Soon to launch financial zone set to significantly contribute to the economy

A new financial centre for Abu Dhabi is taking shape on Al Maryah Island. Due to formally launch in 2015, Abu Dhabi Global Market (ADGM) is designed to promote the emirate as a global financial centre, develop the economy and make Abu Dhabi an attractive environment for financial investments. Developing the financial services sector is one of the seven pillars of Abu Dhabi Economic Vision 2030, and it is highlighted as a key component of achieving a sustainable, diversified economy. ADGM will join three existing free zones in the emirate, each with a focus on a specific sector – media, aviation and green technologies – as well as an industrial free zone that is also in development.

Established by decree in April 2013, ADGM is being designed under the same Federal Law of 2004 regarding financial free zones that created the Dubai International Financial Centre (DIFC).

As of early 2015 the new zone had its own regulatory structure related to non-financial services sectors, while details regarding regulations for the financial services sector were still under consultation. An independent companies registrar will, meanwhile, oversee the registration and regulation of firms established within the ADGM’s jurisdiction.

Legal Basis

Given the zone’s focus on financial activity, another source of regulatory oversight will come in the form of a financial services bureau, intended to act as a financial regulator in the same manner as the Financial Services Authority of the UK. The zone will also operate according to its own legal system, based on common law and comprising a lower court and a court of appeal, both of which will be overseen by a chief justice. The interaction of this system with wider the UAE legal framework will be guided and supported by memoranda of understanding between it and other judicial authorities in the country.

On January 6, 2015 ADGM’s authorities published six consultation papers concerning the regulatory structure for the centre, covering the application of the following regulations: English law, companies, operations, insolvency, employment, and real property and strata titles. The consultation is open for one month, after which the framework will be established.

Attracting Business

The coming year should also see ADGM reveal the details regarding the business value offerings. A number of attractive incentives have already been proposed: companies established within ADGM can be 100% owned by non-UAE nationals, as opposed to the 49% limit that is currently applied in the emirate; a 50-year tax exemption will be granted on the profits of companies and their employees arising out of their activities in the zone; and Customs duty exemption will also be offered to licensed businesses. Similar entitlements have been successfully applied elsewhere in the region, and in this sense Abu Dhabi is proposing a tried-and-tested formula.

ADGM authorities maintain that the zone will work in harmony with the DIFC. “We are not going to compete with the DIFC; the UAE has grown sufficiently to support two financial centres. Overall, I believe the region will benefit from a strong, robust and active financial services sector. Together the pie gets larger and collectively we are strategically located to service the growing economies of Asia, Africa and the Middle East” Ahmed Al Sayegh, chairman of ADGM, told OBG.

While the precise mix of financial and banking services that will base themselves within ADGM is not yet known, the firms that will offer professional support services to the free zone, such as Deloitte and international law firm Reed Smith, are already establishing a presence at the site. Meanwhile, progress on defining the regulatory regime for ADGM reached a milestone in late 2014 with two key appointments. Richard Teng, the former chief regulatory officer of the Singapore Exchange, has taken up the role of CEO of the zone’s regulator, while Hector Sants, who served as the chief executive of the UK’s Financial Services Authority between 2007 and 2012, was appointed as chief advisor, a six-month placement that will see him advise the ADGM chairman and the CEO of the ADGM regulator.