The UAE Legal System
About the UAE’s Legal Structure
The UAE has developed a robust and dynamic legal and regulatory framework over a relatively short period of time to give international businesses and investors significant comfort when deciding to invest or conduct business in the UAE. The sources of Emirati legislation for civil matters include the UAE constitution, federal laws and regulations, Emirati-level laws and regulations, and Islamic Sharia law.
When does Sharia Law apply in the UAE legal system?
Sharia Law applies in three primary contexts in the Emirati legal system. It applies to religious, morality and personal law matters, particularly involving Muslims. It is also used as an interpretive aid where there is no express legislation governing a particular question. Finally, Sharia Law is used for transactions that are intentionally expressed to be Sharia-compliant, such as banking transactions. One area that we see Sharia law applied is in estate law upon a person’s sudden death if there is no will. That’s why non-Muslims in the UAE must take care of estate planning.
The federal government recognises and permits the concept of freedom of contract except when these provisions may not fit under Emirati law (including Sharia law and public policy). This allows contractual counterparts to regulate their relationship as they choose. Emirati investment laws, regulations and incentives are continuously improving to encourage further foreign investment and cement its reputation as a favourable business environment.
Crucial corporate legislation in the UAE legal system
On December 4, 2011, the UAE Federal Cabinet approved a Company Law that paved the way for more relaxed foreign ownership above the existing ceiling of 49 per cent in the future. In addition, the new law allows for a simplified process for starting a business in the UAE and strengthens shareholder protections. The new FDI law (Federal Decree-Law No. 19 of 2018 on Foreign Direct Investment) enacted in 2018, has made the investment environment of the UAE more attractive as it establishes a framework and pathway towards enabling 100% foreign ownership of UAE Limited Liability Companies outside the various UAE designated Free Zones. Among its many aims, the new company legislation hopes to reduce the length of time required to establish a company.