Country audit United Arab Emirates

April 2016

In collaboration with

03 Corporate03 Onshore companies04 Onshore corporate information05 Offshore and free zone entities05 Offshore corporate information07 Financial free zones

08 News

10 Litigation10 AML/CFT regulation10 Official gazettes10 Special jurisdiction in the DIFC

11 Regulators11 Anti-corruption bodies11 Anti-money laundering11 Securities regulators

12 Appendix

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Country Audit / UAE 03

CorporateThe United Arab Emirates have come a long way in the business world over the last thirty years. With economic powerhouses Dubai and Abu Dhabi at the forefront of that change, the UAE has evolved into an attractive investment destination and a prime regional trade hub, well beyond the traditional oil and gas industries.

The country enjoys a unique set of characteristics such as noticeably low taxes, a relaxed regulatory environment as well as pro-Western sentiment and an investment-positive attitude. Combine that with the fact that key emerging markets in the Middle East, Africa and India are only a few hours away, and you have yourself a modern-day business haven.

The high standard of living, fruitful business opportunities and very low tax regimes have produced a noteworthy international workforce – more than two-thirds of residents in the UAE are expats and English is a common language.

But that’s just one side of the coin.

Economic development in the Emirates hasn’t come without bumpers: Dubai was severely hit during the financial crisis and had to rely on loans and credits from Abu Dhabi to stay solvent, whilst the real estate boom came almost to standstill. Moreover, the region’s politics and economics are heavily influenced by ruling families who are actively involved through their investments, sovereign wealth funds and government-related entities, creating a unique and challenging socio-economic environment. Despite the rocky period, Dubai’s finances have since recovered and the economy has again gained momentum.

Onshore companies

Company registration for onshore enterprises operates through a federalised system and registers are run by each Emirate individually. Commercial licenses are issued by the respective Departments of Economic Development and have to be renewed each year.

The most important law regulating companies and commercial enterprises is the Federal Law No. (2) of 2015 on Commercial Companies, which last year replaced its 1984 predecessor. The law introduced new regulations related to corporate governance as well as financial reporting and introduces the concept of holding companies, but foreigners can still own only a maximum of 49% of the shares in a UAE company.

The New Commercial Law also introduces the establishment of a Companies Registrar to hold corporate records and manage the trade name register - whilst this will be the foundation for better public information on companies in the future, access to these records continues to be very restrictive so there is little benefit for external investigators for now.

LLC Limited liability company

One Man Company LLC Limited liability company with a single shareholder

Est. Sole proprietorship

Limited Limited company (pre-1975)

PJSC Private shareholding company

PSC Public shareholding company

Company, Co., Partnership General partnership

BR, Branch

Represenative Office

Representative Office Banking

FZE Free zone enterprise

FZC, FCZO Free zone company

FZ-LLC Free zone limited liability company

Limited Limited company in DIFC, Jebel Ali or RAK

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Overview of the most common company types and abbreviations across the UAE

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Country Audit / UAE 04

There are five different company types that can be incorporated in the Emirates, some of which are only available to UAE nationals. Companies are usually required to indicate their abbreviated legal form after their trade name. Additionally, all public shareholding companies are legally required to always add the full legal form to their trade name. Representative offices and branches of companies usually include these terms in their trade name. For the latter this is often followed by a location, either Emirate or free zone (i.e. “Honest Trading Company DMCC Branch”).

Free zone companies and offshore registration will be discussed further below. Generally, there are three different company types offered: Free Zone Limited Liability Companies (FZ-LLC), Free Zone Establishment (FZE) or Free Zone Companies (FZC).

Onshore corporate information

The Emirates’ Economic Development departments usually provide a very basic trade name or name availability search online. If a company’s website doesn’t state them, these services can be useful for verifying or retrieving the Arabic/English name for a given entity. Onshore companies will usually have a trade name in both Arabic and Latin scripts. Corporations with wider international exposure will often transliterate the English business name into Arabic. As there are usually several ways to transliterate or translate a term, researchers will need to be very careful of the different name variations and shouldn’t exclusively rely on automatic or phonetic translations. Further details can be obtained in inquiry searches available from the three most important Emirates featured below.

A short guide to company research in the UAE

Country Audit / UAE 05

The Ministry of Economy offers a business name availability search that could verify a company’s existence and could help reveal the relevant licensing authority if the location of an entity within the UAE is unknown. However, the database appears to be incomplete and only serves data from the smaller Emirates of Ajman, Ras Al Khaimah, Fujairah and Umm Al Quwain. The individual Departments of Economic Development (DED) all offer trade name searches with varying degree of information provided to the public: Dubai and Sharjah provide basic company details like address, telephone numbers and P.O. boxes as well as registration status, license numbers and business descriptions of companies. Abu Dhabi’s DED offers less data and only reveals the English or Arabic company name.

Further sources of corporate information are the local chambers of commerce that exist in each Emirate. For example, the Abu Dhabi Chamber of Commerce offers an online directory giving detailed contact and capital information. However, it is important to note that this data often relies on self-reporting and cannot be verified.

Sector-specific regulatory authorities might be another source for company information: Financial service providers are registered with the Dubai Financial Service Authority which hosts a public register on its website that includes names of company executives and other authorised individuals, for instance compliance officers. Where applicable, stock exchanges and securities market authorities also provide good information in financial reports.

Offshore and free zone entities

Free zones are special economic areas within the UAE where traditional tax and customs laws and regulations don’t apply. They are attractive for foreign investors, primarily because they allow the incorporation of companies with 100% foreign ownership. Free zones areas are designed for boosting international business by creating an environment where new business can thrive from the tax free, and free customs duty benefits and cost-free exchange or repatriation of capital. Companies established in free zones are not allowed to directly engage with onshore business in the UAE. They are subject to regulatory oversight only from the authority or Companies Registrar of the specific free zone and are generally not covered by the provisions of the Federal Commercial Law. Although nominally independent from the Emirati legislation, the zones themselves are usually set up, constructed and administered by government-owned or -related entities.

In Dubai alone, there are more than 35 different free zones grouped around industrial activities: a look at the map shows the great extent of these areas. The number and size of the individual free zones is expected to rise even further over the next couple of years. Free zones are expected to contribute significantly to the growth and diversification of the Emirati economies away from the oil and gas sector. One example which illustrates this trend in Abu Dhabi is the Khalifa

Industrial Zone (KIZAD), which upon completion in 2030 is expected to take up two thirds of the size of Singapore.

As appealing as that sounds, these “business wonderlands” have some negative connotations attached to them. It is these special economic areas that largely contribute to Dubai being ranked 10th globally in the 2015 Financial Secrecy Index: Dubai especially has earned the reputation of being used by tax avoiders, smugglers, terrorist financers and money launderers. The independent economic nature of free zones might be an important reason for booming foreign investment and trade, but it’s also the main reason they are causing problems when it comes to compliance.

Offshore corporate information

Free zones offer very little public and reliable information on entities, only some offer member directories online and even fewer publish self-reported director or shareholder data. There are also no naming conventions for companies set up in free zones, further complicating external research on these entities.

One way to identify whether a company is actually located in a free zone in the first place is to look up the physical location and use open-source research to check whether this location is within a free zone. There are generally two types of free zones: those that are fenced (e.g. Dubai Airport Freezone) and those that are unfenced. The majority of the free zones are of the latter kind which makes it somewhat more difficult to identify free zone boundaries: whilst some areas are highly concentrated and easily identifiable, other free zones are spread out and might have extensions or single buildings that are not within the “core” area of the free zone, e.g. in the Dubai Media City. Industrial free zones sometimes also have both free zone and non-free zone plots within the economic area, e.g. in the Ras Al Khaimah Investment Authority.

A further complication is that satellite imagery and common online tools simply cannot keep up with the land and real estate developments on the ground. At the same time, the UAE free zone authorities don’t publish factual maps of the free zone but rather futuristic masterplans. A final thing to note is that free zones, especially in Dubai, sometimes change their branding, although they might still be known by their old name or old abbreviation.

Given the disparity of information identifying business relationships and establishing ownership is an especially challenging task for investigators. The reverse-lookup of P.O. boxes or telephone numbers can unearth some affiliations within the UAE. Often though, these issues will require further research outside the UAE.

The UAE is first and foremost used as a transit country for goods but also as a “conduit” haven for companies’ profits. From an investigation standpoint, chances are you’d be able to access more information in jurisdictions where data is more easily available when these goods, companies

Country Audit / UAE 06

Detailed map of free zones in Dubai

Please note that locations of free zone boundaries are approximate and that the map is not exhaustive.

Dubai Wholesale City

Dubai South / Dubai World Central

National Industries Park

Jebel Ali Free Zone

Dubai Silicon Oasis

Sharjah Airport International Free Zone

© OpenStreetMap contributors © CartoDB, CartoDB attribution

Dubai International Financial Centre

Dubai Airport Free Zone

Dubai Studio City

Dubai International Academic CityDubai Science Park

International Media Production City

Dubai Design District

Meydan Business Park

Dubai Auto City

Dubai Industrial City

Free zones in the UAE

Country Audit / UAE 07

or proceeds pop up again, e.g. in documents of customs administrations, bills of lading, or classical destination countries like US or the United Kingdom. With the UAE’s position as a regional hub in the Middle East, it is also often worth checking for companies’ subsidiaries in the region as other jurisdictions may have higher standards of disclosure (e.g. corporate registries in Lebanon and Jordan list shareholder names).

When researchers are at loss of leads for further investigation they might have to resort to a free zone’s reputation – some have better track records whereas others are associated with money-launderers and counterfeit goods. Companies with different regional links might prefer one free zone over another. Jebel Ali, for example, has been noted as being home to a lot of offshore companies with links to Iran.

Financial free zones

The establishment of special economic areas for the financial service industry is regulated in the Federal Law No. 8 of 2004 Regarding The Financial Free Zones. Soon after the law’s adoption, the Dubai International Financial Centre (DIFC) was founded. It is home to the regional headquarters of a large number of international financial institutions but also houses representational offices of smaller private banks as well as consultancies and accounting firms. It is also home to the NASDAQ Dubai stock exchange.

The DIFC shows very different characteristics from other free zones and a stricter regulatory and enforcement regime: financial service providers in the DIFC are also regulated by the Dubai Financial Services Authority and need to satisfy a catalogue of requirements in order to apply for one of the licenses to operate there. The DIFC also provides a unique legal environment in that it has its own sets of comprehensive laws regulating dealings and business within the free zones as well as its independent judiciary. In that sense the DIFC is the most sophisticated free zone and a great success story for Dubai.

Partially aiming to replicate this success and also offer a counterweight, Abu Dhabi recently launched Abu Dhabi Global Market (ADGM), a free zone located on Al Maryah Island in the UAE capital. ADGM will focus on wealth management and private banking and is currently accepting applications for the first licenses.

Image below: Photo by Armin Rodler, CC BY-NC 2.0

Country Audit / UAE 08

NewsPrint newspapers are still widely consumed and are considered dominant sources of information. Print publication readership is very high in the UAE, with 85% regularly reading some kind of print publication and 56% of news readers reading a publication every day. Such high numbers reveal the level of influence the press could potentially have on shaping opinions and behaviours of the general public. UAE ranked 120th of 180th in 2015 World Press Freedom Index and is considered ‘Not free’ in the 2015 Freedom House report. A large number of newspapers, radio and TV stations are government-owned, with exceptions being some family-owned newspapers or news outlets based in the free media zones, usually offering more varied opinions.

Although freedom of expression is guaranteed in the UAE constitution, it can be argued that there is a de facto censorship against critical reports related to the inner dealing of the Emirates, the ruling families or religious matters. The National Media Council is the institution to oversee and license the news content with Arabic-language newspapers being generally more aligned with the government. International news outlets are still subject to censorship. In 2014, for example, the National Media Council blocked publication of a New York Times issue featuring a report on forced labour in the construction of the NYU campus in Abu Dhabi, whilst the London-based Sunday Times was temporarily removed from newsstands in 2009 amid “intensive reporting of Dubai’s debt problems”.

The first Emirati newspaper, Al Ittihad was established by federal decree in 1969 and is still in the top 5 most widely read newspapers. Nowadays, given the influx of expats into the UAE, there has been an online stream of English-speaking publications specifically catering to this audience, such as The National (a sister publication of Al Ittihad) and Gulf News. The latter overtook Al Khaleej in 2009 as the country’s most read newspaper. The most widely read English-speaking business magazines are Arabian Business and Gulf Business.

Given the unique demographic of the UAE, it should be no surprise that there are two Indian titles in the list of the 10 most-widely read newspapers: The English Times of India as well as Malayala Manorama, published out of Karnataka. The majority of newspapers also have online editions and most content is still freely accessible without paywalls or the need to register an account. Some content is exclusively written for online publications and likewise, printed newspapers will not always publish all articles online.

Defamation is a criminal offense limiting the ability of journalists to critically engage with their subjects. As a result, there is a significant amount of self-censorship where journalists will not risk writing content that could potentially get them in trouble. As a lot of journalists aren’t Emirati nationals, the UAE is in the unique position to use the visa card in their favour.

The government’s handling of freedom of expression has further changed since the Arab Spring. As a response to the unrest in the region, Federal Law 5 of 2012 against cyber criminality has been criticised as a tool to crackdown online activism and oppositional voices that are asking for greater public participation in UAE governance. This cyber crime decree is enforced via the Ministry of Interior and the country’s two government-owned internet service providers. There is a proxy blocking access to websites deemed indecent or critical to Islam or the Emirate’s rulers. Journalists must expect that their behaviour online could be subjected to surveillance, making citizen journalism and collaboration of journalists online more difficult.

Country Audit / UAE 09

Ultimate ownership: Abu Dhabi government Dubai government Outside UAE Private

*Khaleej Times appears twice because the government of Dubai holds a 30% stake in the family business behind its publisher.

Source for readership figures: Dubai Press Club (2015), Arab Media Outlook 2011-2015.

Top 10 most read newspapers (%) in the UAE by ultimate ownership

Country Audit / UAE 10

LitigationThe Emirati legal system is primarily based on civil law and takes a lot of its influences from the Egyptian (and hence French) system. A federal judiciary exists and the country’s highest court is the Abu Dhabi Court of Cassation, although the Federal Supreme Council has the highest constitutional authority. Emirates are also free to adopt their own laws and publish independent regulations. Whilst the separation of powers is enshrined in the constitution, the judiciary is not completely independent as the president of the UAE is responsible for appointing the highest federal judges. Additionally, judicial decisions in sensitive areas are de facto subject to review by the political leadership.

Dubai and Ras Al Khaimah were both not part of the UAE federal judiciary authority and have their own courts meaning that the highest legal authority in Dubai is the Court of Cassation. Civil and commercial matters are primarily dealt with in the Courts of First Instance with appeals going to the federal appellate courts in each Emirate. There are also specialised commercial courts and Sharia courts, specifically dealing with civil and religious matters.

AML/CFT regulation

Over the last few years, the UAE has undertaken serious efforts to strengthen anti-money laundering (AML) and counter-terrorist financing (CFT) provisions, but these policy initiatives don’t necessarily translate into opening up more data to the public. Anti-bribery provisions are in the Federal Penal Code and Federal Human Resources Law. Anti-money laundering provisions were introduced in Federal Law No. 4 of 2002 and recently amended by Federal Law No. 9 of 2014 which extended the scope to terrorist financing and further detailed criminalisation of money laundering, including provisions that affect activities in the financial free zones. These provisions give the UAE Central Bank the power to freeze assets of suspected entities or individuals without prior legal permission. The Central Bank has repeatedly used this tool to freeze and blacklist accounts. Since 2012, the State Audit Institution has worked on the introduction of the country’s first anti-corruption law, however the draft has not yet been adopted. This law aims to fully implement the 2006 UN Convention against Corruption. Another long-awaited law to come into force is a unified insolvency law in order to address bankruptcy procedures that are currently not sufficiently regulated within the existing commercial law.

Whereas other regulatory authorities publish information in English as well as Arabic, court proceedings are generally held and published only in Arabic, adding an extra level of difficulty during an investigation. As in many other Middle Eastern countries, there is very limited litigation information available online. Online inquiries are limited to procedural case information and provide no access to case dockets or clearnames of the parties involved. These types of searches

require investigators to input the case number - something which is of course useless when researchers are trying to establish legal risk in the first place.

Special jurisdiction in the DIFC

As previously mentioned, dealings at the Dubai International Financial Centre are subject to their own special jurisdictions which includes the DIFC Courts: the Court of First Instance and Court of Appeals with all dealings and proceedings conducted in English. The court has also published its own set of laws that regulate company licensing, Islamic financial businesses, insolvency or arbitration. These regulations are modeled after Western business laws giving further confidence to foreign investors engaging in the DIFC. Even though it has its independent civil and commercial jurisdiction, the centre is still subject to the UAE criminal jurisprudence. Full-texts of judgments from both courts, as well as arbitration cases and decisions of the small claims tribunal are searchable and published online.

Official gazettes

Unlike many of the other GCC countries, there is no well-established companies gazette system in the UAE. Each emirate has an official gazette which is used to record and announce rulers’ decrees, official appointments and changes to the legal system. These gazettes (which appear in Arabic and English language, although the former is more reliable) can be useful when researching Private Joint Stock Companies (UAE has a total of around 500 such PJSCs) and high profile or politically exposed individuals.Gazettes are available online in Abu Dhabi from the government’s website or in Dubai on a subscription basis.

Country Audit / UAE 11

RegulatorsAnti-corruption bodies Available information State Audit Institution The State Audit Institution is an independent authority that reports to the Federal National Council. It is tasked with overseeing public funds and improving accountability and governance in the UAE federal government. The site contains initial and annual audit reports on the different branches of the government. Abu Dhabi Accountability Authority The Abu Dhabi Accountability Authority is an independent organisation established in 2008 to promote transparency and accountability in the public sector in Abu Dhabi. In May 2015, an “Anti-Corruption Unit” within the Abu Dhabi Accountability Authority was established by Executive Council directive. The taskforce will focus on investigating cases corruption within government bodies and government-related establishment. The website publishes annual accountability reports.

Anti-money laundering Available information Central Bank of the UAE The Central Bank oversees financial institutions in the UAE and can issue administrative sanctions on breaches of compliance, including those violating Anti-Money Laundering regulation. On the central bank’s website you can find lists of regulated entities as well as notices of administrative sanctions. Dubai Financial Services Authority The Dubai Financial Services Authority is an independent financial services regulator for the Dubai International Financial Centre. The site contains data on currently supervised firms in a public register and notices of regulatory actions taken against companies or individuals.

Securities regulators Available information Securities and Commodities Authority The Securities and Commodities Authority is the leading capital market authority in the United Arab Emirates. They offer information all regulated firms and services including quarterly financial statements (Arabic only), board notifications as well as reports and surveys on the Emirates’ markets.

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ةبساحملل يبظظووبأأ

تتااررامإلاا ةلووددل ييززكررملاا ففررصملل

ةيیلاملاا تتامددخلل يبدد ةططلس

علسلااوو ةيیلاملاا ققااررووألاا ةئيیهھھھ

Country Audit / UAE 12

Appendix: Regulatory Bodies

Abu Dhabi City Abu Dhabi Department of Economic Development * Abu Dhabi City Municipality

Al Ain City Abu Dhabi Department of Economic Development * Al Ain City Municipality

Western Region Abu Dhabi Department of Economic Development * Western Region Real Estate

Management

Dubai Dubai Department of Economic Development * Dubai Land Department

Sharjah Sharjah Economic Development Department * Sharjah Real Estate Registration

Directorate

Ras Al Khaimah Ras Al Khaimah Department of Economic Development Ras Al Khaimah Lands Department

Ajman Ajman Department of Economic Development Ajman Real Estate Regulatory

Authority

Umm Al Quwain Umm Al Quwain Department of Economic Development Umm Al Quwain Land Department

Fujairah Fujairah Public Services and Environment Department Fujairah Land Services Section

(License section)

Free zones across the UAE Respective free zone authority * Respective free zone authority

Municipality Corporate register Land register

Below is a list of the relevant regulatory bodies that will hold corporate registration information as well as land registers. An asterisk (*) denotes sources that can at least partially be searched via Arachnys.