This Q&A provides a multi-jurisdictional in-depth understanding of Arbitration. This particular chapter explores the UAE process and challenges faced when considering Arbitration as a course of action. The chapter covers a broad spectrum of truths, a sample of topics covered are as follows; laws and institutions, arbitral proceedings, jurisdiction and competence of arbitral tribunal, interim measures and sanctioning powers and updates and trends.
Author: afridi-angell
Does the New Civil Code have retrospective effect? An Analysis of Articles 4, 6 and 7
Laws ordinarily have prospective effect. This principle protects legal certainty and allows parties to organise their affairs based on the law applicable at the relevant time. Article 27 of the UAE Constitution enshrines this principle in relation to criminal laws, but not with respect to civil and commercial laws.
As will be evident immediately below, the legislature may enact civil and commercial laws with retrospective effect. It is therefore necessary to examine whether any provisions of the Civil Transactions Act of 2025 (“the New Code”) may have this effect. This inBrief examines Articles 4, 6 and 7 of the New Code governing limitation periods and transitional arrangements.
As a general rule, the New Code does not have retrospective effect:
Article 4 (1), effective from 1 June 2026, establishes the general rule:
“The Law shall come into force from the date of its effectiveness and shall not apply to facts and transactions preceding it, unless the Law stipulates otherwise.”
Consequently, the New Code applies only to facts and transactions arising after 1 June 2026. Facts and transactions that occurred prior to this date continue to be subject to the Civil Transactions Act of 1985 (the “Old Code”), unless there is express legislation to the contrary.
However, time limits are affected:
Article 6 provides as follows:
(1) New provisions relating to the statute of limitations (non-hearing of a case due to lapse of time) shall apply from the time they come into force to any period that has not yet been completed.
(2) Old provisions shall apply to matters concerning the commencement, suspension, and interruption of the limitation period regarding the time prior to the new provisions coming into force.
Article 7 provides as follows:
“If a new provision sets a limitation period shorter than that prescribed by the old provision, the new period shall apply from the time the new provision comes into force, even if the old period had already commenced.
If the remaining portion of the period prescribed by the old law is shorter than the period set by the new provision, the limitation period shall expire upon the lapse of that remaining portion.”
The practical effects of Articles 6 and 7 may be summarized as follows:
➢ To the extent that the New Code establishes new time-limitation periods, they will come into immediate effect with respect to causes of action that arose prior to the New Code coming into effect, even where the limitation period under the New Code is shorter.
➢ If the time period prescribed under the Old Code is due to expire before the time period under the New Code does, then the matter will become time-barred on the earlier date.
➢ If any events occurred prior to the New Code coming to effect which effect the application of the time bar (for example, an event that stops or suspends the clock), then those will be assessed under the provisions of the Old Code. Any such events that occur on or after 1 June 2026 will be assessed under the provisions of the New Code.
Consequently, this means that parties who intend to commence litigation find themselves with less time than was initially contemplated to do so. Fortunately, however, the New Code for the most part maintains the limitation periods provided for in the Old Code. An important exception is Article 431 of the New Code, on claims relating to the fees and expenses of doctors, pharmacists, lawyers, engineers, experts, professors, teachers, and brokers. These claims were subject to a five-year limitation period under the Old Code. Article 431 of the New Code reduces this to three years.
For example, where an engineer’s fees became due on 1 January 2025, the claim would ordinarily have expired on 1 January 2030 under the Old Code. However, because the limitation period remained incomplete on 1 June 2026, the new three-year period applies from that date, resulting in the claim becoming time-barred on 1 June 2029.
A separate question arises where the New Code prescribes a longer limitation period than the Old Code. Unlike situations involving shorter limitation periods, Article 7 does not expressly address this scenario. One example is found in Article 510 of the New Code, which provides that an action for warranty against defects shall not be heard after one year from the day following delivery of the sold item, whereas Article 551 of the Old Code prescribed a limitation period of only six months.
Where the six-month period had commenced before 1 June 2026 but had not yet expired by that date, there is a credible argument that Article 6 supports the application of the new one-year limitation period from the date the New Code entered into force, on the basis that the limitation period remained incomplete. However, the New Code does not expressly address this situation, and the extent to which longer limitation periods may apply to pre-existing claims remains open to judicial interpretation. Until judicial guidance emerges, caution should be exercised when assessing the impact of the New Code on claims affected by extended limitation periods.
Conclusion
The transitional provisions demonstrate an attempt to balance legal certainty with the effective implementation of the New Code. While the general rule remains that legislation does not operate retrospectively, Articles 6 and 7 provide an important framework for determining how ongoing limitation periods are treated following the entry into force of the New Code. Parties assessing existing claims should therefore carefully consider the transitional provisions when evaluating limitation-related issues after 1 June 2026. ■
UAE Competition Law – Implementing Regulations Issued
In April, the United Arab Emirates (UAE) Federal Cabinet introduced Cabinet Decision 59 of 2026 On the Implementing Regulation of Federal Decree-Law 36 of 2023 Regulating Competition (the 2026 Decision).
Current position
Until the 2026 Decision enters into force on 20 July 2026, the current merger control framework contained in UAE Federal Cabinet Decision 37 of 2014 continues to apply.
Parties contemplating transactions that may constitute an economic concentration should therefore continue to assess notification requirements under the currently applicable framework during this interim period.
Helpfully, the 2026 Decision contains guidance on important procedural aspects of the merger control review process implemented by the Ministry of Economy (the Ministry). These procedural clarifications are discussed further below.
Stages of review
The Ministry’s review process consists of two stages.
Stage 1 – Formal review
During this stage, the Ministry assesses whether the notification is complete and whether all required documents and information have been provided.
Where deficiencies or missing information are identified, the Ministry may request the notifying parties to provide additional information or documentation.
Stage 2 – Substantive review
Once the filing is formally accepted, the substantive review period commences.
The standard review period is 90 days, which may be extended by an additional 45 days where necessary. The Ministry has also indicated that an expedited review process may be available in cases where the transaction does not raise competition concerns and the filing is complete.
The Ministry may hold meetings with the parties during the substantive review stage in order to clarify particular aspects of the transaction or relevant market dynamics.
Required documents
The notification must be accompanied by various supporting documents, including:
➢ constitutional documents of the relevant parties, duly certified;
➢ draft transaction agreement or relevant transaction documents;
➢ audited financial statements for the last two financial years of the relevant parties and their branches, duly certified;
➢ details of the shareholders or partners of each relevant entity and their ownership interests; and
➢ a report addressing the economic aspects of the transaction, including its anticipated positive effects on the relevant market and any proposed measures intended to mitigate potential adverse competitive effects.
The Ministry has further indicated that submissions marked as “confidential” will be treated confidentially, provided that non-confidential summaries are also submitted.
When is a notification required?
Entities involved in mergers, acquisitions, or other forms of economic concentration (i.e. any transaction resulting in the full or partial transfer of ownership or usufruct rights in assets, rights, stocks, shares, or obligations, granting an establishment or group of establishments direct or indirect control over another) will be required to file an application with the Ministry if either of the following thresholds is met:
1. Turnover threshold: this threshold was originally included as a trigger for the requirement to make a merger clearance filing pursuant to the introduction of the new Federal Competition Law in late 2023 however, the turnover amount was not at that time clarified. The Cabinet Decision 3 of 2025 on the Ratios Related to the Implementation of Federal Decree Law 36 of 2023 Regulating Competition provides that the total annual sales of the relevant entities in the “relevant market” within the UAE must exceed AED 300 million (approx. USD 81.7 million and EUR 79.2 million) during the previous fiscal year; or
2. Market share threshold: the total market share of the relevant entities exceeds 40% of total sales in the “relevant market” within the UAE during the previous fiscal year.
The Ministry’s new notification and review process is expected to become operational during the second half of July 2026, following the entry into force of the 2026 Decision. ■
Capital of Capital: Inside the UAE’s Art Law Framework
The world’s most ambitious cultural art district is rising on Saadiyat Island, as is the legal framework behind it.
Dubbed the “capital of capital”, Abu Dhabi is home to the only Louvre museum outside of France. It is situated within the Saadiyat Cultural District alongside the newly opened Zayed National Museum and the Natural History Museum. Before 2027, this exclusive list of neighbours will be joined by Guggenheim Abu Dhabi, which is expected to be the largest Guggenheim museum worldwide. Frieze is set to bring its internationally acclaimed art fair to the Emirate in November of 2026.
This is indicative of the scale of capital inflow into the UAE – and particularly Abu Dhabi – in recent years, as well as the UAE’s positioning of arts and culture as a matter of national importance. Perhaps less visibly, it may also be connected to the enactment of UAE Federal Decree-Law 29 of 2024 on Empowering the Arts Sector (the Art Law).
The Art Law creates and regulates “Art Institutions”, which are defined as non-profit legal entities licensed to engage in activities related to the arts sector. “Art” is loosely defined as a product of human creativity and talent that translates emotions and inner sentiments or expresses perceptions, whether in an audible, visual or written form. Activities related to antiquities are not covered by the Art Law.
It is important to note that Art Institutions, including museums, foundations and similar institutions, must be non-profit in purpose. Ancillary revenue generating activities – including cafes, gift shops and ticketed programming – may be permitted to operate, provided that surpluses flow back into the institution. Galleries, dealers, advisories and other commercial entities are regulated by different UAE laws (including those applicable in its various free zones) and warrant separate analysis. They are also not able to benefit from certain tax, customs and import/export exemptions that may be available to Art Institutions under the Art Law. Regardless of the underlying objective, unless appropriately licensed, any entity seeking to engage in art activities (whether for-profit or not) must be appropriately licensed in the UAE.
Interestingly, the Art Law moves to designate Art Institutions as regulated entities subject to their own licensing, funding, corporate governance, taxation, profit distribution, insurance, intellectual property and reporting rules. Both the asset (“Art”, which is given a legal definition, including appropriate exclusions) and the market on which it operates (whether through non-profit “Art Institutions” or other commercial entities) are now brought within the realm of a defined regulatory framework and subject to designated licensing rules and governing authorities.
All Art Institutions must appoint a director who reports to a non-remunerated, non-permanent board of trustees. Subject to the board of trustees’ oversight, the director will be responsible for preparing internal annual budgets and accounts, as well as submitting annual budget summaries, performance evaluation reports and final accounts to the UAE Ministry of Culture. The Art Law also contains rules as to the eligibility of directors, trustees and founders. The requirements that apply to regular commercial entities are less stringent than those that apply to Art Institutions.
Certain UAE free zones, in addition to tax incentives, also offer art-grade storage facilities. Artworks stored within certain free zones may be transacted without physically moving them, reducing logistic, fiscal and customs pressure. The Dubai Free Port, for example, now contains a super vault combining world-class custody and security services with efficient airside customs exemptions. This is one of only a few in the Middle East.
Collectively, these measures have contributed to positioning the UAE as a jurisdiction that not only promotes arts and culture, but also allows professionals and enthusiasts alike to participate predictably in the multi-billion-dollar global art market – recognising that art is a matter of enjoyment and sentimental value as much it is a regulated asset class.
Nevertheless, follow-on legislation is expected to be implemented in the near term that will further elaborate upon the requirements set out in the Art Law. These developments are expected to affect commercial entities as well as non-profit Art Institutions.
Museums, galleries, dealers, patrons, advisors and collectors are therefore encouraged to monitor forthcoming developments, as well as their own activities in the UAE. This should allow them to assess how they may be affected by a market that is being regulated at the same pace as growing.
Afridi & Angell is in its sixth decade at the forefront of legal practice and is well placed to work with collectors, institutions, patrons and enthusiasts to navigate the art landscape in the UAE – from licensing and structuring to acquisitions, tax, and the finer details that come with each. ■
The Littler Mendelson Guide to International Employment and Labor Law (UAE chapter)
The Littler International Guide provides an overview of workplace laws and regulations of over 30 countries and territories. This chapter is focused on labor and employment laws in the United Arab Emirates.
The New UAE Civil Code: Assignment of Rights and Debts
Federal Decree-Law 25/2025 Issuing the Civil Transactions Law (the New Code) comes into effect on 1 June 2026, replacing Federal Law 5/1985 Concerning the Issuance of the Civil Transactions Law (the Current Code); UAE’s principal piece of civil legislation.
This article forms part of a series examining the changes introduced by the New Code, and deals with the law on assignments.
An assignment is the transfer by one party (the assignor) of a right, benefit, or interest under a contract or obligation to a third party (the assignee), who consequently steps into the assignor’s position.
1. What is the position under the Current Code?
The Current Code provides a statutory framework for the assignment of debt (hawalat al-dayn), while the assignment of rights (hawalat al-haqq) remains uncodified. The assignment of rights, however, has been recognised and enforced by the UAE courts, who have developed a body of jurisprudence drawing on the statutory provisions applicable to the assignment of debt, together with general principles of contract law and Islamic jurisprudence. In the absence of binding precedent, this body of case precedent provides guidance, but not a binding framework.
The New Code introduces, for the first time, a specific legislative framework governing, among other things, warranties, priority, and notification requirements in the context of assignment of rights. The law on the assignment of debt is not a new introduction but rather a refinement of the existing legislative framework.
2. What has changed?
Assignment of Rights
The New Code codifies the assignment of rights, consolidating principles previously developed through case precedent and practice within a single statutory regime. The New Code provides that:
➢ a right may be assigned by a creditor to a third party without the debtor’s consent, unless the assignment is restricted by law, agreement, or the nature of the obligation (Article 405);
➢ only rights that are legally transferrable may be assigned, together with associated securities, including pledges, guarantees, and any accrued instalments (Articles 406 and 409);
➢ an assignment is effective against the debtor and third parties upon notification to or acceptance by the debtor. Where the effectiveness against third parties is founded upon the debtor’s acceptance (rather than notification), such acceptance must bear a fixed date (Article 407);
➢ the assignee may, prior to notification or acceptance, take steps necessary to preserve the assigned right (by seeking attachment orders, for example) (Article 408);
➢ where the underlying contract is silent, the following default warranties (the Warranties) apply (Articles 411-412):
– the assignor does not warrant the debtor’s solvency unless expressly agreed, and where such a warranty is given, it is limited to the debtor’s solvency at the time of the assignment;
– in an assignment for consideration, the assignor warrants the existence of the assigned right at the time of the assignment; and
– in a gratuitous assignment (i.e., one made without consideration), no warranties are given by the assignor.
➢ by reference to the Warranties, where the assignor knew, at the time of assignment, the assigned right did not exist, it is liable to compensate a good faith assignee for any resulting loss (Article 413);
➢ the assignor is liable to compensate the assignee for loss caused by its own acts, and any agreement to exclude or limit this liability is void (Article 414); and
➢ where competing claims arise in respect of the same assigned right, priority is determined by the date on which the assignment becomes effective against third parties, rather than the date the assignment is concluded (Articles 416-417).
Assignment of Debt
The New Code retains, but refines the existing framework governing assignment of debt. The New Code provides that:
➢ a debt may be assigned to a new debtor unless restricted by law, agreement, or the nature of the obligation, and the assignment is concluded only with the consent of the incoming debtor and the creditor (Article 418);
➢ the discharge of the original debtor is contingent on the creditor’s acceptance of the assignment. In the absence of such acceptance, including where the creditor expressly or impliedly refuses the assignment, the original debtor remains liable (Article 419(1) and (2));
➢ where the creditor is notified of the assignment and given a reasonable period to approve, failure to give approval within that period is deemed a refusal (Article 419(3));
➢ securities attached to the assigned debt, including guarantees and mortgages, continue notwithstanding the assignment. However, providers of personal or real security are not bound by the assignment unless they have expressly consented (Article 421); and
➢ the sale of mortgaged real property does not, by itself, transfer the secured debt to the purchaser. An express agreement is required, and the mortgagee creditor’s consent must be obtained prior to registration of the sale (Article 424).
3. Why do the updates in the New Code matter?
Commercial and litigation impact
➢ The codification of the assignment of rights fills a legislative gap, providing a clear statutory framework for an area previously governed by judicial practice and commentary. Parties may now rely on codified rules when structuring transactions, drafting assignment provisions, and advancing or defending claims.
➢ Further, the rules on priority and competing claims are particularly relevant in insolvency and enforcement proceedings, where the timing of notification may determine the outcome.
Allocation and assumption of risk
➢ The distinction between assignments for consideration and gratuitous assignments has direct consequences for the allocation of risk between the parties. In an assignment for consideration, the assignor warrants the existence of the right, whereas in a gratuitous transfer no such warranty is given and the assignee assumes the risk that the right may not exist.
➢ The assignor’s liability for its own acts cannot be excluded by agreement, limiting the extent to which risk can be contractually allocated between the parties.
4. Practical Takeaways
Do’s
For the assignment of rights:
➢ notify the debtor promptly following any assignment of rights as priority against third parties and the debtor depends on the timing of notification, not the date the assignment was concluded;
➢ ensure that notification is given to the debtor in a manner that evidences receipt; and
➢ in gratuitous assignments, conduct appropriate due diligence on the existence of the right being transferred.
For the assignment of debts:
➢ obtain the creditor’s express consent prior to completing the assignment and, in real estate transactions, prior to registration of the sale; and
➢ ensure that providers of personal or real security expressly consent to remain bound following an assignment of the underlying debt.
Don’ts
➢ use boilerplate assignment clauses without reviewing them against the New Code’s requirements;
➢ treat the New Code as a substitute for a properly negotiated assignment agreement tailored to the underlying transaction; and
➢ assume that an assignment interrupts or resets the statutory limitation period.
For the assignment of rights, don’t:
➢ assume that notification is optional (a common misunderstanding of the fact that debtor consent is not required) – notification is critical to priority and third-party effectiveness; and
➢ rely on undated debtor acceptances as a substitute for formal notification.
For the assignment of debts, don’t:
➢ proceed to registration of a real estate sale without first obtaining the mortgagee creditor’s consent to any intended transfer of the secured debt. ■
The New UAE Civil Code: Contract Formation, Consent, and Good Faith
The UAE’s new Civil Transactions Law (the New Code), coming into force on 1 June 2026, fundamentally changes the legal landscape for anyone doing business in the UAE — and the consequences of getting it wrong could be significant. For the first time, the law imposes express statutory obligations on parties engaged in pre-contractual negotiations: negotiate in bad faith, withhold information that is material to the other side’s decision, or misuse confidential information obtained during the process, and you may be liable even where no contract is signed. In short, contractual risk in the UAE now begins well before the contract is concluded, and businesses that continue to treat the negotiation phase as consequence-free do so at their peril.
1. What has changed
The New Code introduces, for the first time, an express statutory framework regulating party conduct at the pre-contractual stage. The New Code:
➢ requires that the proposal, conduct, and termination of negotiations be carried out in good faith (Article 121(1));
➢ imposes liability for negotiating, or terminating negotiations in bad faith (Articles 121(3) and 121(4));
➢ obliges the disclosure of information that is of “decisive importance to the other party’s consent” (Decisive Information) (Articles 122(1) and 122(2));
➢ allocates the burden of proof such that the party alleging concealment must prove it, while the other party must prove disclosure (Article 122(3));
➢ provides that clauses seeking to limit, waive, or exclude the obligation to disclose Decisive Information are null and void, and grants the aggrieved party the right to seek annulment of the contract (Article 122(4)); and
➢ imposes liability for the unauthorised use or disclosure of confidential information obtained during negotiations or through the contract (Article 123).
Significantly, the New Code also regulates circumstances where a contract is not formed. The New Code provides that:
➢ negotiations do not, in themselves, oblige the parties to conclude a contract (Article 121(2));
➢ a party acting in bad faith may be liable for the actual damage caused to the other party, but does not extend to lost opportunities or lost profits (Article 121(3)); and
➢ clauses seeking to limit, waive, or exclude the obligation to disclose Decisive Information are null and void (Article 122(4)).
2. What was the position before
The current (and soon to be replaced) Civil Code does not contain an equivalent express statutory regime dealing with pre-contractual negotiations. The issue therefore fell to be addressed through general principles and case precedent rather than by a dedicated legislative framework.
Previously, Dubai Court of Cassation case no. 267/2016 (Civil) treated negotiations as a factual act which did not, by itself, create legal obligations. A party was generally free to withdraw from negotiations. Liability could nevertheless arise where the withdrawal was accompanied by fault, in which case the liability was treated as tortious (i.e. an Act Causing Harm as defined in the Civil Code) rather than contractual.
Similarly, while concepts such as misrepresentation, deceit, and bad faith were not foreign to UAE law, the current Civil Code does not contain a statutory duty to disclose material information during negotiation. Nor does it expressly address the unauthorised use or disclosure of confidential information obtained during negotiations as part of a dedicated pre-contractual framework.
The prior position was therefore less structured. Pre-contractual conduct sat in a grey area governed by broad principles, with less certainty as to the source, content, and limits of liability.
3. Why the change matters
Litigation risk
Parties may no longer assume that, absent a signed contract, the negotiation phase is inconsequential. If a party negotiates without genuine intention, withdraws in bad faith, withholds information of decisive importance, or misuses confidential information obtained during negotiations, there is now a clearer statutory route by which liability may be advanced. This may be particularly relevant in failed transactions where one party has incurred material costs in reliance on negotiations that later collapse.
Article 122(3) is also likely to be important in practice. Once concealment is alleged, the other party will need to prove disclosure. This is likely to increase the significance of contemporaneous records of what was disclosed, when, and to whom.
Therefore, these provisions are likely to generate disputes regarding:
➢ what amounts to “bad faith” in the negotiation context;
➢ what information is sufficiently “decisive” to require disclosure;
➢ when ignorance or reliance may be presumed;
➢ how actual loss is to be proved and distinguished from non-recoverable expectation loss; and
➢ whether certain types of differently worded contractual clauses can be considered as limiting, waiving or excluding obligations to disclose material and decisive information; and
➢ the extent to which entire agreement clauses, non-reliance wording, or clauses providing that the contract supersedes prior negotiations may affect claims based on pre-contractual conduct, without excluding mandatory statutory duties under the New Code.
In high-value transactions, this is likely to become a live area of litigation. The negotiation process itself may now become part of the pleaded case, and part of the evidentiary battleground.
Contract drafting impact
As clause limiting, waiving, or excluding the duty to disclose material and decisive information are null and void under the New Code, parties will need to review how they use entire agreement clauses, non-reliance wording, disclaimers, and other standard boilerplate protections. Such clauses may still serve a legitimate function, but they cannot override mandatory obligations imposed by the New Code.
The same applies to confidentiality. Many commercial parties rely on stand-alone NDAs, confidentiality undertakings, or restricted circulation protocols. Article 123 appears to add a statutory layer to that position. That increases the importance of ensuring that confidential information is properly identified, access is controlled, and negotiation documents are prepared on the assumption that misuse of information may later attract legal consequences.
Judicial discretion
Concepts such as good faith, decisive information, presumed ignorance, justified reliance, and unauthorised use of confidential information are inherently fact-sensitive. Their practical content will depend on judicial interpretation. The courts will likely be required to decide where legitimate commercial behaviour ends and actionable bad faith begins.
This is especially so in cases involving partial disclosure, strategic silence, exploratory negotiations pursued for informational advantage, or withdrawals engineered at a late stage after one party has incurred material time and cost.
The availability of annulment as a remedy for breach of the disclosure obligation is also likely to add weight to these disputes, particularly where the allegedly undisclosed information materially affected the other party’s decision to enter into the contract.
The New Code therefore gives the courts a more explicit mandate to scrutinise the contracting process itself, not merely the final written agreement.
4. Practical takeaways
Do’s
➢ approach negotiations on the basis that the pre-contractual phase may now carry direct legal consequences, and that entire agreement clauses, non-reliance wording, disclaimers, and other standard boilerplate protections may not have the same effect that they previously did;
➢ consider carefully whether information in your possession is of material and decisive importance to the counterparty’s consent and document analysis made in this regard;
➢ document negotiation stages, assumptions, reservations, and qualifications clearly;
➢ use confidentiality agreements and internal access controls when sharing sensitive information; and
➢ consider using structured disclosure processes, including disclosure schedules, tracked Q&A processes, and maintain records of disclosed materials.
Don’ts
➢ assume that the absence of a signed contract eliminates legal risk;
➢ rely on broad disclaimers or non-reliance wording to exclude pre-contractual exposure;
➢ use negotiations to obtain confidential information without a genuine transaction purpose; or
➢ terminate negotiations in a manner that could later be characterised as abusive, misleading, or opportunistic.
For businesses and their advisers, the practical message is clear. Contractual risk may now arise well before signature. Parties should therefore negotiate, disclose, and document accordingly. ■
The Rise of Data Centres: Commercial Real Estate and Legal Considerations in the UAE and Dubai
The rapid growth of artificial intelligence (AI), cloud computing, and digital services has significantly increased demand for data centres worldwide. In the UAE, particularly Dubai, this trend is not only transforming the technology sector but also reshaping commercial real estate, positioning data centres as critical infrastructure assets rather than niche developments.
This article provides a concise overview of how data centres are influencing real estate in the UAE, with a focus on structuring, leasing, and key legal considerations.
AI and Digital Demand Driving Real Estate
The UAE has actively positioned itself as a leader in AI and digital transformation, supported by initiatives from the UAE Artificial Intelligence Office and the Dubai Digital Authority. These initiatives are driving demand for:
➢ Cloud and hyperscale infrastructure;
➢ AI processing and data storage capacity; and
➢ Secure, low-latency digital environments.
As a result, data centres are now viewed as core infrastructure, directly influencing land use, development strategies, and investment decisions across the real estate sector.
Dubai as a Regional Data Centre Hub
Dubai has emerged as a leading location for data centre development due to its:
➢ Strategic position between Europe, Asia, and Africa;
➢ Advanced telecommunications and logistics networks; and
➢ Business-friendly regulatory environment.
Key areas supporting this growth include Dubai Internet City, Dubai Silicon Oasis, and Dubai Industrial City, where infrastructure and regulatory frameworks support large-scale developments.
Global providers such as Amazon Web Services and Microsoft Azure have also established a presence in the UAE, further reinforcing demand.
A New Type of Real Estate Asset
Data centres differ from traditional commercial assets in several key respects:
a. Infrastructure and Power-Driven Value: access to reliable and scalable electricity, often coordinated with Dubai Electricity and Water Authority, is a primary factor in site selection and valuation.
b. Long-Term Leasing Models: leases are typically long-term (10–20 years) and structured around power capacity rather than floor area, often backed by strong institutional tenants.
c. Free Zone Integration: many data centres are located in free zones regulated by entities such as the Dubai Development Authority, offering benefits including 100% foreign ownership and streamlined licensing.
Legal and Regulatory Framework
Although there is no single law governing data centres in the UAE, several legal frameworks are relevant.
a. Planning and Land Use: developments must comply with zoning and regulatory approvals, including those from free zone authorities and master developers. Key considerations include:
➢ Permitted use classifications;
➢ Environmental and operational compliance (e.g. cooling, noise); and
➢ Power and infrastructure approvals.
b. Applicable UAE Laws: core legal principles derive from:
➢ UAE Civil Code (Federal Law No. 5 of 1985), governing contractual relationships; and
➢ Dubai Law No. 26 of 2007 (as amended), which regulates landlord–tenant relationships, although data centre agreements often extend beyond standard lease structures.
c. Ownership and Structuring: data centres are typically held through:
➢ Special purpose vehicles (SPVs);
➢ Joint venture arrangements; or
➢ Build-to-suit structures for anchor tenants.
Structuring must account for licensing, ownership restrictions, and operational requirements, particularly where free zones are involved.
d. Financing: given their infrastructure nature, financing arrangements are more complex than traditional real estate and often include:
➢ Mortgages over land and assets;
➢ Assignment of lease income; and
➢ Direct agreements with key tenants, including step-in rights for lenders.
Leasing: Key Differences
Data centre leases in Dubai differ significantly from standard commercial leases.
a. Power-Based Commercial Terms: leases are commonly structured around contracted power usage (kW/MW), with minimum commitments and “take-or-pay” provisions.
b. Service Levels: agreements include detailed service level provisions covering uptime, redundancy, and remedies for outages—reflecting the critical nature of operations.
c. Fit-Out and Infrastructure: tenants often install substantial technical equipment. Legal documents must address:
➢ Ownership of equipment;
➢ Integration with base infrastructure; and
➢ End-of-term obligations.
Market Impact
The rise of data centres is reshaping the UAE real estate landscape:
➢ Developers are prioritising infrastructure and power access;
➢ Landlords are adapting to more complex, long-term leasing structures; and
➢ Investors are increasingly attracted to the stable, long-term income these assets provide.
Government initiatives, including those led by the UAE Ministry of Artificial Intelligence, continue to reinforce the strategic importance of digital infrastructure.
Conclusion
Data centres represent a significant shift in UAE commercial real estate from traditional space-driven assets to infrastructure-led investments. While existing laws such as the UAE Civil Code (Federal Law No. 5 of 1985) and Dubai Law No. 26 of 2007 provide the legal foundation, their application in this context requires more tailored and sophisticated structuring.
As demand continues to grow, success in this sector will depend on aligning real estate strategies with technical requirements, regulatory frameworks, and the UAE’s broader digital economy vision. ■
Fractional Ownership in Dubai: Legal Structuring and Strategic Advantages in a Softening Market
Fractional ownership, in simple terms, allows multiple investors to jointly own a single property, each holding a defined share. Rather than purchasing an entire asset, an investor acquires a “fraction”, typically entitling them to a proportional share of rental income and any future sale proceeds.
In Dubai, this is not a standalone legal regime but a structuring approach built on existing property and corporate laws. Its appeal has grown in recent years as property values have matured and, more recently, as the market shows signs of stabilisation. In this context, fractional ownership provides a more measured and flexible route into real estate investment.
Legal Framework and Structuring Considerations
Fractional ownership operates within Dubai’s established legal framework. Property ownership and registration are administered by the Dubai Land Department, with regulatory oversight from the Real Estate Regulatory Agency. There is no specific “fractional ownership law”; instead, the model relies on a combination of property rights, contractual arrangements, and, in many cases, corporate structuring.
Two principal structures are commonly adopted:
a.) Co-Ownership (Tenancy in Common)
Under this model, multiple investors are registered directly on the title, each holding an undivided share in the property. While legally straightforward, this structure relies heavily on contractual agreements between co-owners to regulate matters such as leasing, use, cost sharing, and disposal. Without clear documentation, co-ownership can lead to practical difficulties, particularly where investor interests diverge.
b.) SPV-Based Ownership
More commonly, the property is held through a special purpose vehicle (SPV), with investors holding shares in that entity rather than the property directly. This structure is generally preferred in practice as it centralises ownership and simplifies administration. It also allows for clearer governance through shareholder agreements, easier transfer of interests, and more efficient management of the asset. SPVs are often established in financial free zones, which can provide additional legal certainty and familiarity for international investors.
In both cases, the legal robustness of the structure depends less on the form itself and more on the quality of the underlying contractual framework.
Advantages in a Softening Market Context
In a slightly downturned or stabilising market, fractional ownership becomes particularly relevant as a more defensive and flexible investment approach.
a.) Capital Efficiency and Risk Mitigation
One of the most immediate advantages is the reduced capital outlay. Investors can access real estate with a smaller initial commitment, which naturally limits exposure to short-term market fluctuations. This is especially relevant in a softer market, where pricing may be uncertain and investors may prefer to avoid deploying large amounts of capital at a single point in time.
b.) Access to Prime and Income-Producing Assets
Fractional ownership is frequently applied to completed, income-generating properties in established locations. These assets tend to be more resilient in weaker market conditions, benefiting from stronger tenant demand and more stable occupancy levels. From a legal perspective, such properties are typically fully registered, which enhances certainty of title and enforceability.
c.) Income Yield as a Defensive Mechanism
Investors receive a share of rental income in proportion to their ownership interest. In periods where capital appreciation slows or temporarily reverses, this income stream can provide a degree of stability and help offset holding costs. The presence of professional management arrangements in many fractional structures further supports consistent income generation.
d.) Cost Allocation and Operational Efficiency
Ongoing costs, such as service charges, maintenance, and management fees are shared among investors. This reduces the financial burden on any single party and can make holding the asset more sustainable during periods of market softness, when margins may be tighter.
e.) Enhanced Exit Optionality
Although fractional interests are not as liquid as publicly traded assets, they often offer more flexibility than traditional whole-property ownership. Well-structured arrangements typically include transfer provisions, pre-emption rights, or platform-based resale options. In a slower market, where disposing of an entire asset may take time, this can provide a meaningful advantage.
f.) Governance and Decision-Making
Particularly in SPV-based structures, governance can be clearly defined through shareholder agreements. Voting thresholds, reserved matters, and management roles can be set out in advance, reducing the risk of disputes and ensuring that the asset can be managed effectively even where multiple investors are involved. This becomes increasingly important in a down cycle, where timely and coordinated decision-making is critical.
Key Legal Risks and Considerations
Despite its advantages, fractional ownership requires careful legal structuring to function effectively. The following areas are of particular importance:
➢ Title and registration: Ensuring that ownership is properly recorded, whether directly or through an SPV, and aligned with DLD requirements
➢ Governance arrangements: Clearly defining decision-making processes to avoid deadlock or disputes among investors
➢ Exit mechanisms: Providing workable routes for transfer or sale of interests
➢ Regulatory considerations: Assessing whether the structure may fall within broader regulatory frameworks, particularly where multiple investors or platforms are involved
➢ Operator and management risk: Reliance on third parties to manage the asset or platform
➢ Foreign ownership compliance: Ensuring that the property is located within areas where foreign ownership is permitted
In practice, many of the risks associated with fractional ownership arise not from the concept itself, but from insufficient or unclear documentation.
Conclusion
Fractional ownership in Dubai is best understood as a practical application of existing legal principles, rather than a distinct legal category. It offers a flexible way to access real estate by lowering the barrier to entry and spreading both risk and cost across multiple investors.
In a slightly downturned market, this model becomes particularly attractive. It allows investors to participate in real estate while limiting exposure, benefit from income-generating assets, and retain a degree of flexibility that may not be available with full ownership.
Ultimately, the success of any fractional ownership arrangement depends on clear structuring, strong governance, and well-drafted agreements. Where these elements are in place, it can serve as a balanced and commercially sensible approach to real estate investment in evolving market conditions. ■
Purchasing and Selling Commercial Real Estate in the UAE: Overview, Practical Law Global Guide
This Practice Note discusses the process of purchasing and selling improved commercial real estate in the Emirate of Dubai, UAE. This Note addresses the key steps in the purchase and sale of commercial real estate in the Emirate of Dubai, including retaining a broker/agent, entering into preliminary agreements, conducting property due diligence, the key transaction documents, financing considerations, and closing mechanics.