Casablanca – Dubai : A Legal and Regulatory Dualism -For the promotion of foreign investors-

A comparative analysis between two legal systems that are both conceptually and geographically distant from one another is no simple task, particularly when it comes to examining certain derogatory legal and regulatory aspects that apply in leading financial hubs at regional or continental levels. As an illustration, the platforms selected for this legal comparative analysis are the iconic financial hubs of Casablanca Finance City (“CFC”) and Dubai International Financial Centre (“DIFC”). The common goal of these two centres is, of course, to attract both direct and indirect foreign investment targeting strategic economic activities, especially in the services sector.

A first comparative element could be, in summary, based on the level of international investments in each of the two countries concerned. This would presumably be an indicator of the legal security available, the more substantial and high-quality the investments, the higher the level of legal certainty.

All other things being equal, the latest statistics from the United Nations Conference on Trade and Development (UNCTAD), as published in the 2024 World Investment Report, show that the United Arab Emirates (“UAE”) are experiencing record levels of net international investments, approximately 30 times higher than those of Morocco, amounting to USD 30 billion in 2024. Should we, therefore, consider that the legal and regulatory framework for investments in the UAE is distinctly more favourable than its Moroccan counterpart?

The numbers are telling, but it may be necessary to delve into more qualitative details to identify differences or similarities. The experimentations for making such an evaluation are quite fitting with the two aforementioned financial hubs, namely CFC and DIFC.

1. The legal framework for foreign investments in the financial hubs of Casablanca and Dubai

1.1. Opportunistic legislation

For the past thirty years, Morocco has undertaken profound reforms and modernisations in business law, particularly with the implementation of two successive investment charters, one in November 1995 and the other in December 2022. The latter, referred to as framework law no. 03-22, constitutes a new investment charter and has overhauled the previous legislation with, unsurprisingly, more suitable provisions for local and international economic and social developments.

For the past thirty years, Morocco has undertaken profound reforms and modernisations in business law, particularly with the implementation of two successive investment charters, one in November 1995 and the other in December 2022. The latter, referred to as framework law no. 03-22, constitutes a new investment charter and has overhauled the previous legislation with, unsurprisingly, more suitable provisions for local and international economic and social developments.It also seeks to enhance Morocco’s attractiveness for private investment, particularly through mechanisms designed to support strategic investment projects as defined in the new development model published in 2021, which is centred on mobilising international partnerships and their natural component—private investments.

This framework is naturally supplemented by a very specific set of legal, fiscal, customs, and financial tools that benefit capital-intensive sectors such as renewable energy, the automotive industry, and the aerospace sector, which have seen unprecedented records in international investment with remarkable export performances.

In line with this, and to further leverage the considerable natural resources for producing green hydrogen and its derivatives, the Moroccan government published a widely publicised circular note in March 2024 entitled “Morocco’s Offer for the Development of the Green Hydrogen Industry.” It should be noted that, while not originating from legislation, the content of this text can be considered, in its organisational and functional aspects, as a genuine sector-specific investment code, which strongly commits the Moroccan state to investors in this promising energy industry.

Particularly in the CFC financial hub, which benefits from a regulatory framework conducive to cross-border activities, especially towards the African continent, multinational companies such as AstraZeneca, known for its pharmaceutical activities, and the Japanese industrial conglomerate Marubeni Corporation, have recently established their respective regional headquarters at CFC. Likewise, global-sized service companies such as Lloyd’s, Allianz, and Thomson Reuters have similarly chosen this option.

1.2. The End of the Sponsor Era

On the other hand, the UAE, with a highly symbolic move, enacted a Federal Law on Foreign Direct Investment in 2018. This law abolished the infamous requirement for foreign investors to partner with a “sponsor” from the host country, thus permitting foreign ownership up to 100% in certain designated activities intended to regulate and encourage foreign investments. The “Positive List” specifically targets sectors such as new technologies, artificial intelligence, transport and logistics, renewable energy, manufacturing, agriculture, and space. Inevitably, these sectors benefit from many privileges similar to those available in Morocco, though with atypical and innovative legal specificities when carried out through DIFC or certain renowned free zones such as Jebel Ali, dedicated to industry and trade.

As for DIFC, it has been particularly attractive to large service companies, notably international trading firms such as Edmond de Rothschild, EnTrust Global, Nomura Singapore Limited, and The Family Office Company, all of which benefit from a world-class financial ecosystem established in Dubai.

2. Specific distinctions between CFC and DIFC

2.1. Common Law Vs civil Law?

CFC and DIFC share a clear political will to promote investment freedom and protect it across most economic sectors. The stated priorities include safeguarding investors’ rights against expropriation and ensuring the free repatriation of profits and invested capital.

However, a significant difference lies in the choice made by the UAE authorities, specifically those of the Emirate of Dubai, to grant, under Law No. 12 of 2004, financial or commercial free zones the ability to apply common law with primary and appellate jurisdictions, as well as execution of judgments within the dedicated institution known as DIFC Courts.

2.2. Dispute Resolution

It is also worth noting that both financial hubs have internationally recognised arbitration centres, such as the Casablanca International Mediation and Arbitration Centre (CIMAC) and the Dubai International Arbitration Centre (DIAC). However, it should be pointed out that DIAC enjoys well-established international renown, whereas CIMAC, which was established in 2016, is still struggling to position itself as a regional or continental African centre due to challenges in implementing its action plan, poor communication, and potentially some concerns raised by the international business community—particularly regarding the potential implications of Moroccan arbitration law, as defined in Law No. 95-17 of June 31, 2022, which may involve Moroccan civil or commercial courts.

Moreover, DIAC applies DIFC’s arbitration rules, based on common law, while CIMAC generally applies different legal rules and principles depending on the agreements made between the parties involved in the arbitration. The difference between CFC and DIFC undoubtedly lies in the natural attraction for Anglo-Saxon lawyers towards jurisdictions where common law predominates, as well as the widespread use of English for the negotiation and drafting of international contracts.

However, regarding tax-related disputes, neither jurisdiction allows the arbitration of such matters, as they fall under the authority of the relevant tax authorities and judicial bodies. Nevertheless, the other alternative dispute resolution method, particularly in the field of taxation, namely mediation, is highly favoured by both tax authorities and taxpayers in both jurisdictions (See Khalil Haloui’s article on amicable agreements; A key to avoiding double taxation in Morocco; Tax Settlement: A Conciliation Path in the Face of Tax Disputes in Morocco – Tax Cluster. The arbitration and mediation forums in each of these financial hubs are perfectly suited for the conduct of such procedures.

2.3. International Legal Expertise

It is also important to highlight the significant number of prominent international law firms that have established themselves in Dubai, particularly within DIFC, where they can represent their clients before the local courts, with the assistance of lawyers specialised in common law who, of course, would not have obtained professional equivalency in their home country. Similarly,

Casablanca, and particularly CFC, attracts many international law firms, though these firms cannot represent clients before Moroccan courts, which is a key difference between the two financial hubs. The first (DIFC) provides a legal and judicial space that operates in an extraterritorial framework established within Dubai’s jurisdiction, while the second (CFC) remains permeable to Morocco’s domestic legal system.

As for foreign exchange regulations, both the Moroccan Dirham and the Emirati Dirham enjoy convertibility for trade and investment purposes. However, from a tax legislative standpoint, income derived from investments in Morocco by foreign entities, such as dividends and interest, is subject to significant withholding taxes, whereas in the UAE, such income is exempt from these levies, as is the case in offshore zones like DIFC. (See Mounir Rguig’s article Dubai vs Casablanca: An Investment Dilemma Between Two Dynamic Economic Hubs – Tax Cluster  on Comparative Fiscal Issues in CFC and DIFC Financial Centres.)

2.4. Regulation of Activities

Finally, when it comes to the regulation of activities of financial institutions operating within CFC and DIFC, the former is directly subject to oversight by two central Moroccan regulatory authorities—Bank Al Maghrib (Moroccan central bank) and the Moroccan Capital Market Authority—at the national level. By contrast, DIFC is regulated by a dedicated authority, established in 2004, known as the Dubai Financial Services Authority (DFSA), which exercises regulatory authority over banks, insurance companies, and stock exchange institutions, among others.

This distinction clearly highlights the significant difference between the quasi-autonomy of regulatory functions within DIFC, where the DFSA operates with significant independence, and the more centralised regulatory framework in Morocco, where financial institutions in CFC are subject to oversight by Morocco’s central authorities. The latter system also involves a more interventionist approach from the Moroccan judiciary, which has yet to fully adapt to the complexities of international investment disputes, particularly those that may reference or involve Anglo-Saxon legal principles.

2.5. The Legal Derivative of Economics and Taxation

Based on the above—which does not likely constitute an exhaustive analysis of the legal and regulatory aspects of the two financial hubs—it seems that DIFC benefits from a more developed legal and regulatory framework, with a more established international reputation than CFC. An international investor’s choice between the two financial hubs would likely depend on their specific objectives, particularly in relation to the legal risks they may encounter with potential local partners in fulfilling contractual commitments or in the event of disputes.

A typical example of this comparative choice between the two financial hubs is the strategic decision made by Chinese company Gotion, a manufacturer of batteries for electric vehicles. This company chose to establish its regional headquarters in DIFC, while simultaneously embarking on a project in Morocco in 2024 to set up a gigafactory for electric vehicle batteries, with a global investment of nearly USD 7 billion.

Nevertheless, if a common denominator could be found encouraging for both financial hubs, it would be their commitment to integrity and compliance with established rules, in line with universal measures designed to combat the illegal movement of financial resources.

In practical terms, an international investor’s assessment of the legal and regulatory aspects of a financial hub like CFC or DIFC would certainly be necessary, provided that the economic and fiscal parameters associated with their international project are favourable, all within the context of the geographic scope of the proposed investment.

For example, an investment planned by an Anglo-Saxon investor targeting countries in Southern Africa or South Asia would likely be more favourably received in DIFC, for the reasons previously mentioned. Conversely, an identical investment aimed at continental African countries operating under civil law, such as the seven OHADA countries or the five North African nations, would likely see CFC, with its clear African orientation, as the more fitting choice.

Ultimately, it all comes down to a careful consideration of multiple criteria in selecting the right financial hub, which may sometimes conflict but often results in a necessary balancing act between what is reasonable and what might be ambitious or even risky.