The United Arab Emirates is a state with a dynamic economy and a country where roads change, buildings rise and shops and restaurants open daily. In order to attract foreign investment, Emirates of the UAE have been establishing economic free zones, usually aimed at businesses operating in a specific sector, e.g. commodities trading (Dubai Multi Commodities Centre), eco- friendly enterprises (MASDAR City, Abu Dhabi), healthcare (Dubai Healthcare City). As part of the strategic plan 2015 for the development of the Emirate of Dubai, the Government of Dubai had instructed a group of experts to advise on a possible route to boost the economy of the Emirate and to secure its long term growth. Based on the expert advice, it became clear that the GCC:
- lacked an internationally accepted common framework and a regulated financial centre with international standards and a transparent system of law; and
- needed to centralise regional wealth for further economic growth and development and to facilitate financial transactions/ serve as a link between Northern African and Asian parties.
To address these Regional needs, in 2004, the Government of Dubai established a financial free zone, namely the Dubai International Financial Centre (“DIFC”) with its own system of laws and regulations separate from the civil and commercial legal framework of the wider UAE.
Legal Foundations:
The DIFC was constituted, given substantive and procedural law independence under:
- Article 12 of the UAE Constitution which allowed free zones to be “exempted from having to apply the rules and regulations of the Union”;
- Federal Law No 8 of 2004 that gave basis for financial and administrative independence for the DIFC; and granted an exemption fromDubai civil and commercial laws; and
- Dubai Law No 12 of 2004 that established an independent court system within the DIFC.
The core mission of the DIFC is to be a catalyst for regional economic growth with a vision to shape tomorrow’s financial map as a global gate way for capital and investment. To date, the DIFC has issued about 1,200 licenses to businesses. Although some companies suspended or withdrew their operations as a result of the global financial crises, the vast majority have been carrying out successful operations. Amongst other things, the DIFC offers:
- a USD denominated environment;
- a transparent operating environment with a common-law based and high standard of rules and regulations;
- strict supervision and enforcement of money laundering laws;
- its own stock exchange, namely NASDAQ Dubai, with primary and secondary listing of equity and debt products;
- 100% foreign ownership;
- 0% income/ profit tax rate;
- the freedom to repatriate capital and profits without foreign exchange or other restrictions;
- a wide network of double taxation treaties available to UAE incorporate entities; and
- an independent court system.
The DIFC is presided by HH Shaikh Maktoum Bin Mohammed Bin Rashid Al Maktoum, Deputy Ruler ofDubai, Chairman of DIFC Higher Board of Directors. Its daily operations are governed by DIFC Governor.
The DIFC is comprised of the following independent bodies:
- DubaiInternational Financial Centre Judicial Authority;
- DubaiInternational Financial Centre Authority;
- DubaiFinancial Services Authority (“DFSA”)
- Register of Real Property;
- Register of Security; and
- Register of Companies.
Services Provided:
The following types of entities can be established in the DIFC: [1]
- Authorised firms;[2]
- Authorised Market Institutions;
- Ancillary Service Providers;
- Representative Offices;
- Recognised Entities;
- Non- Regulated Entities that conduct operations other than providing financial or ancillary services, e.g. family simple office investment holding authorised firms are regulated by the DFSA; and
- Special Purpose Vehicles.
Finally, both companies (i.e. limited liability company, company limited by shares) and partnerships (i.e. limited partnership, limited liability partnership, general partnership) can be registered in the DIFC.
Closing Remarks:
The DIFC is indisputably a state of the art global financial centre. Based on internationally acceptable legal standards, located in the heart ofArabian Gulf, it continues to attract foreign investors. I can recall, in June 2003, I stopped in front of the Emirates Towers wondering what would appear in front of these stunning Jumeirah Group buildings in years to come. I was trying to imagine what the plot of land in the centre of Dubai could become. What has in fact appeared, however, has not only exceeded my expectations but also the expectations of the most demanding tastes of this world – the amazing and truly unique DIFC… [1] As defined by the DFSA. [2] Authorised firms are companies that provide financial services, such as:
- Banking services, e.g. accepting deposits, providing credit;
- Capital markets, e.g. operating an alternative trading system, arranging deals in investments, operating an exchange/clearing house in or form the DIFC through an Authorised Market Institution;
- Asset management and fund registration, e.g. providing fund administration, providing trust services, managing a profit sharing investment, acting as a trustee of a fund, dealing in investments as principal or agent, managing assists, advising on financial products, operating a collective investment fund, providing custody, arranging custody;
- Reinsurance and captive insurance, e.g. effecting contracts of insurance, carrying out contracts of insurance, insurance intermediation, insurance management;
- Islamic finance;
- Business processing operations; and
- Ancillary services, i.e. providing legal or accounting services (e. g. Al Tamimi & Company).
By Izabella Szadkowska, Senior Associate, Corporate Commercial Department, Al Tamimi & Company, Dubai, United Arab Emirates