13 Nov 2018

Scientific Offices in Dubai

Authored by: Ahmad Sergieh and Bilal Snaineh

In brief

  • A ‘Scientific Office’ is essentially a representative office of an overseas pharmaceutical company which manufactures pharmaceutical drugs.
  • A Scientific Office, whether established in onshore Dubai or in a free zone must be licensed by the UAE Ministry of Health.
  • In this article we consider the general differences between setting up a Scientific Office in onshore Dubai versus a Dubai free zone.

1. What is a Scientific Office?

A Scientific Office is essentially a representative office of an overseas pharmaceutical company (Overseas Company/ies) which manufactures pharamaceutical drugs. A Scientific Office will carry out a number of activities, including (but not limited to):

  1. representing one or more medical production Overseas Companies that trade, or desire to trade, in medical products in the UAE;
  2. providing necessary drug information on medical products of the Overseas Company that the Scientific Office represents in the UAE; and
  3. ensuring the observance of good marketing ethics while marketing the medical products of the Overease Company that the scientific office represents in the UAE.

Under the regulations of the UAE, a Scientific Office is not permitted to conduct any activities which generate revenue within the UAE.

2. Ministry of Health requirements

It is important to note that a Scientific Office, whether established in onshore Dubai or in a free zone must be licensed by the UAE Ministry of Health (MoH). Given that the MoH is a federal governmental regulator, the same requirements would apply irrespective of whether the Scientific Office is established in onshore Dubai or in a free zone.

Irrespective of its place of incorporation, the MoH will only agree to issue a Scientific Office licence if the application has been made by the local distributor. However, the MoH has entered into a memorandum of understanding (MoU) with certain free zones (e.g. Dubai Healthcare City and Dubai Airport Free Zone) under which the MoH permits the Overseas Company to apply directly to the MoH without being required to use its local distributor.

As part of the licensing process and subject to the above comment in respect of the MoU, the local distributor must submit to the MoH a document or agreement confirming that is the duly licensed distributor of the Overseas Company.

Also, irrespective of whether the Scientific Office is established in onshore Dubai or in a free zone, a large number of detailed health and technical requirements imposed by the MoH must be satisfied.

As part of the licensing process, the MoH will conduct an inspection to ensure that the health and technical requirements satisfied prior to issuing the Scientific Office’s MoH licence.

3. Where the Scientific Office should be established?

It is important that an Overseas Company looking to establish a Scientific Office in Dubai to consider and take advice as to whether they should establish their Scientific Office in Onshore Dubai or in one of the Dubai Free Zones.

a) The Free Zones generally

There are many separate free zones in the UAE, each of which has its own features, geographic boundaries and specific rules and regulations that govern the activities of the Scientific Office in the relevant free zone. Generally, the key benefit of free zones for a foreign investor is that it may own the entire legal and economic interest of the share capital of a free zone company without the need to have a UAE National holding 51% of the share capital of the company (UAE National Shareholding). However, this key advantage is not relevant for a Scientific Office established in onshore Dubai as the such entities are considered to be non-operational branches of the foreign parent company and, therefore, do not require any UAE National Shareholding.

The main restriction imposed on free zone companies or entities is that they are only permitted to carry out their licensed activities within the relevant free zones or outside the UAE. This is because free zone companies or entities are considered “off-shore” entities for the purposes of UAE law, and are only permitted to carry out activities within the geographical boundaries of the relevant free zone (or outside of the UAE). Accordingly, a free zone company is not permitted to carry out the licensed activities in onshore UAE. This is relevant to the Scientific Office established in the free zone as its employees would only be legally permitted to carry out the relevant activities within the geographical area of the relevant free zone. This constitutes a key difference between establishing a Scientific Office in the free zone versus in one of the free zones.

There are over 30 free zones in existence which tend to cater to different sectors of business activity and generally consist of clusters of businesses in similar industries.

b) Dubai Healthcare City Free Zone

The Dubai Healthcare City Free Zone (DHCC) is the only free zone which specifically caters to the healthcare sector as it was created with the objective of becoming a health and wellness destination. As noted above, the DHCC has entered into the MoU with the MoH which entitles the Overseas Company to apply for a Scientific Office licence without being required to use its local distributor. In summary:

  • Since its launch in 2002 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, the free zone has worked towards its vision to become an internationally recognized location of choice for quality healthcare and an integrated center of excellence for clinical and wellness services, medical education and research.
  • The DHCC is governed by the Dubai Healthcare City Authority (DHCA) and regulated by the independent regulatory arm, Dubai Healthcare City Authority – Regulation (DHCR), whose quality standards are accredited by the International Society for Quality in Healthcare (ISQua).
  • DHCC has close to 160 clinical partners including hospitals, outpatient medical centers and diagnostic laboratories across 150 plus specialties with licensed professionals from almost 90 countries, strengthening its medical tourism portfolio. Representing its network of support partners, close to 200 retail and non-clinical facilities serve the free zone.
  • DHCC is also home to academic institution the Mohammed Bin Rashid University of Medicine and Health Sciences, part of the Mohammed Bin Rashid Academic Medical Center. DHCC’s integrated environment provides leverage for potential partners to set up operations to promote health and wellness.

c) Onshore Dubai

Unlike a Scientific Office established in the DHCC (or another Dubai free zone), we note that a Scientific Office established in onshore Dubai must satisfy the following key requirements:

  • to have a local service agent which must be an individual holding a UAE passport;
  • to provide a bank guarantee in the amount of AED 50,000 to the UAE Ministry of Economy (MoE); and
  • to be registered with the MoE.

As noted above, a Scientific Office established in the DHCC (or any other Dubai free zone) is not subject to the requirements referred to above. However, the DHCC Scientific Office is required to carry out its activities within the free zone (for example, the DHCC Scientific Office cannot employ individuals outside the free zone to physically market the Overseas Company’s products unless it does through individuals duly sponsored by the local distributor). The onshore Scientific Office is not subject to such a restriction in carrying out its marketing related activities.

d) Conclusion

Based on the above, the general differences between setting up a Scientific Office in onshore Dubai versus a Dubai free zone relate to:

  • the fact that certain specific free zones have entered into the MoU with the MoH.
  • the restriction of employees of a free zone to carry out any activities outside the geographical area of the relevant free zone;
  • the fact that there is a dedicated free zone such as the DHCC where a number of healthcare providers are established for the reasons set out above; and
  • the requirements which specifically apply to an onshore Scientific Office as described above.

For more information, please contact us on sectors@hadefpartners.com.