Introduction to Abu Dhabi Global Market (ADGM) and Why it is a Preferred Financial Free-zone

What is ADGM?

Abbreviated as ADGM, Abu Dhabi Global Market is a globally acclaimed and award-winning international financial/commercial center/free zone located in Al-Maryah Island of the United Arab Emirates (UAE). It was established in 2015 by Federal Decree No. (15) of 2013 concerning the establishment of financial free zone in the Emirate of Abu Dhabi (“Federal Decree”) in concurrence with the laws of UAE including Abu Dhabi Law No. 4 of 2013 concerning Abu Dhabi Global Market (“ADGM Law”), to act as a Financial Free Zone (FFZ) in the Emirate of Abu Dhabi. It has been granted the status of an independent legal personality (under Article 2 of ADGM Law) and has its own civil and commercial laws primarily based on the common law and other international best practices. This is intended to provide a world-class legal system and regulatory regime to investors operating in the global market and to facilitate a modern, innovative, and progressive business and financial landscape.

What commercial activities can be carried on in the ADGM?

According to Article 1 of the Federal Law No. 8 of 2004 concerning the Financial Free Zones (“FFZ Law”), commercial activities that can be carried out in the financial free zone include activities & services related to finance and banking, insurance & reinsurance, financial markets, and other supporting activities after obtaining the requisite license to operate within the ADGM from the concerned authorities. Supporting Activities include financial & cash brokerage services and other services to Companies, Establishments and individuals operating in the FFZs. Companies and establishments include companies, branches of companies and establishments formed or licensed to operate in the FFZ.

What are its Achievements till now?

In terms of its achievements, in less than 4 years, ADGM has already achieved many firsts regionally and internationally to be aptly tagged as one of the most innovative, progressive and responsive financial centers operating in the world, which include but are not limited to:

• The first jurisdiction in the Middle East and North Africa (MENA) to apply the common law.
• The First private real estate investment trust (REIT) regime in MENA.
• World’s first comprehensive crypto asset regulatory framework
• The first FinTech regulatory sandbox
• World’s first fully digital courtroom
• The first calibrated Venture Capital Manager framework in MENA.

ADGM gained global industrial recognition, by bagging many prestigious awards that include International Financial Centre Winner award 2019, Legal team of the year award, Fintech Regulator of the year award 2018, etc.

What are the advantages & incentives of operating in the ADGM?

There are endless advantages of establishing businesses and working from the ADGM either physically or virtually. Equipped with the latest technological peculiarities, the Global Market offers great and exceptional incentives to investors to grow and expand their business in manners otherwise unheard of anywhere else in the world.

Tax Exemptions

All authorities and entities of ADGM and their workers are exempt from any corporate/income taxation relating to their operation within the Global Market. As per Article 18 of the ADGM Law, these tax exemptions also apply to the transfer of assets, profits or wages in any currency to any destination outside the ADGM for 50 years commencing from the date of coming into force of this law. The ADGM Law also provides that this exemption may be renewed for another 50 years and so on if the Executive Council of Abu Dhabi by a resolution so resolves.

Ownership Immunity

The law guarantees that properties (tangible or intangible), rights and other activities of ADGM, its authorities and establishments shall not be subject to any actions or kind of confiscation, seizure or any restrictions on private ownership except by a judicial ruling of the competent ADGM Courts. Article 19 of the ADGM Law also provides that entities or establishments registered in ADGM might even be owned (partially or fully) by foreign nationals whether or not domiciled in the State.

Employees and Workers

Article 20 of the ADGM Law grants full autonomy to the Global Market authorities and entities to employ or take the services of persons belonging to any friendly state provided that such individuals are not citizens of countries boycotted by the State.

Exemption from custom duties

All authorities, entities, and establishments based in ADGM are exempt from customs duties on all goods and commodities they import or export for business purposes. This exemption applies to non-financial free zones as well established or managed by the Board of Directors. Article 21 of the ADGM Law explicitly provides that when such goods and commodities are imported or exported, they shall not be subject to any customs duties within the ADGM.

A Robust Data protection Policy

ADGM has a robust data protection policy in place that operates under an independent data protection officer. Operating under the principle of building trust by protecting data, ADGM is committed to the protection of personal data of entities operating within ADGM including employees, individuals, and the general public. Moreover, businesses are prohibited from possessing an individual’s data without their knowledge or consent and in case they hold such a data, access must be given to the concerned individual on his/her request.

What is the nature of Penalties’ for violation of the norms?

If any person or entity registered in the ADGM carries out any commercial activity in contravention of any law, bye-law or regulation applicable to the ADGM, that will be punishable with a fine of not less than 5000 United Arab Emirates Dirhams that may extend up to the higher of 50 million UAE Dirhams and 10% of the value of the concerned transaction depending upon the fact and circumstances of each case. (Article 23 of ADGM Law)

Will I be getting office space in the ADGM on registration?

ADGM’s Registration team will advise entities if they need to have an office space depending on the type of business activity they will be conducting from the global market and the License category. In case, no office space is required, entities will be provided with a virtual address.

Are there any prohibited category of goods and services?

Yes, under Article 17 of the ADGM Law, Goods and commodities prohibited in the Global Market include the following-
• Goods and commodities that are violative of the ADGM Regulations
• Goods and commodities prohibited by law in the Emirate
• Goods and commodities bearing inscriptions in conflict with the religious teachings and beliefs or are repugnant to public morals.
• Any other service or activity that leads to unfair competition amongst the market players.

Conclusion

ADGM’s strategic location at the crossroads of world’s greatest trade routes including the Belt and Road initiative, safe & stable global transportation links, extraordinary tax exemptions, ownership immunity, invaluable business-friendly environment, unparalleled ultra-modern infrastructure built and being run on sustainable green energy, the robust data protection policy, and easy, hassle-free and fully digital setting-up process makes it an ideal place for high-net-worth individuals and entities to establish, transact and grow their businesses from this one of a kind global market and financial free zone.

As of December 2019, with its whooping 2,165 registrations, humongous 22,768 workforces and over $26bn assets under management (AUM), it is certainly acting as an important catalyst for the growth of dynamic financial services sector in the UAE. Speaking about its immense trade potential, Chairman of ADGM, His Excellency Ahmed Ali Al Sayegh said that this blueprint of exchange between the UAE and the world beyond promises to grow in the future as this country becomes an even greater influential hub for the international commerce.

Author:

ADV. Arshadh Malim
Corporate & Commercial – Intellectual Property; Corporate Restructuring | Labor / Employment & Benefits
arshadh.malim@goodwinslaw.ae