The Abu Dhabi Global Market (ADGM), operating under common law, has reported that this legal framework has helped attract businesses looking to establish themselves in the region. This success has sparked Dubai’s interest in exploring the adoption of common law within its free zones, a move experts believe could lead to beneficial outcomes for both new and existing investors.
Integrating new legislation across the free zones, to create a unified legal framework, is seen as a pro-investor strategy that can stimulate growth in these special economic regions, industry professionals suggest. The Dubai government is now contemplating introducing common law in free zones, aiming to improve the business environment and enhance economic efficiency and attractiveness, as reported by the Dubai Media Office.
This initiative aligns with the broader economic goals of the Dubai Economic Agenda D33, seeking to elevate Dubai into the top three global economic hubs. Notably, ADGM, the financial hub of UAE’s capital city, is the first and only jurisdiction in the Middle East to have adopted English common law, specifically through the Application of English Law Regulations 2015, says an official spokesperson.
These regulations have made English common law directly applicable in ADGM, serving as the basis for civil and commercial law within the financial centre. The flexibility of English common law, well-suited to business transactions, particularly financial ones, makes it appealing to the global business and legal communities due to its familiarity and predictability. Moreover, the common law approach of ADGM also helps reduce initial legal expenses and potential litigation risks.
The English common law covers a comprehensive range of situations, aiding commercial transactions by providing extensive case law. “Under the application regulations, all of this case law will have automatic precedential value in the ADGM,” stated the representative.
Currently, the Dubai International Financial Centre (DIFC), regulated by English common law, declined to comment. Established in 2004, the DIFC Courts represent Dubai’s international English-language common law judiciary system and play a pivotal role in the UAE’s legal system.
Hani Naja, a partner at law firm Baker McKenzie, explains that common law, largely applied in Anglo Saxon countries, like the UK, the US, and Australia, relies on the precedent and evaluation of judges and uses past instances to guide future decisions. This approach is somewhat different from the current UAE laws that operate on civil law, where codes are strictly adhered to, and judge precedents and interpretations aren’t always relevant or considered.
This adoption of common law principles by Dubai aims not only to unify laws across its free zones but also to attract more foreign investors. However, the level of legislation varies across different free zones. Some have minimal company regulations and rely on Dubai’s and federal laws, while others like DIFC possess detailed legislations.
The recent commercial company ownership law, allowing foreign ownership in the UAE, raised questions about the need for free zones. However, with the introduction of this new investor-friendly legislation, free zones are likely to receive a significant boost.
David Daly, a partner at the Gulf Tax Accounting Group in the UAE, praised common law’s “great commercial gift” of precedence. According to him, “Certainty is good for businesses. This is an exploratory process that will be widely welcomed.”
The introduction of common law could provide a law of precedence, creating certainty for businesses. This aspect is crucial for business development, and jurisdictions like London and New York have thrived due to consistent and reliable legal systems.
