ASMEC Legal Framework

Article 121 of the UAE Constitution enabled the Federation to create Financial Free Zones within the Emirates and to exempt them from the application of certain Federal laws. A series of Federal and Dubai laws established the Dubai International Financial Centre (DIFC) and its regulatory bodies, including the ASMEC. These laws define the objectives, powers, and responsibilities of the DIFC authorities and provide the legal foundation for its operation as an independent financial jurisdiction.

Federal Law No. 8 of 2004 (English)

Federal Law No. 8 of 2004, titled “The Financial Free Zones in the United Arab Emirates” (the Financial Free Zone Law), established the legal framework for creating and operating financial free zones across the UAE. The law:

• Allows the creation of a Financial Free Zone in any Emirate through a Federal Decree.
• Exempts Financial Free Zones and their activities from all Federal civil and commercial laws.
• Confirms that Federal criminal laws, including Anti-Money Laundering laws, apply within the Free Zones.
• Prohibits DIFC-authorised firms from accepting deposits in UAE markets or dealing in the UAE Dirham.
• Restricts DIFC-authorised insurers to reinsurance activities within the UAE.

As a result, the DIFC operates under its own distinct regulatory and legal framework, separate from Federal and local systems.

Federal Decree No. 35 of 2004 (English)

Federal Decree No. 35 of 2004 formally established the DIFC as a Financial Free Zone in Dubai. Accompanying Cabinet Resolutions:

• Defined the geographic boundaries of the DIFC.
• Allowed DIFC authorities and authorised firms to operate temporarily outside the DIFC for the first four years during its construction phase.

Dubai Law No. 5 of 2021 (English)

Dubai Law No. 9 of 2004, titled “The Establishment of the Dubai International Financial Centre”, was later replaced by Dubai Law No. 5 of 2021. This law:

• Recognises the financial and administrative independence of the DIFC.
• Creates the DIFC’s central governing bodies, including the ASMEC.
• Ensures the ASMEC operates independently from other DIFC authorities.
• Exempts the DIFC from Dubai laws and regulations under certain defined conditions.

DIFC Law No. 1 of 2004 (English)

Known as the Regulatory Law 2004, this is the cornerstone legislation governing ASMEC’s powers, responsibilities, and regulatory mandate. It:

• Grants ASMEC authority to make binding Rules and Regulations.
• Defines the powers and duties of the Board and the Chief Executive.
• Establishes the Financial Markets Tribunal.
• Sets out procedures for licensing and authorising firms and individuals.
• Grants ASMEC powers of supervision, investigation, and enforcement over regulated entities.
• Allows ASMEC to impose restrictions, suspensions, sanctions, and financial penalties.
• Specifies disclosure requirements and decision-making procedures for regulatory actions.

Cabinet Resolution No. 28 of 2007 (English / Arabic)

Cabinet Resolution No. 28 of 2007, issued under Federal Law No. 8 of 2004, provides further clarification on the implementation of the Financial Free Zones Law. It defines operational parameters, compliance obligations, and cooperation mechanisms between Federal and Free Zone authorities.

*An ASMEC consolidated translation.