The Ministry of Economy has detailed provisions of its new e-commerce law that came into effect in September and is aimed at boosting the investment attractiveness of the Emirates and enhancing its economic competitiveness.

The legislation replaces the preceding law of 2006, which was focused more on electronic transactions rather than e-commerce.

“The new law is particularly important as it is the main federal legislation governing e-commerce in the UAE,” the ministry’s undersecretary Abdullah Al Saleh said recently.

The law is compatible with global trends in digital commerce, he said.

“It has been designed to enhance the business environment in the country by facilitating the conduct of business and contracting, enhancing its efficiency, reducing the cost of doing business, and enhancing stability,” Mr Al Saleh said.

What are its objectives?

Known as Federal Decree Law No (14) of 2023 on Commerce through Modern Means of Technology, the new law “aims to stimulate the growth of trade conducted through the means of advanced technologies and the development of smart infrastructure in the country”, according to the ministry.

The UAE is steadily transitioning to a “new economic model” that has resilience, innovation and entrepreneurial thinking as its key pillars, said Mr Al Saleh.

“The law forms part of the integrated legislative updates undertaken by the UAE government to accelerate the transition towards a new economic model and achieve higher levels of competitiveness for the country’s business and trade environment.”

The law also aims to establish a “dynamic” environment that encourages both domestic and foreign investment in the sector.

The new legislation comes amid strong growth in the UAE’s e-commerce market. It is expected to reach $9.2 billion in 2026, up by about 92 per cent from 2021, the Dubai Chamber of Commerce said last year.

The study, based on data from Euromonitor, also projected that the share of e-commerce in total retail sales will reach 12.6 per cent by 2026.

Momentum within the UAE’s e-commerce sector is being supported by rising demand for online shopping and steady investment flows in the sector’s infrastructure.

Setting up an e-commerce business

The new law clarifies the eligibility criteria that must be met for an entrepreneur to start an e-commerce business in the UAE.

These include compliance with all legal, regulatory, professional, and technical requirements; approvals, permits, and licences from the competent authority for conducting business; a secure technology infrastructure for offering e-commerce services; and compliance with the requirements and standards of cyber security and combating piracy as required.

The law allows merchants to sell only goods and services that are legally allowed to be sold in the country. Also, it is now mandatory for merchants to issue a detailed digital invoice for purchases to customers.

The finer details

One of the important provisions of the law is that it “legally authorises” trade conducted through e-commerce, making it similar to conventional trade.

It elaborates on the relationship between merchants as well as that between digital merchants and the consumers.

The law describes the role of authorities responsible for licensing and regulating e-commerce as well as all related entities, including logistics services and digital payment gateways.

The law has also made provisions to protect consumer interests, in terms of safeguarding intellectual property rights. It includes measures to enable consumers to buy goods and services safely, as well as to regulate the refund and exchange process.

The legislation also organises digital payment gateways in co-ordination with the relevant entities in the UAE.

The new law takes “future developments into account and therefore does not limit the provision of trade to a specific technological means such as digital, or even blockchain, but covers any current or future modern technological means”, Mr Al Saleh said.

The law “does not require modification whenever a new technology emerges in the future”, he added.

Resolution mechanisms

One of the provisions of the e-commerce law is that it provides “optional jurisdictions for dispute resolution, including arbitration”.

“The law sets out several options for disputes involving an e-commerce transaction,” said Nadim Bardawil, partner at law firm BSA.

One option is a dispute settlement committee. “This is a new development whereby the relevant ministry or authority may form a committee to settle disputes between parties.”

Another option is arbitration, Mr Bardawil said.

“The law also allows for parties to an e-commerce transaction to agree to arbitration as a means of settling any dispute that may arise between them.”

However, more clarity is awaited on the provisions of the law.

“The law is somewhat unclear on a number of aspects and we will need to wait to see how it is implemented in practice in order to provide full analysis on the content,” Sandeep Dhama, partner at law firm Stephenson Harwood Middle East, said.

A ‘modern legislation’

The Ministry of Economy said it worked in co-ordination with federal and local stakeholders as well as with the private sector and relevant experts to formulate the e-commerce law.

One of the responsibilities set out by the law for the ministry is preparing a general e-commerce policy and supervising its implementation after obtaining the Cabinet’s approval.

The law also empowers the ministry with the right to co-ordinate with the relevant authorities to meet tax compliance requirements and customs authorities’ requirements.

“The e-commerce law is quite a modern legislation in the sense that it is attempting to resolve issues of cross-border e-commerce activity,” said Mr Bardawil.

“The law applies to any e-commerce activity occurring within the UAE as well as e-commerce activity received from abroad.

“This would suppose that all e-commerce platforms selling to users in the UAE will need to comply with this legislation, which is quite a significant development. We believe that there will be further details issued on the applicability of the legislation in the near future.”