JOURNAL: Can you tell us about yourself?
Atty. Ali Cetinkaya: I have been generally focusing on the UAE investment laws and commercial arbitration in the UAE and the Middle East.
JOURNAL: What kind of a legal system does the UAE have? What are their investment laws concerning foreign investors and to what extent do these laws protect the investment of a foreign investor?
A.Ç. United Arab Emirates is a Civil Law Jurisdiction. Many of the laws were inspired from the Egyptian law which was highly influenced by the French Law. You can even see the effects of Ottoman Code of Civil Law (the Majallah Al- Ahkami-Adliyyah) in the laws of UAE. Essentially, Ottoman Code of Civil Law has a remarkable effect on the laws of all the Middle Eastern countries. However the main source of the Emirati law is the Islamic Law.
UAE has a modern constitution consisted of 152 articles and its laws are based on the Federal Constitution. Each emirate has its own courts, and these courts are well-equipped modern institutions.
Apart from the courts, there are three international commercial arbitration centers in UAE; two in Dubai; DIAC, DIFC-LCIA and one in Abu Dhabi (ADCCAC). Arbitration is an alternative dispute settlement that is adopted culturally and procedurally as a dispute settlement mechanism in the UAE.
The investments of foreign investors in the UAE are guaranteed by the law. Additionally, UAE is a signatory country to ICSID (International Center for Investment Disputes) and the New York Convention in regard with the Recognition and Execution of Foreign Arbitration Awards. On the other hand, the UEA have also signed BITs with many countries. It is one of the GCC countries and has free trade agreements with many.
There is no an independent law called foreign investment law in the UAE. However, there are certain laws that affect foreign investors directly. These are; Federal Companies Law, Agency Law, Labor Law, Procurement Law and Free Zone laws. Apart from that, there are Commercial Law, Code of Civil Procedure, and all other laws required in a modern state.
JOURNAL: There is a concept called Sponsorship in the gulf countries and this practice worry foreign investors. Is Sponsorship available in the UAE? What kind of problems can happen in practice? What do you recommend to a foreign investors?
A.Ç. Yes, the concept of sponsorship is a mandatory in the UAE Companies Law. However, this is not a sponsorship in a technical sense. It is only a procedural requirement of having a local partner in the company that is to be established. When you prepare your agreement in consultation with a professional as a foreign investor you will not face any problem. There has not been any considerable issue in this regard.
Except some fees, foreign investors are not taxed and that is regarded as a crucial incentive for foreign investors. In a limited liability company founded in partnership with a local (s), the management of the company can be vested to foreign investor. The foreign investor who owns 49% of the shares in the company can have up to % 80 profit and loss, and this can be stated in the company’s Articles and Memorandum of Association which is required to be signed before the Notary Public.
JOURNAL: Is it possible for a foreign investor to establish a company in the UAE without any local partner?
A.Ç. Of course, it is possible. In the UAE, especially in Dubai, there are many free zones. Mainly in Dubai, amongst which JAFZA is among the biggest free zones in the world. It serves foreign investors with its excellent infrastructure and straightforward procedural operations. In all free zones throughout the UAE, local partner is not required. Moreover, investments in the free zones are not subjected to any sort of tax. Additionally, these free zones, as re-export hubs, provide modern services with excellent shipping networks for the investor, straightforwardly accessing to neighboring countries and other continents. In fact Dubai is one of the biggest reexport
enters of the world after Hong Kong and Singapore.
JOURNAL: Recently, remarkable construction projects especially in Dubai and Abu Dhabi have attracted attention, what kind of agreements are used in these construction projects? Based on what these kinds of mega projects are constructed?
A.Ç. The projects are being carried out on specific construction contracts, the most known are the FIDIC contracts that are used in construction projects. These are sophisticated and perfectly prepared contracts. However these contracts can be amended and modified at the discretion of the contracting parties
JOURNAL: What do you recommend to our citizens who want to trade with or make investment in the UAE?
A.Ç. Our recommendation to Turkish traders and businessmen is that they should in accordance with rules and principles set out by the ICC and work professionally in this multinational market. According to this;
They are recommended to trade through written contracts, to read and understand these contracts carefully before signing it, to protect themselves against any possible risk, and to sign their contracts especially before authorities and with competent people.
They should guarantee their assets and liabilities by referring to the internationally recognized payment and shipment modes suggested by the ICC. Within this context, they should not work with open accounts.
Regarding payments through cheques, they can accept the checks given by any bank from the local banks in the UAE. However, there is a possibility that the checks may be bounced. The banks in UAE are safe.
It is very important to state the delivery type as FOB, CIF, C&F etc. in a way that ICC advises.
In case a dispute arises regarding an agreement, it is advisable to first settle it in an amicable manner, if not the parties may refer their disputes to local courts. About Dubai courts, their decisions are very quick and steadfast. There is not any inconvenience in referring the dispute to Dubai Courts. Disputes in mega construction projects, settlement through arbitration is recommended.
The cost especially needs to be stated in the agreement.
The currency type must be defined beforehand,
Delivery date and delay penalty should be stated in the agreement.
It is very important to add, especially, the inflation clause into Force Majeure clause regarding the construction materials in UAE since there may be a high inflation for construction materials.
The date of the agreement, how many copies it has and where it is prepared should especially be stated.
It shouldn’t be forgotten that in case of a possible conflict and disagreement, the agreement / contract that you have signed will always be put in front of you. Before initiating an investment inside Dubai or in any other emirate or in free zones;
The investors need to perform a proper feasibility study.
They need to see the work that they are going to do and research the working opportunities there.
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