Moving from Jersey to Abu Dhabi has altered Dan’s view on doing business in the region. He was appointed Senior Executive Officer of our ADGM office in early May.
You have recently relocated to Abu Dhabi from Jersey after working with the Middle Eastern clients for a number of years, and with Abu Dhabi Global Markets (ADGM) since the Group’s office was established there. As a brand new jurisdiction for international fiduciary services, with no legacy industry, what niches do you see ADGM developing, both for UAE/Gulf Cooperation Council (GCC) clients and for clients from outside of the region?
What sets us apart by providing experienced and truly international fiduciary services directly from the ADGM is not only our proximity but our innate understanding of what it means to live in this region.
The GCC is a vast region with significant private and corporate wealth, and you only need to look at Sheikh Tahnoon’s recent investment in Lulu Group or indeed the recent partial listing of Saudi Aramco as two examples of sizeable value in this region both private and corporate. Wealth of this size requires proper ‘joined up’ and sophisticated planning.
As a professional who has spent a number of years travelling in and out of the region to service clients, I was always of the opinion that a traditional offshore Director/Trustee was well placed to fully understand and provide the best possible service to clients in this region, of course it suited me to think that way.
However, having only spent nine months here (albeit some in the midst of a global pandemic, the likes of which we may never see again!), I’ve completely changed my thought process. So yes there are the obvious benefits of a Sunday to Thursday working week, an ability to visit clients or intermediaries anywhere within the UAE and wider GCC at a moment’s notice, however, it is only once you live here do you begin to understand some of the challenges that people face in this region in terms of doing business. Perhaps things that those in Europe would take for granted.
The ADGM regulator seems to be very pro-active and innovative in how it intends to grow the industry, by adopting a ‘virtual common law’ legal system, foundations and restricted scope companies. Are you aware of any new ‘products’ in the pipeline?
There has been much a lot in the media recently about the existing End of Service gratuity regime in this region, whether it is still fit for purpose and what can be done to improve it and further protect employees in what can be a volatile market. We already provide services to certain corporate clients in this region who have established their own End of Service benefit plans which use the traditional offshore structure of a trust (although one written under ADGM Law) and operate similarly to a pension arrangement that we would be familiar with in Europe. My expectation is this is a product that will further develop considerably over the next 24 months and beyond.
What types of private client structures have you been seeing in the ADGM office to date?
Unsurprisingly perhaps physical, GCC-situs assets are often the main area where we can provide a solution from within the UAE that perhaps a traditional offshore Trustee may not be able to provide. This is not to say a UAE structure should necessarily be used in place of a traditional offshore solution, in fact we very much believe that individuals resident in this region should use a mix of both offshore and onshore structures as part of their succession planning.
These structures typically include foundations, trusts and special purpose vehicles (SPVs) and could have one overarching family council who oversee both structures or, they could be managed entirely separately from each other. What we are also seeing more of is clients from this region who have in the past established an offshore trust perhaps in the Channel Islands and are now transferring trusteeship to us in the ADGM as they prefer the proximity, regularly travel to the UAE and it allows us to build a proper relationship with them locally.
Setting up and administering End of Service Benefit schemes in ADGM for Abu Dhabi employers, and indeed for GCC employers, is clearly a major growth area. It would seem that in difficult economic times like this, the need to fully fund and ring-fence employers’ liabilities towards their expatriate workforce through setting up suitable trusts is stronger than ever, however, at the same time it requires employers to be able to contribute cash to fund those liabilities at a time when cash resources may be highly stretched. To what extent do you see it becoming a mandatory requirement for employers in the region, as opposed to being more or less voluntary?
Based on many conversations we have had on this subject we fully expect legislation to be implemented making some form of provision a mandatory requirement. This could well have a number of exemptions so as not to unfairly disadvantage smaller companies, where it becoming mandatory could have such a detrimental effect that it simply would be a barrier to remaining in business.
What we have found most interesting during our discussions is that providing some form of pension and/or savings platform for employees does not have to stop with providing for expatriate employees and that the more added value you can provide to employees through such a plan, the more it becomes of interest to those local employees who currently benefit from an existing Governmental gratuity plan, which is very favourable financially however, perhaps lacking in the level of flexibility that may be able to be experienced with some of the expatriate schemes that are being established.
Are you seeing a growing demand for ADGM SPVs and foundations to directly or indirectly own Dubai real estate, following the degree of relaxation by the Dubai Land Authority in recent times?
Unfortunately, while legislation suggests that you can use ADGM SPVs or foundations for the holding of Dubai real estate, the reality is in practice this is not currently a solution that has worked for anyone other than a handful of very senior figures in the region, although in time we hope this will be resolved. In the meantime, Abu Dhabi real estate may be held through either ADGM SPVs or foundations however, if a client has a particular need to structure Dubai real estate we would advocate the use of a Dubai International Finance Centre (DIFC) SPV/foundation where the process for doing this is better established and less difficulties would therefore be faced. We can work with clients and their advisers to provide them with a solution for this also.
You arrived in Abu Dhabi with your young family just prior to going into lockdown due to COVID-19, which must have been quite a challenge, and it looks like you may come out of lock down just as the region’s extreme summer temperatures arrive! What aspects of life in Abu Dhabi are you especially looking forward to with the family once a degree of ‘normality’ hopefully returns?
I am not going to lie it has been something of a rude awakening for my wife and daughter particularly, as they’re of course less familiar with the country and region. We also managed, within three days of moving into our permanent accommodation, to join the long list of people who have suffered from flooding in the region, so it was early in our stay to tick that particular part of living in the Middle East off the to do list!
Once a degree of normality has resumed, we are certainly looking forward to using the UAE as our new travel hub, visiting countries that we have not perhaps been to in the past which are now within easy reach, such as Seychelles and Maldives. In the meantime, we have already been able to visit the lesser known Emirates, having had recent stays in Fujairah, Ras Al Khaimah and Ajman. The quality of the hotels in this region, as many will know, is excellent and has helped to keep my daughter occupied and excited once we got over the 24 hour lock down.
Aside from that just the general climate we have found enjoyable although the family are yet to experience the heat of the summer, but it’s not often a boy from the Channel Islands can say that they’ve managed to improve their golf handicap during the winter months, so I’m enjoying being in an environment where you can play all year round for the first time. Always happy to meet with our clients and intermediaries out on the course!
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