Safeguarding Indian Investments In Dubai

Dubai has recently passed a law permitting non-Muslim expatriates to register Wills that are not governed by the Sharia’. It is the first, and currently, the only jurisdiction in the Middle East that offers such an opportunity to foreign investors. India has a solid trade relationship with Dubai and Indian investors have made billions of dollar worth investments in Dubai. Nevertheless, it is disappointing that a large number of Indian investors is unware of the legal development and is missing out on a great opportunity!

Inheritance and Sharia’

Many of the Indian investors do not know that inheritance in the UAE is governed by the Sharia’. The implication of Sharia’ on inheritance can be substantial. Upon the death of an investor, all his assets will be frozen. The deceased’s legal heirs will not be able to access his assets, including bank accounts. Also, the deceased’s wife may not be permitted to take her minor children out of the UAE since the legal guardianship of a minor will vest with the father’s father and not mother, upon father’s death.

In order to release the assets, the legal heirs are required to approach the Sharia’ court. The court will issue an order listing the deceased’s legal heirs and apportioning the assets among them. To complete the process, the legal heirs shall submit a succession certificate’ or other appropriate document from the competent authority in India identifying the deceased’s legal heirs. This document also needs to go through attestation and legalization exercises.

An important point to note here is, the Sharia’ court’s order will include all the legal heirs of the deceased and the assets will be distributed among them (unless any of them provides a written waiver). The list may include relatives who the deceased did not want to inherit his assets, or in a way he did not intend to! (for e.g. in certain cases, paternal uncles are entitled to the deceased’s assets. Likewise, the wife will inherit only 1/8^th of the assets if they have children). The whole process is time consuming and expensive. Moreover, it is emotionally draining for the grieving family to go through the same.

Current legal position

Some of the investors believe that their investments in the UAE are well protected if they register a Will before a notary public, either in India or in Dubai. There have been some instances in the past where the Dubai courts have considered the deceased’s intention as reflected on his Will, on inheritance. However, many overlook the fact that such Wills primarily covered moveable property. The law clearly provides that real property shall be governed by ‘lex situs’, or law of the place where the property is located. Further, the boom of the real estate sector and consequent change in the definition of ‘assets’ seem to have considerably affected the narrative. In any case, it is worth noting that that Sharia’ considers ‘inheritance’ as a matter of ‘public policy’ and as per the UAE laws, public policy cannot be interpreted in a way that contradicts Sharia’.

What is a DIFC Will and why is it revolutionary?

The newly created DIFC Wills & Probate Registry is a public entity and is part of the Dubai International Financial Centre (DIFC), one of the leading financial free zones in the world. A Will registered with the DIFC shall be governed by the DIFC Wills & Probate Registry Rules which is modelled after the English common laws. Sharia’ law does not apply to DIFC Wills.

The law permits all non-Muslims above 21 years of age with assets in Dubai or Ras Al Khaimah (another emirate in the UAE which has attracted substantial Indian investment) to register the Will. The law does not require the testator to be a resident of Dubai or Ras Al Khaimah. In other words, persons residing anywhere in the world can register the Will if they have assets in Dubai or Ras Al Khaimah. Also, a testator is free to choose his beneficiaries and gift his assets to them the way he wants. The term ‘asset’ is widely interpreted and includes cash, bank accounts, insurance policies, shares, jewelleries, vehicles, apartments and real property. More importantly, the Will may include a provision for the guardianship of minor children.

It’s commendable that due care has been taken to ensure confidentiality of the Will. No one, except the testator or his lawyer, is permitted to access the Will during the former’s lifetime. Further, the process is managed in such a way that there are limited chances of a challenge during probate. In order to maintain quality, only DIFC licensed lawyers are permitted to draft or register the Wills.

On the practical side, the probate process is clear and simple. The legal heirs can directly approach the DIFC courts to get the probate done. This is a great relief to foreign investors, since the DIFC courts follow the common law system (legal system followed in India) as against the civil law system followed by the UAE courts. All the court proceedings are conducted in English.

Application in other emirates

It is disappointing that the benefit of the DIFC Will is currently available only for investors in Dubai and Ras Al Khaimah. There are a large number of Indians who have invested in other emirates, including the capital city of Abu Dhabi. Emirates like Sharjah and Fujairah too have seen substantial investments from Indians, primarily because they offer cost effective investment options. It will be great if the UAE government expands the scope of the DIFC Will to cover assets owned by expatriates in the entire country. Such a step will further strengthen foreign investors’ trust in the UAE and enable it to position as one of the prime investment destinations in the world.

Let’s secure our future!

Dubai has always dared to dream big and it has a passion to pursue the unimaginable. The new law is another bold initiative from the government in this direction. Over the years, Indian investors have made substantial investments in Dubai and have greatly contributed to its growth. Here’s an amazing gift offered by the Dubai government to us, to effectively protect our investments and safeguard our minor children’s interests. Let’s make this opportunity count!

Faizal Latheef is a Partner, Kochhar & Co. Dubai. Faizal has close to two decades of professional experience and focuses on corporate and compliance laws. He is one of the few Indian lawyers licensed by the DIFC Wills & Probate Registry and can be reached on faizal@kochhardubai.com.