Abu Dhabi financial ‘free zone’ to base rules on English common law

Gulf News reported that the establishment of the Abu Dhabi Global Market (ADGM), to be formally launched this year, comes as the emirate “diversifies its economy beyond oil and gas, while expanding its footprint in the Gulf’s competitive financial services industry”.

The ADGM, which will be based on Al Maryah Island with its own administration, court system and tax incentives to attract banks and companies from around the world, has published a series of draft legislation papers covering its operations and asked for public comment by 5 February.

The draft legislation, which covers areas including companies, insolvency, employment, operating regulations and property, has already undergone “pre-open market consultation” with comment sought from more than 16 “major international financial institutions and industry bodies”, ADGM said.

ADGM chairman Ahmed Ali Al Sayegh said: “A robust legal system based on a legislative framework that meets international financial services standards is at the core of Abu Dhabi Global Market’s value proposition. In order to ensure we provide this, the legislation has been drafted with advice and input from major international financial institutions and industry bodies in the United Arab Emirates and major capital markets around the world.”

Al Sayegh said: “ADGM will provide a robust regulatory framework designed to support a dynamic and competitive international financial centre that is both risk-focused and responsive to changing market needs and requirements.”

ADGM said Al Maryah Island aims to attract registered institutions to “operate within a world-class regulatory framework with its own judicial system and legislative infrastructure”.

The emirate’s Executive Council announced in 2013 that a new law issued by the president of Abu Dhabi would create two dedicated courts for the free zone: a lower court and courts of appeal. The law would also establish a companies registrar, the Global Marketplace Registration Bureau, and a financial services regulator, the Financial Services Regulations Bureau.

The Executive Council said the two new bodies would have "independent budgets and corporate independent legal personality". They would 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 ADGM would be able to provide a range of financial and banking services, including 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 would 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 ADGM 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 ADGM in any currency. Goods imported into the free zone for use in a business would be exempt from customs duties.