In this brief article, Natalie Scott, Senior Counsel in our Regulatory and Government Advisory team, provides an overview of the recent announcement of ADGM expansion and what its implications for current and future businesses and residents of Reem Island might be.
Abu Dhabi Global Market (ADGM), a Financial Free Zone (FFZ) in the Emirates of Abu Dhabi, established pursuant to Federal Decree No. (15) of 2013 and Cabinet Resolution No. (4) of 2013, has announced its expansion.
Following the issuance of the UAE Cabinet Resolution No. (41) for 2023 to expand the jurisdiction of ADGM from its current location at Al Maryah Island (area of 1,680,323) sq. m) to encompass Al Reem Island, the combined geographic area of ADGM has increased to almost 14,377,774.9 sq. m, or nearly 1,438 hectares – 10 times greater than ADGM’s current footprint. According to ADGM, it is now set to become one of the world’s largest International Financial Districts.
With Al Maryah occupancy rates at over 95% - which, in itself, is a testament to ADGM being the fastest growing International Financial Centre in the region since its inception in 2015 - the expansion is a welcome development that allows ADGM to accommodate the increasing demand from local, regional and international companies seeking to establish a presence in Abu Dhabi. Entities licensed by ADGM that are based in Al Reem Island will be able to benefit from ADGM’s common law jurisdiction and its pioneering regulatory framework.
The expansion underlines ADGM’s Growth Strategy 2023-2027 and “provides a unique opportunity for Abu Dhabi to reinforce its position as a world-leading international financial centre and a global destination of choice”, said Ahmed Al Zaabi, chairman of the Abu Dhabi Department of Economic Development (ADDED) and the ADGM.
ADGM is one of the two UAE FFZs, established following an amendment to Article 121 of the Constitution in 2004, which enabled the creation of FFZs in the UAE. ADGM is governed by Federal Law No. (8) of 2004 Concerning Financial Free Zones, along with Cabinet Resolution No. (28) of 2007 on the Implementing Regulations of Federal Law No. (8) of 2004, as amended, and Abu Dhabi Law No. (4) of 2013 Concerning Abu Dhabi Global Market, as amended.
The expansion of ADGM’s jurisdiction represents a significant milestone in Abu Dhabi’s diversification of its economy away from oil and towards a booming financial services sector.
The broader implications, including the transitional arrangements, of this expansion are yet to be revealed, which will answer questions, such as:
- Which entities / establishments on Reem Island will fall under the ADGM jurisdiction?
- What transition period(s) will be offered to existing entities operating on Reem Island?
- What dual licencing or other arrangements will be introduced to regulate the entitles presently regulated by federal and emirate level authorities (such as the Central Bank of the UAE, the Securities and Commodities Authority and the ADDED, to name a few)?
- Will the ADGM regulatory framework be offered as an optional alternative to the existing ‘mainland’ regulatory framework, or rather applied on a mandatory basis on conclusion of the transition period?
- Will new Al Reem establishments enjoy the preferential corporate tax rate of Zero % on their qualifying income
These, and many other questions about the expansion and its implications for current and future businesses and residents of Reem Island will be answered in due course. Until then, we will continue to monitor these developments and the transitional arrangements. In the meantime, if you have any questions, please feel free to reach out to Natalie Scott, Senior Counsel in our Regulatory and Government Advisory team.