Suhail Mirza: Hi everybody my name is Suhail Mirza and I am a Partner at Gowling Dubai. I am here with Simon my colleague to talk about all things e-commerce.
Simon Elliott: Thanks Suhail. So we are here today to discuss part two in our e-commerce series which is all about establishing e-commerce business in the UAE. Just to start off Suhail, what is e-commerce?
Suhail: E-commerce, I mean it does not actually have a legal definition per se. E-commerce encapsulates generally all things relating to business activity undertaken online. In our context it is mainly to deal with retail sales and operations here in the UAE buying and selling goods and offering services through an online portal.
Simon: Sure so why is e-commerce so relevant now and going forward.
Suhail: Well e-commerce is not a new thing it has been relevant forever since people have had access to online services. It is more important these days because due to COVID-19 and obvious restrictions on physical buying people are having to move their businesses online and therefore we are seeing a huge push across all sectors of the UAE economy to moving operations online.
Simon: Sure, so how are e-commerce businesses accommodated in the UAE?
Suhail: That is a really good question Simon. The UAE government has been very proactive in promoting e-commerce business. You will be aware of some very notable success stories. Amazon acquiring souq.com, we have all heard of Dubizzle, we have all heard of operators like bayut.com, and wesellanycar.com. They are all sort of organic home-grown businesses and the UAE government has facilitated those businesses by providing various initiatives.
If you look at the DIFC for example there is a FinTech hive which is intentionally structured to attract FinTech start-ups and they provide shared services in terms of accommodation, floor space and also incentives in terms of licensing and reductions in licencing fees.
So that is an example of how the UAE government has been able to incentivise e-commerce business and in that context FinTech business to establish in this region. More generally, there is a whole host of laws and regulations that support e-commerce business and also licensing regulations as we might go on to discuss.
The UAE is a very licensing intensive jurisdiction so any business wanting to set up in this region should really get its head around licensing regulations as it applies on a jurisdiction by jurisdiction basis. By that, I mean on an Emirate by Emirate basis but also on a free zone by free zone basis. So it is very important to get your head around licensing regulations in order to make sure your free zone or your e-commerce business I should say is properly structured.
Simon: I think just following on from that you have mentioned the licensing aspects. So how is it that an e-commence business can actually be established in the UAE and within its various jurisdictions?
Suhail: Okay the first question to ask as you go through this journey of establishing a business here is what does your business plan actually entail. As I said, e-commerce does not have a legal definition per se.
At its very basic level e-commerce is operating an online portal where you can attract buyers and sellers and deal with the sale of goods and promote e-commerce through that portal. So that will just be a portal where you would have to look at the relevant licensing regulations to see what your business plan is and accommodate that with the licensing codes as they were, the activity codes as set out in their free zone regulations or in the Dubai Economic Department's ("DED") licensing regulations.
You need to look at your business plan and accommodate that with the licensing requirements but beyond that you have got to look at where your business is going to be operated; is it going to be purely free zone based so it is going to be mainland operations? Will you be doing physical delivery of goods on the mainland? In which case you have got to look at other forms of licences so a trading licence issued by the Department of Economic Development in the relevant jurisdiction, you have got to make sure you comply with the regulations on a free zone by free zone basis or requirement basis as the case may be.
Simon: Sure, sounds like it is a matter of looking specifically at your business activities that you are carrying out and making sure you have the right licences for the relevant jurisdiction.
Suhail: Exactly, and I think one of the points that the free zone regulations and also the DED regulations are very prescriptive they will go into a great amount of details as to what sort of goods or services you are providing. For example if you are a ride hailing app like Careem you are going to have to have consents to deal with passenger transport and you are going to have to liaise with relevant authorities, for example the Road and Transport Authority ("RTA") to get their consent as part of that last seen process. You have to be very mindful of what your business entails and be sure that you have the relevant consents from the right departments.
Simon: So far, I think we have looked at the corporate structuring and also the licensing requirements for establishing e-commerce business in the UAE. From an operational perspective I think e-commerce companies need to look at logistics, warehousing and also the last mile delivery. How is that usually structured or how do companies go about procuring those types of services in the UAE?
Suhail. Yes that is a very good question again. I think the big ticket issue is how do you want to deal with that last mile delivery and the spectrum of operations that will be involved in e-commerce.
Last mile delivery is very important because it is all about customer facing experience and making sure that the product is delivered on time and we are going to deal with the logistics but generally speaking, you have got to look at having a business entity that can provide that last mile delivery.
You can outsource it to a third party so there are logistics providers who will provide that or you can do it yourself but you will have to set up the right business structure for that and likewise you have got to look at warehousing and reporting. We will cover this in the next article.
Simon: Okay great. I think just finally are there any other legal aspects that an e-commerce business established in the region needs to look at further to what we discussed earlier about the corporate structuring etc. are there other legal aspects to consider?
Suhail: Yes, as with any business there are other considerations not just around licensing and set up but you have to look at your personnel, so obviously having employment visas and consents from the immigration authority is important for expatriate employees. You have to look at your brand, protecting your brand/protecting your IP is important so registration of trademarks is very important and we have a market leading team at Gowling that are involved in brand protection and trademark registration.
Then beyond that there are more wider concerns - fundraising and obtaining financial resources and backing from local banks for example might be another issue in which case you would need to look at your funding requirements and the question of equity versus debt but again we will touch upon those in our future articles as well.
Simon: That is great, thanks very much Suhail, thanks for your time.
Suhail: Thanks it has been good to talk to you Simon.
Simon: Thank you.