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100% Foreign Ownership for the Maritime Sector in the UAE

The maritime sector has always been significant to the growth of the UAE economy over the decades. This has been most apparent in Dubai where the creation of Jebel Ali Port and the Dubai Dry Docks in the 1970’s laid the foundation for Dubai to become the maritime hub for the Middle East, in much the way that Singapore is for Asia. Not only is Jebel Ali in the top 10 ports in the world by volume of traffic but the Free Zone is also home to over 6,000 companies whose economic importance in consolidating Dubai as the logistical epicentre for the region cannot be underestimated.

However, by the very nature of Jebel Ali as a Free Zone with restricted access to the UAE internal market, the focus of the maritime sector has been on transhipment and servicing the off-shore sector. The element that has been missing is the creation of a UAE shipping registry which matches the significance of Jebel Ali Port and Free Zone. Other steps have been taken on the route to expanding the status of Dubai as a maritime hub: Dubai Maritime City Authority has led the charge, particularly with the creation of the Emirates Maritime Arbitration Centre in 2016. This is a specialised dispute resolution forum for the shipping industry which has adopted best practice rules based on the experience of other centres such as London, Singapore and New York.

While the Emirates Maritime Arbitration Centre is gathering momentum as an internationally recognized forum the absence of a shipping registry which opens UAE flagged vessels to foreign capital is very much a missing part of the jigsaw. Hitherto, the restrictions imposed by Article 14 et seq of the UAE Maritime Code (Federal Law No (26) 1981 on the ownership of UAE flagged vessels were strict, effectively limiting the UAE flag to vessels wholly owned by UAE entities or individuals. This has had the inevitable consequence of restricting the size of the UAE registry in comparison to other centres of comparable importance.

As part of the wider review of direct foreign investment in the UAE, maritime business figures in the “Positive List” of sectors to be opened to 100% foreign ownership and it is widely expected that the new draft Maritime law will transform this into reality during the course of this year. Not only will this allow the UAE Shipping Registry to expand in size with the consequent benefit in fee income for the UAE government, it will also pave the way for foreign maritime capital generally to move on-shore. Given the entrepreneurial strength of foreign investment in the Jebel Ali Free Zone, this measure can only be welcomed in a post-COVID-19 world where competition for investment can only become more intense.

Authored by Of Counsel, Jonathan Brown
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