This article examines the impact of the recently-announced new Dubai Law No. 5 of 2021 (the New Law) on the activities of Dubai Financial Services Authority (DFSA) regulated financial institutions operating in and from the DIFC.*

On 6 May 2021 it was announced that the Dubai International Financial Centre's (DIFC) founding law, Dubai Law No. 9 of 2004, is being replaced with the New Law. The New Law is designed to expand the DIFC's strategic objectives. The new objectives of the DIFC include:

“advancing sustainable economic growth for Dubai, developing and diversifying the economy and increasing the GDP contribution of the financial services sector, to promote investment into Dubai and to attract regional and international entities to establish themselves in DIFC as their principal place of business”.

Provision of services to customers outside the DIFC

Article 19(c) of the New Law states that DIFC Establishments (which includes DFSA-regulated firms):

“...may provide their services through the DIFC to customers outside the DIFC, provided that provision of their services to their customers shall primarily be provided within the borders of the DIFC.”

This provision in the New Law removes any residual doubt that may have existed as to whether DIFC companies can provide their services to customers located in the United Arab Emirates (UAE) outside the DIFC (in so-called “onshore UAE”). It also aligns Dubai law with Federal Law No.8 of 2004 (the FFZ Law), the UAE law which created the concept of a “financial free zone” under federal law.

Although the FFZ Law contains some limited restrictions on onshore activities by financial free zone companies - such as the prohibition on taking deposits from the UAE markets - it does not prevent financial free zone companies from carrying on their activities in onshore UAE. In fact, it contains a clear inference that financial free zone companies may conduct activities in onshore UAE, such as in Article 4(4):

“The carrying out of insurance in the State shall be restricted to reinsurance.”

Read properly, Article 4(4) of the FFZ Law permits DFSA-regulated firms to conduct reinsurance activities in onshore UAE from their place of business in the DIFC. In other words, the FFZ Law would only restrict DFSA-regulated firms from conducting activities in onshore UAE which are expressly prohibited under the FFZ Law, provided that any onshore activities are carried on substantially from a place of business in the DIFC.  

Promotion and offering of services to customers outside the DIFC

Article 19(e) of the New Law states that DIFC Establishments (which includes DFSA-regulated firms):

“… may offer their services and promote their products outside the DIFC, in accordance with sub-articles (c) and (d) of this article, provided that they shall do so subject to DIFC Laws, DIFC Regulations, and the legislation applicable in the relevant jurisdiction outside the DIFC.”

As with Article 19(c), this provision in the New Law removes any residual doubt that may have existed as to whether DIFC companies can promote or offer their services to customers located in onshore UAE. Note that Article 19(e) of the New Law is subject to legislation applicable in the relevant jurisdiction outside the DIFC.

Our initial thoughts comments on Article 19(e) are as follows:

  • DFSA-regulated firms will need to continue to comply with any relevant onshore regulations on the promotion of financial products, such as the Emirates Securities and Commodities Authority’s 2017 Promotion and Introduction Regulations.
  • Any promotion or advertising by a DFSA-regulated firm in onshore UAE will need to ensure that it makes no reference to specific financial products (unless an exemption applies e.g. reverse solicitation).
  • The UAE Decretal Federal Law 2018 on the Central Bank and Organisation of Financial Institutions and Activities contains a restriction on the promotion of Central Bank licensed activities other than in accordance with the provisions of the law and the implementing rules and regulations. However, the implementing regulations do not impose any specific restrictions or obligations on persons other than Central Bank licensed firms. Therefore, there does not appear to be any legal obstacle preventing DFSA-regulated firms which conduct banking activities from promoting their services in onshore UAE (with the exception of stored value and payment services providers).

*Health warning - This article is based on an unofficial English translation of the Arabic original. Readers should refer to the official Arabic version for certainty.