YEMEN: An Introduction to General Business Law

The Republic of Yemen 

The Republic of Yemen is an Arab, Islamic and independent sovereign state whose integrity is inviolable; and the people of Yemen are part of the Arab and Islamic nation. The people of Yemen are the possessor and the source of power, which is exercised directly through public referendums and elections, or indirectly through the legislative, executive and judicial authorities, as well as through elected local councils.

The Republic of Yemen confirms its adherence to the UN Charter, the International Declaration of Human Rights, the Charter of the Arab League, and principles of international law which are generally recognised.

Political Structure and Administration 

The Republic of Yemen was established with the merger of the Yemen Arab Republic (Sana’a) or North Yemen and the People’s Democratic Republic of Yemen (Aden) or South Yemen. The head of state is the President, and the head of government is the Prime Minister. The cabinet, the “Council of Ministers” is appointed by the Prime Minister. The President is elected by direct, popular vote for a seven-year term. The political system of the Republic of Yemen is based on political and partisan pluralism in order to achieve a peaceful transformation of power.

Legislative power is vested in a bicameral legislature, consisting of a Shura Council (200 seats; members appointed by the President) and a House of Representatives, with 301 seats directly elected by universal adult suffrage (at 18 years of age).

The country is divided into administrative divisions termed Governorates (muhafazat, or the singular muhafazah) and sub-divisions of these called Directorates and sub-Directorates. Yemen is divided into 21 Governorates. For electoral and administrative purposes, the capital city of Sana’a is treated as an additional Governorate.

Legal System 

Yemen’s constitution is based on the principle of the independence of the judiciary and identifies Islamic law (Sharia) as the basis of all laws.

Prior to 1990, there were two separate laws in existence in the Yemen, namely the socialist-based laws of The People’s Democratic Republic of Yemen, and the laws of The Yemen Arab Republic. After their unification in 1990, new laws were enacted and put in place. The laws were put in place very quickly, without much study, and were generally adopted and copied from other jurisdictions.

Court Structure 

The Republic of Yemen has a three-tier court structure, namely the Primary Courts, Courts of Appeal and the High Court. All cases are heard before the Primary Courts and appealed to the other higher tiers respectively.

Commercial Cases are heard before the Commercial Courts; they are structured in the same way into Primary, Appeal and High Court.

The Investment Law and the Investment Authority 

Yemen is totally raw and requires development in almost every field. The scope of opportunities is very wide and diverse.

The Investment Law has been amended a number of times since 1990 in order to meet the requirements of foreign and local investors. The main features of the Investment Law No 22 of 2002 are as follows.

(i) Parity between a foreign and a local investor in terms of rights, privileges and obligations.

(ii)) A foreign investor may solely own their investment project without the sponsorship or participation of a Yemeni national and may also own land.

(iii) Exemption from income tax, profit tax, real estate tax and other fees for a period of up to seven years.

(iv) Exemption from customs duty on all machinery, equipment and materials needed for a project.

(v) Repatriation of profits and capital and a number of other relevant privileges granted to investors from other countries.

The Commercial Courts have exclusive jurisdiction to deal with and look into matters relating to investment projects.

Whereas the above-mentioned incentives offered by the Investment Law are certainly very attractive to a foreign investor, there is normally concern about a number of surrounding factors such as political stability, the independence of the judiciary and an efficient civil service, which are all vital for foreign investment.

The Free Zone Authority in Aden 

The Free Zone Authority in Aden has set up a workable and user-friendly mechanism for registering Limited Liability Companies and Branches of Foreign Companies, as well as the granting operating licences. The registration system at the Aden Free Zone Authority works along the same lines as that of her sister Authority, the Investment Authority, down to the “one-stop-shop” arrangement.

As of January 2024, only the first phase of the free zone has been completed, namely the Aden Container Terminal. This means that only companies intending to work within the Container Terminal may be granted a licence. Investors may also be given areas to set up industrial projects within the Free Zone Area, around the Container Terminal.

The Status of the Political Dispute 

It has never been more confusing or more difficult for companies to manage their affairs in Yemen as it is at present. Companies are torn between two governments, two presidents and two parliaments, each of whom is claiming legitimacy: one in Aden (the legitimate government) and the other in Sana’a (the revolutionary political council).

The government in Aden has the full recognition of the United Nations as well as of the International Community. The Houthie factions in control of all the Government Ministries in the capital Sana’a seem to be recognised as the de facto rulers of the northern provinces of Yemen.

Neither of these two governments recognises the other, and the decisions of each of them are neither recognised nor implemented in the territories controlled by the other. Neither is in a position to claim that it is effectively managing the territories that it occupies, or is able to effectively manage to generate sufficient income to pay for salaries and basic services. Both governments are corruptible and have lost the trust of the people of Yemen.