Foreign Direct Investment Regulations in the Middle East

Foreign direct investment (FDI) regulation across the Middle East continues to develop as part of regional economic reform. While most jurisdictions in the region have not adopted formal EU- or US-style foreign investment screening systems, governments increasingly regulate foreign participation through sector-specific approvals, licensing requirements, and national security provisions. This brief outlines the current frameworks and recent developments in Saudi Arabia, Iraq, and the United Arab Emirates, with particular attention to FDI regulations.

Saudi Arabia

Saudi Arabia’s Investment Law Royal Decree M/19 (New Investment law), entered into force in February 2025, replaced prior Foreign Investment Law. The old Foreign Investment Law followed a more conventional model of regulating FDI. The law focused mainly on granting incentives to attract foreign capital into certain sectors while limiting or prohibiting foreign participation in other specific sectors to guide investment flows.

Under the new regime, foreign and domestic investors are generally subject to similar treatment and compliance with sector-specific rules and conditions. Registration with the Saudi Ministry of Investment (MISA) is required before commencing activities commence, and failure to register may result in administrative penalties. Furthermore, changes in ultimate beneficial ownership in a Saudi entity must be registered with the newly established UBO register.

FDI screening only applies to certain so-called “excluded activities”. If a foreign investor seeks to engage in an excluded activity, an application must be submitted to the MISA. The investment may not be implemented prior to the MISA granting approval. At the time of writing of this client brief the list of excluded activities had not been published yet. Hence, the new Saudi FDI screening is not yet being enforced. Furthermore, clarification on the scope and detail of the review process are still outstanding.

Aside from FDI review, the New Investment Law allows the MISA to suspend foreign investment on national security grounds. Moreover, sector regulators continue to play significant role alongside MISA. Activities in specifically regulated sectors such as banking, insurance, capital markets, telecommunications, energy, and healthcare remain subject to licensing and supervision by sector specific regulators.

Iraq

Iraq’s foreign investment regime is governed by Investment Law 13/2006, administered by the National Investment Commission (NIC) together with sector-specific authorities. Iraq does not maintain a standalone foreign investment screening mechanism. Regulation of foreign investment is instead carried out through project licensing, sector-specific approvals, and compliance with corporate and commercial laws. While there is no general FDI screening in Iraq, acquisitions—whether direct or indirect—of a relevant stake in an Iraqi entity, may nonetheless require approval from sector-specific regulators.

The Iraqi Investment Law restricts foreign direct and indirect ownership in natural resources, particularly in relation to extraction and processing. In oil and gas sector, foreign participation is structured through specific contractual and licensing arrangements with the  Ministry of Oil and other public authorities. Investments in banking and financial services require approval from the Central Bank of Iraq.

United Arab Emirates

Like other Middle Eastern jurisdictions, foreign investment in the UAE is regulated primarily through licensing requirements, foreign ownership rules, and sector regulator approvals rather than through a comprehensive FDI screening. When a foreign investor establishes a new onshore UAE company or directly acquires shares in an existing UAE company, the process typically involves review by the relevant Emirate-level licensing authority such as the Department of Economy and Tourism and, where applicable, the competent sector-specific regulator. This review focuses on permitted activities, compliance with ownership rules, required approvals, and registration of shareholders and ultimate beneficial owners. It does not constitute a transaction-specific national security filing comparable to regimes in the US or the EU.

Indirect acquisitions are treated differently in practice. Where a foreign investor acquires a foreign parent that owns a UAE subsidiary, UAE law generally does not impose a separate FDI review. Regulatory obligations arise only if local corporate records, licenses, or sector approvals require updating.