Revealed: what’s next on Dubai’s regulatory agenda – International Financial Law Review

by admin on November 28, 2012

Dubai International Financial Centre (DIFC) is the platform that connects Dubai with the rest of the world. Since its launch in 2004, Dubai’s financial free zone has played a major role in transforming Dubai from an oil and gas dependent state to a diverse economy based on international trade, banking, tourism, real estate and manufacturing.

Here Roberta Calarese, Chief Legal Officer at the DIFC Authority, outlines how best to balance between regulating sensibly and promoting business.

How has the DIFC contributed to the development of the legal landscape in the region?
Calarese: We are a common law jurisdiction within a civil law jurisdiction – that factor will clearly remain unique, but we have shown that we can act in line with international standards.

The DIFC is a model jurisdiction that has achieved so much. The Dubai Financial Services Authority [DFSA] is a member of all the standard setting bodies for financial services regulation including Iosco [the International Organisation of Securities Commissions] and IAIS [the International Association of Insurance Supervisors]. The DIFC has been subject to a number of reviews by the IMF [International Monetary Fund] and World Bank and has been positively reviewed.

Because we were able to create a financial centre from scratch, in a sense, it was easier to incorporate all these principles as opposed to having to adopt them later on. The DIFC also has its own judiciary known as the DIFC Courts which are modelled on the English courts and staffed with senior international judges from around the world.

A recent decision by the Ruler of Dubai to extend the jurisdiction of the DIFC court to parties who aren’t related to the DIFC is also significant. Such an extension was very well received by the business community as it allows them to litigate matters in the English language and based on common law principles.

We also have a very sophisticated insolvency regime in contrast with the UAE whose regime isn’t as well developed. This resulted in the creation by the Ruler of Dubai of a special tribunal in the DIFC to handle various matters pertaining to the settlement of the financial position of Dubai World and its subsidiaries using DIFC laws.

What are the benefits of setting up in the DIFC and how can DIFC’s clients take maximum advantage of their presence in the centre?
Calarese: DIFC is in a very unique time zone with access to a large number of markets spanning from the Middle East, to Asia and Africa. In addition, it has a world class legal and regulatory infrastructure which provides the same level of legal certainty and protections that investors expect from financial centres in developed markets.

The DIFC also has a zero per cent tax regime, 100% foreign ownership and no restrictions on repatriation of capital. Dubai’s lifestyle and superior infrastructure support the growth of the DIFC as a global financial centre and make the DIFC a very attractive platform from which to operate. Today we host the top financial institutions, law firms, accountancy firms and other types of consultancy firms in the world.

Another important point is that we have an efficient legislative process which means we’re able to pass legislation that adapts to international standards fairly quickly. This is in contrast with the more established countries that have a far more complicated legislative process that’s much more lengthy than ours.

How does the DIFC promote the growth of Islamic finance?
Calarese: We are geographically located in the centre of the Islamic world and this has been one of the pillars of the DIFC since its inception. We have a number of Islamic finance initiatives. Although this relates to financial services regulation I can talk about some of it because I also worked at the DFSA for a number of years.

On the business development side, we make an effort to target Islamic financial institutions moving to the DIFC. We have a bespoke Islamic financial services regime which is aligned with international standards and with developments in Islamic finance. We also have a very large sukuk market as you can see from Nasdaq Dubai. At one time the DIFC had the most sukuk listings in terms of value, although I believe that we have been overtaken by Malaysia now.

Looking to the future and the region’s continued development as a global financial hub, what are the next steps for the DIFC?
Calarese: That’s a very important question. I think the next step is for us to look at and evaluate the effects of the global economic crisis which started in 2008. There is an increased sense of having to impose the right level of regulation since the crisis. The world reacted to the international crisis by putting in place very high levels of regulation. But if you look at Asia, the level of regulation has remained quite commensurate to the amount of business that’s done there.

So we definitely want to follow international regulatory trends but at the same time continue to promote business. We will continue to look at areas such as the hedge fund industry and other sectors that are developing in emerging markets.

See also

‘UAE investment crackdown to halt DIFC growth?’

‘What DIFC’s new chief must prioritise’

‘EXCLUSIVE: the law that will open Saudi Arabia’s stock exchange’

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