Abu Dhabi Global Market - The first budding financial free zone of Abu Dhabi

The Launch

The United Arab Emirates (the “UAE”) has developed a number of free zones over the years. The concept of creating and establishing a free zone immerses from its benefits of providing among other things, 100% foreign ownership; 100% repatriation of capital and profits, exemptions from personal and capital gains tax and corporate tax for fifty (50) years.

Earlier in UAE there existed only one financial free zone established in Dubai – the Dubai International Financial Centre (the “DIFC”). After a wait of ten (10) years, Abu Dhabi has finally now utilised Federal Law No. 8 of 2004 (the “Financial Free Zones Law”), to establish a financial free zone of its own on the newly developed Al Maryah Island.

The Federal Decree No. 15 of 2013 (the “Decree”) issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan President of UAE and Ruler of Abu Dhabi), and Federal Cabinet Resolution No. 4 of 2013 (the “Resolution”) issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum Prime Minister of UAE and Ruler of Dubai officially established the new and the very first financial free zone of Abu Dhabi – to be named the Global Market Place Abu Dhabi (the “GMAD”). Details of the governance, legislative, regulatory framework and activities of GMAD have been set out in Abu Dhabi Law No. 4 of 2013  (the “Law”) signed by His Highness Sheikh Khalifa bin Zayed Al Nahyan in his capacity as Ruler of  the Emirate of Abu Dhabi.

Pristine Features

GMAD will be Abu Dhabi’s first and UAE’s second financial free zone. It will unlike DIFC also focus on licensing activities which are related to trading in commodities.

GMAD like any financial free zone, or typically like DIFC will have at its disposal the benefit of establishing its own independent legal and regulatory bodies and frameworks and legislations for commercial and civil law (except for UAE penal laws).

Although the Law is pristine and still in its early stages, it is believed that it will like DIFC follow the common law legal system and issue its own employment, companies and insolvency regulations – the content and details of which are yet to be published.

The Law also stipulates that subject to the global market, authorities and institutions of the GMAD and their workers to a zero tax rate, including the income tax related to its operations within the global market. The tax rate includes the transfer of assets, profits or wages in any currency of currencies to any destination outside GMAD for a period of fifty (50) years.

Additionally the Law exempts GMAD, its authorities and institutions from customs duties on all goods imported or exported by it for the purposes of its business in GMAD.

Also read:

Set up requirements of operating a Private Financing Platform

Set up of a Financial Consultancy/Advisory Firm in the ADGM

Supervisory and Regulatory Bodies of GMAD

According to the Law, GMAD will have the following supervisory and regulatory bodies:

• The board of directors (the “Board”), will be the ultimate supervisory and governing body of GMAD. The Board will be responsible for drafting laws and appointing a management and administrative team at GMAD.

The Board of GMAD comprises the following individuals:

• Ahmed Ali al- Sayegh – chairman of energy company Masdar, CEO of Dolphin Energy and deputy chairman of Abu Dhabi Media has been appointed as the Chariman of GMAD;
• Mohammed Darwish Mohamed al Khouri, who currently sits on the board of Abu Dhabi Commercial Bank and is executive director of internal equities at the emirate’s sovereign wealth fund, the Abu Dhabi Investment Authority;
• Ali Majid Mubarak al-Mansouri, chairman of Abu Dhabi Airports Authority;
• Mohammad Naim al-Qubaisi, of the Abu Dhabi Department of Economic Development; and
• Ibrahim Obeid al-Zaabi, deputy chief executive at the Securities & Commodities Authority (SCA).
• Two independent courts comprising the court of first instance and the court of appeals. The lower court shall have one judge and the courts of appeals shall have three judges;
• companies registrar, to be called the Global Marketplace Registration Bureau,
• Financial services regulator, to be called the Financial Services Regulations Bureau.

Licensed Activities

According to the Law, companies licensed in the Global Marketplace Abu Dhabi will be able to provide a range of services, including but not limited to:

• Trading storage and transport of commodities (by air, rail, sea and road)with a focus on energy, oil and gas, renewable energy and carbon credit;
• Activities and financial services, including banking and financial services activities and the provision of financial facilities and secured and unsecured loans for short-term, medium-and long-term;
• All kind of investment businesses and commercial banks, investment banking and private finance companies, investment companies, wholesale and e-banking and investment management, to deal with and organize it;
• Trading in securities, currencies and commodities and minerals and all kinds of derivatives (including trading and futures trading or immediate and on the margin or through the sale and purchase and display all kinds of financial options);
• Storage, treatment and delivery of goods and metals of all kinds, whether these goods or minerals are represented by instruments or through physical delivery, and carrying out any complementary services to it;
• Market-making through offers of buying and selling of currencies and commodities, metals, securities, bonds and financial instruments and derivatives of all kinds;
• Islamic finance and Islamic banking activities and associated activities;
• The establishment and composition, operation, management and marketing assets and funds, investment funds, pension funds, credit, mutual funds and hedge funds and investment portfolios of all kinds and constrained, unrestricted asset management and (Trust)and credit  representation services and escrow accounts, and provide associated services with any of the foregoing;
• Custodian;
• Central clearing, settlement and depository;
• Project financing and the provision of capital for companies and organizations in all areas of investment;
• Buying and selling and issuing stocks and bonds, instruments and permissions and other securities and financial products of all kinds, currencies and commodities and metals of all kinds and derivatives, including futures and financial options which lies on any of them, and borrowing to ensure any of them to provide liquidity to direct all the activities and other services to related markets, cash and securities (Money Market);
• Ownership, management and operation of the stock exchanges and financial markets for equities, bonds, currencies and financial instruments and securities, commodities and metals futures and futures and options and derivatives of all kinds;
• Insurance and re-insurance, insurance brokerage, including securing property and casualty insurance, life insurance and other types of insurance and any other services related to this;
• Banking advisory services, financial and investment;
• Audit and accounting services, legal services and any other services belonging to the business and financial and banking activities;
• Business and support services, support and credit rating services and information services for business and financial and banking activities.

The Future of GMAD

The establishment of GMAD is indeed a step forward towards the development of Abu Dhabi’s economy and gaining recognition in international financial markets. Although inevitable comparisons have already been drawn and will continue to be drawn in the future with DIFC (to name a few; establishing and creating independent legal and regulatory bodies – following the common law legal systems, implementation and introduction of its own civil and commercial laws, introduction and establishment of its own independent securities exchange and many others) it is yet to be seen how GMAD will actually work in future alongside DIFC and whether it will replicate the framework established in DIFC or introduce and work on the areas left untouched by DIFC.

Our Experience

lecocqassociate provides professional company incorporation and corporate administration services in Malta, Switzerland and the UAE.

This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on info@lecocqassociate.com for any questions.

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