiting certain virtual asset activities without an appropriate license from the SCA or a local authority with emirate-level competence. The only such local licensing authority is the Virtual Assets Regulatory Authority (VARA) in Dubai.

The UAE has three stock markets: Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai. SCA, the onshore regulatory body, classifies brokerages into two groups: those that engage in trading only while the clearance and settlement operations are conducted through clearance members, and those that engage in trading clearance and settlement operations for their clients. Under the regulations, trading brokerages require paid-up capital of $820,000, whereas trading and clearance brokerages need $2.7 million. Bank guarantees of $367,000 are required for brokerages to trade on the bourses.

In March 2021, the SCA issued new corporate governance rules under the Chairman of SCA Board Decision No (03 R.M) of 2020 concerning adopting the Corporate Governance Guide for Public Joint Stock Companies. The new rules describe the principles and objectives of corporate governance which are centered around the key pillars of accountability, fairness, disclosure, transparency, and responsibility.

In January 2022, the SCA approved the Special Purpose Acquisition Company (SPAC) regulatory framework, paving the way for the listing of the first SPAC on ADX in 2022.

To attract global real estate investment funds to the emirate, Dubai issued Decree No (22) in July 2022, opening real estate assets in the districts previously closed to foreign-owned funds.

Credit is generally allocated on market terms, and foreign investors can access local credit markets. Interest rates usually closely track those in the United States, since the local currency is pegged to the dollar.

Money and Banking System

The UAE has a robust banking sector with 51 banks, including 21 foreign institutions and seven GCC-based banks. The number of national bank branches declined to 506 in September 2022, compared to 526 in September 2021, due to bank mergers and the transition to online banking.

Non-performing loans (NPL) comprised 6.8 percent of outstanding loans in Q3 2022, compared with 7.5 percent in Q3 2021, according to figures from the Central Bank of the UAE (CBUAE). The banking sector remains well-capitalized. The CBUAE recorded total sector assets of $975 billion at the end of Q3 2022. Banks reported significant improvements in profitability and asset quality metrics. The CBUAE took unprecedented measures to inject liquidity and introduce other debt relief measures that helped the financial sector weather the impact of the COVID-19 pandemic. In October 2022, new amendments to federal legislation prevented banks from pursuing criminal proceedings against individual defaulting borrowers if the lender did not perform an appropriate credit risk assessment and called for the CBUAE to establish an independent legal entity to manage consumer protection responsibilities and rule on consumer complaints.

The Financial Action Task Force (FATF) added the UAE to its list of Jurisdictions Under Increased Monitoring (grey list) in 2022. The FATF Plenary of February 2023 kept the UAE on the grey list, while noting the country’s progress in addressing some strategic deficiencies.

Foreign Exchange and Remittances

Foreign Exchange Policies

According to the IMF, the UAE has no restrictions on making payments and transfers for international transactions, except security-related restrictions. Currencies trade freely at market-determined prices. The UAE dirham has been pegged to the dollar since 2002. The mid-point between the official buying and selling rate for the dirham (AED or Dhs) is fixed at AED 3.6725 per USD.

Remittance Policies

The Central Bank of the UAE initiated the creation of the Foreign Exchange & Remittance Group (FERG), comprising various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry. Exchange companies in the UAE are primary conduits for transferring large volumes of remittances through official channels. According to migration and remittance data from the World Bank, in 2020, the UAE had migrant remittance outflows of $43.2 billion. Exchange companies are important partners in the UAE government’s WPS electronic salary transfer system. They also handle various ancillary services ranging from credit card payments to national bonds to traveler’s checks.

As part of its focus on improving Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) systems within the UAE, in September 2020, the CBUAE introduced a mandatory registration framework for Hawala providers or informal money transfer service providers that operate in the UAE.

Sovereign Wealth Funds

The Emirate of Abu Dhabi maintains three primary sovereign wealth funds and publishes limited information about their investments. The Abu Dhabi Investment Authority (ADIA) is the largest with assets of approximately $941 billion. It is chaired by Deputy Ruler of Abu Dhabi and National Security Advisor Tahnoon bin Zayed Al Nahyan (TbZ). ADIA does not invest in the UAE, and approximately half of its portfolio is invested in the United States. Mubadala Investment Company, which is chaired by the UAE Vice President and Deputy Prime Minister Mansour bin Zayed Al Nahyan, has an estimated $284 billion in total assets. Mubadala invests approximately 34 percent of its portfolio in the United States and 28 percent in the UAE. Abu Dhabi Holding (ADQ) assets include investments in private firms and state-owned firms with interests in agriculture, aviation, financial services, healthcare, industries, logistics, media, real estate, tourism and hospitality, transport, and utilities. TbZ also chairs ADQ, which holds assets worth approximately $157 billion. While ADQ appears to have significant domestic investments, it does not publicly report investment holdings.

The Investment Corporation of Dubai (ICD) is the Emirate of Dubai’s primary sovereign wealth fund with an estimated $300 billion in assets, according to ICD’s 2021 annual report. Emirates Investment Authority, the UAE’s federal sovereign wealth fund, has estimated assets of $87 billion.

Domestic investments by these sovereign wealth funds presents both challenges and opportunities to competing U.S. investors.

Climate Issues

The UAE has pledged to reach net zero carbon emissions by 2050 and announced it would invest $163 billion in clean and renewable energy and key technologies. The UAE has made significant progress in developing its urban infrastructure, as the country diversifies from an hydrocarbons-focused economy to a knowledge-based economy. The UAE’s per capita energy and water consumption are among the highest in the world, leading to a heavy carbon footprint. The UAE is one of the world’s most water-scarce nations, caused by an arid climate, high temperatures, and very low levels of precipitation. With limited natural freshwater resources, the country relies on desalinated seawater to meet its demand for potable water.

The UAE takes seriously the need to address and mitigate negative impacts on the environment and has taken steps to demonstrate the importance of the issue, including establishing the Ministry of Climate Change and Environment (MOCCAE) in 2016. The UAE launched a National Climate Change Plan in 2017 and was one of the first Gulf countries to ratify and sign the Paris Accord in 2015. The UAE will host the UN Framework Convention on Climate Change (UNFCCC) 28th Conference of the Parties (COP28) in November-December 2023. The UAE has adopted policies and strategies aimed at addressing the impacts of climate change, improving air quality, reducing the emission of greenhouse gases, improving water and food security, promoting low-carbon energy, and conserving the UAE’s natural resources.

In anticipation of COP28, the UAE President declared 2023 the “Year of Sustainability.” The UAE Cabinet also set “championing the environment and sustainability” as one of the UAE’s five priorities for 2023. In January 2023, the UAE issued a ministerial resolution to prohibit the import, production, and circulation of single-use plastic shopping bags from January 1, 2024. The ban will extend to other single-use plastic products from January 1, 2026. In December 2022, the cabinet approved the National Building Regulations policy, including new sustainability standards for roads, buildings, housing, and other areas to reduce the country’s carbon footprint. In August 2022, MOCCAE introduced the UAE-Climate Responsible Companies Pledge to increase the engagement of the private sector in the country’s decarbonization drive.

In November 2022, the UAE and United States launched the Partnership for Accelerating Clean Energy (PACE) to catalyze $100 billion in financing, investment, and other support to deploy 100 gigawatts (GW) of clean energy by 2035 in the UAE, United States, and third countries. In January 2023, a bilateral working group was established for PACE implementation, which announced $20 billion of initial investments to fund 15 new gigawatts (GW) of clean and renewable energy projects in the United States before 2035. These projects would be financed through $7 billion in cash equity from the private sector and $13 billion through debt financing and other instruments.

The UAE aims to increase its global competitiveness by increasing the share of low-carbon energy in the country’s total energy mix; establishing robust recycling and waste management industries, including several waste-to-energy plants; developing massive reverse osmosis seawater desalination plants to replace older, energy-intensive thermal plants; improving water efficiency through “reduce and reuse” initiatives; implementing green standards in the construction and management of buildings; and adopting green products and technologies. The UAE and local governments in Dubai and Abu Dhabi have launched various platforms to engage businesses to share knowledge and best practices. The Abu Dhabi Future Energy Company (Masdar) develops and finances greenfield renewable energy projects in UAE and in several countries, including the United States.

Hiring of Nationals

The Emiratization Initiative is a federal program to increase Emirati employment in the private sector. Most Emirati citizens in the private sector are employed by GREs. Requirements vary by industry, but the Vision 2021 national strategic plan aimed to increase the percentage of Emiratis working in the private sector from five percent in 2014 to eight percent by 2021; in 2019 the UAE reached 3.64 percent. The government said it would work closely with the private sector to achieve this target. In August 2020, the Emirates Job Bank (EJB), a government-facilitated job portal for UAE nationals, obliged government and onshore private employers to justify their decisions not to hire interviewed UAE citizens before they could hire a non-citizen.

In September 2021, the UAE launched program Nafis (“compete” in English) to support the employment of Emirati nationals in the private sector. Under Nafis, the UAE will spend up to $6.5 billion to employ 75,000 Emiratis in the private sector during 2021-2025, with the aim of having Emiratis hold ten percent of the UAE’s private sector jobs by 2026. In May 2022, the UAE Cabinet adopted resolutions and incentives packages to enhance Emirati participation in the private sector, including reducing the service fees of the Ministry of Human Resources and Emiratization (MOHRE) by 80 percent for companies that successfully recruit Emirati employees. The Cabinet approved increasing the Emiratization rate by two percentage points annually for high-skilled jobs in establishments that employ 50 workers or more. In November 2022, the UAE Cabinet approved penalties ranging from $5,445 to $27,226 for each Emirati employee terminated for a cause other than approved justifications under the Nafis program. Effective January 2023, non-compliant companies were required to pay a monthly fine of $1,633 for every position not filled by an Emirati citizen.

To support this effort, in September 2022, the Abu Dhabi Department of Education and Knowledge (ADEK) launched a $517 million (AED 1.9 billion) scholarship program to send up to 6,000 Emirati students from the emirate of Abu Dhabi to community colleges in the United States and Canada by 2028. The program aims to equip Emirati students with the highest quality education and practical skills needed to support the UAE’s knowledge-based economy private sector expansion. Students will then be eligible to transfer their credits to an international or local university to complete their bachelor’s degrees.

Expatriate Labor Regulations

A significant portion of the country’s expatriate labor population consists of low-wage workers who are primarily from South Asia and work in labor-intensive industries such as construction, manufacturing, maintenance, and sanitation. In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families. Federal labor law does not apply to domestic, agricultural, or public sector workers. In 2014, the federal government implemented a law mandating a standard contract for all domestic workers. The UAE updated its domestic workers law in December 2022, building on 2017 legislation that regulates their rights and contracts. Under the new UAE labor law, employers must pay severance to workers who complete one year or more of service, which is calculated based on their salary.

The UAE government implemented the Unemployment Insurance Scheme on January 1, 2023, for UAE nationals and residents working in the federal government and the private sector. Based on the Federal Decree Law no (13) of 2022, the scheme is designed to provide financial support to employees in the event of job loss. The subscription fees depend on the employee’s basic salary. Termination of UAE nationals in most situations requires prior approval from MOHRE.

The guest worker system generally guarantees transportation back to country of origin at the conclusion of employment. Repatriation insurance costs $16 per year per employee. Most employees are not subject to excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility. Article (8) of the new Law indicates that unlimited contracts are to be abolished and replaced with work contracts of a fixed term for a period of three years.

Employees who live in the UAE on a sponsored work visa can undertake part-time jobs and work for multiple employers simultaneously to earn additional income. The new labor law allows children aged 15 and over to take on part-time jobs. The UAE Cabinet approved a measure in January 2021 permitting foreign university students in the UAE to sponsor their families, provided they have the financial means to do so and can afford suitable housing.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries. The UAE government has implemented a licensing and regulation scheme to oversee recruitment agencies in an effort to improve regulation and standards.

Wage Policies

While not yet in force, Article 27 of the new federal labor law (Federal Law No (33) of 2021) says the cabinet may, upon the proposal of the Minister of Human Resources and Emiratization and in coordination with the concerned authorities, issue a resolution to determine the minimum wage for workers or any category thereof. MOHRE unofficially mandates an AED 5,000 ($1,360) monthly minimum wage for locals at job fairs. Some labor-sending countries require their citizens to receive certain minimum wage levels as a condition for allowing them to work in the UAE.

Labor Standards and Worker Protections

The law prohibits public sector employees, security guards, and migrant workers from striking, and allows employers to suspend private sector workers for doing so. In addition, employers can cancel the contracts of striking workers, which can lead to deportation. Changes to the penal code effective January 2022 mandate deportation of noncitizen workers inciting or participating in a strike. According to government statistics, there were approximately 30 to 60 strikes per year between 2012 and 2015, the last year for which data is available. Delivery drivers in Dubai staged protests in May 2022 over long working hours, inadequate safety conditions, lack of medical insurance, and predatory third-party agencies charging illegal visa fees. One delivery company responded by cancelling planned wage cuts for its motorcycle delivery force and launching an investigation into third-party agencies. Mediation plays a central role in resolving labor disputes. MOHRE and local police forces maintain telephone hotlines for labor dispute and complaint submissions. MOHRE manages 11 centers around the UAE that provide mediation services between employers and employees. Disputes not resolved by MOHRE are transferred to the labor court system.

MOHRE inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law. Emirate-level government bodies, including the Dubai Municipality, also carry out regular inspections. MOHRE also enforces a mid-day break from 12:30 p.m.-3:00 p.m. during the extremely hot summer months. The federally mandated Wages Protection System (WPS) monitors and requires electronic transfer of wages to approximately 4.5 million private sector workers (about 95 percent of the total private sector workforce). There are reports that small private construction and transport companies work around the WPS to pay workers less than their contractual salaries. MOHRE announced the optional implementation of WPS for domestic workers starting January 2022, following a pilot program in 2020. Starting April 2023, the registration of certain domestic workers in WPS will become mandatory, but excludes housekeepers, nannies, and servants, who make up the majority of domestic workers. In February 2022, MOHRE increased the minimum amount of an employee’s salary to be paid via WPS from 80 percent to 90 percent.

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No (11) in May 2017, which mandates employers provide basic health insurance coverage to their employees or face fines. Dubai’s mandatory health insurance law covers 4.3 million people.

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor. Child labor is illegal and rare in the UAE. The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations, such as the International Organization for Migration and the United Nations Office on Drugs and Crime, regarding labor exploitation and human trafficking.

A new federal law, Federal Law No (9), on domestic workers went into effect December 15, 2022, replacing the existing law in effect since 2017. The new law extends anti-discrimination provisions to cover disabilities, expands sick leave allowances and pay, guarantees worker repatriation, and lifts some restrictions on inspecting worker accommodation and places of work. Under the new law, violations of worker labor rights and recruitment policies are punishable with stricter penalties of up to one year in prison and 1 million AED ($272,000) per violation.

On December 20, 2022, MOHRE issued, with immediate effect, two decrees that complement existing domestic worker legislations via added protections and procedural elaborations. Decree #674 provides time limits on the employer hiring bans in the domestic workers law’s executive regulations, setting them at six-months for those guilty of contractual violations, wage denial, or abuse, and at least one year for those convicted in court of “exploiting a domestic worker for forced labor or any activity that constitutes human trafficking.” It also lists absconding from work among violations that would earn a domestic worker a one-year labor ban.

Section 7 of the Department of State’s Human Rights Report (http://www.state.gov/j/drl/rls/hrrpt) provides more information on worker rights, working conditions, and labor laws in the UAE. The Department of State’s Trafficking in Persons Report (https://www.state.gov/reports/2022-trafficking-in-persons-report/) details the UAE government’s efforts to combat human trafficking.