(Want to receive more corruption report updates? Subscribe here!)
Corruption is a moderate risk for companies in the United Arab Emirates. The UAE offers a business-friendly environment, with an effective and efficient public administration. However, foreign companies often rely on local sponsorship if they want to succeed, and ruling families’ involvement in the economy creates an uneven playing field. The UAE Penal Code criminalizes active and passive bribery, embezzlement and abuse of functions. Anti-corruption and anti-fraud legislation is enforced, and practices of bribery and petty corruption are uncommon. Gifts and hospitality are regulated under the UAE’s anti-corruption framework. Facilitation payments are treated as bribes and are thereby illegal. It should be noted that information on business and political corruption in the United Arab Emirates is scarce due to severe censorship in the country, making it difficult to estimate the extent of corruption.
Last updated: May 2018
Corruption is a moderate risk in the UAE’s judicial system. The UAE’s constitution provides for an independent judiciary, but in practice, court decisions are subject to review by the political leadership (HRR 2017). Companies indicate, however, that irregular payments and bribes are not commonly exchanged for favorable judgments (GCR 2015-2016). Business executives express general satisfaction with the efficiency of the legal system when it comes to settling disputes and challenging regulations (GCR 2017-2018). Notwithstanding, some concerns pertaining to weak dispute resolution mechanisms and insolvency laws have been voiced by some foreign investors (ICS 2017). Moreover, there is a perception that domestic courts are likely to rule in favor of Emirati nationals over foreigners (ICS 2017). Investors should note that the legal system is divided into Sharia (Islamic law) courts for family and criminal matters, and a system in the free trade zones which is based on common law (ICS 2017). Dispute resolution can be difficult and uncertain in the UAE, and small, medium, and some larger enterprises fear being frozen out of the UAE market, as court proceedings may be lengthy and costly, especially when politically influential local parties are involved (ICS 2017). In severe cases, some enterprises even feel compelled to leave the UAE market (ICS 2017). Enforcing a contract is significantly less time-consuming in Dubai compared to elsewhere in the region (DB 2018).
The UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards is in effect in the UAE and supersedes all incompatible legislation and rulings (ICS 2017). The UAE is a member state of the International Centre for Settlement of Investment Disputes (ICSID) and a signatory to the 1958 New York Convention.
Businesses face a low risk of corruption when dealing with the United Arab Emirates’ police. Impunity among the police force has not been reported, but it should also be noted that there is no publicly available information about any investigations into complaints of police corruption (HRR 2017). Companies demonstrate a high degree of trust in the police’s ability to protect them from crime and to uphold the rule of law (GCR 2017-2018).
A police officer from Sharjah was sentenced to three years of imprisonment in addition to a AED 3000 fine on charges of bribery and aiding the escape of a prisoner (HRR 2017).
Businesses dealing with public services face moderately low risks of corruption. In fact, the UAE is among the countries companies rate the least likely in the world to bear risks of irregular payments or bribes when obtaining public utilities (GCR 2015-2016). There are concerns, however, about a lack of transparency in the regulatory system (ICS 2017). In addition, the regulatory framework generally favors local investors over foreign ones (ICS 2017). The administrative system functions well and without major friction, but appointments of public servants are often based on personal connections rather than solely based on merit (BTI 2018). Power remains concentrated around political elites who use their authority to further their personal interests using widespread networks of patronage (BTI 2018). The use of wasta (connections and favoritism) represents a challenge as it can affect hiring and promotion policies (Emirates 24/7 News, Aug. 2015).
Starting a business requires only half the steps and half the time required elsewhere in the region (DB 2018). The UAE is very advanced in the development of e-governance, and businesses are advised to consider the UAE’s one-stop shop portal with information and services.
There is a moderately low risk of corruption when dealing with the UAE’s land administration. The mechanism for enforcing property rights through the court system is generally considered predictable and fair (ICS 2017). Companies indeed express strong confidence in the government’s ability to protect property rights (GCR 2017-2018). Particularly Dubai has a strong system of recordkeeping for land titles (ICS 2017). Problems can arise from variations in the regulation of property acquisition between nationals and non-nationals, stringent visa rules for investors, lack of transparency in canceled projects, unclear procedures for resale of property, and the need for a proper dispute resolution mechanism (BTI 2018). There have not been any expropriations recently and there are no formal federal rules regulating expropriation (ICS 2017).
Registering property in the UAE takes only two steps and less than two days, which is far below the regional average (DB 2018). Dealing with construction permits also takes less than half of the time required elsewhere in the region (DB 2018). The Dubai real estate portal, eMart, enables free exchange of information on the sale and rental of properties, and it facilitates transactions between public and private sectors.
Businesses face a low risk of corruption when dealing with the Emirati tax administration. Irregular payments or bribes rarely occur when paying taxes (GCR 2015-2016). Companies located in the multiple free trade zones, known as ‘free zones’, are exempt from import and export taxes (ICS 2017).
Dealing with tax payments in the UAE is easier than anywhere else in the world: Preparing, filing and paying taxes takes on average 12 hours per year (DB 2018). As the UAE does not levy income or profit tax, the total tax rate is much lower than the regional and OECD average (DB 2018).
The risk of corruption in the UAE’s customs sector is low. Irregular payments and bribes during customs procedures are uncommon (GETR 2016). Companies express strong satisfaction with the efficiency and time-predictability of the customs clearance process in the country (GETR 2016). Tax exemptions for companies importing and/or exporting to and from free zones reduce costs (ICS 2017). While the time required to comply with import and export procedures falls significantly below regional averages, the costs required are generally in line with the regional average (DB 2018).
The UAE’s public procurement sector lacks transparency and carries moderate risks of corruption to investors. Two out of five businesses report that they have suffered some form of procurement fraud in the past two years (pwc 2018). Despite these findings, businesses demonstrate a high degree of trust in government officials to make decisions objectively and to not favor well-connected companies or individuals when awarding public contracts (GCR 2017-2018). Businesses further report that irregular payments or bribes in connection with awarding contracts and licences are uncommon (GCR 2015-2016). While there is a general lack of transparency in the Persian Gulf states regarding defense spending, the UAE stands out with higher levels of integrity and institutions to counter corruption than others (TI: GDACI 2015). However, there still are concerns about the lack of transparency in the government’s procurement process and the overlap between public and private affairs (BTI 2018). Many seemingly private enterprises have close connections to the ruling family or are government-owned (BTI 2018). Foreign companies have to rely on local sponsorship, and the widespread involvement in the economy of a small number of influential families makes for an uneven playing field (Al Tamimi & Co, July 2015).
Foreign investors considering bidding on public tenders are advised to use a specialized public procurement due diligence tool to help mitigate corruption risks associated with procurement in the United Arab Emirates.
There is a moderate risk of corruption in the UAE’s natural resource sector. Companies should note that corruption risks can exist as the overall budget lacks transparency, not least because oil revenues are not included in the federal budget calculations (BTI 2018; NRGI 2017). In addition, due to the lack of transparency, corruption risks might exist when dealing with state-owned enterprises and in the licensing process (NRGI 2017).
The UAE has a comprehensive legal framework against corruption, but it is scattered across various laws and codes of conduct (Baker McKenzie 2017). On the Federal level, the UAE Penal Code criminalizes corruption, embezzlement, abuse of office, passive and active bribery, bribery or attempted bribery of public employees, a term that covers everyone performing a job for the public service. The revised Penal Code of 2016 makes it illegal to bribe a foreign public official (Baker McKeznie 2017). Facilitation payments are considered a form of bribery (Baker McKenzie 2017). Whether a gift is considered appropriate depends on a number of factors, including its value, the intention behind the offer, the frequency with which gifts are offered, and the relevance of the gift (Baker McKenzie 2017). The mediator or middleman between the recipient and the person offering the bribe is also guilty of an offense (Ethic Alliance, 2016). In the private sector, however, only an individual who accepts a bribe, in exchange for acting in violation of the duties of their position is guilty of an offense (Baker McKenzie 2017). A public official found guilty of accepting a bribe is sentenced to five to ten years’ imprisonment, while a private person or a mediator trying to bribe faces a maximum of five-years’ imprisonment. Federal Law on the Criminalization of Money Laundering criminalizes money laundering. The Federal Human Resources Law provides specific provisions addressing gifts, bribes, and conflicts of interest among federal government employees. The Dubai Government Human Resources Management Law aims at curbing government corruption in Dubai, while Law No. 1 of 2006 contains anti-corruption provisions and civil service conduct regulations for the Emirate of Abu Dhabi. The UAE has ratified the United Nations Convention against Corruption (UNCAC).
In terms of corporate governance, two-thirds of board-level executives in Dubai have indicated in a survey that they believe their anti-bribery policies are failing, and only slightly more than a third say they understand their own company’s anti-bribery policies (Arabian Business, May 2016).
Freedoms of expression and the press are granted by the constitution, but in practice, these rights are restricted by the government (HRR 2017). There is no fundamental right guaranteeing freedom of information, and in practice government entities frequently ignore or reject requests for information (FotP 2017). Most media outlets are government-owned or closely affiliated with the government (FotP 2017). The Federal Law of Governing Publications and Publishing is among the most restrictive press laws in the Arab world; it prohibits domestic and foreign publications and prohibits criticism of public officials or members of the ruling families (FotP 2017). It is also prohibited to publish information that could damage the national economy (FotP 2017). Accordingly, information on business and political corruption in the UAE is scarce (Al Tamimi & Co, July 2015). Journalists can face defamation charges from the government, so most exercise self-censorship (FoP 2017). Online censorship is extensive, and activism and free expression are penalized (FotP 2017). The press environment in the United Arab Emirates is considered ‘not free’ (FotP 2017).
The government places limits on freedoms of assembly and association (FitW 2018). Political organizations, political parties, and unions are illegal in the UAE (HRR 2017). Civil society organizations (CSOs) must register with the Ministry of Labour and Social Affairs before applying for government subsidies (FitW 2018). Foreign NGOs cannot have a base in the country, but the government allows for limited visits of their representatives and of international organizations addressing human rights issues. Another constraint facing civil society is a risk for individuals to be detained or imprisoned when speaking with civil rights groups (FitW 2018). However, CSOs play a very limited role in the country and have no impact on its governance (BTI 2018). There are no CSOs focussed on investigating corruption in the UAE (ICS 2017).
- World Bank: Doing Business 2018.
- Bertelsmann Stiftung: UAE Transformation Index 2018.
- pwc: Global Economic Crime and Fraud Survey 2018
- Freedom House: Freedom in the World 2018.
- World Economic Forum: Global Competitiveness Index 2017-2018.
- US Department of State: Investment Climate Statement 2017.
- US Department of State: Human Rights Practices Report 2017.
- Baker McKenzie: Anti-Corruption in the United Arab Emirates 2017.
- Natural Resource Governance Institute: UAE Profile 2017.
- Freedom House: Freedom of the Press 2017.
- World Economic Forum: Global Enabling Trade Report 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Ethic Alliance: Anti-corruption legislation in the United Arab Emirates 2016.
- Arabian Business: “Anti-Bribery Policies ‘Failing’, Say Majority of Dubai Bosses”, 19 May 2016
- Transparency International: Government Defence Anti-Corruption Index 2015.
- Emirates 24/7 News: “Jobs in UAE: ‘Wasta’ is Dead’ Long live Employee Referrals”, 24 August 2015.
- Al Tamimi & Co: “UAE says no to corruption,” June/July 2015.