On 16 November 2014, the Dispute Resolution Authority (DRA) of the Dubai International Financial Centre (DIFC) released a month long public consultation on its draft rules relating to succession and inheritance matters for non-Muslims with assets in Dubai.
Once implemented, these much anticipated rules will provide welcome certainty to non-Muslims in passing their Dubai estate to their chosen heirs without the need for their executors to be involved in often complex, costly and uncertain proceedings in the Dubai Courts.
This hugely significant development demonstrates the commitment of Dubai and the DIFC to retaining and supporting expatriates in the Emirate and should result in capital retention in Dubai, as well as growth in direct investment.
The background
While the existing UAE law appears to provide that the law of the nationality of a non-Muslim should apply to the devolution of his estate, in practice the Dubai Courts have tended to apply Shariah law at first instance.
Assuming the executors and heirs do not wish the Shariah rights of inheritance to apply, they are then forced to appeal such decisions through the Dubai Courts. Invariably, this process is uncertain and can take years to resolve. In the meantime, assets located in Dubai may be frozen, forcing some into financial hardship.
Due to this uncertainty, individuals have been more reluctant to invest in Dubai and tend to minimise assets held in the Emirate by keeping cash offshore and holding real estate (ultimately) through an offshore company.
The new rules discussed below should make this unnecessary.
The DIFC Will and Probate Rules (WPR)
Subject to certain conditions, any non-Muslim with assets in Dubai will soon be able to execute and register a will under the jurisdiction of the DIFC and its courts.
Upon the testator's death, the executors will apply to the newly formed DIFC Wills and Probate Registry for a grant of probate. As the grant is issued by the DIFC Court, it will be directly enforceable in Dubai (like other orders of the DIFC Court) without the need to go through the Dubai Courts (to decide on the merits) and the resulting uncertainty this brings.
Another common fear among expatriate families living in Dubai has centred around guardianship of minor children residing with parents in Dubai. In order to address this, testators will also be able to appoint guardians in respect of any minor children within their DIFC will.
The key requirements
The principal proposed requirements to create a valid DIFC will are as follows:
- The testator must not be a Muslim
- The testator must be 21 or above
- The will must only cover assets situated in Dubai
- The will must be in writing and signed in front of, and witnessed by, the Registrar or an authorised officer
- Executors must be 21 or above
- The will must be registered with the DIFC (and remain so at the time of death)
- The will must confirm that the testator intends DIFC law to apply to administration and succession matters
- For a will to be registered, executors and guardians (if any) must undertake to act (in person or by witness statement) in accordance with the WPR and DIFC law and submit to the jurisdiction of the DIFC Court
- Pay the specified registration fee (proposed to be US $2,800)
On registration, an electronic version of the will is stored and a future grant will be issued on the basis of the electronic version of the will.
Freedom of testamentary disposition?
The rules do not seek to limit testamentary freedom. However, it will be incumbent upon the individual and his advisors to ensure that any DIFC will complies with the law applicable to the succession of his estate. Failure to do so will open the door to potential challenges.
While there may be little to be concerned about for an English or US domiciled expatriate for example, those from civil law countries where forced heirship rules are enshrined in the national law will need to ensure any DIFC will does not fall foul of any other applicable law (e.g. the law of their nationality, habitual residence or domicile) in order to reduce the risk of future challenge.
When will the Rules come into force?
While no specific date has been given, the DIFC has indicated that it intends to accept appointments for the registration of wills in January 2015.
How can we help?
As contributors to this project to date and as one of the only premier international private client firms with an office in the DIFC, Dubai, we are extremely well placed to advise on DIFC wills, which are likely to become a key part of any international succession plan for those with assets in the Emirate. We would be delighted to assist in the preparation of wills on a standalone basis or as part of a wider estate planning exercise.