Category: inBriefs

Dubai Court of Appeal shuts down ‘guerilla tactics’ aimed at bypassing arbitration agreements

There are a number of reasons why parties who have agreed to arbitrate disputes (ordinarily by way of an arbitration clause in a contract) may later wish to litigate their dispute in the UAE courts. A common reason is the cost of arbitration, which can be quite significant compared to the cost of litigating in the UAE Courts. Further reasons may be that the party wishes to take advantage of the relative unpredictability of outcomes in the UAE Courts, which do not follow a system of binding precedent as understood in common law jurisdictions and, perhaps more importantly, do not award legal costs except in a token amount, thereby minimizing the cost of a failed claim.

 

Irrespective of the reason, a popular strategy deployed by parties wishing to bypass an arbitration agreement and invoke the jurisdiction of the UAE Courts (ordinarily a claimant) is to add parties who are not party to the arbitration agreement, as in cases which involve multiple defendants, a UAE court which has jurisdiction over one defendant has jurisdiction over all the defendants.

 

In a recent judgment issued by the Dubai Court of Appeal, this strategy was comprehensively rejected. The case in question involved a contract for the construction of a pavilion at Expo 2020, which contained an arbitration clause. The contractor asserted several claims against the employer and, in an attempt to bring the matter within the jurisdiction of the Dubai Court, impleaded the employer’s manager as a co-defendant.

 

The Dubai Court of Appeal saw through this stratagem, and held that the courts have no jurisdiction over the dispute because the proper parties to the contract have agreed to resolve disputes arising out of the contract by arbitration. In its judgment, the Dubai Court of Appeal laid down several clear principles:

 

– while a claimant may add multiple defendants, and while a court which has jurisdiction over one defendant will have jurisdiction over all the defendants, there must be ‘real claims’ against each of the defendants;

 

– what constitutes ‘real claims’ is a matter to be determined by the trial court based on the evidence and any applicable presumptions of law [in this case, the court found that the claimant’s cause of action was clearly a contractual one, and there were no ‘real claims’ against individuals who were not party to the contract; and

 

– adding parties solely for the purpose of invoking the court’s jurisdiction is not permitted.

 

Interestingly, while the multiplicity of defendants was the principal argument advanced by the claimant in this case in its attempt to bypass the arbitration agreement, this issue was not the basis of the judgment of the Court of First Instance which held that the courts have jurisdiction. The basis of the judgment of the Court of First Instance was that the amendment to the contract between the parties (necessitated by the delay to Expo 2020 due to the Covid-19 pandemic) did not expressly refer to the arbitration clause, and consequently that it did not meet the requirements of Article 7(2)(b) of the UAE Federal Arbitration Law, which provides that an arbitration agreement shall be deemed to be in writing if there is a reference in a written contract to any model contract, international agreement, or any other document containing an arbitration clause and the reference is such as to make that clause part of the contract. This finding was set aside by the Dubai Court of Appeal, which held that there was no requirement to expressly refer to the arbitration clause as the amendment clearly formed part and parcel of the contract which contained the arbitration clause (i.e. as opposed to standard terms or a different contract containing an arbitration clause which is incorporated by reference). Nevertheless, following the judgment of the Court of First Instance, the prudent practice appears to be to make express reference to an arbitration clause in the main document in all subsequent contractual documents, even where the subsequent document is only an amendment to the contract. ■

 

ESG in the UAE: Has it arrived?

Over the past few years, the United Arab Emirates has witnessed an increase in awareness and significance of environmental, social and governance (ESG) issues. While businesses in the UAE have begun to acknowledge that conscious efforts towards ESG compliance is imperative for growth and longevity of their business, the question remains whether ESG compliance can truly be said to now form a part of the UAE compliance ecosystem.

 

ESG significance on the rise: Key Factors

 

M&A has been on a steady rise in the MENA region (with the UAE continuing to demonstrate resilience despite global headwinds). ESG compliance has become a point of concern for investors, who are frequently concerned to fully investigate and understand the nature and extent of ESG compliance by UAE targets.

 

In cases where such compliance can be successfully demonstrated, investors derive comfort regarding sustainable financial performance and the ability of the management to identify and account for long term business risks. On the other hand, a lack of transparency concerning ESG compliance often results in questions regarding the sustainability of the business and management’s lack of sensitivity to an issue that is increasingly important to investors and stakeholders.

 

As a consequence, ESG rating agencies are often engaged by potential investors for the purposes of conducting an ESG diligence which has led to the “ESG Score/Ratings” becoming increasingly significant in evaluating, and to an extent negotiating certain contours of an investment. In most cases, the ESG score/rating will have a direct impact on the valuation of a target.

 

Good-to-have or must-have: Where do we stand?

 

While the UAE business ecosystem awaits further and more granular regulation of ESG matters, the question arises whether UAE businesses should of their own initiative, take cognizance of an issue that is now at the core of many investment mandates. Improved capability of risk management, higher brand value, advantage over non-compliant competitors and potentially reduced business costs resulting in higher valuation are only a few of the factors that influence the decision-making process. ■

UAE Cabinet Decision No. (49) of 2023 dated 8 May 2023 (effective 1 June 2023)

UAE Cabinet Decision No. (49) of 2023 dated 8 May 2023 (effective 1 June 2023) states that for the purposes of Clause 6 of Article 11 of the Corporate Tax (CT) Law, Businesses or Business Activities conducted by a resident or non-resident natural person shall be subject to CT only where the total Turnover exceeds AED 1,000,000 for a calendar year.   Importantly, the Decision also states that activities of resident or non-resident natural persons that result in Turnover from Wage, Personal Investment Income or Real Estate Investment Income shall not be considered Businesses or Business Activities that are subject to the CT Law.  Therefore, such natural persons shall not be required to register for CT assuming they do not conduct any other Businesses or Business Activities that are subject to CT. ■

Emiratisation deadline for the private sector set at 30 June for 2023 half yearly targets

The Ministry of Human Resources and Emiratisation has announced 30 June 2023 as the deadline for private sector companies with 50 employees or more to achieve their half-yearly Emiratisation targets, set at 1% of skilled jobs. This is in addition to the 2% Emiratisation that companies should have achieved by the end of 2022.

 

Organizations that failed to meet the 2022 targets were subject to a fine of AED 6,000 a month or AED 72,000 a year for each Emirati national not hired as per the Emiratisation norms. Post June 2023, fines will be applied on non-compliant companies for not achieving the required half-yearly rate for 2023 as well as the 2022 targets. A penalty of AED 42,000 (on half yearly basis) will be applied for every Emirati national not hired as per the Emiratisation norms by 30 June 2023. The calculation is based on a penalty of AED 7,000 per month for 2023 and will increase by AED 1,000 annually for each year until 2026.

 

Please refer to our earlier inBrief, where we had provided an overview of the Emiratisation requirements, applicability thresholds and the consequences of non-compliance, for further details. ■

The Ministry of Finance publishes an Explanatory Guide on the Corporate Tax Law

Last Friday, on 12 May 2023, the UAE Ministry of Finance (Ministry) published an Explanatory Guide which provides an explanation of the meaning and intended effect of each article of the Corporate Tax (CT) Law. The Explanatory Guide may be accessed here.

 

The Introduction to the Explanatory Guide states that the Explanatory Guide may be used in interpreting the CT Law and how particular provisions of the CT Law may need to be applied, and that it must be read in conjunction with the CT Law and the relevant decisions issued by the Cabinet, the Ministry and the Federal Tax Authority. The Introduction also makes it clear that the Explanatory Guide is not meant to be a comprehensive description of the CT Law and its implementing decisions.

 

Some highlights of the Explanatory Guide include:

 

  • For CT purposes, a civil company (which under the UAE Civil Code enjoys the status of a separate legal person) will not be treated as a separate legal person and be treated as the natural person or persons owning them because of their direct relationship and control over the Business and their unlimited liability for the debts and other obligations of the Business;

 

  • Certain qualifying activities conducted by free zone persons are eligible for the zero percent CT benefit;

 

  • Tax residency for CT purposes is not dependent on legal residency;

 

  • No time limitation for carry forward of tax losses;

 

  • Details transfer pricing documentation requirements and thresholds for maintaining master file and local file;

 

  • Scope of ‘Qualifying Income’ for free zone establishments remain undefined; and

 

  • Acknowledgement that taxpayers are permitted to optimize their tax position in a manner consistent with the CT Law.

 

The Afridi & Angell Tax Team is closely reviewing the 106-page Explanatory Guide and will continue to provide more details in the coming days. ■

Planning for Canada’s Departure Tax

We have written previously about the importance of planning for the tax consequences of emigrating from Canada; see our previous inBrief here. In this inBrief, we will describe a number of more advanced planning options for Canadian residents who are considering giving up their Canadian residency. Bear in mind that not all of the approaches discussed in this inBrief will be right for any particular person, as each person’s individual circumstances will differ.

 

Upon becoming a non-resident, Canada imposes a departure tax in the form of deemed disposition of certain capital assets, causing any unrealized capital gains to be realized in the year of departure. It is common for high net-worth individuals in Canada to hold their public and private investments through holding companies (Holdcos), so one major source of capital gains upon emigration is the shares they own in their Holdcos. We will also touch upon foreign trust planning, Canadian real estate holdings, and charitable donations.

 

With respect to Holdco shares, much emigration planning focuses on how to minimize the departure tax by reducing the fair market value of those shares prior to exit. Some potential options to achieve this may include.

 

Strategic Dividends: Causing Holdco to pay out dividends to the maximum extent it can out of tax-preferential accounts maintained by it, which may include Holdco’s capital dividend account (CDA), eligible refundable dividend tax on hand (ERDTOH) and non-eligible refundable dividend tax on hand (NERDTOH). Dividends can be paid out of Holdco’s CDA tax-free, and dividends that are paid out of its ERDTOH and NERDTOH result in tax refunds to the company, making them somewhat more tax-efficient. In advance of doing this, it may be advisable for Holdco to sell some of its investments, thereby realizing capital gains and creating additional CDA that can be dividend out tax free. The payment of dividends in this manner will reduce the fair market value of Holdco’s shares, thereby reducing the amount of the deemed capital gain on such shares upon emigration.

 

The other reason you should be sure to dividend out all CDA in any Holdco prior to emigration is because such dividends lose their tax-free status when paid to a non-resident shareholder. Once you are a non-resident, Holdco will be required to apply a withholding tax to any dividends paid to you, and you will be taxed on such dividends personally under the laws of your new country of residence. If Holdco will continue to operate after you emigrate and will continue to have Canadian resident shareholders, it would be prudent to create separate classes of shares that allow for dividends out of CDA to be paid to Canadian shareholders (who can receive them tax-free), and other dividends to be paid to you (as you may very well be in a position to receive them much more tax-efficiently than a Canadian shareholder[1]).

 

Life Insurance: Cause Holdco to acquire life insurance on your life, acquiring a policy that is maximum funded at the outset but with attributes that result in the policy having a low fair market value. This expenditure in exchange for an asset that is initially low-value (the life insurance policy) reduces the value of the Holdco shares. There are several other potential benefits to this approach that stem from the value of the insurance policy itself, because its value will increase after you have emigrated and can be leveraged as a valuable asset of Holdco going forward (i.e., front-end or back-end leveraging strategies to extract value from the policy during your life), in addition to the security of the death benefit.

 

If Holdco does leverage the life insurance policy by borrowing against it, Holdco will be able to use those funds for income-generating investments and will be permitted to deduct the interest on the loan. This can be an attractive arrangement.

 

You may wish to consider whether it makes sense to introduce a foreign ownership structure that is more forward-looking and supports your wealth and estate plans more broadly. For example, if you intend to establish a family trust structure in an offshore jurisdiction as part of your post-emigration planning, it may be prudent to transfer the shares of Holdco to the foreign trust at approximately the same time that you emigrate from Canada. You would do this after having taken any available steps to reduce the value of Holdco’s shares, as described above. If Holdco’s value is derived primarily from Canadian real estate holdings, this approach could be beneficial if you foresee a sale of Holdco in the future. In that case Holdco shares will be “taxable Canadian property” and will be taxed in Canada, and you can reduce the impact of that tax by reducing the value of Holdco’s shares through dividends after you are a non-resident (at the lower beneficial treaty rate).

 

There are special considerations with respect to Canadian real estate holdings. Canadian real estate is “taxable Canadian property” and is not subject to the deemed disposition upon emigration.[2] How you can best structure your holding of Canadian real estate as a non-resident will depend on whether it is property for your personal use, or if it is a rental property. If it is for personal use, you will need to consider whether your ownership of it puts you at risk of being deemed to be Canadian resident for tax purposes even after your emigration.[3] If it is a rental property, you will likely wish to transfer ownership of it to a Canadian holding company, otherwise the tenant will be required to withhold an amount in respect of tax from every rent payment they make to you as a non-resident owner.

 

Finally, an option that is not to be overlooked is simply making a charitable donation of assets that have significant accrued capital gains before you emigrate, which will have the effect of reducing both the value of your holdings as well as reducing your departure tax exposure. It will also generate a charitable tax credit which you may use to further reduce your tax burden on exit. If your charitable intentions are relatively large and you wish to maintain some ongoing involvement and control over the how the endowment is managed, you may wish to establish a charitable foundation instead of simply donating funds or assets to an existing charity. A charitable foundation that is registered as such with the Canada Revenue Agency will qualify as a registered charity and can issue charitable tax receipts, and can carry out activities and funding in line with its charitable purpose in Canada and overseas. The charitable options should, of course, only be considered where the primary objective is furthering the chosen charitable purpose with any tax incentives being secondary.

 

The strategies discussed in this inBrief are intended to illustrate that there may be effective pre-emigration planning that you can consider, aimed at reducing the impact of Canada’s departure tax. All such strategies are complex in their planning and application and professional advice is required to evaluate and execute them. If you are interested in exploring planning of this nature, please contact us and we will be delighted to assist. ■

 

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[1] The withholding tax that Holdco would be required to apply to dividends paid to you as a non-resident would be a default rate of 25% if you reside in a non-treaty country, or could be 5%, 10% or 15% if you  reside in a treaty country.  You may need to hold your shares through a company established in your new country of residency to access these reduced rates.

[2] You may elect to trigger a deemed disposition of taxable Canadian property if you prefer, in order to trigger gains or losses which you are able to offset against other losses or gains on exit, respectively.

[3] Very briefly, owning a residential property which is available for your personal use in Canada will cause you to be deemed tax resident in Canada, unless there are tie-breaker rules in the applicable treaty with your new country of residence.  Ensuring that you will indeed be non-resident for tax purposes is a critical aspect of non-residency planning.

 

UAE Corporate Tax Law (CT) – the Conditions under which the Presence of a Natural Person in the UAE will not Create a Permanent Establishment for a Non-Resident Person

The UAE Minister of Finance by Ministerial Decision No.83/2023 dated 10 April 2023 has set out the conditions under which the presence of a natural person in the UAE would not create a Permanent Establishment for a Non-Resident Person.

 

For the sake of context, Article 12 of CT provides that a Non-Resident Person is subject to Corporate Tax on Taxable Income in certain circumstances, which include, the Taxable Income attributable to the Permanent Establishment of the Non-Resident Person in the UAE.

 

While Article 14 (1) and (2) of the CT deals with circumstances under which a Non-Resident Person is considered to have a Permanent Establishment in the UAE. Article 14 (3) of the CT sets out the circumstances a fixed or permanent place of a Non-Resident Person in the UAE will not be considered as a Permanent Establishment.

 

Article 14 (7)(a) of the CT also provides that for the purpose of Article 14(3), the Minister may prescribe the conditions under which the mere presence of a natural person in the UAE does not create a Permanent Establishment for a Non-Resident Person where the presence of such natural person in the UAE is due to a ‘temporary and exceptional situation’. The conditions are set out in Ministerial Decision No. 83 of 2023 which states that, a ‘temporary and exceptional situation’ is where all of the following conditions are met:

 

a) The presence of the natural person in the UAE is due to exceptional circumstances of a public or private nature;

 

b) The exceptional circumstances cannot reasonably be predicted by the natural person of the Non-Resident Person;

 

c) The natural person did not express any intention to remain in the UAE when the exceptional circumstances end;

 

d) The Non-Resident Person did not have a Permanent Establishment in the UAE before the occurrence of the exceptional circumstances; and

 

e) The Non- Resident Person did not consider that the natural person is creating a Permanent Establishment or deriving income in the UAE as per the tax legislation applicable in other jurisdictions.

 

The Ministerial Decision states that ‘an exceptional circumstance’ is a situation or an event beyond the natural person’s control, which occurred while such person was already in the UAE, which he could not reasonably predict or prevent and which prevented him from leaving the UAE as originally planned.

 

The Ministerial Decision continues to provide further guidance on what ‘exceptional circumstances of a public nature’ and ‘exceptional circumstances of a private nature’ are:

 

Exceptional circumstances of public nature include: (a) adoption of public health measures by the competent authorities in the UAE or in the jurisdiction of the original workplace or by the World Health Organization; (b) imposition of travel restrictions by the competent authorities in the UAE or in the jurisdiction of the original workplace; (c) imposition of legal sanctions on the natural person preventing them from leaving the UAE; (d) acts of war or occurrence of terrorist attacks; (e) occurrence of natural disasters or force majeure beyond reasonable control.

 

Exceptional circumstances of a private nature include occurrence of an emergency health condition affecting the natural person or their relatives up to the fourth degree, including by way of adoption or guardianship. ■

UAE Corporate Tax Law (Law 47 of 2022) – Exemption for Qualified Public Benefit Entities

Pursuant to Article 9 of the Corporate Tax Law, a Qualifying Public Benefit Entity will be exempt from Corporate Tax if the conditions set out in Article 9 (1) of the Corporate Tax Law are met. In order to benefit from this exemption, Article 9 (2) also requires the Qualifying Public Benefit Entity to be listed in a Cabinet Decision. Yesterday, on 24 April, the schedule to the Cabinet Decision 37 of 2023, listed the names of the Qualified Public Benefit Entities. The UAE Ministry of Finance has also clarified that Qualified Public Benefit Entities are eligible for tax exemption under the Corporate Tax Law because they are established and operate for the wider public benefit, such as charitable, religious, cultural, healthcare and educational purposes. Pursuant to Article 9 (3) of the Corporate Tax Law, the Federal Tax Authority may routinely request relevant information or records from a Qualifying Public Benefit Entity to monitor the continued compliance of the Qualifying Public Benefit Entity.

 

Donations, grants or gifts to a Qualifying Public Benefit Entity may be allowed as deductible expenditures for Corporate Tax purposes pursuant to the Corporate Tax Law. ■

Corporate Tax: Threshold for “small business relief” set at AED 3 million or less

The UAE Ministry of Finance today issued a new ministerial decision providing the threshold for “Small Business Relief”. Accordingly, taxable persons that are resident persons can claim “Small Business Relief” pursuant to Article 21 of the Corporate Tax Law if their revenue in the relevant tax period is below AED 3 million for the taxable period. If however the revenue threshold of AED 3 million for each tax period is exceeded, the “Small Business Relief” will not be available. This means that a taxable person that generates revenue of AED 3 million or less for each taxable period may elect to be treated as not having derived any taxable income.

 

The AED 3 million revenue threshold will apply to tax periods starting on or after 1 June 2023 and subsequent periods ending on or before 31 December 2026. ■

Evolving Landscape for Whistleblower Protection in the UAE

Whistleblowing or simply put, the act of drawing attention to or complaining about perceived wrongdoing, misconduct, unethical activity within one’s organisation has been a topic of great relevance in the last few years. While there is no federal law relating to whistleblowing in the UAE, there have been significant legal developments in this area.

 

The Dubai Law No. 4/2016 on Dubai Economic Security Centre which applies to all entities licensed in Dubai and the freezones established the Dubai Economic Security Centre (DESC). The DESC is tasked to fight corruption, crimes of fraud, bribery, embezzlement, damage to public property, forgery, counterfeiting, money laundering, financing terrorism and monitor financial violations and markets. This law defines a whistleblower as a person who notifies or cooperates with the DESC about any matter that may prejudice the economic security of Dubai. DESC is required to ensure confidentiality and provide the necessary protection to the whistleblower from retaliation or discrimination. However, this law has not seen much practical implementation and is yet to be tested.

 

In this inBrief, we look at whistleblowing policies that have been adopted by three freezones in the UAE: the Dubai Multi Commodity Centre, the Dubai International Financial Centre, and the Abu Dhabi Global Markets.

 

Dubai Multi Commodity Centre (DMCC)

 

Subsequent to the establishment of the DESC, the DMCC, one of Dubai’s most prominent freezones, also issued a whistleblowing guidance note for its members on 10 November 2019. The DMCC has defined whistleblowing very widely to include any concern regarding actual or potential illegal activity, or unacceptable or undesirable behavior of public concern which may have reputational impact including financial malpractice, fraud, failure to comply with a legal obligation, human rights abuses, dangers to health and safety or the environment, etc. The guidance extends to (i) employees and former employees; (ii) consultants; (iii) accredited members of DMCC clubs; (iv) owners, residents and visitors to DMCC free zone; and (v) owners’ associations and management companies.

 

Any such complaint must be made to the dedicated email ID of DMCC Authority and may be made anonymously. It also contains principles relating to confidentiality and protection if such complaint is made in good faith and with reasonable suspicion.

 

Dubai International Financial Centre

 

The Dubai Financial Services Authority (DFSA) published its own Whistleblowing Regime in April 2022 that applies to a registered auditor, a DFSA Authorised Person (an entity licensed to undertake financial services in the DIFC), or a Designated Non-Financial Business or Profession (which includes real estate developers, dealers in precious metals, law firms, accounting firms, company service providers or a singly family office). All these entities need to put in place appropriate and effective policies and procedures to facilitate the reporting and assessment of regulatory concerns. The whistleblowers may make a complaint to its organisation or directly to the DFSA. Legal protections are available to the whistleblowers only when the disclosure relates to a reasonable suspicion that the organisation has contravened any law or is engaged in money laundering, fraud or any other financial crime provided that the disclosure is made in good faith. These provisions have been given legal effect by making adequate amendments to the DIFC Regulatory Law 2004.

 

The Abu Dhabi Global Markets (ADGM)

 

The ADGM, the other financial freezone in the UAE aside from the DIFC, is the latest entrant to this regulatory space. The ADGM issued Guiding Principles on Whistleblowing in December 2022 and, unlike the DIFC, the ADGM has issued a non-binding Guidance which is proposed to complement its regulatory framework and act as guidance for all ADGM entities when designing and implementing a whistleblowing infrastructure. It is worth noting that the ADGM Authority and its financial regulator, the Financial Services Regulatory Authority, also provide infrastructure (on their websites) to make such complaints directly to the authorities. However, it is advised (but not mandated) that the complainant tries contacting the relevant entity directly in the first instance as this can often lead to a swift and efficient resolution of the issue.

 

The ADGM Guidance is very comprehensive and sets out the following principles:

 

1. Guiding Definition of Whistleblowing: ADGM encourages entities to use a broad definition of whistleblowing which could include references to fraud, money laundering, corruption, breaches of legal or regulatory requirements, unethical conduct and/or acts to cover up wrongdoing. It should be clear that whistleblowing is distinct from an employee grievance or a customer complaint.

 

2. Non-Retaliation: A whistleblowing framework should at all times adequately protect whistleblowers from any and all forms of retaliation or disadvantage arising from their whistleblowing. The policy of non-retaliation should be credible and convincing.

 

3. Confidentiality and Due Process: ADGM entities should have controls in place to prevent unauthorised access to whistleblowing reports or any information that might inadvertently or inappropriately reveal the identity of a whistleblower or the subject of the complaint. Disclosure of information to appropriate external whistleblowing channels – such as a regulator or independent investigator – should be expressly exempt from confidentiality requirements.

 

4. Reporting in Good Faith: Protection to whistleblowers is only afforded if the report is made in good faith, i.e. based on an honestly held belief that the information offered at the time of disclosure is true. While a genuine misunderstanding should still be protected, deliberate false disclosures or those made exclusively in self-interest do not meet this criterion.

 

5. Components of a Whistleblowing Framework: No one-size-fits-all approach. Each entity has the flexibility to decide its own policy and reporting requirements depending on its size, business, risk profile and complexity. Independent assessment and investigation should be supported with appropriate training and awareness sessions for staff and managers.

 

6. Culture: The Guidance insists on a ‘tone from the top’ approach and emphasises that a robust whistleblowing approach is ineffective if not supported in practice. It highlights issues such as under resourcing, low responsiveness, inadequate investigation and poor confidentiality as roadblocks and insists that the entity culture should be such that whistleblowers feel safe to raise issues, and that there are credible channels they are aware of and can use.

 

The ADGM Guidance adds to the regulatory regime applicable across UAE and provides entities with several key issues that they must consider while drafting their internal whistleblowing policies. Similar to the DIFC, it can be expected that the existence of an effective whistleblowing policy, and measures taken by an entity to enforce it, may be considered as a relevant factor while determining any penalties or sanctions imposed by the ADGM against such an entity. This would imply that an ADGM entity should take adequate measures to formulate and maintain its internal policies in line with the Guidance. ■