In recent years, Dubai has significantly raised its profile as a safe haven for capital from across the world. With its enviable hard and soft infrastructure, it has created a secure environment for individuals to grow their wealth.
However, legal uncertainty surrounding inheritance processes has been a sticking point for many high-net-worth-individuals. Many have been haunted by the question of whether their assets can be transferred to their natural heirs after death without having to navigate complex and opaque legal procedures.
All that is set to change. The DIFC Wills and Probate Registry rules, a new set of laws recently enacted to create legal clarity and certainty on inheritance matters for non-Muslims, could help bring a new tide of capital and investment flows into Dubai.
Inheritance is a major concern among long-term expatriate residents in Dubai. It is interesting to look at the perspectives of two major expatriate communities in Dubai – non-resident Indians (NRIs) and European expatriates.
Among the former, there are many who have built business empires over the last four decades that rank among the region’s largest. Ensuring that their hard earned wealth will be transferred to their families after their death, without being encumbered by difficult procedures, is of vital concern for them.
To avoid being subject to the UAE’s Shariah-based forced heirship regime, they have explored every possible alternate local mechanism for transferring their wealth to their families. However, none exist. Some of them have resorted to creating companies in obscure overseas jurisdictions to ensure the transfer of their estates to their family upon death.
European expatriates in Dubai, on the other hand, have largely acquired surplus wealth over the years by investing their savings in real estate or businesses. They are aware that they are at the mercy of the courts’ discretion in applying Sharia Law to inheritance. They are also keenly aware of the risk of lengthy and costly probate battles at the Dubai Courts as well as the risk of estates being contested. All these complexities are increasingly leading many Dubai-based expatriates to transfer their assets into offshore structures in places like Jersey, Channel Islands or Singapore.
According to one estimate, the Jersey Financial Commission recently acquired 3,000 trusts from the GCC with assets worth billions of sterling, 40 per cent of which came from the UAE. Many of these trusts were used for inheritance purposes.
With the establishment of the DIFC Wills and Probate Registry, this exodus of wealth could well be reversed. The first service of its kind in the Middle East, the new registry is a simple opt-in mechanism that gives non-Muslim expatriates the legal certainty that their Dubai-based assets will be transferred to their loved ones upon death according to their own wishes. Its rules give non-Muslim expatriates in Dubai the ability to choose an English-language system that provides familiarity, trust, transparency and security for inheritance.
With a comprehensive set of principles and processes to guide succession and inheritance matters, the registry creates the confidence and security necessary for promoting investment in Dubai and minimising capital flight. At a time when capital from different parts of the world is converging on Dubai, the new registry will significantly add to Dubai’s value proposition for investors and businesses.
The new registry could have a substantial knock-on effect on the Dubai economy. The first to benefit could be business support service providers like law firms and the financial services sector. Many wealthy individuals may choose to first dip their feet in the water by setting up businesses or entrepreneurial ventures in Dubai after seeking advice from lawyers and financial institutions. The new wealth that this would bring to Dubai could significantly expand the market for sectors like private banking.
I believe the new registry will enhance Dubai’s attractiveness as a destination for investment. I see the service substantially contributing to raising both Dubai’s and the UAE’s profile as one of the world’s best places to live and work.
Sandy Shipton, a former executive director at the Dubai International Financial Centre (DIFC), currently sits on a special interest group of the Society of Trust & Estate Practitioners (STEP) in London.