Abu Dhabi Global Market to base rules on English Common Law
According to Reuters, the Emirate of Abu Dhabi plans to base all rules of its Finance Centre on English Common Law, in a decision that could reduce costs and help the Emirate develop stronger banking and securities market ties with Dubai. The Abu Dhabi Global Market (ADGM) is to be launched this year as the Emirate diversifies its economy away from oil and gas, while expanding its footprint in the Gulf’s competitive financial services industry. But would the English Common Law rules in Abu Dhabi new Finance Centre be that helpful in an increasingly globalised world ?
The ADGM will have its own administration, court system and tax incentives to attract banks and companies from around the world. It recently published a draft legislation that covers its operations and requested public comments by 5 February. Its decision to use English Common Law, instead of the French and German Civil Law Codes, means it will have a legal framework similar to the existing British Custom based Dubai International Financial Centre (DIFC). This it is hoped, looks likely to facilitate ties between the ADGM and the DIFC, allowing more effective interface within the large community of bankers and lawyers of Dubai with those of Abu Dhabi. “ADGM has decided to legislate for English Common Law to apply in, and form part of the law of, the Global Market,” ADGM said in one of six consultation papers released on Wednesday. “English Common Law, as it stands from time to time, will therefore govern matters such as contracts, tort, trusts, equitable remedies, unjust enrichment, damages, conflicts of laws, security, and personal property.” The ADGM said it is adopting this ‘cherry-picking approach’ of other legislation pieces from around the world as and when it felt that would be more effective. For example, shares in ADGM companies will not have a par value, in line with the approach taken in jurisdictions such as Hong Kong, Singapore and Australia, it said. “ADGM has the opportunity to take the best of the UK approach, while avoiding some of its historic peculiarities that have been removed or abandoned by the best practice of other jurisdictions,” it said. In another step that could cut costs and attract more business, the ADGM said it would introduce a new type of firm with lighter disclosure and compliance requirements. These “restricted scope companies” would be “holding vehicles for professional investors and limited instances of institutions for whom less regulation and a greater degree of confidentiality will be appropriate”. The ADGM is considering extending this regime to include entities owned entirely by an individual or close family members, it added. Such “family offices” manage much of the assets of wealthy Gulf businessmen and royal family members.