Published by: Jamie Tredgold and Nathan Hooper, Support Legal
The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are two distinct “free zone” financial centres that operate within the UAE. Although they both offer similar services, there are several key differences between them.
This article will look at some of the key differences between the DIFC and ADGM to provide some clarity when deciding which one to choose for your new venture.
English Law Application in the ADGM and DIFC
ADGM is unique in that it has directly adopted almost 50 laws from England & Wales, together with general principals of English common law (including equity and trusts). However, this is subject to certain Abu Dhabi and ADGM laws and regulations which always take precedence.
As with the ADGM, the DIFC is a common law jurisdiction. However, unlike the ADGM, the DIFC has its own laws and regulations and does not incorporate any foreign laws directly. If a DIFC law does not cover a particular issue, the applicable law is determined by a preset order, with English law being the law of last resort.
Court Systems
The ADGM court’s jurisdiction is limited to civil and commercial disputes connected to the ADGM. The ADGM Court comprise two levels: a Court of First Instance (with Civil, employment, and Small Claims divisions) and a Court of Appeal. The courts directly apply English law and may reference (and rely upon) English court precedents. The ADGM judiciary come exclusively from common law jurisdictions, such as England, Australia, and New Zealand.
The DIFC Courts can hear disputes between parties who have chosen to submit to DIFC jurisdiction, even if they have no connection to the DIFC. As with the ADGM, the DIFC Court has two levels: a Court of First Instance (with Civil & Commercial, Technology & Construction, Arbitration, and Digital Economy divisions) and a Court of Appeal. The DIFC courts apply DIFC Court precedent only. However, judgments from England & Wales (and other common law jurisdictions) are persuasive, particularly if the DIFC Court has no DIFC law precedent to follow. DIFC case law is substantial and therefore the need to resort to foreign judgments is ever decreasing.
The DIFC judiciary comprises a mixture of UAE civil-trained judges and judges from common law jurisdictions, such as England & Wales, Australia, and Singapore.
Arbitration
The ADGM does not have a specific set of arbitration rules. Instead, it has collaborated with the International Chamber of Commerce (ICC) to establish an ICC Court's Representative Office within the ADGM Arbitration Centre (ADGMAC). The ADGMAC has, however, published a set of bespoke Arbitration Guidelines, which parties can incorporate alongside whatever rules they choose to apply. The ADGM has its own Arbitration Regulations, which apply to all ADGM-seated arbitrations.
The DIFC has its own Arbitration Law but, following the disbanding of the DIFC-LCIA, has no specific arbitration rules. This means that parties must now elect a set of rules to apply to their DIFC arbitration, failing which the Dubai International Arbitration Centre (DIAC) Rules will apply by default. The DIFC Court (arbitration Division) is the default supervisory court for all DIAC arbitrations.
Insolvency Law
The ADGM Insolvency Regulations are based on English insolvency law and allow for the appointment of an administrator or restructuring of a company using a deed of company arrangement.
In the ADGM, a foreign company can be wound up if it has a "sufficient connection" to the ADGM if there is a realistic prospect that a winding-up order will benefit the requesting parties, and if the court has jurisdiction over one or more stakeholders in the asset distribution.
The DIFC's insolvency law shares similarities with UK insolvency law. It encompasses aspects such as liquidation, receivership, and company voluntary arrangements. However, it does not incorporate the concept of administration as a rescue tool.
In the DIFC, a foreign company can be wound up under DIFC Insolvency Laws if it meets certain criteria, such as inability to pay debts, dissolution or deregistration in its home country, cessation of operations in the DIFC, having a DIFC address solely for winding-up purposes, or if the court deems it just and equitable.
In summary
The DIFC and ADGM are two distinct financial centres that offer a range of services and benefits, but each has its own unique set of regulatory frameworks and advantages. Investors should carefully consider the different aspects of both jurisdictions before making their decisions on where to establish operations.
This material is provided for general information only. It does not constitute legal or other professional advice.