The UAE’s soon-to-be-introduced 100% ownership law will initially be limited to certain global companies, according to Dr Habib Al Mulla, chairman of Dubai law firm Baker & McKenzie.
Speaking to Arabian Business, he said the new law will primarily aim to attract specific sectors such as nuclear technology.
“I don’t think [the ownership law] will apply across the board to everyone including, for example, retail and small LLCs; at least not in the first stage. I don’t think that’s the interest of the legislator at this point in time. They want to attract certain capital, certain types of sectors, mainly technology and global names,” he said.
The law, which was announced last week, is expected to be introduced in Q3 this year. It allows full ownership to foreign companies which were traditionally allowed full possession solely in freezones.
Dr Al Mulla said the first beneficiaries will include the likes of Apple, Google and Tesla.
“Then you will have global names, even if they are going into retail. These will also be welcomed. Then of course, high [level] investors. We’ll have to see what level of investment the legislator is going to impose. Also certain sectors that the state might need, like technology and advanced healthcare. I would assume that these would be the first sectors [to benefit],” he said.
However, Dr Al Mulla predicts the law will eventually expand to include all industries.
“It will start through that, but this is a [move] that once you start, you will not stop. And eventually, I think it will become a reality of life and it will expand to other sectors,” he said.
Last week, the chairman revealed he originally proposed the 100% foreign ownership law and longer residency in an article in 1997. While he received harsh criticism for his suggestions at the time, he believes Emiratis are becoming more receptive to the topic as they aim to attract more foreign investment.
“At the time, in that famous or infamous article, I suggested three things: ownership of land for foreigners, long-term residency and the 100% foreign ownership of companies. All three were taboo at the time, so maybe it was too much, at the time, to digest. Things have changed, times have changed and people are more receptive to what I would call concept of free trade,” he said.
But concerns among UAE nationals continue to occur today, as many worry foreign ownership would further fuel an existing population imbalance, where Emiratis are the minority and expats make up 90% of residents.
“Are there concerns among Emiratis? Absolutely. There are some people who are still too concerned… particularly when you look at what I would call an imbalance of the population, where you have the majority of the population as foreigners.
"Our situation is a bit unique. You can’t compare it to other jurisdictions, for example the UK or Canada where the expat community is a minority. Here it’s vice versa. So these are genuine concerns which needs to be addressed also,” he said.
One of the ways in which such issues can be tackled include innovative concepts like temporary sale of property, according to Dr Al Mulla.
“Foreigners do not want tenancy ownership, they want actual ownership, but at the same time, you have concerns from some of the local community whereby foreigners are owning property. So why not come with an innovative concept of a temporary sale of property contract?
"It is possible and there are examples of it in other jurisdictions. It is actual ownership, but you could limit it to a certain time. So you can leverage it, sell it and mortgage it… you can exercise your full right of ownership on it, but at some point in time, that ownership expires. That could be the balance between the two opposing interests,” he said.
The chairman had submitted a memo of the property suggestion to the government in early 2007, he said, but it was not brought to attention due to the financial crisis taking place at the time.
He said it could be a beneficial tool to give owners the comfort they need, while alleviating concerns some nationals may have on foreign ownership.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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