UAE risks "losing ground" to regional competitors as companies law delayed further

The country's English language newspaper, The National, said that no reason had been given publicly for the ongoing delays to the law. At a recent FNC session, Speaker Mohammed Al Murr had asked for a debate to be postponed until 14 May, according to the paper. However, there is no mention of the debate in the agenda for this week, according to The National.

The new Companies Law was first drafted in 2006 and is intended to update the existing regime, which dates back to 1984. During a lengthy debate in February the FNC removed the most eagerly anticipated clause from the new legislation, which would have changed current rules limiting foreign ownership of companies based outside the 'free zones'. Foreign ownership rules will now be considered as part of the Investors Law, which is not due to be discussed until after the FNC's summer break.

"The decision to move the provisions in relation to the foreign ownership laws out of the draft Companies Law removed the issue of most interest to foreign investors and their advisers, and also the issue which was likely to be the most contentious at FNC level," said Alan Wood, a Dubai-based corporate law expert with Pinsent Masons, the law firm behind Out-Law.com.

"Let's hope, therefore, that this is just a short-term delay as regards the remainder of the draft law as any further delay will, inevitably, lead to further rumours and uncertainty. That in turn runs the risk not only of the UAE losing ground to regional competitors such as Qatar and Bahrain, but also providing a basis for a further delay in promotion of the UAE to Emerging Market status by MSCI," he said.

Current rules limit foreign ownership of UAE businesses located outside the various economic 'free zones' to 49%. Companies located in a free zone can be 100% foreign owned, although businesses established in a free zone are generally prohibited from carrying out activities in mainland UAE.