Abu Dhabi's financial 'free zone' to have its own courts

Global Marketplace Abu Dhabi will be established on Al Maryah Island, Abu Dhabi later this year. The Executive Council has said that the new zone will form a "strategic link" between financial markets in the Far East and Europe.

Dubai-based corporate finance expert Alan Wood of Pinsent Masons, the law firm behind Out-Law.com, said that it was likely that Global Marketplace Abu Dhabi would replicate the type of legal structure currently operating in the Dubai International Financial Centre (DIFC). Free zones such as DIFC are areas of economic priority with special legal status, allowing companies operating within them to be treated as if they operate outside of the UAE.

"The announcement by Abu Dhabi of the creation of a financial free zone has long been anticipated and paves the way for the capital to fully throw its weight behind establishing itself as an international financial services hub," Wood said. "If, as seems likely, the Global Marketplace Abu Dhabi replicates the type of legal structure adopted by the DIFC then it will provide the international business community with a transparent and well understood legal system in which to transact banking and other financial services."

Global Marketplace Abu Dhabi will become the emirate's fifth free zone. However, Wood said that given the existence of the nearby DIFC its success could be limited.

"As with previous initiatives in relation to Abu Dhabi's airport, Etihad Airlines and new Khalifa Port and Kizad free zone, the announcement does however beg the question as to whether the UAE needs or can support two financial services hubs, or whether international banks and professional services firms will be encouraged to relocate their operations from Dubai," he said.

A new law issued by the President of Abu Dhabi will create two dedicated courts for the free zone: a lower court and courts of appeal. The law will also establish a companies registrar, to the called the Global Marketplace Registration Bureau, and a financial services regulator, the Financial Services Regulations Bureau. The two new bodies will have "independent budgets and corporate independent legal personality", the Executive Department said. They will be able to "issue executive decisions within their jurisdiction as determined by the law and the world market regulations".

According to the new law, companies licensed in the Global Marketplace Abu Dhabi will be able to provide a range of financial and banking services. These will include providing short, medium and long-term secured and unsecured loans; business, commercial and investment banking; private finance; brokerage; and trading in securities, commodities and derivatives. They will also be able to provide Islamic finance and Islamic banking activities.

Among the incentives set out in the new law is 50 years of "zero taxation" for Global Marketplace Abu Dhabi authorities, companies and their employees. This includes income tax relating to activities taking place within the global marketplace, and any transfer of assets, profits or wages to any destination outside the Global Marketplace in any currency. Goods imported into the free zone for use in a business will be exempt from customs duties.

Companies established in the Global Marketplace may be wholly or partially owned by persons or entities who are not UAE citizens and do not have a place of residence in the UAE, according to the draft law.