With great times comes great laws, this is the motto in GCC states throughout the past ten years and for the upcoming years in aims of achieving the 2030 vision.  The newly issued United Arab Emirates (“UAE”) Federal Decree Law No. 25 of 2022 (the “Law”) was introduced to support the organization and development of the national industrial sector by increasing the flexibility to adopt more supportive policies and provide further incentives to the UAE industrial businesses. The Law is playing an important role as a key enabler for the industrial sector, by increasing attractiveness for foreign investors, and by encouraging local and foreign investment in industrial activities to coordinate on the same with UAE federal and local authorities.

The Law became effective as of 2 January 2023 and replaced the old law No. 1 of 1979 in a wave of development of industrial matters throughout the UAE jurisdiction. It is applied to all industrial activities in the country, including free, economic, and specialized zones.

We note that the Law is allowing for the creation of a package of incentives and it is enhancing the industrial sector in a way that supports national strategic objectives. This includes the establishment of a national industrial registry that features an integrated database of industrial projects detailing their contributions to the national economy. The database also supports manufacturers with feasibility studies and the evaluation of potential investment opportunities.

The role of the UAE Ministry of Industry and Advanced Technology

The Law created a national industrial registry that includes a database detailing how much each industrial project contributes to the national economy, and creates a registry that enables investors evaluate investment opportunities, industrial facility performance, licensing procedures, permits, and exemptions. The data also helps companies and investors to evaluate potential investment opportunities. The registry’s data is protected, and it is prohibited to circulate the data, except in accordance with the conditions specified by the relevant authorities. The registry also outlines a set of obligations that support the performance of industrial facilities, and enhance industrial licensing procedures, permits, and exemptions.

Advantages and Exceptions

A set of exemptions and advantages are granted under this Law to industrial entities based and founded on the pillars of developed technological tools and industrial solutions, to entities compliant with sustainable production, and also to entities established in freezones or special zones which are considered by the UAE as investment development areas or to entities specializing in conducting activities related to the usage and development of natural resources existing in the UAE. These advantages are applied to all entities that constitute a strategic component and additional to the country’s industrial cursor on the map.

The exemptions and advantages are decided by the UAE Cabinet of Ministers based on the proposal submitted by the Minister of Industry and Advanced Technology who shall liaise on such incentives and exemptions with the relevant competent authorities.

Support and encouragement of international agreements

The law also supports the goals of international agreements in which the UAE participates, such as those of the World Trade Organization.

Mandatory controls and inspection

The Law outlines that the authority competent for inspecting and investigating is assigned through the Ministry of Justice. Such authority has  the right to access all industrial entities’ establishments and issue reporting minutes. The inspection will usually be for the purpose of investigating industrial entities’ compliance with safety, health and environmental measures as well as compliance with the conditions of industrial production in the UAE and conditions of exemptions granted to industrial entities under the Law.

Penalties and liabilities

The Law states that monetary penalties will be imposed in the event of any breach or violation. Any damages arising due to the industrial entity’s behavior, act, omission and the entity fails to remedy such damages, the competent authority will be responsible of the eviction of the industrial premise, izala, and will impose on the breaching party an additional 20% fine of the value of all costs and expenses incurred.

In the same vein, administrative fines and penalties are imposed by the competent authority and criminal lawsuits are filed based on a written order from the licensing authority or the Ministry of Industry and Advanced Technology. Nevertheless, the Law provides for a space of possible settlement procedures. The Law allows for settlement in crimes related to the practice of industrial activity without industrial license. However, an amount not exceeding the maximum amount fixed as a fine under the Law shall be paid in such case.

Conclusion

We anticipate a considerable growth and attraction in the industrial sector and a continuum longstanding in the UAE of Industrial businesses. In the world of UAE leaders’ words, this Law aligns with “Make it in the Emirates” initiative and will intensify UAE as a “global hub” for industrial entities and investors searching for flexibility and sustainability.

Author: Rana Moustafa, Associate

For further information, please contact Alex Saleh (alex.saleh@glaco.com) and Yousef Al Amly (y.alamly@glaco.com).