Abu Dhabi Global Markets: Rising to the Challenge

 Abu Dhabi Global Markets: Rising to the challenge

Historically, finance has always been ‘international’ in character; capital has rarely been mobile. Money has moved freely across borders for all of civilisation with gold and silver being global currencies for millenia. With passage of time, money has been reverting to its natural state with removal of capital controls and the gradual integration of national capital and banking markets but now on a global scale1.

Rapid advancements in field of technology, free movement of capital globally, and need to service an increasingly global clientele are creating opportunities that call for establishment of new world class financial centres. Any new development in the financial market piques the interest of people globally. London may have edged ahead of New York and Singapore may have become more competitive financial centre compared to Hong Kong. These big financial centres now face competition from several new and ambitious challengers and one of them being the Abu Dhabi Global Markets in Abu Dhabi, United Arab Emirates.

The establishment of a financial free zone in Abu Dhabi has been generating buzz since the time of its inception. The establishment of Abu Dhabi Global Markets (the ADGM) under the Federal No. 4 of 2013 came at a time when Abu Dhabi had begun facing the heat of a volatile oil market and needed to broaden its horizons from the oil and gas economy. Upon its commencement of operations in the year 2015, the financial market has been keenly following the progress of this latest entrée in the financial free zone arena. Investors have been speculating whether ADGM can offer similar lucrative options for investment and unparalleled infrastructure as its neighbour, Dubai International Financial Center (the DIFC).

This Article examines the regulatory and legal landscape of ADGM to determine the ease by which businesses may be set up in ADGM.

Regulatory Framework

In order to ensure that ADGM maneuvers its operation efficiently, the regulatory framework is hinged upon its three independent authorities; Regulatory Authority, Financial Services Regulatory Authority (the FSRA) and ADGM Courts.

ADGM has demarcated the manner of regulation of registration of companies undertaking financial and non-financial business activities including retail activities. Financial activities are regulated and supervised by FSRA while non-financial activities and retail organization shall be registered with the Registration Authority. To obtain a license from ADGM to commence operations, an applicant has to first identify the category of business activities and the type of company desired to be registered with ADGM. ADGM establishments are allowed to be registered as public company limited by shares, private company limited by guarantee, private company limited by shares, private company unlimited without shares, restricted scope company, private company unlimited with shares and branch of a foreign company.

The applicant company desirous of obtaining a license to undertake non-financial activities will have to submit an application form and supporting documents alongwith the business plan outlining the activities to the business development team of Registration Authority of ADGM with an initial fee. Consequently, if the Regulatory Authority concurs that the activities desired to be undertaken are permissible and the supporting document are found to be in order, the applicant company may then proceed to apply for name reservation with the online registry. Upon successful completion of reserving a name for the company, a license to the applicant company for carrying out the activities will be issued. The operational framework of ADGM has been discussed at length in one of our other articles.

In an effort to streamline the process of setting up business in ADGM and for the ease of the investors registering under ADGM, Mubadala Development Company has taken charge of all leasing activities pertaining to office premises within ADGM. Investors, now have to only approach Mubadala for the purpose of leading office space. Similarly, companies desirous of being registered as a financial services provider are regulated by the FSRA and FSRA derives its powers under the Financial Services & Markets Regulations 2015 (FSRA Regulations) enacted on 4 October 2015. FSRA Regulations provide for the list of regulated activities permissible to be carried out. The applicant company is required to have an initial meeting with the Authorization team of the FSRA wherein the applicant company must have a regulatory plan setting out the activities proposed to be undertaken, internal controls and resources to address the related risks. The applicant company is also required to complete an application form by the name of ‘General Information for Regulated Activities (GIRA)”, alongwith supplementary forms in relation to activities and make payment of the initial fee.

An essential distinction between ADGM and DIFC’s permitted business is that ADGM allows grant of license for business of commodities related activities, which so far has not been allowed under DIFC.

Legal Framework

In a bid to provide a transparent and robust system of laws with a well established legal framework, the ADGM legislature has incorporated the English Common law as its keystone and enacted the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 and rules thereto, independent of the UAE legal framework. ADGM Courts comprise, a Court of First Instance and a Court of Appeal as modeled on the English Common Law structure. The ADGM can confer its jurisdiction on all civil and commercial matters except matter pertaining to criminal cases, divorce, and inheritance.

Conclusion

While DIFC has had a head start of a decade, ADGM has swiftly risen to the opportunity. The regulatory framework has been in line with the digital age and for the ease of the investors, the registration process can be undertaken online without any difficulty. If ADGM continues to achieve the objects for which it was established, it shall soon be leading financial hub offering an array of services. Inspite of the presence of DIFC, which is still a popular platform for investment, Abu Dhabi’s rich oil reserves and one of the leading sovereign wealth assets shall ensure investors areattracted to this upcoming financial center.

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1 The Dubai International Financial Centre, Information Pack - Publication, STA Law Firm available online

Note: This article was originally published on Lexology