Pursuant to Cabinet Resolution No. 16 of 2020, the UAE has confirmed the list of sectors and economic activities in which increased foreign direct investment is permitted (the “Positive List”).

This briefing supplements our previous Dechert OnPoint “Alert on New UAE FDI Law,” which discussed the introduction of the Foreign Direct Investment Law (Federal Decree-Law No. 19 of 2018) (the “FDI Law”) in the UAE in 2018. As previously noted, the FDI Law provided a statutory framework and pathway towards allowing up to 100% foreign ownership of “onshore” companies (that is, companies outside of the various UAE designated free zones). Up until the introduction of the FDI Law, all “onshore” companies in the UAE were subject to strict foreign ownership restrictions and foreign investors could only hold a maximum of 49% of the share capital with a UAE national (or a UAE company) holding as a minimum 51% of the shares. As with most complex legislations, a number of items in the FDI Law remained subject to further clarifications and guidance to be issued in order to become fully effective. In this respect, the FDI Law established the principle of both a “Negative List” (which included 13 sectors expressly not open to foreign investment above 49%) and gave the UAE Cabinet the authority to issue a “Positive List” of economic activities in which up to 100% foreign investment would be permitted.

The Positive List under the FDI Law has been confirmed and is now effective. The Cabinet Resolution provides a list of 122 economic activities across the agriculture, manufacturing and services sectors (including, amongst others certain healthcare, education, construction and hospitality activities). The Positive List also specifies the minimum capital requirement and any other specific condition or requirement for each activity.

The FDI Law, coupled with the Positive List, is a welcomed development which should encourage foreign investment into the UAE and help further diversify the local economy. Foreign ownership restrictions had always been a key concern for investors and having clarity on those expressly permitted activities is certainly helpful. It is important to note, however, that the FDI Law does provide for the possibility of applying to the relevant competent authority in respect of economic activities not on the Positive List, and such applications will be reviewed on a case-by-case basis.

Any companies considering new investment opportunities or any current investors who would like to explore the alteration of their corporate structure to take advantage of the FDI Law and the confirmed Positive List, should contact an attorney.