The United Arab Emirates has continued to develop its legislative framework in 2023 at speed. We have recently highlighted the introduction of the corporate tax regime, the establishment of the Gaming Authority, the changes to the commercial agencies law amongst others.
It might be worth taking a breath, considering the changes that have been made and trying to understand the journey the UAE is on and the ultimate destination.
A lot has changed
We should first appreciate the scale of the change that has taken place. Think back just 3 short years, to those Covid ravaged days of 2020. The then existing onshore labour law was 40 years old, the agencies law 39 years. The companies law was recently amended in 2015 but the gist of it dated back to 1984. There was no onshore data protection regime other than in limited contexts. In practice, the historic restrictions on non-nationals owning more than 49% of an onshore company were still in place. There was no corporate taxation, and VAT was still a new concept being grappled with. Many aspects of personal life were also considered differently by the laws in place.
We now have a new companies law (2021), a new onshore labour law (2021), a new agencies law (2022). A Personal Data Protection Law was introduced in 2021, and a new corporate tax regime in the same year.
This is just a small sample; there have been updates to consumer protection legislation, rules on e-commerce, a liberalisation of the residency regime in effect de-linking residency and work, and the expansion of visas to reflect modern working practices.
What does this mean
The effect of these changes is to position the UAE more closely with other international jurisdictions and provide a high degree of alignment in living, working and business practices. This in turn has led to increased foreign investment in the UAE from the business confidence that these changes have engendered.
The UAE has been able to fast-track these changes by being able to consider best practice legislation in other jurisdictions and create laws which work in the context of the UAE’s culture and values whilst being aligned to those of other jurisdictions. Certainly a business coming to the UAE now will immediately be more familiar with the legislative landscape than a similar business would say 20 years ago.
For businesses from more mature markets, the pace of change can be bewildering and requires constant monitoring to ensure they are both up to date and able to take advantage quickly of benefits resulting from the changes.
Where are we headed
The UAE’s leadership has continually expressed its desire to place the UAE amongst the leading business destinations in the world and have backed this desire with concrete development of the UAE’s laws to ensure this is the case. Of course, it is a competitive market, both internationally and regionally, to attract businesses and talent but the UAE has shown it has the nous and nimbleness to quickly adapt to keep its advantage over its competitors.
It seems clear that the UAE measures its development not just against other countries in the region, but the leading nations of the world and changes to its laws must be seen in that context. Of course, the UAE has its unique culture and norms but this has been cleverly harnessed to adapt international legislative concepts in a manner that supports the ongoing development of the UAE.
The pace of change will not slow but accelerate, and in many areas (such as the regulation of virtual assets and the use of technology in Government transactions) the UAE is in the vanguard of development.
Most people consider that these changes move the UAE firmly from a developing to a developed market, and further changes will put it at the forefront of those markets. The UAE has taken those advantages which have always made it attractive to investors (for example, low taxation, no capital controls and a flexible labour market) and have built well considered laws not only to entrench these advantages but also create the certainty and regulation that international business is accustomed to working with.
This is an exciting time to be developing a business both in and from the UAE.
Next steps
Hogan Lovells and its lawyers have been in the region for a long time and can provide expert advice both on changes that have occurred and on future development. Crucially, we advise on these matters within a well understood context of the historical development of such laws. This enables us to help business to ‘see around corners’ and anticipate issues by understanding the both the context and practicality of changes to the law to be able to take maximum advantage. Please do contact Imtiaz Shah Imtiaz.shah@hogalovells.com or your usual Hogan Lovells contact and we would be pleased to guide you.
Authored by Imtiaz Shah.
