New Dubai Law: DIFC financial institutions are permitted to advertise outside the DIFC

The effect of the newly announced new Dubai Law No. 5 of 2021 (the New Law) on the operations of Dubai Financial Services Authority (DFSA) licenced financial institutions operating in and from the DIFC is examined in this article.

In an announcement made on May 6, 2021, it was stated that Dubai Legislation No. 9 of 2004 (the foundation law of the Dubai International Financial Centre (DIFC)) will be repealed and replaced by the New Law. According to the New Law, the DIFC’s strategic goals would be broadened. The following are the new goals of the DIFC:

«(c) of the New Law stipulates that DIFC Establishments (which includes DFSA-regulated companies) must comply with the following requirements:

“…may offer their services to consumers outside the DIFC via the DIFC, provided that the provision of their services to their customers is mainly supplied inside the boundaries of the DIFC.”

As a result of this provision in the New Law, any remaining uncertainty about whether DIFC businesses may offer their services to clients who are situated in the United Arab Emirates (UAE) outside the DIFC (the so-called “onshore UAE”) has been removed. It also brings Dubai law into line with Federal Legislation No.8 of 2004 (the FFZ Law), the United Arab Emirates law that established the idea of a “financial free zone” under federal jurisdiction.

The FFZ Law includes certain limited limitations on the activities of financial free zone businesses onshore, such as the ban on accepting deposits from UAE markets, but it does not preclude financial free zone companies from continuing on their operations in the onshore United Arab Emirates (UAE). The law includes an unmistakable conclusion that financial free zone firms may undertake operations in the United Arab Emirates, as shown in Article 4(4) of the law:

According to the law, “the provision of insurance in the state must be limited to reinsurance.”

Reading the law as intended, Article 4(4) of the FFZ Law allows companies that are licenced by the Dubai Financial Services Authority to undertake reinsurance operations in the onshore United Arab Emirates from their place of business in the DIFC. With this in mind, the FFZ Law would only ban DFSA-regulated companies from engaging in activities in the UAE onshore that are explicitly forbidden by the FFZ Law, provided that such onshore operations are carried out in significant part from a place of business in the DIFC.

Outside the DIFC, marketing and service provision to consumers are carried out.

Article 19(e) of the New Law stipulates that DIFC Establishments (which includes DFSA-regulated companies) must comply with the following requirements:

In accordance with sub-articles (c) and (d) of this article, companies may provide services and advertise their goods outside the DIFC, provided that they do so in compliance with DIFC Laws, DIFC Regulations, and the laws applicable in the relevant jurisdiction outside the DIFC.

As with Article 19(c), this clause in the New Law eliminates any remaining uncertainty about whether DIFC businesses may advertise or sell their services to consumers situated in the onshore UAE, which may have remained in the previous law. It should be noted that Article 19(e) of the New Law is subject to the laws of the relevant jurisdictions outside the DIFC, as defined in the New Law.

The following are our first views and observations on Article 19(e):

It is restricted to the marketing and provision of services, rather than the provision of financial goods.
Affected companies would be required to continue to comply with any applicable onshore laws governing the marketing of financial products, including the Emirates Securities and Commodities Authority’s Promotion and Introduction Regulations, which were last updated in 2017.

DFSA-regulated firms operating in the onshore UAE will be required to ensure that any marketing or advertising they do does not include explicit references to financial products.
It is prohibited to promote Central Bank licenced operations in any way

other than in compliance with the requirements of the law and the implementing rules and regulations, according to the UAE Decretal Federal Law 2018 on the Central Bank and Organization of Financial Institutions and Activities. In contrast, the implementing rules do not impose any particular limitations or responsibilities on individuals or entities other than Central Bank-licensed businesses. As a result, it does not seem that there is any legal impediment to DFSA-regulated businesses who engage in banking operations from marketing their services in the onshore UAE.