With the aim of promoting Dubai as the regional hub for business in the Middle East, the Government of Dubai recently introduced a new Licensing Law that delegates to DED the responsibility of streamlining and updating the current licensing system as well as, more generally, regulating economic activities in Dubai. Sharhzad Molavi highlights the main provisions of this new law.

In Brief:

  • The new Licensing Law, through a single portal, aims to facilitate improved coordination between various relevant authorities to regulate economic activity in Dubai, particularly with respect to licensing and permissions for small and medium sized businesses.
  • The new Licensing Law has assigned the Dubai Department of Economic Development (DED) the task of overseeing this move towards a streamlined process for licensing as well as, more generally, regulating various economic activities in Dubai, outside the free zones.
  • It remains to be seen how successful the new Licensing Law will be in promoting Dubai as an investment-friendly environment, and what, if any, effect it will have on both Dubai and free zone companies seeking to do business in Dubai; therefore, ongoing consultations with the DED and any other relevant regulators will be required for those investors seeking to operate in Dubai.

Introduction

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the U.A.E., in his capacity as Ruler of Dubai, issued in late September Law No. 13 of 2011 (the Licensing Law), which aims to create a business-friendly environment for investment across various economic sectors in Dubai.

Highlights of the new Licensing Law

The Single Portal

The new Licensing Law establishes a single portal through which companies, which intend to carry on business in Dubai, can apply for a license from the DED.

Under the previous system, businesses had to obtain approvals from a number of different authorities, including the DED and the Dubai Municipality, before being able to carry on economic activities in Dubai.

By grouping together and placing the responsibility for the various licensing and approval process aspects of setting up business in Dubai, the new regime gives the DED the task of coordinating with any other relevant regulators to assess applications, and where it sees fit, grant licenses to prospective investors.

It remains to be seen whether this "one stop shop" structure will be able to facilitate a smoother and more efficient system of licensing for companies looking to do business in Dubai, although creating a single unified system for licensing in Dubai is certainly moving in the right direction in encouraging businesses to establish and develop in the Emirate.

The Role of DED

The new Licensing Law places DED at centre stage in overseeing the new licensing regime, making it the go-to place for the issuance of licenses across various economic activities in Dubai. Other government agencies will no longer be directly involved in the licensing of businesses in Dubai, but will instead coordinate with the DED in the approval process when requested to do so.

Together with this new approval procedure, the new regime has also created a grievance process, allowing companies to appeal against decisions rendered by the DED. Specifically, the Director-General of the DED may form a committee to consider any complaints and must arrive at a decision within 30 days from the date of receiving the grievance.

In addition to licensing matters, the DED has been given the task of regulating, more generally, various economic activities in Dubai. For instance, the new regime authorises the DED to manage all issues relating to monitoring and inspecting possible violations of intellectual property rights and fraud, and managing consumer protection in Dubai.

The new regime marks a new phase in addressing the rights of consumers in Dubai. The Commercial Compliance and Consumer Protection Division of DED has expressed its intention to increase awareness of consumers and retailers about their rights, in addition to proposing regulations, policies and legislation related to trade protection, which would likely include fraud, infringement of trademarks, names and commercial agencies.

The DED will also be in charge of issuing permits for promotional and marketing activities in Dubai, however, the new law has not specified how these permits will be granted and under what conditions.

In sum, the DED has the considerable task of handling not just licensing in Dubai, but also a broad range of economic activities across Dubai. The new law does not specify how DED will regulate many of these activities, but for most part, gives the DED the authority to produce and implement regulations as it sees fit. Therefore, on the face of the new Licensing Law, it is uncertain what the full implications of this new regime will be on businesses as well as those investors seeking to set up in Dubai, and we will have to monitor developments on this front in the coming months.

Licensing Rules

The new Licensing Law has added to and modified previous licensing and registration rules, mapping out a new direction for licensing in Dubai. For instance, the law sets out new procedures for modification, renewal and suspension of licences, as well as disciplinary actions by the DED resulting in business closures and licence cancellations, among other issues.

In addition, the DED will only grant one year licenses and therefore businesses must submit for a renewal of license on an annual basis; however, it is possible, upon request, to obtain a four year license with approval from the DED.

Again, the details regarding how licensing procedures will be carried out is left to DED's discretion and we will need to monitor how these rules will be implemented in practice in the coming months.

Free Zones

The new Licensing Law also clarifies what free zone businesses will have to do in order to be able to operate in Dubai.

Free zones refers to free economic areas, which have their own set of rules and regulations separate from Dubai laws and cater to various different industry sectors including healthcare, information and communication technology and air transport, among others.

While the Commercial Companies Law (Federal Law No. 8 of 1984 Concerning Commercial Companies) prohibits free zone companies from conducting economic activities outside of their designated free zone, given the less than rigorous stance in enforcing this restriction by some authorities in the past, many free zone companies have been under the erroneous impression that they are able to trade onshore in Dubai as if they were licensed in Dubai.

The new Licensing Law clarifies this situation by establishing a new regime which allows businesses licensed to operate in one of the free zones to operate outside of these areas provided that such activity has been approved by both the DED and the relevant free zone authority. The free zone businesses will have to comply with local Dubai law in such cases.

Unification of the Business Registry

Under the new regime, DED will also be responsible for managing a unified register of business names and licenses for businesses operating in Dubai, with the aim of promoting greater accuracy and transparency of information utilising the latest software and electronic systems. In particular, the DED will organise the registration of businesses in the registry, maintain business records and update those records regularly in coordination with other relevant regulators. This unification should make it easier for the DED to regulate the issuance and maintenance of licenses, as well as for businesses looking to update their information on their licensees, given that all license data will be kept in a single registry.

Conclusion

While the underlying aims of this new Licensing Law are commendable, the new legislation does not detail the licensing procedures, electing instead to leave this to the DED's discretion. Therefore, it remains to be seen whether the new law, as implemented by DED regulations and policies, will be fully effective in creating a more investment-friendly environment in Dubai. In the meantime, it is important for investors seeking to establish businesses, and those currently licensed to operate in Dubai or one of its free zones, to monitor the implementation of DED's new rules and regulations, and maintain dialogue with DED and any other relevant regulators to ensure compliance with the new licensing rules.

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