In the Markets: United Arab Emirates (UAE)
6 min read
2024-09-23

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UAE

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UAE
More questions on this topic? Email the Editorial Team.
Chris Lester
Partner & Co-Chair of the Middle East Corporate Department, Latham & Watkins
Ksenia Koroleva
Associate, Latham & Watkins

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How has AI investment evolved in the UAE?

In recent years, the UAE has been at the forefront of a global surge in investments, joint ventures, and M&A related to AI, reflecting the UAE’s strategic vision and commitment to becoming a global AI hub.

Recent transactions include Microsoft’s US$1.5 billion investment in Abu Dhabi-based company G42, the leading UAE-based AI technology holding company, G42, and Mubadala’s creation of MGX, a US$100 billion technology investment company focused on AI initiatives.

Government policies and projects

These strategic investments and M&A activities are part of a comprehensive approach to AI investment in the UAE. This approach is supported by numerous initiatives, including the UAE Strategy for AI , which aims to position the country as a global leader in AI by 2031.

Other programmes supporting AI in the UAE include: the Generative AI Guide, which explores more than 100 use cases of generative AI; the AI and Coding Licence, which allows AI companies and coders to work from the Dubai International Financial Centre (DIFC) Innovation Hub; and the launch of UAE AI and Robotics Award for Good, which encourages innovative solutions.

The UAE is actively pursuing various initiatives that help the UAE to establish itself as a leading AI ecosystem.

The Dubai AI Lab, an initiative by Smart Dubai , collaborates with businesses to develop AI solutions for government services, highlighting the UAE’s dedication to leveraging AI for public sector innovation. Indeed, the Mohamed bin Zayed University of Artificial Intelligence (MBZUAI) recently signed a Memorandum of Understanding with the Abu Dhabi Global Market (ADGM) to advance the role of AI in financial sector regulations.

In addition, the Technology and Innovation Institute within Abu Dhabi’s Advanced Technology Research Council (ATRC) launched a large language model known as “Falcon” (Falcon LLM), which has been assessed as the first “truly open” model with capabilities rivalling many current closed-source models, according to Hugging Face. Falcon LLM has been adopted not only in the UAE but also in other countries, including in Serbia.

Targeted initiatives

These initiatives are supplemented by the expansion of existing authorities and the creation of new authorities and agencies across the UAE, which are dedicated to the development of, investment in, and research into AI. This work includes appointing His Excellency Omar Sultan Al Olama as the Minister of State for AI, Digital Economy and Remote Work Applications Office (AI Office), as well as establishing the UAE Council for AI and Blockchain, Advanced Technology Research Council (ATRC), and Mohamed bin Zayed University of Artificial Intelligence (MBZUAI).

The UAE is also supporting international cooperation on enhancing R&D of AI, and promoting its adoption. For example, the AI Office recently signed international agreements, notably with the UN Development Program and several countries, including Austria, Mongolia, and Colombia.

Regulation and enforcement

AI has a significant impact on law and enforcement in the UAE at all levels, and federal, Emirati , and free zone authorities all emphasise the need for ethical AI development and compliance with laws when using AI.

The UAE civil liability rules require businesses to apply a standard of care when designing and using various types of systems, including AI systems. The expected standard of care is set in recommendations on AI Ethics and Principles published in the UAE, including the AI Office’s AI Guidelines and Digital Dubai’s AI Principles and Ethics. These principles include fairness, transparency, accountability, security, privacy, sustainability, and human-centricity of AI.

Whilst the UAE does not have a separate intellectual property (IP) law for AI, the UAE’s extensive IP legislation applies to ownership and protection of AI algorithms, input, and output. For example, AI algorithms could be protected as inventions if they are novel, constitute an inventive step, and have industrial applicability. Persons using AI algorithms, output, or databases in breach of third-party IP may be subject to liability under UAE IP laws.

From a data protection perspective , the DIFC amended its Data Protection Regulations to regulate processing of personal data conducted via “autonomous and semi-autonomous systems”, including AI. The rules, among other matters, require compliance with the key ethics principles when developing AI systems, their certification, and disclosure of AI use. Whilst the rules are mandatory only in the DIFC, businesses in the UAE should give consideration to adhering to similar measures.

Moreover, if businesses operate in certain sectors, UAE-wide mandatory rules on data protection may apply. For example, the UAE Central Bank (CBUAE) published Guidelines for Financial Institutions Adopting Enabling Technologies, which regulates the use of AI and other technologies in banking and requires compliance with certain standards, including in respect of design and data protection. AI-focused rules have been adopted in other sectors, such as government procurement, transportation (e.g., autonomous vehicles), telecoms and healthcare.

Licences and approvals

Licences and authorisations from various UAE authorities can be required for AI-related activities in the UAE, such as the licence from the UAE Media Regulatory Office for developing AI. Moreover, authorisations from the Abu Dhabi Department of Health are required for health-related AI applications, which process patient data.

The UAE adheres to UN sanctions and has comprehensive export controls, based on which customs authorities may prohibit or require approvals or permits from the Telecommunications and Digital Government Regulatory Authority (TDRA) for certain AI-related hardware and equipment products.

Foreign direct investment

The UAE’s foreign direct investment rules encourage foreign investment in the UAE. The UAE employs a negative and positive list system, whereby the negative list outlines sectors restricted or prohibited for foreign investment and the positive list specifies sectors in which 100% foreign ownership is permitted. The negative list is relatively short and is limited to certain highly strategic or sensitive sectors (such as security and defence), whereas the positive list is more comprehensive and includes various AI-related activities, including AI development services, innovation and AI research and consultancies, development and innovation in computer systems and programs.

Regulatory approval requirements vary across different sectors, with specific laws for matters such as merger control and financial services regulation.

Chris Lester is a partner and Co-Chair of the Middle East Corporate Department and Ksenia Koroleva is an associate at Latham & Watkins LLP.

Sources

  1. Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications Office, December 2022. AI Ethics Principles & Guidelines
  2. The Artificial Intelligence, Digital Economy and Remote Work Applications Office, 30 April 2023. Generative AI Guide
  3. Central Bank of the UAE et. al., 15 November 2021. Guidelines for Financial Institutions Adopting Enabling Technologies
  4. The Office of the Minister of State for Artificial Intelligence, 7 November 2023. UAE Strategy for Artificial Intelligence
  5. UNCTAD, 20 June 2024. World investment report 2024: Investment facilitation and digital government