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Business

SETTING UP BUSINESS
General introduction
Incorporating a Limited Liability Company
Establishing a Branch or Representative Office
Commercial Agency
Public Sector Procurement
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Public Sector Procurement

The Federal Regulation of Conditions of Purchases, Tenders and Contracts, Financial Order No. 16 of 1975 (the Public Tenders Law) regulates bidding for public sector tenders. With certain exceptions, only UAE nationals, foreign entities represented by a UAE agent, or foreign entities with UAE partners (i.e., a UAE entity with at least 51 per cent UAE ownership (‘national entities’) may bid for public sector tenders for the supply of goods and public works projects that are governed by the Public Tenders Law. As a result, foreign entities wishing to perform public sector contracts are generally required to have some level of UAE national participation. Such participation typically takes the form of either:

(i) A registered commercial agency
(ii) A ‘service agent’ of the foreign entity’s UAE branch office
(iii) The majority owner of a joint venture in which the foreign entity owns 49 per cent or less of a UAE limited liability company (i.e. a national entity).

The following are three major exceptions to the application of the Public Tenders Law:

o The Public Tenders Law does not apply to purchases and contracts conducted by the federal defence forces – procurements for the federal defence forces are conducted pursuant to Decree 12 of 1986 of the Deputy Supreme Commander of the Armed Forces (the ‘Armed Forces Procurement Regulations’.

o The Public Tenders Law relates to federal government procurement and not procurement by the governments of the individual emirates. For example, Abu Dhabi has a procurement system, which generally tracks that of the Federal Public Tenders Law by requiring suppliers to have commercial agents or national companies that are registered with the Abu Dhabi municipality.

o The general requirement for UAE national participation is not uniformly observed by all government agencies in the context of certain direct sales to the public sector or private tenders in which the government solicits bids directly from relevant manufacturers, particularly in cases in which the goods or services are quite specialized or not widely available.

These ‘exceptions’ arise on a case-by-case basis.

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