IFLR (International Financial Law Review) reports that five firms have opened up in 2005: Baker Botts, Maples and Calder, Simmons & Simmons, Ashurst and Freshfields Bruckhaus Deringer.

The survey points to the recent establishment of the Dubai International Financial Centre (DIFC) and the Dubai International Financial Exchange (DIFX) as the main attractions, although the booming local property market also exercises a draw.

The DIFC, which offers zero tax on income and profits, complete foreign ownership and no restrictions on foreign exchange or capital repatriation, opened for business this year, and has been flooded with applications from banks, insurers and back-office services.

The DIFC also has its own legal structure which aspires to the highest international standards, including a judicial apparatus. During the last two years a full set of financial and corporate laws has been put into place. This year, in June, the Emirate enacted five new laws dealing with legal obligations, employment and security interests in relation to the Dubai International Financial Centre, and the Board of Directors of the Dubai International Financial Centre Authority has issued additional company regulations.

The new legislation comprises:

• Employment Law No. 4 of 2005. This law provides for minimum employment practices comparable to established international standards, so as to promote fair treatment of employees and employers;
• Law of Obligations No. 5 of 2005. This law creates a framework for claimants to seek recovery for non-contractual claims and sets out the rules as to when obligations arise and how disputes involving them are resolved;
• Implied Terms in Contract and Unfair Terms Law No. 6 of 2005. This law provides for fairness and certainty in contracts governed by the laws of the DIFC by providing terms and conditions not normally included in contracts and assures the necessary framework for their enforcement;
• Law of Damages and Remedies No. 7 of 2005. This law creates the structures necessary to assure the recovery of damages and other forms of relief to claimants within the DIFC; and
• Law of Security No. 9 of 2005. This law defines various forms of security interests as collateral for repayment of debts and prescribes the process for their perfection and enforcement.

Commenting on the issuance of the new laws and regulations, Dr Omar Bin Sulaiman, DIFCA Director General observed that:

“The DIFC is a distinct legal jurisdiction. This is a critical component of the overall offering of the DIFC and a major factor in the decisions of the numerous financial institutions that have applied for and received licenses to operate here. In the development of this legal system we have sought input from the world’s leading capital markets so as to ensure that we provide the world’s financial communities with the legal certainty they require."

"The issuance of these laws and regulations confirms our commitment to the continuing development of a framework which they will understand and within which they will feel comfortable operating. This legal framework was set in motion with the passage of the first set of laws in September of 2004 and the process is on-going. Other laws are planned for passage later this year in keeping with the DIFC’s promise of providing the best-in-class legislation addressing the full breadth of operations permitted to be carried out in

In September, as part of the establishment of the DIFX, which operates within the DIFC and applies appropriate parts of its legal structure, the authorities enacted a number of new laws and regulations dealing with personal property, insolvency, collateral security, and the use of electronic stock instruments.

These laws and regulations are among the body of legislation dealing with non-regulated activities which DIFCA is charged with administering under Law No. 9 of 2004.

The new laws are:

• The Personal Property Law No. 9 of 2005.
  This law provides defines the rights and obligations of parties in relation to property other than real estate (land and buildings) located in the DIFC and, among other things, segregates property belonging to account holders of the Dubai International Financial Exchange (DIFX) from the property of the DIFX itself.

• The Law Relating to the Application of DIFC Laws (Amended and Restated) No. 10 of 2005.
  This law, initially passed in September of 2004, has been amended to harmonize defined terms appearing in the 2004 version of the law with terms used in the Personal Property Law as relates to DIFX operations.

The regulations consist of the DIFC Dematerialization of Securities Regulations, DIFC Security Regulations and DIFC Insolvency Regulations which are issued by the Board of Directors of the DIFCA pursuant to the authority given to the Board by Law No. 9 of 2004.

These regulations, respectively, provide for the issuance, trading and registration of securities in electronic form as required to expedite DIFX operations; the creation, recordation and enforcement of various forms of collateral security as guarantees for the payment of loans and other debt; and the procedures and formalities governing the dissolution and winding up of insolvent companies.

Commenting on the issuance of these laws and regulations, Dr Omar Bin Sulaiman, DIFCA Director General, noted that:

"In preparing these laws for issuance, the drafters worked diligently to remove any doubt regarding the smooth and orderly operation of the DIFX’s trading activities. Similarly, in developing our legal system in general, we continue to seek as we have with the preparation of these laws, the input of leading financial and legal practitioners from around the world so as to ensure that we provide a focused, responsive and reliable legal system on par with those of other global financial centres.”

Dean Ferris, DIFCA Chief Legal Officer and Chairman of the Legislative Committee added:

“The DIFC has decidedly set its policies and procedures in a manner designed to optimize for DIFC securities brokers, traders and investors, as well as for DIFC-based lenders, the realization of their commercial and legal expectation in the context of a coherent and user-friendly legal framework. The confidence which these purpose-built laws and regulations, and correspondingly the DIFC’s robust judicial system promote is an essential factor in attracting world-class financial institutions to establish their regional operations in the Centre.”