DUBAI, 12 May 2004 — In a sweeping change to business regulations in the United Arab Emirates, the Federal National Council approved yesterday a bill banning Emirati nationals from hiring out commercial licenses to foreign partners. Tens of thousands of businesses run by foreigners across the country are expected to be affected when the seven-article bill becomes law.
Officials said it was partly aimed at pre-empting financial crises caused by foreign partners fleeing the country after incurring losses and leaving the local sponsor to face the law.
The law will take effect three years after it is endorsed by a presidential decree and published in the official gazette. The three-year grace period will give existing businesses time to rectify their status or wind up.
Under the law, a UAE national holding a commercial license has to be actively involved in the business. He cannot simply draw up an agreement with a foreign partner, obtain a commercial license and allow the partner to run the business.
The law states that anyone entering such agreements will be held accountable, with fines of up to 100,000 dirhams on every count of violation.
The punishment is the same whether the violator is an actual partner or merely a nominal sponsor.
Repeat offenders could be sentenced to two years in prison in addition to the fines. The foreign partner faces the same sentence and will be deported immediately after serving the term.
Commerce and Economy Minister Sheikh Fahim Al-Qasimi said the sweeping law was urgently needed in the country.
He noted that in most cases, the role of the local partner ends when the license is obtained, with the foreign partner taking absolute control of the operation of the business.
If the business goes bankrupt, the partner flees the country, leaving the local partner to face financial obligations and legal repercussions.
Dozens of major cases involving millions of dirhams are reported every year.
Law enforcement agencies say they have many ways to determine the actual nature of the business and whether the local partner is actually involved in business or is offering a screen for foreign partners.
