Category: inBriefs

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. ■

Force Majeure in Real Estate Contracts: UAE Legal Position in a Period of Regional Instability

Introduction

 

Ongoing geopolitical tensions across the Middle East have brought renewed scrutiny to force majeure in UAE real estate transactions. While the UAE market remains resilient, indirect impacts, such as supply chain disruption, airspace restrictions, regulatory responses, and financing constraints, continue to affect performance across development, leasing, and investment structures.

 

Importantly, force majeure may be invoked under UAE law even in the absence of an express contractual provision. The concept arises as a matter of statute under the UAE Civil Code and operates independently of contractual drafting.

 

However, reliance on statutory force majeure is subject to a strict and narrow test, typically more onerous than contractual formulations.
This note outlines the legal framework and practical application of force majeure in the current environment, with reference to both contractual and statutory positions.

 

Legal Framework (UAE Law)

 

Under the UAE Civil Code:

 

– If performance becomes impossible, the obligation is extinguished;

– If impossibility is partial or temporary, performance may be suspended.

 

To qualify, the event must be:

 

– External to the parties;

– Unforeseeable at the time of contracting; and

– Render performance objectively impossible (not merely delayed or more expensive).

 

In the context of regional instability, the distinction between impossibility and hardship is critical. Disruption, delay, or cost escalation will rarely meet the statutory threshold absent a direct prevention of performance.

 

From a seller/landlord perspective, this high threshold offers protection against broad or opportunistic claims. From a buyer/tenant perspective, reliance on statute alone requires clear evidence of genuine impossibility.

 

Contractual Force Majeure

 

In practice, most UAE real estate contracts include bespoke force majeure provisions. These clauses typically take precedence, defining both the scope of qualifying events and the consequences of invocation.

 

Commonly included events in the current climate include:

 

– War, hostilities, or regional conflict;

– Government restrictions or regulatory action;

– Disruption to labour, logistics, or materials;

– Sanctions or financial restrictions.

 

The effectiveness of such clauses depends on drafting. Key variables include:

 

– Whether indirect effects (e.g. regional instability) are captured;

– The requirement for direct causation;

– The remedies available (suspension vs termination).

 

In practice, the contractual regime governs first, with statutory force majeure operating as a fallback where contracts are silent or unclear.

 

From a seller/landlord perspective, clauses are often drafted narrowly to preserve performance and limit termination exposure. Conversely, a buyer/tenant will seek broader wording to capture indirect disruption and secure flexibility.

 

Application in Real Estate Transactions

 

(a)  Development and Construction

 

Regional disruption may impact materials, labour, and approvals. These typically justify extensions of time, not termination, unless performance becomes impossible. Cost increases alone will not qualify.

 

A developer/seller will focus on preserving timelines through extensions, while a buyer will look to enforce longstop dates and delay remedies.

 

(b)  Leases

 

Tenants may seek rent relief due to operational disruption or reduced demand. However:

 

– Economic hardship is not force majeure;

– Relief depends on express lease provisions.

 

Absent clear drafting, rent obligations generally continue.

 

A landlord will rely on strict interpretation to enforce payment, while a tenant must anchor any relief in express contractual wording.

 

(c)  Sale and Purchase Agreements (SPAs)

 

Force majeure may arise where transfers or payments are delayed due to administrative or banking disruption. The typical outcome is deferral of completion, with termination linked to longstop dates.

 

A seller will resist termination and favour completion, while a buyer may seek exit rights where delay becomes prolonged.

 

Rights and Remedies

 

Where established, force majeure may result in:

 

– Suspension of obligations;
– Extension of time;
– Termination (in cases of permanent impossibility);
– Limited restitution.

 

Relief is conditional on strict compliance with:

 

– Notice provisions;
– Mitigation obligations;
– Evidence of causation.

 

From a seller/landlord perspective, remedies are structured to preserve contractual continuity. A buyer/tenant will focus on flexibility, including suspension or exit where justified.

 

Distinction from Exceptional Circumstances (Hardship)

 

Where performance is not impossible, but becomes excessively onerous, and Force Majeure is not available, parties may look to the doctrine of exceptional circumstances under the UAE Civil Code. Courts may rebalance obligations, though this remains discretionary and is applied conservatively.

 

Practical Considerations

 

– Causation is key: direct linkage between event and non-performance is essential.
– Foreseeability is shifting: ongoing tensions may weaken claims in new contracts.
– Drafting matters: tailored force majeure provisions are increasingly standard.
– Procedure is critical: failure to comply with notice or mitigation requirements may defeat a claim.

 

In practice, a seller/landlord will adopt a narrow, compliance-driven approach, while a buyer/tenant must build a robust evidentiary position to support relief.

 

Conclusion

 

Force majeure remains a high-threshold doctrine under UAE law. While regional instability creates real disruption, relief depends on demonstrating objective impossibility, not commercial inconvenience. Contractual provisions are central, but statutory force majeure remains available even where contracts are silent, subject to stricter requirements.

 

Where force majeure cannot be established, the doctrine of exceptional circumstances (hardship) offers a potential alternative, allowing courts to adjust obligations in cases of excessive burden. In the current environment, careful drafting, proactive contract management, and clear risk allocation remain essential.

Conflict in the Gulf: Contractual Disruption, Force Majeure and Risk Allocation under UAE Law

The recent escalation of hostilities involving the United States, Israel, Iran and several Gulf States has increased security risks across key transport and energy routes in the region. Reports of attacks on commercial shipping, rising war-risk insurance premiums, and the potential disruption of navigation through the Strait of Hormuz have already begun affecting maritime and aviation activity.

 

For businesses operating in or through the Middle East, such developments can raise immediate questions regarding the performance of contractual obligations, particularly in sectors reliant on shipping, logistics, commodities, construction supply chains, and energy transport.

 

This inBrief outlines how these developments may affect contractual obligations under UAE law and highlights key issues businesses should consider when assessing contractual risk.

 

Regional disruption and supply chain impact

 

The Strait of Hormuz remains one of the most strategically important maritime corridors in the global energy market. A significant proportion of the world’s oil and liquefied natural gas exports transit the Strait, meaning that disruption to navigation in the region can quickly affect shipping availability, insurance markets, and global supply chains.

 

Recent reports indicate that some shipping operators have delayed voyages, altered routes, or reassessed operations in the Gulf in response to increased security risks. At the same time, war-risk insurance premiums have reportedly risen sharply, and in some cases, cover has been restricted or withdrawn. Airspace restrictions and operational changes have also affected certain aviation routes across the region.

 

These developments may affect contractual performance in several ways, including:

 

– delays in shipment or delivery of goods;
– reduced availability of vessels or aircraft;
– withdrawal or significant increases in insurance costs;
– increased freight and logistics expenses; and
– disruption to energy supply or raw material availability.

 

Where such issues arise, parties will often first examine whether the relevant contract provides relief through force majeure or other contractual risk-allocation mechanisms.

 

Force majeure under UAE law

 

Although the UAE Civil Code does not contain a single comprehensive definition of force majeure, the concept is recognised in several provisions.

 

Article 273 of the Civil Code provides that if a force majeure event renders the performance of a contract impossible, the corresponding obligation ceases and the contract may be automatically cancelled. UAE courts have historically interpreted this principle strictly. The key requirement is impossibility of performance, rather than mere inconvenience or increased cost.

 

Accordingly, the fact that performance has become more expensive or commercially unattractive will not ordinarily be sufficient to establish force majeure.

 

Where a contract contains a force majeure clause, the availability of relief will depend primarily on the wording of the clause. Provisions referring to events such as war, hostilities, blockades, governmental restrictions, or disruptions to transport routes may be particularly relevant in the present circumstances.

 

Parties seeking to rely on force majeure should also ensure that any contractual procedures—particularly notice requirements—are carefully followed.

 

Exceptional circumstances and contractual hardship

 

Where performance remains possible but has become significantly more onerous, a party may seek relief under Article 249 of the Civil Code.

 

Article 249 provides that if exceptional events of a general nature occur which could not reasonably have been foreseen and which render performance oppressive so as to threaten the obligor with serious loss, a court may adjust the obligation to a reasonable level after balancing the interests of both parties.

 

Unlike force majeure, this provision does not terminate the contractual obligation. Instead, it allows a court to rebalance the contract where circumstances have fundamentally altered its economic equilibrium.

 

In situations involving sustained geopolitical disruption, significant increases in shipping costs, or systemic constraints affecting transport or energy markets, parties may seek to rely on Article 249 where strict force majeure arguments cannot be established.

 

Liability and extraneous causes

 

Article 287 of the Civil Code may also be relevant in certain circumstances. This provision states that a party may avoid liability if it can demonstrate that the harm arose from an extraneous cause in which it played no part, such as force majeure, a sudden incident, or the act of a third party.

 

Where contractual non-performance results directly from external events such as conflict-related disruptions to shipping routes or government restrictions affecting transport operations, parties may seek to rely on this principle in defending claims for damages.

 

Insurance and contractual risk allocation

 

Another practical issue concerns contractual insurance obligations.

 

Many commercial arrangements—including charterparties, commodity sale agreements, financing arrangements, and shipping contracts—require vessels or cargo to maintain specified levels of insurance coverage. If war-risk insurance becomes unavailable or prohibitively expensive, parties may encounter difficulties complying with these contractual requirements.

 

Disputes may arise as to whether the inability to obtain insurance constitutes a contractual breach or whether the underlying circumstances justify suspension or renegotiation of contractual obligations.

 

Similarly, increases in freight costs or the imposition of war-risk surcharges may raise questions regarding cost allocation where contracts do not expressly address such contingencies.

 

Practical steps for businesses

 

Businesses with exposure to regional transport routes or energy supply chains may wish to consider the following steps:

 

– review key commercial contracts to identify force majeure provisions, delivery obligations, insurance requirements, and cost-allocation mechanisms;

– confirm the scope of marine, cargo, and political risk insurance coverage;

– monitor potential supply chain disruptions that may affect contractual performance; and

– ensure timely communication with contractual counterparties and compliance with any contractual notice requirements.

 

Conclusion

 

Periods of geopolitical instability frequently give rise to contractual disputes concerning delay, non-performance, and increased costs. Under UAE law, parties seeking relief must carefully assess whether the circumstances amount to force majeure, exceptional hardship, or simply commercial difficulty.

 

The outcome in any particular case will depend on the facts, the contractual wording, and the applicable legal framework. Businesses affected by regional disruption should therefore review their contractual position at an early stage in order to manage risk and preserve available remedies. ■

Modernising the Backbone of UAE Private Law: The New UAE Civil Code

Introduction

The Civil Transactions Act, commonly referred to as the Civil Code, is arguably the single most important piece of civil legislation in the UAE.

 

While there are extensive laws regulating specific subject matter such as labour relations, real estate and leasing, companies, banking, and other commercial activities, the fundamental principles which form part of those laws are rooted in the Civil Code. This includes concepts such as good faith, abuse of rights, party autonomy, fault, harm, causation, unjust enrichment, and nullity.

 

The importance of the New UAE Civil Transactions Act of 2025 (“the New Code”), which comes into effect on 1 June 2026, is therefore impossible to overstate. The New Code replaces the Civil Transactions Act of 1985 (the “Old Code”), and constitutes both an overhaul of the law, and a legislative response to four decades of economic, social, and technological developments which has seen the UAE become a global centre for investment, digital innovation, and complex transactions. The New Code addresses these developments by modernising language, refining legal concepts, and introducing solutions aligned with contemporary realities, while preserving fundamental values such as justice and legal certainty.

 

In this inBrief, the first of a series examining the nature and consequences of the changes introduced by the New Code, we offer, as an important introduction, a conceptual analysis of select key features of the New Code, including its role in bridging legislative gaps, clarifying terminology, introducing new regulatory areas, and expanding judicial discretion.

 

From Silence to Structure: How the New Code Addresses Longstanding Omissions

 

One of the most prominent legislative objectives of the New Code is to fill substantive gaps that existed in the Old Code. One such example is the law regulating assignments. The Old Code confined itself to the issues around the assignment of debts, while being silent on the assignment of rights. In the absence of legislative provision, the courts developed clear principles on the assignment of rights. However, as UAE’s legal system does not recognise the concept of binding precedent, these principles were considered guiding practice. The New Code at Articles 405 to 424 codifies these principles into law, thus providing welcome certainty.

 

The New Code now contains provisions on pre-contractual negotiations, which was not an area that was previously covered by legislation, and has already understandably garnered wide interest.

 

Articles 121, 122, and 123 of the New Code now govern negotiations and the conduct of parties leading up to the formation of a contract. The New Code imposes specific obligations on the parties where pre-contractual negotiations are concerned, which, most notably, include duties to negotiate in good faith and disclose relevant information. Furthermore, the New Code stipulates that abusive termination of negotiations may give rise to liability, granting the aggrieved party the right to claim compensation even in the absence of an executed contract. Such compensation is a statutory or tortious liability rather than a contractual liability, which are considered distinct sources of obligation under Article 121 of the New Code.

 

Notwithstanding these advances, it is noteworthy that the new provisions do not expressly address the legal status of admissions made by parties during the negotiation process. In particular, uncertainty remains as to whether such admissions may be relied upon in subsequent legal proceedings if negotiations fail and no contract is formed. Previously, at least one judgment of the Dubai Court of Cassation held that such admissions are not admissible as evidence. Article 123 of the New Code provides that anyone who uses or discloses, without authorisation, confidential information obtained during negotiations or the contract, shall be held liable in accordance with the general rules. Whether this provision encompasses inadmissibility of admissions made during negotiations, or only extends to safeguarding confidential information exchanged during negotiations, remains to be clarified through judicial interpretation.

 

On the flip side of the coin, the New Code omits altogether matters from the Old Code which have since been addressed in specific legislation. Examples include the burden of proof, previously set out in Article 112 to Article 123 of the Old Code, which is now set out in the Federal Decree-Law No. 35 of 2022 Promulgating the Law of Evidence in Civil and Commercial Transactions. Similarly, rules governing bankruptcy and insolvency which were previously contained in Articles 401 to 413 of the Old Code, have been omitted in light of the enactment of Federal Decree-Law No. 51 of 2023 on Financial Reorganization and Bankruptcy Law and Federal Decree-Law No. 19 of 2019 on Insolvency. This streamlining of legislation is a welcome development.

 

The Expansion of Judicial Reasoning and the Reconfiguration of Legal Sources

 

Article 1 of the New Code significantly broadens the discretionary power that may be exercised by the UAE Courts in the absence of applicable statutory provisions. Under the Old Code, the judges were directed to refer to the Islamic Sharia in such circumstances. However, their discretion was restricted by a hierarchical methodology that required judges to consult the Maliki and Hanbali schools of Islamic jurisprudence first, and if no guidance was found, to then look to the Shafi and Hanafi schools. This formulation imposed not only a restrictive waterfall methodology of reference, but also an implicit confining of judicial reasoning to those specific schools of Islamic jurisprudence.

 

The New Code removed this fetter from the courts and empowers judges with discretion to refer to, interpret and apply Islamic Sharia more broadly as the circumstances warrant. This development reflects a conscious legislative choice to replace methodological rigidity with principled flexibility. At the same time, it raises a practical question as to the contours of “Sharia” as a source of law, given its breadth and conceptual diversity. This places a heightened responsibility on higher courts, particularly the Court of Cassation, to articulate guiding principles that can ensure coherence and consistency over time.

 

The New Code also introduces natural law and rules of justice as additional subsidiary sources to which the court may resort if no solution is found in statutory provisions, Sharia, or customary principles. This underscores the legislator’s expectation that judges will exercise active intellectual effort in seeking fair solutions in the absence of legislative provision. However, the absence of a codified definition or criteria for what constitutes natural law and rules of justice may pose interpretative challenges and uncertainty, particularly in complex commercial disputes.

 

Precision of Terminology and Structure in the New Code

 

Beyond substantive reform, the New Code reflects a deliberate drafting philosophy centered on precision, structure, and accessibility. This plays a central role in ensuring consistent interpretation, predictable application, and effective compliance.

 

For example, under the Old Code (Article 890), a subcontractor (i.e. a person or entity engaged by a main (or prime) contractor to perform part of the contractor’s obligations to a third party) was described as Second Contractor. The New Code, at Article (832) replaces Second Contractor with Subcontractor which is linguistically and conceptually precise, immediately conveying the legal nature of the relationship as one derived from and dependent upon a primary contract.

 

Through such refinements, the New Code demonstrates a commitment to simplifying language, improving organisation, and aligning statutory terminology with established legal usage, thereby enhancing both the intelligibility and practical effectiveness of the law.

 

Conclusion

 

The promulgation of the New Code marks a decisive moment in the evolution of private law in the UAE, and showcases the UAE’s legal system as one that is attentive to its historical foundations while being responsive to the demands of a rapidly transforming society.

 

As is the case with all legislation, the true impact of the New Code will ultimately depend on the courts’ interpretation and application of its provisions, particularly the level of guidance flowing from the superior courts in the initial years. In this sense, the New Code should be viewed, not as the final word but, as the beginning of a renewed dialogue between the legislators and the judiciary. ■

Responsibilities and Code of Ethics for Real Estate Brokers in Dubai

Dubai’s property market continues to grow at record pace, attracting buyers from around the world. With this growth comes closer scrutiny of real estate brokers, who play a key role in keeping the market transparent, trustworthy, and compliant with regulations.

 

Why Broker Regulations Matter

Dubai strictly regulates real estate brokerage to protect investors and ensure fair dealings. Only trained, licensed, and registered brokers can broker real estate transactions. Regulatory bodies the Dubai Land Department (DLD) and the Real Estate Regulatory Agency (RERA) enforce clear rules, monitor behaviour, and penalise violations such as misleading ads or unlicensed activity.

 

What Brokers Must Do

Brokers in Dubai have legal duties that go far beyond connecting buyers and sellers. These include:

 

Holding proper licences and registrations: brokers must complete RERA training, pass exams, and carry valid broker IDs.

 

Keeping clear records: all transaction documents must be properly maintained and shared with clients when requested.

 

Being transparent: brokers must clearly disclose all relevant information, negotiation terms, and conditions.

 

Acting lawfully and in good faith: facilitation of any unlawful deal, or acts of fraud or deception, can lead to loss of commission and legal penalties.

 

Safeguarding client money: any funds or cheques entrusted to a broker must be protected and used only as agreed.

 

Earning commission properly: fees are due only when the broker successfully concludes the deal and fulfils agreed conditions.

 

Sharing liability when multiple brokers are involved: unless agreed otherwise, responsibility is joint.

 

Ethical Standards Brokers Must Follow

RERA’s Code of Ethics requires brokers to uphold professionalism at all times. Core expectations include:

 

Honesty, integrity, and respect: privacy, dignity, and transparency must guide all interactions.

 

Following all laws and regulations: no misleading advertising, false claims, or unauthorised activities.

 

Protecting documents: brokers must preserve all records linked to transactions.

 

Respecting DLD procedures: professional conduct is mandatory; personal connections may not be used to influence processes.

 

Practical Obligations in the Transaction Process

To safeguard buyers and sellers, brokers must comply with several operational rules:

 

Use RERA-standard forms: Form A (Seller), Form B (Buyer), and Form F/C (Sale).

 

Disclose commissions upfront: usually 1–5%, and always written in the contract.

 

Verify property ownership and documents: due diligence is mandatory.

 

Follow escrow (trust) account rules for off-plan projects: all payments must go into RERA-approved escrow accounts, not to brokers or to developers.

 

Advertise responsibly: Ads require RERA approval and must be accurate and non-misleading.

 

Meet AML/KYC requirements: brokers must verify client identity and report suspicious activity.

 

How Compliance Is Enforced

DLD and RERA actively monitor brokers through inspections, licence renewals, and mandatory training. Penalties for breaches are significant — including fines, warnings, and suspension of agents. Complaints from consumers can be filed directly with DLD, and unresolved matters can proceed to Dubai Courts.

 

Why This Matters to Consumers and Brokers

Dubai’s real estate success depends on transparency and trust. Licensed, ethical brokers have assisted to strengthen the market over decades; unprofessional practices damage the market overnight.

 

For brokers, professionalism is not optional. It is the foundation of credibility in a tightly regulated market. ■

Amendments to the UAE Federal Companies Law – Key Changes

The UAE recently introduced Federal Decree-Law 20 of 2025 (the CCL Amendment) amending several provisions of Federal Decree-Law 32 of 2021 regarding commercial companies (the Companies Law). Certain key provisions of the Companies Law have been amended in order to: give clarity on its scope; introduce common law principles and rules surrounding non-profit companies, as well as flexibility in structuring shareholding arrangements. These amendments came into effect on 15 October 2025.

 

Applicable to free zones

The CCL Amendment provides that the provisions of the Companies Law apply to branches or representative offices of free zone companies established on mainland UAE (i.e. outside of the free zone areas). The Companies Law does not apply to companies incorporated in UAE free zones where the relevant free zone’s laws and regulations contain specific provisions disapplying the provisions of the Companies Law.

 

Most free zones of the UAE have their own laws and regulations. However, if a free zone’s laws and regulations do not contain specific provisions excluding the provisions of the Companies Law, the provisions of the Companies Law may apply in addition to its own laws and regulations. Furthermore, there are certain free zones in the UAE that do not have their own laws and regulations and, in those cases, the provisions of the Companies Law may apply. When addressing any corporate law issues, it is crucial for a free zone company to consider if the Companies Law will apply to that free zone company and the impact of those provisions on its company.

 

The CCL Amendment re-affirms that free zone companies are considered to hold the nationality of the UAE. This aspect is important from the perspective of UAE corporate tax and double taxation treaties which may be entered into between the UAE and other countries.

 

Flexibility in shareholding and share transfers

 

One of the most notable changes is the introduction of shareholder-rights mechanisms. Limited liability companies (LLCs) and private joint stock companies may now include drag-along and tag-along rights in their Memoranda of Association and by-laws. Further, the CCL Amendment provides for a structured succession approach where, in the event of a shareholder’s death, remaining shareholders have a right of first refusal over the shares of the deceased shareholder, with valuation determined, by agreement, with the legal heirs or by the competent court (in the case of non-agreement). The Memoranda of Association and by-laws must include provisions regarding the right of first refusal.

 

Classes of shares

 

The CCL Amendment now permits the issuance of different classes of shares. These shares may, for example, have different rights and restrictions in terms of value, voting rights, redemption rights, priority in the distribution of profits or liquidation, etc. Memoranda of Association and by-laws of LLCs will be required to have specific provisions regarding the issuance of different classes of shares. The Cabinet will determine the categories of different classes of shares and set out the respective conditions of each category of those shares.

 

Companies looking at restructuring their shareholding and issuance of different classes of shares would be advised to wait for the issuance of further guidance by the Cabinet. It is worth noting that there are free zones in the UAE where the issuance of different classes of shares is currently permitted.

 

Re-domiciliation and cross-jurisdiction mobility

 

The CCL Amendment introduces the concept of re-domiciliation of companies. This new option permits a company to move its corporate registration from one jurisdiction to another without dissolving the company or creating a new legal entity. Subject to the satisfaction of certain criteria, a company may transfer its jurisdiction of incorporation from one Emirate to another or from a free zone to mainland or vice-versa.

 

The provisions are silent on foreign companies transferring their jurisdiction of incorporation to mainland UAE. However, there are certain free zones in the UAE where a foreign company can transfer its domicile.

 

Non-profit companies

 

The CCL Amendment specifically provides for the incorporation of non-profit companies. The net profits of a non-profit company are required to be reinvested in the company in order to achieve the company’s objectives. The profits cannot be distributed to its partners or shareholders. The Cabinet is expected to issue further clarification regarding the prescribed purposes of such non-profit companies as well as regulations governing such non-profit entities.

 

Improved governance mechanism

 

The CCL Amendment introduces a more expedient approach for resignation, removal, and continuity rules for mainland LLCs’ managers. A decision on a manager’s resignation must be taken by the shareholder(s) within 30 days of the submission of such resignation otherwise the manager’s resignation will be considered automatically effective. This period has been reduced from the initial 40 days to 30 days.

 

It remains to be seen if the local licensing authorities will record a resignation by a manager and remove a manager’s name from an LLC’s license in the absence of an appointment of a replacement by the shareholders.

 

Conclusion

 

The CCL Amendment is important in that it expands the scope of mainland LLCs and offers greater flexibility.

 

Previously, when structuring a joint venture entity with complex shareholding arrangements, shareholders tended to opt for an offshore jurisdiction or free zone for ease of doing business and flexibility. Now however, the CCL Amendment provides the option to structure these same arrangements locally without the need for a holding company structure. It will be interesting to observe how these provisions are practically implemented by local authorities. ■

New Anti-Money Laundering Law – Federal Decree-Law 10 of 2025

Introduction

 

The United Arab Emirates (UAE) has enacted Federal Decree-Law 10 of 2025 Regarding Combating Money Laundering Crimes, Combating the Financing of Terrorism and the Financing of Arms Proliferation (the New AML Law), replacing the 2018 legislation and further strengthening the UAE’s alignment with international financial crime standards. The framework introduces expanded definitions, new and updated offences, enhanced preventive obligations and broader supervisory and investigative powers. It also anticipates the risks associated with digital system misuse, virtual asset channels and the UAE’s developing tax landscape, ensuring that the regulatory regime can respond effectively to emerging financial crime threats.

 

Expanded predicate crimes and updated core definitions

 

The reform begins with significantly broader and more precise definitions. The term “Predicate Crime” now expressly includes terrorist financing, proliferation financing, and both direct and indirect tax evasion, along with any felony or misdemeanour under UAE law, whether committed within or outside the UAE. This refinement ensures that a wider range of conduct, including tax-related offences, can give rise to “criminal property” and therefore fall within the anti-money laundering regime, an important development in the context of the UAE’s corporate tax framework.

 

Core definitions have also been modernised. “Funds” now encompass digital and encrypted assets, and “Criminal Property” extends to instruments and assets used or intended to be used in terrorism or proliferation-related activity. The definition of “Money Laundering” explicitly captures conduct executed through digital systems, encrypted platforms and virtual asset channels, ensuring that the regime keeps pace with technological developments and the shifting methods by which illicit value is moved.

 

These refinements broaden the legal foundation of the framework and enhance regulators’ ability to address a more diverse and technologically complex risk environment.

 

Express inclusion of proliferation financing

 

A significant expansion included proliferation financing, which is now treated as a distinct and fully articulated offence. The New AML Law defines “proliferation of arms” to include activities relating to the manufacture, acquisition, transfer or stockpiling of weapons of mass destruction and their delivery systems, and criminalises the provision or collection of funds in support of such activities. Importantly, knowledge may be inferred from factual and objective circumstances, enabling authorities to take action even where direct evidence of intent is limited, but surrounding indicators strongly suggest an illicit purpose.

 

By expressly incorporating proliferation financing and lowering the evidentiary threshold, the framework aligns more closely with global non-proliferation standards and strengthens the legal basis for enforcing targeted financial sanctions measures, thereby ensuring that businesses operating in the UAE maintain robust controls and remain vigilant to potential exposure to proliferation-related risks.

 

Digital systems and virtual asset coverage

Another area of significant development is the treatment of digital systems and virtual asset activity, reflecting the growing relevance of technology-driven financial channels. “Virtual Assets” and “Virtual Asset Service Providers” (VASPs) are now expressly defined, and money-laundering, terrorism financing and proliferation financing offences are recognised as capable of being carried out through digital systems, encryption technologies and virtual asset platforms.

 

In addition, the introduction of a specific offence targeting, anonymity enhancing virtual asset tools, those designed to obstruct the tracing of transactions or the identification of their parties, further strengthens the regime’s capacity to address technologically enabled concealment.

 

Together, these provisions ensure that virtual asset activities are subject to the same standards of transparency and oversight applied to traditional financial services, positioning the regulatory framework to respond to emerging digital-asset risks with greater clarity.

 

Lower knowledge threshold and strengthened penalties

 

The framework also revises the knowledge standard applied to principal offences, lowering the threshold for establishing awareness of the illicit nature or purpose of funds. For money laundering, terrorism financing and proliferation financing conduct, knowledge may now be inferred from factual and objective circumstances, rather than requiring direct proof of subjective intent. This refinement enables enforcement where risk indicators are ignored or where conduct reflects wilful blindness to the nature of the funds, elevating expectations on both institutions and individuals.

 

Individuals face higher fines and potential imprisonment, while legal persons may be subject to penalties ranging from AED 5 million to AED 100 million or higher, where fines are linked to the value of the criminal property involved. Courts may also order the dissolution of an entity or the closure of premises in serious cases. Proceedings and penalties relating to these offences do not lapse with time, creating enduring exposure. These measures reinforce the need for proactive, risk-sensitive AML controls supported by effective governance.

 

Preventive measures and regulation of VASPs

 

Preventive obligations have been expanded and clarified, particularly with the inclusion of VASPs within the regulated perimeter. Financial institutions, Designated Non-Financial Businesses or Professions (DNFBPs) and VASPs must implement risk-based customer due diligence, verify beneficial ownership, maintain detailed records, implement targeted financial sanctions obligations, and report suspicious transactions to the Financial Intelligence Unit (FIU). Operating without an appropriate licence or registration constitutes an offence.

 

These obligations integrate virtual asset activity into the established compliance landscape and reinforce the expectation that all financial service channels, traditional or digital, apply equivalent standards of scrutiny and control.

 

Strengthened FIU and investigative powers

 

The FIU’s operational authority has been enhanced. It may suspend suspicious transactions for up to ten working days and freeze funds for 30 days without prior notice, with potential extension by the Public Prosecution. Competent authorities may access banking and systems data, impose travel bans, monitor accounts and conduct controlled operations, enabling earlier detection and more coordinated intervention in cases of suspected financial crime.

 

These powers strengthen the investigative infrastructure supporting the AML framework and enable a more agile response to emerging risks.

 

International cooperation and asset recovery framework

 

The New AML Law also enhances the UAE’s ability to cooperate internationally. UAE courts may recognise and enforce foreign provisional measures and confiscation orders without the need for a domestic investigation, and competent authorities are required to prioritise and respond promptly to mutual assistance requests. A forthcoming Cabinet decision will set out procedures for the management and disposal of seized, frozen and confiscated assets, ensuring that asset-recovery efforts are supported by clear operational guidelines.

 

These developments improve the efficiency of cross-border enforcement and reinforce the UAE’s reputation as a cooperative and reliable jurisdiction in the global AML landscape.

 

Conclusion

 

Taken together, these reforms mark a decisive shift in the UAE’s approach to financial-crime risk: expectations on institutions are higher, supervisory powers are broader, and the margin for error is smaller. Businesses operating in or from the UAE, whether in financial services, commercial sectors, professional services, or virtual asset activities, should take this moment to reassess the adequacy of their AML arrangements. In practice, this may require recalibrating risk assessments, strengthening customer due diligence frameworks, enhancing sanctions-screening capabilities and updating escalation protocols to reflect the expanded definitions, lowered knowledge threshold and increased penalties under the New AML Law.

 

Afridi & Angell regularly assists clients in navigating regulatory developments of this nature. Our team advises on the design and implementation of AML compliance frameworks, conducts gap analyses and risk assessments, prepares and updates internal policies and reporting procedures, and provides targeted training for management and frontline staff. We are well positioned to support organisations in aligning their operations with the New AML Law and ensuring they meet evolving regulatory expectations. ■

Expanding Boundaries to Mainland Dubai: A Game-Changer for Free Zone Entities

On 3 March 2025, the Dubai Executive Council issued Dubai Executive Council Resolution No 11 of 2025 concerning the regulation of free zone entities’ operation of their activities within the Emirate of Dubai (the Resolution).

 

Except for financial entities licensed in the Dubai International Financial Centre, the Resolution applies to all free zone entities in the Emirate of Dubai (Entities), that wish to carry out their activities outside the free zone and within the Emirate of Dubai i.e., mainland Dubai. The Resolution introduced three types of licenses or permits that are available to Entities and are issued by the Dubai Department of Economy and Tourism (DET):

 

(1) license for establishing a branch of the entity in mainland Dubai;

 

(2) license for establishing a branch of the entity with its headquarters in the free zone; and

 

(3) temporary permit for conducting certain activities within mainland Dubai.

 

The Resolution stated that the temporary permit under (c) above would be applicable for a period of six (6) months and would be available to Entities conducting certain types of economic activities, as determined by the DET, in collaboration with the relevant licensing authorities of the Entities.

 

Pursuant to the Resolution, on 8 October 2025, the Dubai Business Registration and Licensing Corporation (part of the DET), in collaboration with the Dubai Free Zone Council, officially announced the introduction of the “Free Zone Mainland Operating Permit” (Permit).

 

Key features of the Permit are as follows:

 

(1) Eligibility: all Entities holding a Dubai Unified License (DUL) can apply for the Permit through the Invest in Dubai platform. The DUL was introduced in 2023 (in phases) for all entities licensed in free zones and mainland Dubai. It is not yet mandatory for an Entity to have a DUL and all services currently available to an Entity shall continue to be available (even if such an Entity has not yet obtained a DUL).

 

(2) Validity and fees: the Permit is valid for a period of six months at a fee of AED 5,000 and is renewable for the same fee every six months.

 

(3) Applicability: in the first stage, the Permit is only available to non-regulated Entities undertaking activities in the field of technology, consultancy, design, professional services, and trading. This is expected to be expanded to regulated Entities in the future. Note that an Entity’s free zone license must be valid to be eligible for the Permit.

 

(4) Corporate tax and maintenance of financial records: For corporate tax purposes, Entities are required to maintain financial records for operations conducted in mainland Dubai separate from free zone operations. Entities will be subject to 9% corporate tax on income earned on their operations conducted in mainland Dubai (unless the income is otherwise exempt).

 

(5) Employment flexibility: the Permit allows for employees of the Entities in free zones to work in mainland Dubai, thereby eliminating the requirement to hire new employees or transfer existing employees and apply for new visas.

 

The introduction of the Permit is in line with Dubai’s Economic Agenda D33 and is expected to increase cross jurisdictional activity. This is indeed a big boost to all Entities interested in expanding their businesses to mainland Dubai and gain direct access to bid for government contracts and serve mainland clients more efficiently. ■