Strategic Legal Insights for International Tech Companies Operating in UAE

For international technology firms seeking expansion, the UAE offers a compelling environment for growth, characterised by its economic vibrancy, supportive infrastructure, skilled workforce and business-friendly regulations, making it an appealing destination for business expansion. 

The demand for skilled professionals, especially in data management, cybersecurity, and AI, is surging in the UAE. Initiatives like Dubai Silicon Oasis and Dubai Internet City are designed to foster innovation and attract tech companies. 

The UAE legal system is a complex framework of federal and local laws. Federal laws apply to the entire UAE, while local laws only apply in the emirate in which these are passed. 

For example, Dubai has its own laws and regulations related to real estate as well as rental properties. Furthermore, the UAE has a multifaceted regulatory framework. Several local authorities in the UAE supervise business operations, such as the  Ministry of Economy, Department of Economic Development, etc. 

These authorities frequently update rules and regulations related to the licensing of various business activities, AML compliance, and registration of intellectual property rights. Given the complexity of the UAE legal system, it is important to have a thorough understanding of the legal landscape to ensure a successful expansion. 

Understanding the Regulatory Environment

A comprehensive grasp of local laws, such as data protection, intellectual property rights, and business licensing, is crucial for any tech company operating in the UAE. 

• Data protection is vital not only for legal compliance but also for building trust with consumers and to adjust to the ever-changing digital environment.
• The management of Intellectual Property Rights has also assumed a great significance in the present-day economy. There are different types of IPRs that are governed by separate laws, such as copyright, trademarks, industrial designs, etc.
• Local business licensing regulations determine how companies can legally operate within the UAE. 

Choosing the Right Business Structure

There are several options for setting up a business in the UAE, each catering to different business needs and operational strategies. The primary business setups are mainland and free zone.

Mainland and Freezone Companies

Mainland companies are registered under the Department of Economic Development (DED) of the respective emirate and are subject to UAE federal laws. On the other hand, Freezone companies are registered in freezones, which are designated economic zones in the UAE and are authorised to enact their own laws and regulations. 

For example, the Dubai International Financial Centre (DIFC), which is a financial free zone, has its own laws derived from the English Common Law system, such as Contract Law, Employment Law, etc. 

Selecting between a mainland or free zone company setup in the UAE primarily hinges on the business objectives, target audience, and operational requirements.

Ownership

In a Free Zone, foreign investors can own 100% of the company without the need for a UAE national partner. Regarding mainland business, even though foreign investors can now own up to 100% of shares in specific sectors, there are certain activities that may still necessitate a UAE national partner or agent.

Market Access

Mainland companies provide wider market access and greater flexibility, although they may entail more regulatory obligations. Conversely, free zone companies facilitate easier establishment and complete ownership but face geographical restrictions on their business activities.

Compliance with Data Protection and Privacy Laws

Federal Decree Law No. 45 of 2021, known as the Personal Data Protection Law (PDPL), establishes a comprehensive framework to safeguard the confidentiality of personal information and ensure the privacy of individuals within the UAE. This law provides clear guidelines for data governance, outlining the rights and responsibilities of all stakeholders involved in data management and protection. By doing so, it seeks to create a secure environment for personal data handling, promoting accountability and transparency among organisations that process such information.

PDPL aims to align with the General Data Protection Regulation (GDPR), which is a comprehensive data privacy law enacted by the European Union. There are several key similarities between PDPL and GDPR, such as :

• Both highlight the importance of transparency and accountability in data processing.
• Both prohibit the processing of personal data without the consent of its owner.
• Both require that data breaches be reported to authorities and the individuals affected.

Intellectual Property Protection

Intellectual property is the creative work of the human intellect. Intellectual property plays a vital role in the economy, and its protection is important due to the following reasons:

• To create a sense of security among creators.
• To reward and encourage creativity through incentives.
• To encourage technological innovations.
• To encourage fair trading, which would contribute to economic and social development.

The registration of intellectual property (IP) in the UAE involves several steps and varies depending on the type of IP—trademarks, patents, or copyrights. For example, to register a trademark, a customer can submit an online application via the ministry’s website. Registration documents include a trademark logo, a copy of the commercial licence, power of attorney, a priority document, a passport copy, and other attachments.

Copyright

Copyright is a type of IPR that protects artistic and creative works such as works of literature, music, theatre, architecture, etc. It enables the creator/author of an original work to control the use of their work and prevent plagiarism.

 The copyright law in the UAE is governed by Federal Decree-Law No. 38 of 2021 on Copyrights and Neighbouring Rights (UAE Copyright Law). The UAE Copyright Law provides protection for a wide range of original works, encompassing books, music, films, software, databases, visual arts, architectural designs, etc.

Registration

Under UAE Copyright Law, copyright registration is not mandatory. Copyright originates as soon as an original work is created, and it automatically belongs to the owner even if it is not registered. However, it is highly advisable to formally register a copyright with the UAE Ministry of Economy because it can serve as evidence of ownership of the work should there be any infringement dispute in the future.

Rights Granted

Economic rights: UAE Copyright Law grants exclusive rights to authors to reproduce (including downloading or electronic storage), broadcast, re-broadcast, publicly perform or communicate, translate, assimilate, modify, rent, lend or publish their works (including making it available through computers, data or communication networks or any other means). The economic rights of an author are protected for the duration of his life plus 50 years starting from the first day of the calendar year following his death.

Moral rights: UAE Copyright law grants certain moral rights to authors, such as the right to decide the first publication, the right to prohibit any modification of the work, the right to withdraw the work from circulation, and paternal rights, i.e., the right to claim authorship of the work.

Infringement of Copyright

The copyright in a work is infringed if it is published or displayed without its owner’s consent. In case of infringement, an author can request the authorities to take the following measures:

• Stopping the publication, display or production of the work;
• Provisional seizure of the copies of work;
• Provisional seizure of the revenue resulting from publication or display.

Trademark 

Trademark means any name, label, word, symbol or logo which distinguishes the product or services of one person from those of others. Trademark protects the public from confusion and deception by identifying genuine products and services.

Trademark protection in the UAE is governed by Federal Decree-Law No. 36/2021 (UAE Trademark Law). The UAE Trademark Law covers a wide range of trademarks such as names, words, signatures, letters, symbols, numbers, addresses, seals, drawings, pictures, engravings, packaging, graphic elements, forms, colours, a sign or a group of signs, including three-dimensional marks, hologram marks. A distinctive sound or smell may also be considered as a trademark. 

The Law outlines several exceptions that cannot be considered trademarks, such as marks lacking distinctiveness, breaching public morals, containing religious symbols, being identical or similar to well-known trademarks owned by others, and containing misleading or false information.

Registration and Protection Period

Individuals and entities can apply to the UAE Ministry of Economy for trademark registration. The Ministry is required to decide on the registration application within 90 days from the date of its filing. Upon successful registration, trademarks in the UAE are protected for ten years from the application filing date unless renewed.

Infringement

Infringement occurs when a person or entity who is not a registered owner uses a mark that is the same as or similar to a registered trademark. The owner of a registered trademark may commence legal proceedings for trademark infringement to prevent unauthorised use of that trademark. The UAE Trademark Law imposes stringent penalties for infringement ranging from AED 100,000 to AED 1 million.

Patent

A patent gives the inventor the sole authority to exploit their invention commercially. In UAE, patents are governed by Federal Law No. 11 of 2021 on the Regulation and Protection Of Industrial Property Rights (UAE Patent Law). Under the UAE Patent Law, the eligibility criteria for granting a patent include:

• a new invention resulting from an innovative idea or innovative improvement
• a creative step
• industrial applicability

Registration and Protection Period

Application for a Patent must be submitted to the UAE Ministry of Economy. The application shall include the names of the applicant, inventor, and registration agent (if any), as well as a detailed description of the invention in addition to one or more protection elements and an illustration of it (if any). A patent is valid for 20 years from the date of application submission.

Rights Granted

(i) If the subject matter of a patent is a product, the holder of the patent shall have the right to manufacture, use and sell it. The holder of the patent shall, moreover, have the right to prevent third parties from manufacturing, using, or selling the product without obtaining his prior consent to do so.

(ii) If the invention involves an industrial process or a manufacturing method of a certain product, the patent holder shall have the same right with respect to the direct product of such process or method. In addition, the holder shall have the right to exploit such process or method and prevent a third party from doing so without obtaining his prior consent.

Non-Compete Clauses in Employment Contracts 

If the work assigned to the worker allows him to gain knowledge of the employer’s clients or have access to its work secrets, the employer may require that the worker under the employment contract shall not, after the expiry of the contract, compete with the employer or be engaged in any competing project in the same sector, provided that the restriction is specified, in terms of time, place and type of work. 

The maximum period that can be specified in an employment contract for such a restriction is two years from the date of expiry of the employment contract.  In this regard, it should be noted that even if a non-compete clause is in accordance with the parameters specified in the law (i.e., in terms of time, place, and type of work), the UAE Court can still refuse to enforce the non-compete clause if it believes that the same is not necessary to protect the legitimate business interests of the employer. 

Therefore, even if the non-compete clause is in accordance with the provisions of UAE Labour Law, the employer will still have to demonstrate that the said clause is necessary in order to protect its legitimate business interests. 

Conclusion

By focusing on regulatory compliance, tech companies in the EU can ensure they fulfil the legal obligations necessary for effective operations in the UAE. This involves comprehending local regulations, securing the required licenses, and following industry standards, all of which are vital for establishing trust and credibility in a new market.