A Guide to Doing Business in the United Arab Emirates

II. General Considerations

The U.A.E. is officially known as "Dawlat al Imarat al Arabiyya al Muttahida", or the State of the United Arab Emirates. The U.A.E. Constitution was adopted on December 2, 1971 and made permanent in 1996.

A. Political System

The U.A.E. has a unique political system in that it brings together both traditional and modern structures that have enabled the country to maintain great political stability. As previously mentioned, the country is comprised of seven Emirates, each of which is led by a Ruler who inherits this position. The Rulers of the Emirates make up the Supreme Council of the Federation, the top policy-making body of the country. The President is elected from within this group by the Rulers, with the President being historically the Ruler of the Emirate of Abu Dhabi. The Supreme Council also determines who will hold the position of Vice President, who has historically always been the Ruler of the Emirate of Dubai.

The President's cabinet is the Council of Ministers, which is the highest constitutional authority in the U.A.E.

The legislative branch of the government is the "Majlis al-Ittihad al-Watani", or the Federal National Council. It is a unicameral council with 40 members from the various Emirates based on population; with half of such members appointed by the Rulers and the other half elected to serve two-year terms.

B. Legal System

The U.A.E. Constitution provides for a federal court system, but acknowledges the right of each constituent Emirate to maintain an independent court system. Currently, the Emirates of Ajman, Fujairah, Sharjah and Umm Al Quwain are in the federal court system. The Emirates of Abu Dhabi, Dubai and Ras Al Khaimah each maintain separate court systems. Rules of evidence and court procedure, however, are governed by federal laws, which apply in all seven Emirates.

The legal system in the U.A.E. (which includes U.A.E. Federal laws and individual Emirate laws) is a developing system which, necessarily, means that it is likely to be subject to more rapid and substantive changes from time to time than a developed legal system. This is evident from a review of the changes in the local legal system that occurred in the past two decades, during which many basic codes and other laws were promulgated. Further, the judiciary was reorganized during that period.

Such codes and certain other laws applicable in the U.A.E. are quite general in nature and in certain respects ambiguous in their application vis-à-vis each other. By way of example, new laws promulgated by the Federal or Emirate authorities frequently recite a standard formula to the effect that "anything that conflicts with the provisions of this Code is annulled" or the like. This formulation, together with the general principle enunciated in the U.A.E. Constitution that Federal law supersedes those provisions of Emirate law which conflict with such Federal law, often makes it quite difficult to determine precisely to what extent, if any, a particular law or a particular provision therein has been superseded. In the absence of clear statutory guidance, the applicability of a particular law to a particular case can be definitively established only retrospectively, when a U.A.E. court issues its ruling in the case.

Further ambiguity is created due to the fact that many court decisions are not reported. Also, as in the case of civil law jurisdictions, there is no system of binding precedent.

Court proceedings in the U.A.E. are often time-consuming. There are no juries, and cases are heard by a single judge or a three-judge panel, depending on the nature of the dispute. Cases proceed on the basis of written pleadings submitted by advocates at a series of brief hearings stretching over a period of months. Hearings are in Arabic and are normally open to the public. All evidence submitted to the court must be in Arabic or be translated into Arabic by a U.A.E. certified translator. The court would likely construe the translation of a document without reference to the English original even if the text provides that the English text is to have priority over any translation. Translation is an art and not a science and there can be no guarantees that an Arabic translation would not introduce ambiguities into the text or be interpreted by a U.A.E. court differently from the manner in which the English original is intended.

C. Financial System

The U.A.E. Central Bank (the "Central Bank") was created pursuant to Federal Law No. 10 of 1980 concerning the Central Bank, the Monetary System and the Organization of Banking.

The Central Bank is entrusted with the issuance and management of the country's currency and the regulation of the banking and financial sectors. It is a governmental agency with its capital fully owned by the Federal government and has its headquarters in Abu Dhabi.

D. Tax

There is no personal income tax, sales tax or VAT in the U.A.E. Corporate income tax statues have been enacted in various Emirates but they generally are not implemented except with regard to specific activities.

E. Customs Duties

A customs duty of 5% is generally charged on the CIF (cost, insurance and freight) value of certain goods at the port of entry.

F. Telecommunications

The U.A.E. has a very modern telecommunications system. Efforts have recently been made by the U.A.E. Telecommunications Regulatory Authority to end the legal monopoly of the telecommunications provider, Etisalat, which is partially owned by the Federal government, by licensing new telecommunications providers such as du and Yahsat.