HAS Law Firm

INTRODUCTION   For approximately four decades, construction contracts in the United Arab Emirates (“UAE”) have been governed by Federal Law No. 5 of 1985 concerning the Civil Transactions Law of the UAE (the “1985 Civil Code”). However, the 1985 Civil Code is now set to be replaced by Federal Decree Law No. 25 of 2025 concerning the Civil Transactions Law of the UAE (the “New Civil Code”), enacted on 20 September 2025 and coming into full effect on 1 June 2026 (the “Effective Date”).   From the Effective Date onwards, construction contracts across the UAE, including contracts entered into between developers, employers, contractors, subcontractors, consultants and supervising engineers (collectively, the “Construction Parties”), shall be governed by the New Civil Code.   The 1985 Civil Code has historically formed the principal legal framework governing construction contracts in the UAE, including the legal principles relating to contractual performance, liability for structural defects, termination, payment obligations and dispute resolution. While the New Civil Code preserves the underlying structure of the previous regime, it also introduces a number of material changes which are likely to have significant practical and commercial implications for Construction Parties operating within the UAE construction sector.   Accordingly, this article considers the principal construction related provisions under the New Civil Code and compares them against the position previously applicable under the 1985 Civil Code.   THE CONSTRUCTION CONTRACT: DEFINITION AND SCOPE   Under the 1985 Civil Code, a construction contract was characterised as a Muqawala, being a contract pursuant to which one party undertakes to make a thing or perform work in consideration for remuneration to be provided by the other party. The New Civil Code preserves the substance of this definition under Article 812, although the terminology adopted under the new regime differs from that previously used under the 1985 Civil Code.   While the substantive nature of the construction contract remains largely unchanged, the drafting of Article 812 under the New Civil Code reflects a more commercially precise formulation. In particular, the reference to “remuneration” in place of the broader concept of “consideration” provides greater clarity as to the underlying commercial character of the contractual relationship between the Construction Parties.   Similarly, the mandatory contractual requirements applicable to construction contracts remain substantially preserved under the New Civil Code. Both the 1985 Civil Code and the New Civil Code require construction contracts to identify, amongst other things, the subject matter of the works, the nature and quantity of the works, the method of execution, the completion period and the agreed contract price. While Article 813 of the New Civil Code adopts a clearer and more structured drafting approach than the corresponding provisions under the 1985 Civil Code, the substantive legal position remains materially unchanged.   One notable clarification introduced under Article 814 of the New Civil Code relates to the supply of materials. Under the 1985 Civil Code, the statutory wording contemplated situations in which the contractor supplied the materials required for the works, although the position in relation to partial supply arrangements was not expressly addressed.   Article 814 of the New Civil Code now expressly recognises that the contractor may supply all or part of the materials necessary for the execution of the works. This clarification reflects common commercial practice within the UAE construction industry and removes potential ambiguity surrounding mixed procurement and supply arrangements.   OBLIGATIONS OF THE CONTRACTOR   Materials and Workmanship   Under Article 875(1) of the 1985 Civil Code, where the contractor supplied the materials required for the execution of the works, the contractor was liable for the quality of such materials in accordance with the terms of the contract and prevailing practice. The New Civil Code materially strengthens this position. Article 815 now expressly provides that the contractor warrants the quality of the materials supplied to the employer.   This distinction is significant. The shift from a general obligation of liability to an express statutory warranty broadens the potential remedies available to employers in relation to defective materials and aligns the contractor’s obligations more closely with broader principles applicable to defective goods and contractual warranties.   Where materials are supplied by the employer, the substantive obligations imposed upon the contractor remain largely consistent across both the 1985 Civil Code and the New Civil Code. In both cases, the contractor remains obliged to preserve such materials with due care, utilise them in accordance with proper technical standards, and return any unused surplus upon completion of the works. The contractor also remains liable for any loss, damage or deterioration arising as a consequence of its fault or negligence.   However, Article 816 of the New Civil Code introduces two additional statutory obligations of particular practical significance. First, where employer supplied materials become unusable or unsuitable as a consequence of the contractor’s negligence or misuse, the contractor is now expressly required to refund the value of those materials. This goes beyond the position under the 1985 Civil Code, which primarily contemplated liability in damages.   Secondly, Article 816(3) introduces a new statutory notification obligation. Where defects arise in employer supplied materials, or where circumstances arise which may impede the proper execution of the works, the contractor is now required to promptly notify the employer of such matters. Failure to provide such notification exposes the contractor to liability for all resulting consequences arising from that omission.   This represents a material development under the New Civil Code and reflects concepts commonly found in international standard form construction contracts, including early warning and notification obligations typically encountered under the FIDIC suite of contracts. From a practical perspective, this provision is likely to increase the importance of contemporaneous site records, technical notices and project correspondence maintained by Construction Parties during the course of execution.   Completion and Defective Performance   Under Article 877 of the 1985 Civil Code, the contractor was required to execute and complete the works in accordance with the contractual specifications and agreed conditions. Where defects arose during the course of execution, the employer could either seek immediate termination where rectification was impossible, or require the contractor to remedy the defective works within a reasonable period, failing which the employer could seek judicial cancellation of the contract or appoint an alternative contractor at the defaulting contractor’s expense.   Article 818 of the New Civil Code preserves the overall structure of this regime but introduces several important refinements.   First, the contractor’s completion obligation now expressly incorporates a time requirement. The contractor must complete the works within the agreed contractual period, or alternatively within a reasonable period having regard to the nature of the works where no specific completion date has been agreed. While timely completion was always commercially significant under the 1985 Civil Code, the inclusion of an express statutory time obligation under Article 818 strengthens the legislative emphasis placed upon timely performance.   Secondly, the New Civil Code introduces a more structured process in relation to defective performance. Before exercising further remedies, the employer is generally required to formally place the contractor in default and provide an opportunity for rectification.   Most significantly, Article 818 now expressly identifies circumstances in which the employer may seek immediate rescission without the need to provide any cure or rectification period. These include situations where: (a) rectification is impossible or inconsistent with the contractual terms; (b) the contractor’s delay renders completion within the agreed period effectively impossible; (c) the contractor’s conduct demonstrates an intention not to perform its obligations; or (d) the contractor commits an act rendering performance impossible.   The latter two grounds are of particular significance as they effectively codify the concept of anticipatory breach within the statutory framework governing construction contracts under UAE law. Under the 1985 Civil Code, such arguments generally had to be derived from broader contractual principles rather than arising expressly from the construction provisions themselves.   The Right of Retention   Article 879 of the 1985 Civil Code granted the contractor a right of retention over property in its possession pending payment, provided that the contractor’s works had produced a beneficial effect upon such property. Article 820 of the New Civil Code preserves this right in substantially identical terms.   Accordingly, where the contractor’s works have generated a tangible benefit to the property, the contractor may continue to retain possession pending payment of its dues. Conversely, where no beneficial effect has been produced, no corresponding right of retention arises. In such circumstances, the continued retention of property may expose the contractor to liability under general legal principles.   THE TEN-YEAR STRUCTURAL DEFECT WARRANTY   The Core Warranty   The decennial liability regime remains one of the most significant and distinctive features of UAE construction law. Under Article 880 of the 1985 Civil Code, where the subject matter of the contract involved the construction of buildings or fixed installations designed by an architect and executed by a contractor under the architect’s supervision, both the architect and the contractor were jointly liable for a period of ten years from delivery of the works for any total or partial collapse of the structure, as well as for any defect threatening the stability or safety of the structure.   Importantly, such liability applied irrespective of whether the defect arose from the condition of the land itself or whether the employer had approved or consented to the defective works. The decennial liability regime under the 1985 Civil Code was therefore mandatory in nature and operated independently of contractual allocations of risk between the Construction Parties.   Article 821 of the New Civil Code substantially preserves the core framework of the decennial liability regime. However, the provision also introduces several notable clarifications and refinements. Most visibly, the terminology adopted under the New Civil Code replaces references to the “architect” with references to the “engineer”. This amendment reflects the practical and regulatory realities of the UAE construction industry, where licensed engineers frequently undertake both design and supervisory functions traditionally associated with architects.   In addition, Article 821 of the New Civil Code adopts a more structured formulation of the defects giving rise to decennial liability. In particular, defects affecting the safety, solidity or structural integrity of the works are separately addressed from circumstances involving actual collapse of the structure. This clarification is significant as it reinforces that decennial liability is not limited solely to cases involving physical collapse, but also extends to serious structural defects capable of threatening the long-term integrity or safety of the works.   Supervision Only Engineers   The 1985 Civil Code principally addressed two categories of professional responsibility. First, where the architect undertook both design and supervision responsibilities, the architect and contractor were jointly liable under the decennial liability regime. Secondly, where the architect’s role was limited solely to design, liability was generally confined to defects arising from the design itself pursuant to Article 881 of the 1985 Civil Code.   However, the 1985 Civil Code did not expressly address the position of consultants engaged solely for supervisory functions without undertaking any design obligations. The New Civil Code now expressly addresses this issue. Article 822(1) preserves the position applicable to design only engineers by confirming that liability remains limited to defects attributable to the design and does not extend to defects arising from methods of execution.   More significantly, Article 822(2) introduces an express statutory basis of liability for supervision only engineers. Under this provision, an engineer engaged solely to supervise the execution of the works may now be jointly and severally liable with the contractor for defects arising from the execution of the works occurring under that engineer’s supervision.   This represents a material development under the New Civil Code, particularly given the prevalence within the UAE construction market of projects where design and supervision responsibilities are divided between separate consultants and entities. As a practical consequence, consultants undertaking supervisory functions may need to reassess their contractual risk allocation mechanisms and professional indemnity insurance arrangements in light of this expanded statutory exposure.   Subcontractor Recourse and Limitation of Liability   Article 821(4) of the New Civil Code introduces a clarification which did not previously appear under the 1985 Civil Code. The provision expressly confirms that the decennial liability regime does not apply to rights of recourse pursued by the main contractor against subcontractors.   Accordingly, while the decennial liability regime continues to operate as a mandatory and non excludable protection in favour of employers, downstream contractual relationships between contractors and subcontractors remain governed by ordinary contractual principles. As a result, parties retain greater flexibility to negotiate and agree contractual limitations of liability within subcontract arrangements, provided such provisions remain enforceable under general principles of UAE law.   This clarification is likely to be commercially significant given the uncertainty that previously existed in relation to the extent to which subcontract arrangements could contractually allocate or limit liability arising from structural defects. The New Civil Code also omits a feature previously recognised under Article 880 of the 1985 Civil Code, namely the ability of parties to agree to extend the duration of the decennial liability period beyond ten years. No equivalent provision appears under Article 821 of the New Civil Code.   As presently drafted, the ten-year statutory period now appears intended to operate as both the minimum and maximum duration of the statutory decennial liability regime. Consequently, parties seeking to impose longer periods of structural protection may need to structure such arrangements separately through express contractual guarantees, latent defect obligations or insurance backed protections rather than through extensions of the statutory warranty itself.   Non Excludability and Limitation Periods   The mandatory nature of the decennial liability regime remains preserved under the New Civil Code. Article 823, consistent with Article 882 of the 1985 Civil Code, provides that any agreement seeking to exclude or limit the liability of the engineer or contractor arising under the decennial liability provisions shall be void.   Similarly, the applicable limitation period remains substantially unchanged. Article 824 of the New Civil Code preserves the three-year limitation period for claims arising under the decennial liability regime, commencing from the date of collapse or the discovery of the relevant defect.   One minor drafting refinement introduced under the New Civil Code is the reference to an “action for warranty” rather than a “claim for compensation”. While the practical effect of this distinction remains to be tested, the revised wording arguably adopts a broader formulation capable of encompassing remedies extending beyond purely compensatory relief.   SUBCONTRACTING   The legal framework governing subcontracting arrangements remains substantially unchanged under the New Civil Code. Article 832 of the New Civil Code preserves the position previously set out under Article 890 of the 1985 Civil Code, pursuant to which a contractor may subcontract the whole or part of the works to a subcontractor unless: (a) the contract expressly prohibits subcontracting; or (b) the nature of the works requires personal performance by the contractor itself.   Importantly, the appointment of a subcontractor does not relieve the main contractor of its contractual obligations or liabilities towards the employer. The main contractor accordingly remains fully responsible for the performance of the works notwithstanding the engagement of downstream subcontractors.   Similarly, Article 833 of the New Civil Code preserves the established position governing the relationship between subcontractors and employers. In the absence of an assignment or direct contractual arrangement, a subcontractor does not acquire any direct right of recourse against the employer in relation to sums owed by the main contractor.   However, as discussed above in relation to the decennial liability regime, the New Civil Code now expressly clarifies that rights of recourse pursued by the main contractor against subcontractors fall outside the scope of the statutory decennial liability provisions. Accordingly, liability allocation between contractors and subcontractors in relation to structural defects will continue to be governed primarily by ordinary contractual principles and the specific terms agreed between the parties.   TERMINATION OF THE CONSTRUCTION CONTRACT   General Grounds for Termination   The general principles governing termination remain largely preserved under the New Civil Code. Article 834 of the New Civil Code, consistent with Article 892 of the 1985 Civil Code, provides that a construction contract may terminate upon completion of the agreed works or through rescission, whether by mutual agreement or judicial intervention.   Similarly, Article 835 preserves the right of either party to seek rescission where supervening circumstances render performance impossible. While the substantive position remains materially unchanged, the New Civil Code adopts more precise terminology, including the use of “rescission” rather than “cancellation”.   Termination for Convenience   One of the most significant developments introduced under the New Civil Code is the employer’s express statutory right to terminate the contract for convenience.   Under Article 836, the employer may withdraw from the contract and stop execution of the works prior to completion, even where the contractor is not in breach. Under the 1985 Civil Code, such rights generally existed only where expressly incorporated into the contract, commonly through standard form construction contracts such as the FIDIC suite.   However, the exercise of this right gives rise to a corresponding compensation obligation. The employer must compensate the contractor for expenses incurred, the value of completed works and the profit which the contractor would have earned on the unperformed portion of the works.   Importantly, the court retains discretion to reduce the profit element where justified by the circumstances, including where the contractor avoided costs or secured replacement work following termination.   Force Majeure and Pre Delivery Loss   The New Civil Code also introduces a more structured framework governing destruction of the works prior to delivery. Under Article 837, where the works perish due to force majeure before delivery, the contractor is generally not entitled to remuneration or reimbursement of expenses, while the loss of materials falls upon the party which supplied them.   Where destruction occurs following the employer being placed in default for refusing delivery, or due to the employer’s fault, the risk shifts to the employer. Conversely, where destruction occurs after the contractor has been placed in default, or due to the contractor’s fault, the contractor may remain liable for compensation. This provision introduces a clearer allocation of risk than previously existed under the 1985 Civil Code.   Death or Incapacity of the Contractor   Articles 838 and 839 of the New Civil Code preserve the general position previously reflected under Article 896 of the 1985 Civil Code. Where the contractor’s personal qualifications or performance formed a material basis of the contract, the contract may terminate upon the contractor’s death or incapacity. Otherwise, the employer may seek rescission where the contractor’s heirs or successors are unable to provide sufficient assurances regarding completion of the works.   The New Civil Code additionally permits the employer, upon termination, to request delivery of prepared materials intended for incorporation into the works, subject to payment of fair compensation. This clarification is likely to be significant in projects involving prefabricated materials or bespoke project components procured specifically for the works.   THE CONTRACTOR’S PRIORITY RIGHT OVER STRUCTURES   Article 1421 of the New Civil Code preserves the statutory priority right previously recognised under Article 1527 of the 1985 Civil Code in favour of contractors and engineers in respect of structures constructed or maintained by them.   As under the previous regime, the priority right must be formally registered and takes effect from the date of such registration. However, the New Civil Code introduces two notable refinements.   First, the method for calculating the value of the priority right has been simplified. Under the 1985 Civil Code, the calculation depended upon the extent to which the value of the works exceeded the value of the land at the time of sale. Article 1421 of the New Civil Code instead adopts a more direct approach based upon the increase in value attributable to the works themselves.   Secondly, the New Civil Code expands the categories of qualifying works to expressly include “restoration” alongside construction, reconstruction, repair and maintenance works. This clarification potentially extends the scope of the statutory protection to significant restoration and renovation projects which may not previously have fallen clearly within the scope of the 1985 Civil Code.   BUILDING CUSTODIAN LIABILITY   The New Civil Code introduces a more structured statutory framework governing liability arising from unsafe or defective buildings. Article 270 provides that the custodian of a building may be liable for damage resulting from the total or partial collapse of that building. Importantly, the concept of “custodian” is not limited to the legal owner of the property and may extend to lessees, managers or other parties exercising effective control over the building.   Under Article 270, the custodian may avoid liability only by establishing either: (a) the existence of a foreign cause beyond its control; or (b) the absence of negligence in maintenance together with the absence of any defect or excessive age affecting the building. In practical terms, this provision effectively reverses the burden of proof, requiring the custodian to positively disprove liability once collapse and resulting damage are established.   Article 272 supplements this framework by granting persons threatened by an unsafe building the right to require the custodian or owner to undertake preventative measures. Where such measures are not implemented within a reasonable period, the affected party may seek judicial authorisation to undertake those measures at the custodian’s expense. In emergency situations, such measures may be implemented immediately without prior court approval, subject to subsequent recovery of the associated costs.   These provisions are likely to be of particular significance to property managers, facilities management companies and long-term occupiers exercising day-to-day operational control over buildings, particularly from a risk management and insurance perspective.   CONCLUSION   The New Civil Code preserves the fundamental structure of UAE construction law established under the 1985 Civil Code, including the continued application of the mandatory decennial liability regime, the contractor’s statutory priority rights and the core framework governing the respective obligations of Construction Parties.   However, the New Civil Code also introduces several material developments which are likely to have significant practical and commercial implications across the UAE construction sector. These include, amongst other things, the employer’s statutory right to terminate for convenience, the introduction of a statutory entitlement to progress payments in certain projects, expanded liability for supervision only engineers and enhanced notification obligations imposed upon contractors.   The New Civil Code also adopts a more structured approach in several areas, including anticipatory breach, allocation of force majeure risk and liability arising from unsafe buildings. Collectively, these changes reflect a broader legislative movement towards greater commercial clarity, enhanced risk allocation and a more modernised statutory framework governing construction relationships within the UAE.   Accordingly, Construction Parties should carefully review their existing contractual frameworks, procurement structures, insurance arrangements and risk allocation mechanisms prior to the Effective Date to ensure compliance with, and adequate protection under, the New Civil Code.     Author/s Rachel Mannam Senior Associate, HAS Law Firm [email protected]   Zuhaib Habib Associate, HAS Law Firm [email protected]  

An analysis of Federal Decree-Laws No. 32 and 33 of 2025 and the UAE's broader 2025–2026 legislative reform programme Legislative Context The UAE's capital markets framework has, since its inception, been built on Federal Law No. 4 of 2000, which established the Emirates Securities and Commodities Authority and provided the foundational architecture for regulating securities, commodities, and investment activities onshore. Despite a series of regulatory updates, the framework was increasingly strained by the scale, cross-border complexity, and pace of financial innovation that now characterise UAE markets. The 2025-2026 reforms address these structural limitations through a coordinated package of primary legislation that touches every significant dimension of UAE’s financial regulatory architecture. The 2025-2026 reforms have four components, each of which affect capital markets participants to varying degrees: Federal Decree Laws No. 32 and 33 of 2025[1]: the centrepiece of the reforms, effective 1 January 2026, governing the new Capital Market Authority and the substantive regulation of UAE capital markets respectively. Federal Decree Law No. 20 of 2025: amendments to the Commercial Companies Law (“CCL”), effective 15 October 2025, introducing multiple share classes for limited liability companies, statutory drag-along and tag-along rights, a private placement pathway for private joint stock companies ("PrJSCs"), and a corporate re-domiciliation framework. Federal Decree Law No. 6 of 2025[2]: a comprehensive overhaul of the Central Bank Law, effective 16 September 2025, consolidating oversight of banking, insurance, payments, and fintech regulation under a unified supervisory framework. Federal Decree Law No. 10 of 2025[3]: a replacement of the 2018 AML/CTF framework, effective December 2025, expanding the Financial Intelligence Unit's operational powers and tightening obligations across financial institutions and virtual asset service providers. This Article focuses primarily on the Federal Decree Law No. 32 of 2025 Regarding the Capital Market Authority (“CMA Law”) and Federal Decree Law No. 33 of 2025 Regarding the Regulation of Capital Market (“Capital Market Law”), with specific analysis of the CCL amendments where they are directly relevant to capital markets activity. The Capital Market Authority: Institutional Reconstitution The CMA Law reconstitutes the Securities and Commodities Authority ("SCA") as the Capital Market Authority ("CMA"), an independent federal public authority with separate legal personality, which assumes all rights, obligations, contracts, and liabilities of the former SCA. All existing references to the "SCA" in legislation, contracts, and official documents are automatically substituted by "CMA" without further amendment. The institutional change is substantive, not cosmetic. For the first time, the CMA's core statutory objectives are embedded in primary law. These include: regulating, supervising, and developing the UAE's capital markets sector in accordance with the country's broader economic and policy objectives; protecting investors and market participants; enhancing market integrity, efficiency, and transparency; promoting fair competition; supporting sustainable economic growth; fostering innovation within a safe and well-governed environment; and positioning the UAE as an internationally competitive financial centre. Embedding these objectives in statute is legally significant, in any future challenge to CMA regulatory action, they provide a benchmark against which the reasonableness and proportionality of that action may be assessed. The CMA is also granted broader supervisory, investigatory, and enforcement powers than its predecessor, including the ability to impose a wider range of administrative sanctions and to conduct on-site inspections and information-gathering exercises with enhanced statutory backing. The CMA Law introduces express governance and accountability requirements applicable to the CMA itself. These include requirements relating to board composition and structural matters, information safeguarding obligations applicable to board members and all CMA staff, and external auditing requirements. These provisions are designed to reinforce institutional credibility and provide a framework for oversight of the regulator as well as by it. All entities and persons within scope of the new legislation must regularise their position within one year of 1 January 2026, i.e., by 1 January 2027, subject to extension by the CMA Board.[4] Pre-existing Cabinet decisions and SCA resolutions remain operative to the extent they do not conflict with the Decree-Laws, until replaced by new implementing resolutions. In practice, the substantive SCA rulebook carries over in the interim, and the transitional window is intended to give the CMA time to issue updated rules and regulated firms time to adapt their compliance frameworks accordingly. Firms that take a proactive approach to identifying gaps and engaging with CMA guidance during this period will be better placed than those who wait for formal requirements to crystallise. The Capital Market Law: Key Substantive Reforms An Expanded Regulatory Perimeter Article 2 of the Capital Market Law materially expands the CMA's jurisdictional reach. The provision expressly extends the scope of the Capital Market Law to: financial products dealt with within the UAE; financial activities practised within the UAE or by any person operating in a UAE financial free zone; licensed persons, approved persons, issuers (including foreign issuers), funds, and connected persons operating within the UAE; and any person targeting clients within the UAE, even where the activity is conducted from outside the UAE or from a financial free zone such as the DIFC or ADGM. Public sector issuances and activities within the exclusive purview of the Central Bank are expressly excluded from scope. Under the prior framework, regulatory reach was largely tied to domestic execution and physical presence, leaving meaningful uncertainty around the treatment of cross-border activity. The new provision resolves that uncertainty by making explicit that directing financial services, offers, or marketing at UAE investors, regardless of where the firm is incorporated or where the transaction is executed, falls within the CMA's regulatory perimeter. Firms currently relying on cross-border exemptions that were available under the old regime should not assume those exemptions automatically carry over; the CMA is yet to confirm whether or how existing exemptions will be preserved under the new framework. Foreign financial institutions, fund managers, and investment advisers with UAE investor bases should treat this change as a prompt to review their licensing and compliance frameworks. The jurisdictional reach of the Capital Market Law is broader than the prior regime, and the position on cross-border exemptions remains to be clarified by the CMA through implementing regulations. Statutory Prospectus Liability Article 29 of the Capital Market Law introduces a unified statutory prospectus liability regime applicable to all issuers of securities in the UAE. Statutory liability is expressly imposed on the issuer's board of directors, executive management, and advisers for any failure to provide required information, or for providing misleading or inaccurate information, within the prospectus, each within the scope of their respective competence. The liability standard is stringent and leaves no room for ambiguity: if the information is wrong or missing and falls within a party's area of responsibility, that party is exposed. For intentional conduct, the Capital Market Law imposes criminal sanctions including imprisonment of not less than one year and substantial financial penalties. Prior to this reform, prospectus liability in the UAE was derived primarily from SCA regulatory rules and exchange requirements rather than primary statute. While liability existed, the legal basis was indirect and its scope was uncertain. Article 29 resolves that uncertainty entirely, placing prospectus liability on a clear and direct statutory footing for the first time. Issuers, their boards, and their advisers should review diligence processes, verification procedures, and sign-off frameworks in light of the direct statutory exposure now imposed by Article 29. Comfort letter and verification frameworks developed under the old regime may need updating. Underwriting banks, in particular, should consider whether their existing diligence records and verification materials are sufficiently robust to support available defences Inside Information and Delayed Disclosure Article 33(2) of the Capital Market Law permits an issuer to delay the public disclosure of inside information where it has reasonable grounds to believe that immediate disclosure would cause serious harm to its interests or those of its shareholders. To invoke the delay, the issuer must submit a justified written request to the CMA (for unlisted securities) or to the relevant exchange, the Abu Dhabi Securities Exchange ("ADX") or Dubai Financial Market ("DFM"), in respect of listed securities. The CMA or exchange may accept, reject, or subsequently amend or revoke the decision to delay. This is a welcome and practical provision: the ability to manage the timing of sensitive disclosures in a structured and legally compliant manner is important for issuers managing complex corporate events. Complementing this is the substantially strengthened market abuse framework under Article 37, which codifies a more granular and behaviourally precise set of prohibited market conduct offences. These include: entering into transactions with the intent to deceive or mislead investors or the market; employing manipulative trading practices; disseminating false or misleading statements about a financial product or issuer; inciting or spreading rumours capable of affecting the price or value of securities; and exploiting inside information, with the prohibition capturing both direct and indirect dealings by persons in possession of material non-public information. The CMA is underpinned by a significantly enhanced enforcement apparatus, including robust surveillance and investigation tools, graduated administrative sanctions, and direct criminal referral powers. Administrative penalties may reach up to AED 200 million or ten times the illicit gains realised or losses avoided, whichever is higher. The CMA may also impose warnings, suspend or cancel licences, and publish imposed penalties. The enhanced penalty regime is a material change from the prior framework and substantially elevates the consequences of non-compliance. All regulated firms should review their market conduct policies and training programmes in light of the broadened offences and significantly increased sanctions. Price Stabilisation Safe Harbour Article 37(2) of the Capital Market Law codifies a statutory safe harbour for price stabilisation activities conducted in connection with securities offerings. The provision states that the exercise of price stabilisation controls, procedures, or mechanisms for which controls have been issued by the CMA or Capital Market Institutions shall not constitute a violation of the Capital Market Law or of the provisions of Federal Decree-Law No. 32 of 2021 on Commercial Companies that prohibit the influencing of securities prices. This resolves a longstanding and practically significant ambiguity. Under the prior framework, investment banks conducting standard IPO stabilisation programmes operated in a theoretically exposed position, with comfort derived from regulatory practice and structural workarounds, including the frequent appointment of independent third-party stabilisation managers, rather than a clear statutory exclusion. Article 37(2) eliminates that structural uncertainty and places the safe harbour on an explicit primary legislative basis. Investment banks acting as stabilisation managers in UAE public offerings should update their stabilisation documentation, internal procedures, and disclosure materials to reflect the new statutory framework. The codification of the safe harbour may also remove the need for certain structural arrangements that were historically used to manage stabilisation risk. Systemically Important Licensed Persons and Recovery The Capital Market Law introduces a dedicated regulatory framework for entities designated as Systemically Important Licensed Persons. The CMA has full discretion to determine which firms fall within this category based on criteria including size and market share, complexity, interconnectedness with other market participants, and potential systemic impact. Designated firms are subject to enhanced prudential requirements, including capital, liquidity, governance, and risk management obligations, as well as recovery and resolution planning requirements. The CMA is granted a comprehensive toolkit of early-intervention and resolution powers. In resolution, it may: remove or appoint management; terminate, assign, or vary contracts; write down or convert debt; transfer assets and liabilities to third parties or bridge entities; impose temporary stays on termination rights; and conduct orderly wind-downs with a statutory hierarchy of claims. These powers may be exercised before formal insolvency proceedings are initiated, giving the CMA meaningful tools to intervene at an early stage and manage a firm's failure in an orderly manner. Firms of a size or complexity that could attract systemic importance designation should begin assessing their exposure now, before formal designation criteria are published. Recovery planning, governance documentation, and capital planning frameworks should all be considered as early priorities. Investor Protection Fund and Settlement Guarantee Fund Article 44 of the Capital Market Law requires the CMA to establish an Investor Protection Fund, an independent legal entity with separate legal personality and financial liability, the purpose of which is to protect investors' funds against risks determined by the CMA. The CMA is responsible for issuing a decision regarding the fund's establishment, operational mechanisms, management, membership conditions, financial resources, obligations towards investors, risks covered, eligibility periods, and dissolution mechanisms. Separately, Article 45 permits the central clearinghouse to establish a Settlement Guarantee Fund, also with independent legal personality, the purpose of which is to guarantee the settlement of transactions executed on the market, subject to CMA-approved controls. These mechanisms are a structural improvement over the prior regime, which lacked equivalent statutory investor compensation or settlement guarantee arrangements, and are designed to deepen confidence among the full range of investors engaging with UAE markets. Whistleblower Protections Article 60 of the Capital Market Law introduces robust whistle-blower protections. Any person may report suspected violations to the CMA, to a Capital Market Institution, to their employer, to the compliance officer of their employer, or to judicial authorities. Persons making such reports are afforded immunity from criminal, civil, and contractual liability arising from the act of reporting, as well as protection from compensation claims and adverse employment consequences. This provision is designed to encourage the reporting of misconduct from within regulated firms and is likely to increase the volume and quality of information reaching the CMA through internal channels. Regulated firms should review their internal whistle-blower and speak-up frameworks to ensure they are consistent with Article 60 and that employees are aware of both the internal and external reporting channels available to them. Collective Investment Schemes Article 38 of the Capital Market Law establishes a revised framework for investment funds. Funds now enjoy independent legal personality and ring-fenced financial liability, strengthening the structural integrity of UAE-domiciled funds and the protections available to fund investors. Funds may be established in one of two forms: as an investment fund established and licensed by a CMA decision; or as a recognised form of commercial company, established in accordance with applicable UAE company laws, with prior CMA approval. This dual-track structure provides meaningful flexibility for fund sponsors in designing their fund vehicles. Virtual Assets Article 39 of the Capital Market Law formally integrates virtual asset trading into the capital markets regulatory perimeter. The CMA assumes federal supervisory responsibility for virtual asset activities in the onshore UAE, and trading of any virtual asset is prohibited unless it has been approved and listed by a CMA-licensed virtual asset platform operator registered with the CMA. The existing delegation arrangement to the Dubai Virtual Asset Regulatory Authority ("VARA") is preserved pending amendment or repeal, meaning the UAE's multi-regulator approach to digital assets continues within a clearer federal framework. Implementing regulations are expected and will define much of the practical operation of this regime. Firms operating in the virtual asset space, whether as issuers, platform operators, or advisers, should closely monitor CMA publications as implementing regulations take shape. The licensing requirements, the interface with VARA's existing framework, and the precise scope of the approved asset list will all be critical details that the primary law leaves to secondary legislation. Criminal Settlement Mechanism Article 75 of the Capital Market Law introduces a pre-prosecution criminal settlement mechanism. Prior to initiating criminal proceedings, the CMA may settle with a violator in respect of crimes under the Capital Market Law, subject to controls to be issued by Cabinet decision. If settlement is not achieved or the violator rejects its terms, the CMA is required to refer the matter to the public prosecution. The public prosecution may also settle after proceedings commence, but before final judgment is delivered. This mechanism gives the CMA a more proportionate and commercially sensitive enforcement pathway, enabling resolution of serious matters without necessarily resorting to criminal prosecution, while preserving the ability to escalate where appropriate. Commercial Companies Law: Capital Markets Implications The October 2025 amendments to the CCL are a distinct legislative framework, but their relevance to capital markets activity is direct. Three changes are of particular note. Private Placements for Private Joint Stock Companies Article 32 of the CCL, as amended, permits PrJSCs to raise capital through regulated private placements on UAE financial markets for the first time, without the need to conduct a full public offering. Prior to this reform, PrJSCs had no clear domestic pathway for accessing institutional capital short of a full listing, a structural gap that regularly drove issuers towards offshore structures or parallel vehicles. The reform closes that gap and is expected to deepen the pipeline of growth-stage companies able to access UAE capital markets and, in time, to graduate to the ADX or DFM. The practical operation of the private placement framework is contingent on implementing regulations from the CMA, which remain outstanding. The shape of those regulations, including eligibility criteria, investor categorisation, disclosure requirements, and any resale restrictions, will determine how commercially viable this new pathway proves in practice. Market participants with an interest in this area should monitor CMA publications closely. Statutory Investor Rights and Multiple Share Classes Article 14 of the CCL, as amended, introduces statutory recognition of drag-along and tag-along rights, which may now be embedded directly in a company's constitutional documents rather than relying on private shareholders' agreements with historically uncertain enforceability. Multiple share classes are also now available in limited liability companies. These changes bring UAE corporate governance tools meaningfully closer to the structures available in leading investment jurisdictions, reducing transaction friction and providing materially stronger and more reliably enforceable protections for private equity and venture capital investors in UAE-incorporated entities. Corporate Re-domiciliation The new Article 15 of the CCL establishes a framework for corporate re-domiciliation, permitting companies to transfer their commercial register and licensing to a different competent authority — including from foreign jurisdictions into the UAE, while preserving the same legal entity and its existing contractual relationships. There is no requirement for liquidation or reincorporation, and there is no discontinuity of legal personality. For regional groups seeking to consolidate their structures, or for foreign businesses considering establishing a UAE anchor entity, this is a new and commercially significant option that was previously unavailable. Key Considerations for Market Participants The transitional window runs until 1 January 2027, but a number of the changes described in this article have immediate compliance implications. The following sets out the priority considerations by market participant type. Licensed Financial Intermediaries Map existing licences against the Capital Market Law's revised activity definitions. Gaps are more easily addressed proactively than reactively, and the CMA is likely to expect regulated firms to have conducted this exercise. Review conduct of business policies, governance arrangements, and fitness and propriety assessments for senior staff against the elevated CMA expectations embedded in the new framework. Assess whether your firm could attract designation as a Systemically Important Licensed Person and, if so, begin preliminary recovery planning work ahead of any formal regulatory requirement. Ensure AML/CTF procedures have been updated in line with the new AML Law and associated FIU requirements. These obligations are already in force. Review and update internal whistle-blower and speak-up frameworks to reflect the protections and reporting channels now codified in Article 60. Issuers and Prospective Issuers Revisit prospectus diligence frameworks, verification procedures, and board sign-off processes in light of the direct statutory liability imposed by Article 29. Boards should be satisfied that their internal disclosure controls are robust and that each party signing off on a prospectus is comfortable with the statutory exposure attaching to their respective area of responsibility. PrJSCs with capital raising plans should engage advisers to monitor and assess the private placement framework as CMA implementing regulations are published, and to evaluate whether the domestic route under Article 32 offers advantages over offshore alternatives. Companies considering conversion from LLC to PrJSC, or a cross-authority re-domiciliation under Article 15, should evaluate whether these pathways now offer a commercially attractive route to restructuring. Investment Banks and Financial Advisors Update IPO stabilisation documentation, internal procedures, and disclosure materials to take full advantage of the statutory safe harbour now codified in Article 37(2). Consider whether structural arrangements previously used to manage stabilisation risk remain necessary under the new framework. Reassess compliance frameworks for cross-border offerings directed at UAE investors. Article 2's expanded jurisdictional perimeter means UAE compliance obligations may extend further than your existing framework assumes, and the CMA's position on cross-border exemptions is yet to be confirmed. Advise clients with virtual asset ambitions on the new CMA licensing requirements and the continued VARA delegation arrangement, and monitor CMA publications for the implementing regulations that will define the operational framework. Foreign Entities and Investors Assess whether cross-border activities directed at UAE clients — including fund marketing, investment advisory services, and solicitation of investments — fall within the CMA's expanded jurisdictional perimeter under Article 2, and take licensing or exemption advice accordingly. Consider the re-domiciliation framework as a potential tool for consolidating regional group structures into the UAE without the cost and disruption of liquidation and reincorporation. Establish a structured process to monitor CMA Board resolutions and implementing regulations. The primary legislative framework is in place, but much of the practical operation of the new regime, including key licensing requirements, exemptions, and the virtual asset framework, will be shaped by secondary legislation that is still to come. Conclusion The enactment of the CMA Law and the Capital Market Law, taken together with the concurrent reforms to the Commercial Companies Law, the Central Bank Law, and the AML/CTF framework, represents the most comprehensive overhaul of the UAE's financial regulatory architecture since the establishment of the SCA in 2000. The reforms mark a structural shift from a rulebook-driven and interpretive regime to one that is statutory, consolidated, and enforcement-oriented: statutory prospectus liability, a codified market abuse framework, enhanced penalty powers, and new recovery and resolution tools all point in the same direction. For market participants, the reforms bring both opportunities and obligations. The areas of new legal certainty reduce transaction risk and create a more predictable operating environment. At the same time, the expanded regulatory perimeter, the significantly increased penalty regime, and the new obligations applicable to systemically important firms materially raise the compliance bar. The central challenge of the period ahead will be navigating the transition thoughtfully. The primary legislative framework is in place and clear in its direction. However, a significant body of implementing regulation remains to be issued, and the practical shape of several key provisions, including the virtual asset framework, private placement rules, cross-border exemptions, and systemic importance criteria, will only become clear as that secondary legislation emerges. Firms that engage early, monitor CMA guidance closely, and take a proactive approach to remediation will be better positioned than those who wait. We will continue to monitor developments as implementing regulations are issued and will publish further analysis as the framework develops. We welcome the opportunity to discuss the implications of these reforms for your specific circumstances.   Author/s Evgeny Yafasov Partner – HAS Law Firm Chirag Chhabra Associate – HAS Law Firm   [1] Federal Decree Law No. 32 of 2025 Regarding the Capital Market Authority and Federal Decree Law No. 33 of 2025 Regarding the Regulation of Capital Market. [2] Federal Decree Law No. 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business. [3] Federal Decree Law No. 10 of 2025 Regarding Anti-Money Laundering, and Combating the Financing of Terrorism and Proliferation Financing. [4] Article 83 of the CMA Law.

The United Arab Emirates is no longer simply a strong aviation market. It is building a legal and industrial ecosystem for civil aviation, drones, defence technology and next-generation aerospace. That is visible not just in legislation, but in the market itself. Dubai Airshow 2025 described a week of breakthroughs, strategic partnerships and industry-shaping discussions. EDGE said it unveiled 42 new products there across air, space, autonomy, propulsion, radar and secure communications; and the UAE’s sustainable aviation fuel policy targets 700 million litres of domestic SAF production annually by 2030. For lawyers, investors, OEMs, MRO providers, drone operators and defence contractors, the real point is this: the UAE is not difficult because it is overregulated. It is difficult because civil aviation, dual-use controls, defence licensing and foreign ownership rules can overlap in the same project. The framework is anchored in the Civil Aviation Law, which official sources now describe as amended by Federal Decree-Law No. 12 of 2024, the GCAA Law of 1996, the 2022 drone law, the 2021 non-proliferation controls law and its 2024 executive regulations, the 2019 weapons and military materiel law, and the 2021 strategic impact regime. Civil aviation in the UAE is mature, but it is not static The civil side of the regime is relatively legible. The Civil Aviation Law remains the foundation of the UAE aviation framework, while the GCAA remains the federal authority responsible for executing that law. But the mistake outsiders make is assuming that “mature” means “settled.” Official UAE sources now refer to the Civil Aviation Law as amended in 2024, which is a reminder that this framework continues to evolve alongside the industry it regulates. For market participants, the real legal question is not abstract sovereignty over airspace. It is licensing, operating permissions, continuing airworthiness, training, safety supervision and regulatory timing. One technical point is worth stating plainly because professionals care about it and non-specialists often miss it: the official English legislation portal itself says the Arabic text prevails in the event of inconsistency. In this sector, that matters. When the question is scope, penalty, or classification, translation is not a clerical issue; it is a legal one. Drones are not a side issue anymore The UAE’s drone framework is one of the clearest signs that aerospace regulation is moving from aircraft law to airspace management. Federal Decree-Law No. 26 of 2022 applies to all UAVs and related activities across the UAE, including free zones, and assigns the GCAA a central role in creating a unified register and approving the conditions for permits and certificates. That is already more than hobby regulation. It is the architecture of a managed operating environment. The penalties confirm the seriousness of the regime. Operating activities without registration can attract fines of AED 50,000 to AED 500,000. Conducting design, manufacture, testing, trading or related commercial activities without the required licence or permit can trigger fines of AED 100,000 to AED 2,000,000. More serious conduct, including operations in restricted or prohibited areas or conduct jeopardising airspace safety, can lead to imprisonment of six months to five years and or fines up to AED 1,000,000. What makes the UAE interesting is that the regime is strict in theory and granular in practice. The GCAA’s operational rules for individual users require registration, confine smaller recreational drones to approved zones, require line-of-sight operations, cap altitude at 400 feet above ground, limit flying to daytime and good weather, and prohibit operations within 5 km of airport perimeters. More recent GCAA recreational rules also point pilots to accredited training and the UAE Drones platform. In parallel, the regulatory conversation has already moved to U-space service providers at federal level and U-space airspace in Dubai’s 2025 UAS regulation. In other words, the UAE is not merely permitting drones; it is building traffic rules for them. The real legal dividing line is export control Many aerospace businesses assume they are safely on the civil side of the fence until a software module, sensor, propulsion component, encryption feature, maintenance dataset or engineering support package pushes them into dual-use territory. That is where the UAE’s non-proliferation regime matters. Cabinet Resolution No. 97 of 2024, the executive regulation under Federal Decree-Law No. 43 of 2021, defines “permit” in a way that reaches import, export, re-export, transshipment, in-transit shipping, transport between ports and brokerage. Even the structure of the executive regulation is revealing: it contains dedicated articles on records keeping, inspection procedures, seizure, detainment of commodities and appeals. This is not symbolic legislation. It is a functioning compliance system. The territorial point matters too. The law applies across the UAE, including free zones. That single detail is enough to upset a common assumption that a free zone structure somehow neutralises export-control risk. It does not. In practice, the harder questions are often not about shipping a finished product out of the country, but about technical data, end-user documentation, re-export chains, brokerage arrangements and whether a transaction has drifted from “commercial aviation support” into a controlled technology transfer. Defence regulation in the UAE is a national security regime, not just a sectoral one Federal Decree-Law No. 17 of 2019 is broader and sharper than many readers expect. “Military materiel” is defined to include aircraft, boats, submarines, machinery, equipment, devices, unmanned systems, ammunition, explosives and weapons used for military purposes, as well as related parts, spare parts, technology and manufacturing devices. That definition matters because it collapses the comfortable distinction between a finished platform and the technology stack behind it. The operational reach of the law is equally broad. Article 3 provides that possession, acquisition, carrying, import, export, re-export, transit, trans-shipment, trade, manufacture, repair, transportation and disposal of weapons, ammunition, explosives, military materiel and hazardous substances are not permitted without the relevant licence or permit. The licensing authority may refuse to grant or renew licences and may add restrictions, and the law establishes a dedicated Weapons and Hazardous Substances Office within the national security structure. This is exactly the point at which a conventional commercial mindset becomes dangerous: in the UAE defence space, regulatory discretion is part of the system, not an exception to it. The penalty landscape is even more revealing. Unlicensed trading in, importing, exporting or manufacturing explosives or military materiel can trigger temporary imprisonment and a fine of at least AED 500,000. The unauthorised leakage or publication of plans, drawings, documents, information or data relating to weapons, ammunition, explosives or military materiel can attract life imprisonment and a fine of at least AED 500,000. Even repair activity without a licence is criminalised. For defence contractors and technology suppliers, the message is obvious: this is not a back-office licensing exercise; it is a core national-security compliance issue. Foreign ownership is liberal in the UAE, except where it is not The UAE has rightly advertised its openness to full foreign ownership across much of the economy. Official government guidance confirms that foreigners can establish companies with 100 percent ownership in many mainland activities. But aerospace and defence readers should focus on the carve-out, not the headline. Cabinet Resolution No. 55 of 2021 places security, defence and activities of a military nature on the list of “strategic impact” activities. For those activities, the Ministry of Defence and Ministry of Interior may determine not only the percentage of national participation in capital, but also the percentage of national participation on the board. That is a sophisticated control tool, and it tells you everything about how the UAE balances investment openness with sovereign oversight. This is why structuring questions in the UAE cannot be left to corporate housekeeping at the end of a transaction. The ownership analysis may change depending on whether the activity is genuinely civil, dual-use, defence-adjacent or plainly military. Free zone location, shareholder mix, board composition, licensing sequence and the identity of the actual operating entity all matter. The legal issue is not simply “Can a foreign investor own this?” It is “What exactly is the regulated activity, and who gets to say so?” The most interesting part of the UAE story is that policy, industry and regulation are moving together This is what makes the market more dynamic than a dry statute-by-statute summary suggests. On the civil side, the UAE’s 2023 sustainable aviation fuel policy aims to raise domestic SAF production capacity to 700 million litres annually by 2030, support research and development, create a national regulatory environment for production plants and build in-country value. The GCAA also states that its CORSIA implementing decree was the first legislation of its kind in the Arab region approved by the PMO. That is not a country sleepwalking into compliance. It is a country trying to shape regional practice. On the defence side, the industrial narrative is equally visible. Dubai Airshow 2025 described a week of breakthroughs, partnerships and industry-shaping discussions, while EDGE said it unveiled 42 new products across air, space, autonomy, propulsion, radar and secure communications, and that more than 53 percent of its revenue was export-driven. Even allowing for the promotional character of a company release, the strategic direction is clear: the UAE is building industrial depth, not merely acting as a procurement market. That matters legally because industrial depth generates more IP, more technology transfer, more data movement, more export-control touchpoints and more security review. Conclusion The UAE’s aerospace and defence framework is best understood as a system of classification and sequencing. Classification, because the outcome depends on whether a product or service is civil, unmanned, dual-use, defence-related or strategically sensitive. Sequencing, because approvals obtained in the wrong order can damage timetable, structure, cost and sometimes the viability of the deal itself. The businesses that succeed in this market are usually the ones that map those issues early: they classify products and data, separate civil from defence support, check export-control implications before sharing technology, address ownership and board constraints at the structuring stage, and treat drone operations as aviation activity rather than consumer tech. The UAE is open for aerospace and defence business. It is simply not casual about it.   Authors Ilya Dvorkin Partner, HAS Law Firm [email protected] Samara El Doukhei Paralegal, HAS Law Firm [email protected]

A Comparative Analysis of Legal Frameworks, Principles and Practices in Court Systems and International Arbitrations I. Introduction 1. Costs on an indemnity basis is a feature observed in common law jurisprudence, and enables a party to secure compensation to as full an extent as possible for the outlay and trouble of litigation. 2. Jurisdictions which are based on a common law system i.e., England and Wales, the Dubai International Financial Centre (“DIFC”), Singapore, Hong Kong, etc., have mechanisms which inter alia govern costs on an indemnity basis and how these are applied. 3. This article shall consider how indemnity costs are dealt with by court systems in England and Wales, the DIFC, but also the trend in international arbitrations. II. Rule of Indemnity Costs 4. Usually when making an order of costs, the basic rule is that the successful party is entitled to costs on the standard basis; however, the successful party can secure a different order which is that costs will be assessed on an indemnity basis. 5. An indemnity costs order cannot be construed as a penal costs order, it allows costs to be assessed on the basis of what has been reasonably incurred rather than the default standard basis of what is reasonable and proportionate both in amount and work done. 6. Therefore, one of the major differentiating factors between indemnity costs and standard costs is that where in a case of standard costs, the party will receive only costs which are proportionate, this requirement of proportionality does not exist in relation to an order of costs made on an indemnity basis. 7. However, while proportionality is not the cornerstone for an order of costs on an indemnity basis, it is often perceived that indemnity costs are punitive in nature. On the contrary, the basis for indemnity costs is not to punish the paying party but to arrive at a fair result for the party in whose favour costs are issued. III. Statutory Framework Adopted by the Courts for Awarding Costs on Indemnity Basis 8. The basis for awarding indemnity costs is prevalent across several common law judicial systems. 9. Some of the key jurisdictions i.e., England & Wales and the DIFC Courts are highlighted for the purpose of this article, below. 10. In England & Wales, Part 36 of the Civil Procedure Rules (“CPR”) provides a structured settlement mechanism which is designed to encourage parties to resolve their disputes before trial. 11. Under Part 36 of the CPR, either party can make an offer to settle a claim or a portion of the claim/counter-claim, in writing, specifying a ‘relevant period’ of at least twenty-one (21) days during which the other party can accept or refuse the offer. 12. For the purpose of this article, the costs consequences of a Part 36 offer is relevant inasmuch as it allows the offering party to seek costs from the Court on an indemnity basis from the date on which the relevant period expired. 13. While awarding costs on an indemnity basis, the Court needs to adopt the following basis of assessing costs: (a) disallow any costs which it finds to have been unreasonably incurred; or (b) disallow any costs which it considers to be unreasonable in amount. 14. Further, the Court needs to ensure to resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party. 15. It is noteworthy that the Court’s discretion in awarding indemnity costs is wide, and it will exercise this by considering all circumstances and considering matters complained of in the context of the overall litigation. In one instance, the Court awarded indemnity costs in cases subject to fixed costs, where a claimant beat his own Part 36 offer. 16. In recent times, the Court has been strict in its application of indemnity costs, considering even £1 settlement offers genuine and awarding indemnity costs after the claimant was able to achieve a better outcome at trial. 17. Even in arbitration claims, the Court has considered the application of indemnity costs arising due to discontinued proceedings seeking to challenge two arbitral awards. 18. The DIFC Courts modelled on common law system, has adopted a similar pattern, bringing the concept of indemnity costs to the United Arab Emirates and the Middle East. 19. Part 32 of the Rules of the DIFC Courts (“RDC”) also incentivizes early settlement of disputes by imposing cost consequences when a 20. Similar to the CPR, the RDC also requires the offer to be in writing, specify a period of not less than twenty-one (21) days and state whether it relates to the whole or part of the claim/counter-claim. 21. Further, the DIFC Court also has power to and will order costs on the indemnity basis from the date on which the relevant period expired, unless it considers it unjust to do so. 22. Meanwhile, Part 38 of the RDC also adopts a mechanism similar to Part 44 of the CPR, inasmuch as where costs are to be assessed on an indemnity basis, the Court will resolve the doubt as to whether costs were reasonably incurred or were reasonable in amount, in favour of the receiving party. 23. Therefore, the Court will also consider the following factors while assessing costs on the indemnity basis i.e., costs unreasonably incurred or unreasonable in amount. 24. The DIFC Courts’ Cost Regime, also stipulates factors to be considered by the Courts, in determining whether costs are to be issued on a standard basis or indemnity basis: (a) circumstance where the facts of the case and/or the conduct of the paying party are/is such as to take the situation away from the nor; for example, where the Court has found deliberate misconduct in breach of a direction of the Court or unreasonable conduct to a high degree in connection with the litigation; or (b) otherwise inappropriate conduct in its wider sense in relation to a paying party’s pre-litigation dealings with the receiving party, or in relation to the commencement or conduct of the litigation itself; or (c) where the Court considers the paying party’s conduct to be an abuse of process. 25. It is also open to the DIFC Court to award costs on the indemnity basis in relation to specific portions of the trial or hearings which have led to unnecessary costs being incurred by a party. However, an order for indemnity costs will not enable a party to receive more costs than what they have incurred. 26. The DIFC Courts have also ordered costs on an indemnity basis based on the principle under RDC 32.49(b) that the party’s offer was at least as advantageous to them as the proposals contained in the party’s Part 32 offer. 27. In 2017, the DIFC Courts introduced an administrative direction empowering the Court to order costs on an indemnity basis for failed challenges to set aside arbitral awards or applications for removal of arbitrators, before the DIFC Courts. The DIFC Courts have applied this administrative direction inter alia noting that a category of circumstances justifying an order for indemnity costs is where an unsuccessful Article 41(2) challenge is made which has been found not to have real prospects of success. 28. Meanwhile, several other jurisdictions i.e., Singapore and Hongkong also have similar provisions. 29. In Singapore, the rules follow similar procedure for issuing costs on the indemnity basis. It is however pertinent to point out that in offers to settle, the ‘relevant period’ is lesser i.e., fourteen (14) days, with similar cost consequences of indemnity costs if a party fails to settle from the date of the offer unless the Court orders otherwise. 30. Singapore Courts have been careful in imposing indemnity costs and have held that if there is no genuine or serious effort to compromise, an insincere offer will not trigger issuance of costs on an indemnity basis. 31. In a recent decision, the Singapore High Court has also set down categories of conduct that may provide good reason to order indemnity costs: (a) where the action is brought in bad faith, as a means of oppression or for other improper purposes; (b) where the action is speculative, hypothetical or clearly without basis; (c) where a party’s conduct in the course of proceedings is dishonest, abusive or improper; and (d) where the action amounts to wasteful or duplicative litigation or is otherwise an abuse of process. 32. The rules of the Court in Hongkong also allow for Court’s to impose cost consequences on an indemnity basis where a party fails to do better than the sanctioned offer or sanctioned payment. 33. Moreover, the Courts in Hongkong have adopted a default rule that when an award is unsuccessfully challenged, indemnity costs will be granted in the absence of special circumstances. IV. Indemnity Costs and its Application in International Arbitrations 34. Unlike court systems, the issue of costs in international arbitrations is usually reserved for the tribunal’s assessment and determination. Several arbitral institutions like UNCITRAL , DIAC , ICC , SIAC simply reserve the issue of costs to the tribunal, without in any manner expanding on the issue of costs. 35. On the other hand, the rules of the LCIA provide some much-needed clarity as to the general principle of costs being followed by tribunals i.e., costs should reflect the parties’ relative success and failure in the award or arbitration or under different issues, except where it appears to the tribunal that in the circumstances the application of such a general principle would be inappropriate under the arbitration agreement or otherwise. 36. Interestingly, the LCIA also adopts a different methodology as compared to other arbitral institutions, with a rebuttable presumption that tribunals shall not be required to apply the rates or procedure for assessing such costs practised by any state court or other legal authority. 37. The English Arbitration Act, 1996 (“English Arbitration Act”) also provides that the Tribunal shall award costs on the general principle that costs follow the event except where it appears to the Tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs. Thus, sufficient autonomy is placed in the hands of the Tribunal insofar as it relates to the issue of costs. 38. However, the DIFC Arbitration Law (DIFC Law No.1 of 2008) (“DIFC Arbitration Law”), does not provide the same clarity as the English Arbitration Act, but on the contrary only provides the heads of costs a Tribunal can fix in its award. 39. Therefore, the DIFC Arbitration Law fails to provide as much autonomy as provided under the English Arbitration Act. While there have been no challenges before the DIFC Courts thus far relating to the issue of awarding indemnity costs, it will be interesting to see whether Tribunals seated in DIFC award indemnity costs which are challenged before the DIFC Courts. V. Conclusion 40. While costs on an indemnity basis is a general rule in a common law court system and has been enforced time and again by the courts, it may not as straightforward in international arbitrations, with varying permutations and combinations being applied by both arbitral institutions and Tribunals alike, insofar as it relates to fixing costs. 41. Although arbitral institutions have generally kept the door open insofar as it concerns costs, it does not specifically address indemnity costs. Nevertheless, while Tribunals may be empowered to order costs on an indemnity basis, it is by and large an issue which is reserved for the Tribunals determination and assessment. 42. Therefore, even though common law courts are now increasingly open to issuing costs on an indemnity basis inter alia for unsuccessful challenges to arbitral awards, it will be interesting to see how this area of law evolves further and whether we see more challenges being filed before the Courts as a result of Tribunals fixing costs on an indemnity basis. Author:  Adhiraj Malhotra, Senior Associate, [email protected],    

The Dubai International Financial Centre (the “DIFC”) is a global financial hub that has positioned itself as a leading destination for financial services, international trade, and investment. The DIFC Courts offer a robust legal and regulatory environment, which includes an advanced insolvency framework. DIFC Law No. 1 of 2019 (the “DIFC Insolvency Law”) and the DIFC Insolvency Regulations 2019 (the “DIFC Insolvency Regulations”) are designed to regulate the financial restructuring and insolvency proceedings of companies operating within the DIFC jurisdiction. Rooted in transparency and fairness, the law aims to balance the interests of creditors, shareholders, and companies, to ensure financial stability while offering businesses the opportunity to recover from distressing circumstances. A critical element is the Rehabilitation Process, which provides companies with a structured approach to restore their financial health and avoid liquidation. Rehabilitation under DIFC Insolvency Law Part 3 of the DIFC Insolvency Law contains provisions which establishes a court-supervised debtor-in-possession system known as “Rehabilitation”, which effectively allows a debtor to save its company by presenting a rehabilitation plan to its Creditors and Shareholders for approval. A company is eligible for rehabilitation under Article 13 of the DIFC Insolvency Law, where it is or is likely to become unable to pay its debts and there is a reasonable likelihood of a successful rehabilitation plan being reached between the Company, its Creditors, and Shareholders. Process of Rehabilitation The DIFC Rehabilitation Process follows a series of clearly defined steps aimed at achieving recovery while ensuring accountability and involvement of all stakeholders of the Company. Stage 1: Proposal of the Rehabilitation Plan[1] The Directors of the Company are responsible for proposing a Rehabilitation Plan to its Shareholders and Creditors. This plan forms the foundation for restructuring and recovery. Stage 2: Notification to the Court The Company’s Board of Directors must notify the DIFC Courts of the Rehabilitation Plan in writing, accompanied by relevant documents. If the Company is an Authorised Person, the Directors must also obtain the Dubai Financial Services Authority’s (the “DFSA”) consent before submitting the Rehabilitation Plan to the DIFC Courts. An Authorised Person, under the laws of the DFSA, is defined as an Authorised Firm or an Authorised Market Institution which has a license granted by the DFSA. Stage 3: Automatic Moratorium[3] Upon notification of the Rehabilitation Plan, the DIFC Courts shall grant an automatic moratorium for 120 days, halting any actions by creditors (secured and unsecured) without their consent. The moratorium begins on the day the DIFC Courts are notified by the Company of its Rehabilitation Plan (the “Notification Date”), which allows the Company sufficient time to implement the Rehabilitation Plan. Stage 4: Appointment of Rehabilitation Nominee[4] The Company’s Board of Directors must appoint one or more Rehabilitation Nominee(s), i.e., a registered insolvency practitioner, immediately before the Notification Date. The Rehabilitation Nominee’s name and qualifications should be outlined in the Rehabilitation Plan that shall be sent to the DIFC Courts. Stage 5: Relief from Moratorium[5] Creditors of the Company can file an application to the DIFC Courts for relief from the moratorium period under Article 19 of the DIFC Insolvency Law. When granting the relief, the DIFC Courts shall consider whether there is any “imminent irreparable harm” to the Company in the absence of a moratorium, and whether the Creditor would suffer any “significant loss” which the Company cannot compensate the Creditor for, and the balance of harm to the Creditor outweighs the interest of the Company. If the conditions are satisfied, the DIFC Courts shall grant the relief after a notice of 10 days to the Company. Stage 6: Appointment of an Administrator[6] If the Directors of the Company are guilty of any fraud or mismanagement offences, the DIFC Courts shall appoint an Administrator to manage the affairs of the Company. In such a scenario, the remuneration paid to the Administrator and the Rehabilitation Nominee, and their expenses are prioritised over any unsecured debts at the time of payments. Stage 7: Termination of Moratorium Period[7] The DIFC Courts can terminate the moratorium period prior to its expiration upon the request of any Creditor of the Company by providing a notice and hearing for cause shown including bad faith. Stage 8: Post-Moratorium Period Actions by the Company[8] Upon the termination or expiration of the moratorium period, the Company must: Seek directions[9], or Accept any of the alternative Rehabilitation Plans proposed by the Creditors and Shareholders of the Company, or Apply to the DIFC Courts to terminate the process of the Rehabilitation Plan and wind up the Company. Stage 9: Directions under Article 24[10] Once the Rehabilitation Plan is ready to be proposed and considered by the Creditors and the Shareholders, the Company should notify the same to the DIFC Courts and submit the voting procedures for approval. These procedures classify the secured Creditors, unsecured Creditors, and Shareholders into groups, ensuring equitable representation in the voting process. The Rehabilitation Nominee or the Administrator must file a statement to the DIFC Courts in their opinion which considers the prospects of the Rehabilitation Plan being approved, the funds that are available with the Company, and the meetings conducted between the Company and its Creditors and Shareholders to consider the Rehabilitation Plan. Stage 10: Directions Hearing[11] The DIFC Courts shall hold a Directions Hearing at which the Creditors and Shareholders of the Company will be able to voice their opinions on the Rehabilitation Plan, upon a 10 days' notice, and may approve or reject the proposed notice and voting procedures or may approve it after modifying the procedures. The DIFC Courts may also extend the moratorium period to accommodate further discussions on the proposed plan. Stage 11: Voting Process by the Creditors and Shareholders[12] The Creditors and the Shareholders will receive a notice for the voting in writing along with a copy of the proposed Rehabilitation Plan. The Rehabilitation Plan needs at least 75% of the Creditors of each class to support the Rehabilitation Plan to get it approved. Stage 12: Challenges to the Rehabilitation Plan[13] The Creditors and the Shareholders may challenge the Rehabilitation Plan if they consider the arrangement to be unfairly prejudicial, or that the Rehabilitation Plan was not proposed in good faith, or that there had been a material violation of the notice and voting procedures approved by the DIFC Courts at the Directions Hearing. Subsequently, the Creditor or the Shareholder can file a written application to the DIFC Courts stating their objection anytime until 10 days prior to the Post-Plan Hearing. Stage 13: Post-Plan Hearing[14] At the Post-Plan Hearing, the DIFC Courts shall sanction the Rehabilitation Plan if the 7 conditions set out under Article 27 of the DIFC Insolvency Law are satisfied. These are namely to ensure that the Rehabilitation Plan has been proposed in good faith; that it complies with Part 3 of the DIFC Insolvency Law; that the arrangement is not unfairly prejudicial; that there is no material violation of the notice and voting procedures approved by the DIFC Courts; and so forth. If the DIFC Courts sanction the Rehabilitation Plan, it shall be binding upon all persons who have a claim and hold an interest in the Company; however, if the DIFC Courts do not sanction the Rehabilitation Plan at the hearing, the DIFC Courts shall then immediately proceed to take steps to wind up the Company. Stage 14: Application for Discretionary Relief[15] The Company can file an application to the DIFC Courts after providing a 10-day notice to the Creditors and Shareholders, seeking any relief, which may be authorised upon the DIFC Courts’ discretion. Stage 15 – Completion of the Rehabilitation Plan[16] Upon completion or termination of the Rehabilitation Plan, the Company must notify the same to the Creditors and Shareholders within 28 days of the completion or termination of the Rehabilitation Plan. A copy of the notice should also be sent to the Registrar of Companies and the DIFC Courts. Summary The Rehabilitation Process under the DIFC Insolvency Law and the DIFC Insolvency Regulations offers a sophisticated approach to corporate recovery, balancing creditor protection with business rehabilitation opportunities. Through its structured 15-stage process, the framework ensures transparency and fairness whilst providing distressed companies with a viable path to recovery. The incorporation of key features such as the automatic moratorium, qualified supervision, and robust voting procedures, all under careful judicial oversight, demonstrates the DIFC's commitment to international best practices in insolvency regulation. Notably, the entire process takes approximately 7-8 months from the proposal of the Rehabilitation Plan, offering a relatively swift resolution timeframe. This comprehensive framework not only enhances the DIFC's standing as a global financial centre but also provides businesses with a clear and efficient mechanism for addressing financial distress, ultimately promoting market stability and sustainable business practices. Authors Robert Whitehead – Partner I Head of DIFC & International Arbitration E: [email protected] Fahad Khalid – Associate E: [email protected] Payal Jain - Intern Footnotes [1] Article 15(1) of the DIFC Insolvency Law [2] Article 15(2) of the DIFC Insolvency Law [3] Article 16 of the DIFC Insolvency Law [4] Article 20 of the DIFC Insolvency Law [5] Article 19 of the DIFC Insolvency Law [6] Article 22 of the DIFC Insolvency Law [7] Article 23 of the DIFC Insolvency Law [8] Article 23 of the DIFC Insolvency Law [9] under Article 24 of the DIFC Insolvency Law [10] Article 24 of the DIFC Insolvency Law [11] Article 24 of the DIFC Insolvency Law [12] Article 25 of the DIFC Insolvency Law [13] Article 26 of the DIFC Insolvency Law [14] Article 27 of the DIFC Insolvency Law [15] Article 30 of the DIFC Insolvency Law [16] Article 3.2 of the DIFC Insolvency Regulations 2019  

Mergers and Acquisitions (M&A) involve the consolidation of companies or assets through various financial transactions, aiming mainly to enhance business growth, competitiveness, or market presence. To ensure a successful transaction, it requires careful consideration of numerous factors, including but not limited to financial valuation, regulatory compliance, market dynamics, potential risks, warranties, guaranties, covenants, indemnities, exit clauses, and others. Valuation in M&A refers to the process of determining the economic worth of a business, its assets, or its shares. Although valuation methods are primarily financial in nature, it is equally important to address the legal implications associated with the valuation, as set out below. Payment terms, especially when structured as installments, introduce additional legal complexities that must be addressed to safeguard the interests of the parties involved, particularly in cases of default. Definition of Valuation Valuation serves as the monetary benchmark for negotiations, influencing (i) the purchase price and (ii) the structure of the transaction. Beyond financial relevance, it ensures legal compliance with fiduciary duties, regulatory standards, and stakeholder protections. Legal Perspective on Valuation From a legal standpoint, accurate valuation plays a crucial role in ensuring fairness, transparency, and enforceability in M&A transactions. For the Buyer, it guarantees that upon payment of the agreed consideration, ownership of the target shares or assets will be transferred. For the Seller, it provides assurance that if the purchase price is not paid, they retain the right to either recover the payment or regain possession and ownership of the shares or assets, as the case may be. It also involves: Fiduciary Duties: Directors and officers must ensure valuation accuracy to protect the interests of all stakeholders, particularly minority shareholders. Regulatory Compliance: Valuation processes must align with statutory requirements, such as the UAE Commercial Companies Law, ensuring (i) lawful disclosure, (ii) safeguards against unauthorized disclosure, and (iii) appropriate actions to prevent unlawful non-disclosure. Judicial Review: Courts may scrutinize valuation processes in disputes, particularly in case of fraud or claims concerning shareholder dissent or alleged misrepresentation. Payment Terms in M&A Transactions Payment terms outline the financial structure of the transaction, directly reflecting the agreed valuation. These terms are crucial in defining how the purchase price will be settled and may include provisions such as the payment schedule, method of payment (e.g., cash, stock, credit-notes, or a combination), any earn-out arrangements, contingencies, and the handling of potential adjustments based on future performance or specific conditions. Other important elements may include interest rates, penalties for late payment, and any security interests or guarantees required to ensure payment. These terms may include, but are not limited to, the following provisions, which are among the most commonly encountered.  One-Time Payment: A one-time payment whereby the buyer is required to pay the entire purchase price either upfront or on the closing date of the transaction. This structure is straightforward and often preferred for its simplicity, as it eliminates the need for ongoing negotiations or adjustments. For the seller, it reduces complexities and risks, offering immediate liquidity and certainty regarding the final amount received. This payment method also avoids potential delays or contingencies, providing a clear and definitive conclusion to the transaction. However, it may limit the buyer's flexibility, as they are required to pay the full price at once. Deferred Payments: Deferred payments, on the other hand, involve spreading the total purchase price over an agreed timeline. This payment structure is designed to provide flexibility to the buyer, allowing them to manage cash flow or reduce the immediate financial burden. It may involve installment payments over months or years, potentially with interest, depending on the terms agreed upon. In many cases, a down payment is required upfront as part of this arrangement, which serves as a form of security for the seller and demonstrates the buyer's commitment to the transaction. While the deferred payments make the overall transaction more accessible to the buyer, the down payment helps reduce the seller's risk by securing part of the purchase price early on. Despite this, deferred payments still introduce an element of risk for the seller, as they may not receive the full payment until later. Provisions like guarantees or security interests can be included to mitigate this risk. Earn-Outs: Performance-based payments depending on the achievement of specific metrics. Earn-outs can be incorporated into the valuation or considered separately, often added to the total valuation. While they are commonly included in such transactions, the terms, conditions and clear legal definitions and remedies for disputes are crucial in these arrangements and must be carefully defined to avoid potential conflicts. Escrow Arrangements: Escrow arrangements are commonly used to protect either all or part of the consideration payment in a transaction. This structure involves a third-party holding funds or assets until certain pre-defined conditions are met, typically related to the fulfillment of specific obligations, the resolution or settlement of certain designated liabilities, the completion of agreed-upon milestones, or the verification of financial performance. By holding the payment in escrow, both parties are provided with added security, ensuring that the buyer’s funds are only released when the seller has satisfied the agreed-upon terms, and for the seller, securing payment once the specified conditions are fulfilled. Clearly defined conditions for the release of the escrowed funds are critical, as they prevent disputes and provide a clear path for resolving any outstanding issues. Escrow arrangements offer a balanced approach by minimizing risk for both parties, ensuring that the transaction proceeds smoothly and that any contingencies are addressed in a controlled manner. Installment Payments and Legal Consequences of Default  When payments are structured in installments, it is essential to establish strong legal provisions to protect the seller in the event of non-payment or delayed payments. These provisions help ensure that the seller's interests are safeguarded and provide a clear course of action in case of default. Such provisions may include: Acceleration Clauses: An acceleration clause allows the seller to demand immediate payment of the remaining balance if the buyer fails to pay an installment. This protects the seller from extended delays and mitigates financial risk. Interest and Penalties: Agreements may stipulate interest or penalties for late payments to incentivize timely compliance and compensate the seller for any delays. These terms should be carefully crafted to ensure that they comply with applicable laws, such as interest rate caps or restrictions on penalty amounts, and are enforceable in court or arbitration proceedings. The legal framework provides clarity on how these penalties are calculated and ensures that they are not deemed excessive or unconscionable, thus maintaining their validity and effectiveness in safeguarding the seller's interests. Termination Rights: In some cases of non-payment or default on payment, the seller may retain the right to terminate the purchase agreement and reclaim ownership of the business or assets, should they have already been transferred. It is essential that these provisions are clearly outlined in the contract to prevent potential disputes. Retention of Title Clauses: These clauses allow the seller to retain legal ownership of the transferred shares or assets until the buyer has completed all installment payments, ensuring that the seller maintains control over the property until full payment is made. These provisions offer an added layer of protection for the seller, reducing the risk of financial loss if the buyer defaults on their payment obligations. However, it is important to note that in the UAE, such clauses must comply with local property and contract laws, including those governing the transfer of ownership and the enforcement of security interests. Aligning these clauses with legal requirements is crucial for their validity and enforceability; failure to do so could lead to disputes or prevent the agreement from being upheld in court or arbitration. Dispute Resolution Mechanisms: Dispute resolution mechanisms are essential in agreements to address potential payment disputes effectively. Including provisions for arbitration or litigation ensures that both parties have a clear, agreed-upon process for resolving conflicts. In M&A transactions, arbitration is often preferred due to its efficiency, speed, and the expertise of arbitrators, especially in complex technical areas where traditional judges may lack familiarity (such as communications, AI, and other specialized fields). Additionally, arbitration ensures confidentiality and provides a neutral third-party decision-maker to resolve disputes outside the court system. However, agreements may also outline the option for litigation, particularly when legal precedents or public judgments are required. These mechanisms help avoid protracted negotiations, provide enforceable solutions, and ensure that both parties understand their rights and obligations, thus reducing the risk of lengthy and costly legal battles. By clearly defining the process for resolving payment disputes, agreements offer greater certainty and protection for all involved parties. Security Arrangements: Sellers may also require the buyer to provide collateral or guarantees, ensuring recourse in case of default. This can include personal guarantees from directors or liens on company or personal assets. Conclusion Valuation and payment terms, including installment structures, are critical components of M&A transactions and have significant legal implications. It is essential to address potential default scenarios with clear, enforceable clauses in the transaction agreement to safeguard both parties' interests and ensure the stability of the deal. A well-structured legal framework that promotes transparency, fairness, and compliance is key to ensuring the success of the transaction. Author:    Ziad Chebli

Liabilities and warranties, especially in construction contracts are very fluid, and it ebbs and flows depending on the nature of the project and more importantly, the type of contract. One such contract, which we shall deliberate upon in this article is the Design and Build Contract. As the name suggests, a design and build contract is where a contractor assumes the role of both designer and contractor for the purposes of a project. In doing so, all the responsibilities of the design and all the responsibilities of the project execution fall on one legal entity i.e., the contractor. The reverse of this is more commonplace, where there is a separate design consultant (usually appointed by the employer/client) and a separate contractor builds the project based on the design provided by the design consultant. Therefore, there are significant legal implications for a design and build contract, which are discussed below. A design and build contract is essentially a one-stop-shop for a client, where the contractor does everything in a project right from the design phase to the build phase, and even until the expiry of the defect’s liability period. Therefore, in terms of liability, there is typically only one stop, and that is at the contractor’s doorstep. For a client, the legal implication is that since liability rests with one person, any dispute may be brought against that one person, which is a contractor. Courts have held contractors accountable for failures even in cases where fulfilling contractual obligations became commercially impractical. A notable U.S. case Lockheed Martin Idaho Technologies Co. v EG&G Idaho Inc. involved a turnkey environmental remediation contract with strict performance specifications. Despite significant expenditures, the contractor failed to meet its obligations and was terminated for default. The contractor argued that the cost of compliance exceeded $100 million beyond the contract price, claiming commercial impossibility. The court rejected this defence, emphasizing that the contractor had assumed the risk of performance and ordered it to repay over $50 million received under the contract. Thus, the courts reinforced the legal principle that underpins Design and Build Contracts. Moreover, liability in these contracts extends beyond performance issues to include the quality of design. The case of IBA v EMI Electronics Limited and BICC Construction Limited (1980) 14 BLR 1 illustrates this point, where IBA contracted with EMI for the design and construction of a television mast, and EMI then sub-contracted the works to BICC. The mast subsequently collapsed due to defective design. The House of Lords held that EMI must have warranted that BICC’s design would not be negligent, hence, EMI are liable to IBA. The Courts looked at the level of duty which was implied in the absence of express terms. The standard forms of design and build contract do, however, expressly state the extent of the design obligations of contractor. Effectively, this means that contractor’s responsibility for design is limited to the reasonable skill and care test, and the absence of express terms does not absolve the contractor from implied obligations. Yet, liability can also extend to clients, particularly when design assumptions are made. Many owners assert that their designs are preliminary and should not be relied upon, placing the responsibility solely on the contractor. However, this perspective can lead to disputes, as contractors may argue that they are entitled to rely on the accuracy of the client’s provided designs. The case of Donahue Electric INC. (2002) (VABCA No 6618) exemplifies this tension. The issue involved problems that resulted when a boiler prescribed by the government in the bidding documents turned out undersized and could not operate a piece of government furnished equipment. The Veterans Administration argued that the design-builder was obligated to properly size the boiler and could not rely on the bidding documents. However, this was disagreed by the U.S. Department of Veterans Affairs Board of Contract Appeals. Specific requirements such as the quantities and sizes are set forth in the specifications provided by the client, which were included in a design/build contract. This places the risk of design deficiencies on the owner. Thus, the VA reassumed the risk and warranted the accuracy of the specifications regarding the boiler that it specified, thus, emphasising the importance of clarity in design specifications. As a contractor carries out both the design and the actual construction, they also carry the liability for these scopes. The most striking example to give will be situations where a contractor is seeking an extension of time claim, specifically for delays caused due to defect in the design. The way this situation would transpire in a design and build contract is very different from a traditional construction contract. In the latter, the contractor can claim extension of time and the related prolongation costs, as the design is not within their scope. However, in a design and build contract, the contractor effectively relinquishes this right to claim delay due to defective designs. If a contractor were to agitate such a claim in a design and build contract, they would in reality be blaming themselves for the delay! The case of Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar (2015) EWCA Civ 712 illustrates this point. Here, the dispute arose from a construction contract between GOG and OHL. OHL claimed that the amount and location of contaminated materials required redesigning the work after the original contract period has expired. GOG terminated the contract due to delays and issues with cost of removing the contaminated materials. OHL opposed the validity of the termination since the redesign is necessary due to unforeseeable contamination levels. The England and Wales High Court (Technology and Construction Court) determined that the termination of contract is valid, and the contamination levels were not unforeseeable, holding that the amount of contaminated soil that OHL had encountered was not more than an experienced contractor should have foreseen. The case, thus, highlights the contractor’s comprehensive responsibility for both design and execution in these types of contracts. Another legal implication arises in respect of variations. Typically, variations are claimed by contractors when they are required (at the behest of the client) to perform works that are out of their scope. Therefore, under traditional construction contracts, if a contractor is involved in rectifying a defect in the design, this may be claimed as a variation. However, in a design and build contract, any works on design will not be viewed as a ‘variation’ as this will arguably still be within a contractors’ scope. Considering this, it is very important to properly and strictly define the design scope and specify that anything over and above the scope may be claimed as a variation. Any open-ended clauses may be interpreted against a contractor (considering the original liability lies with them). Another important legal implication is in respect of the duty of skill and care required for the design. A contractor is held to the same standards as a designer, as they assume the responsibility and for design and any liability in its defects. This would entail the contractor to carry out the design scope with not only the reasonable skill and care, but also to submit designs that the compliant with ongoing standards and that are “fit for purpose” (which is a much higher duty of care). The FIDIC Yellow Book contract (which is typically used as a standard for design and build contracts) also specifies that works when completed by the contractor must also be fit for purpose, which   The discussion on design standard and skill brings us to the next important aspect, which is warranty. The case of Trebor Bassett Holdings Ltd and the Cadbury UK Partnerships v ADT Fire and Security plc (2012) EWCA Civ 1158 has raised the thorny question of implied fitness for purpose obligations in construction contracts. However, the decision has further clouded the waters rather than clarifying matters. Until this case, the law pointed to contractors being under an implied obligation to design and build complete products and systems that are reasonably fit for purpose. ADT signed an agreement with Trebor to develop and implement a custom fire suppression system for Trebor's facility. The factory caught fire and burned down, indicating that the fire suppression system had failed. Trebor successfully sued ADT for negligence in both its design and its conduct. Nevertheless, the court determined that Trebor was also negligent, and Trebor's damages were cut by 75%. Trebor contended that the system constituted a supply of goods and hence required an implied fitness for purpose under the Sale of Goods and Services Act 1982. Not so according to the England and Wales Court of Appeal. The court held that primarily what ADT was supplying was not “goods” but the supply of design services, so the SGSA did not apply. The components that were used in the system were of an acceptable quality, it was the design that was negligent. This ruling indicates the nuanced distinctions that can arise in warranty claims, reinforcing the need for clear contract definitions. A contractor typically warrants the completion of the project within the particular time and pursuant to a particular standard. However, in traditional construction contracts, this warranty is subject to various factors such as correct design, supply of materials and operation and maintenance, to name a few. Therefore, if the project is not completed as per the warranties provided by the contractor, a contractor has the liberty to cite various factors (as listed above), to mitigate their liability for breach of warranty. However, in the case of a design and build contractor, the contractor's warranty also includes the design, i.e. that the design will meet the requirements and be fit for purpose, and that it will be effectively executed in the project. This is due to the fact that the distinctions between designer and contractor often become blurred. Furthermore, because the contractor is accountable for the majority of the project's stages, it becomes difficult to exclude any warranties that would not apply to a contractor. For this reason, it is crucial that the agreement clearly identifies these boundaries. Certain warranties, such as operation and maintenance, should be retained by the client. To conclude, contractors and clients alike must be extra vigilant when entering into a design and build contract. For a client, it may be a one-stop-shop for all of its requirements for the project, however, this is a double-edged sword. Clients often relinquish a lot of the control they would typically possess over such projects, if they enter a design and build contract, as most of the work is essentially within the purview of one person i.e., the contractor. There is also a possibility of there being a compromise on the innovation in design. When a designer and the contractor are one, it is often difficult to treat each role in a vacuum and the contractor’s considerations such as mitigation of risk often seeps into the mind when working on the design. However, there is no denying the benefits of entering into such a contract. Often times design consultants and contractors can be at loggerheads on various issues throughout the project. These types of contracts can almost eliminate such issues, and one might even argue that this will reduce the delays. At the end of the day, it depends on the type and scale of project and the requirements of the client. From a contractor’s perspective, their best and strongest defence is a robust contract. Each and every term needs to be properly defined. The scope of work needs to be properly itemized and more importantly, it should expressly be stated that anything over and above the scope will be excluded. This will ensure that the contractor is not saddled with work or obligations by implication. For design and build contracts, it all comes down to what is on paper and agreed. The contract is king and can determine whether a project is a success or whether it crumbles into litigation. Authors: Robert Whitehead and Rachel Mannam   

Re-domiciliation, also known as corporate migration or transfer of incorporation, is an increasingly popular strategic process that allows companies to shift their seat of incorporation from one jurisdiction to another.This maneuver offers a seamless transition, and the United Arab Emirates (UAE) has emerged as a premier destination for such transitions. The UAE’s numerous free zones and well-established legal frameworks make it an attractive locale for re-domiciliation. Diverse Motivations for Re-Domiciliation  Companies pursue re-domiciliation for various reasons, including commercial, practical, taxation, and legal considerations. Key considerations include: Tax Efficiency: Companies seek favorable tax regimes to optimize their tax liabilities. Regulatory Environment: Operating within a more lenient regulatory framework can enhance operational flexibility. Market Access: Better access to key markets can drive business growth. Stability: Enhanced legal and political stability offers a more secure business environment. Operational Efficiency: Improved infrastructure and resources can streamline operations. Investment Opportunities: Access to new investment avenues can foster expansion. Skilled Labor: A skilled workforce can bolster business capabilities. Brand Reputation: A UAE base can enhance a company’s global brand image. Industry-Specific Advantages: Legal and operational advantages tailored to specific industries. Importantly, re-domiciliation does not disrupt a company's operations or affect the validity of its existing agreements, ensuring business continuity during the transition. The UAE’s Appeal for Re-Domiciliation  The UAE offers a range of compelling advantages for companies considering re-domiciliation, making it a highly attractive destination for corporate migration. By re-registering as a UAE entity, companies can ensure a smooth and uninterrupted continuation of their existing rights and obligations, safeguarding their operational integrity and business continuity. The UAE’s business-friendly environment is characterized by its tax-efficient framework, which includes low corporate tax rates and numerous incentives that can significantly reduce operational costs. Additionally, the UAE boasts an extensive network of double tax treaties with numerous countries, which helps prevent double taxation and provides further financial benefits, making it an economically advantageous location for international business. Beyond the financial incentives, re-domiciling to the UAE positions a company strategically within a dynamic and rapidly growing market. The UAE serves as a regional hub with unparalleled access to emerging markets across the Middle East, North Africa, and South Asia. This strategic location not only enhances the company’s regional influence but also demonstrates its commitment to leveraging the UAE’s robust economic opportunities and fostering growth in the broader Middle Eastern market. Moreover, the UAE’s regulatory environment is designed to support and encourage foreign investment, offering various free zones with specialized facilities and services tailored to diverse industry needs. This supportive infrastructure, combined with the UAE’s stable political and economic climate, makes it an ideal environment for companies seeking to enhance their global footprint while capitalizing on the region’s growth potential. Criteria for Re-Domiciliation Eligibility  Companies must verify their eligibility before re-domiciliation to the UAE free zones such as the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM). Essential criteria include compliance with the specific regulations outlined in Article 8 and subsequent articles of the DIFC Companies Regulations and Section 100 and subsequent sections of the ADGM Companies Regulations. This includes meeting legal requirements related to corporate governance, and regulatory compliance to ensure a smooth and successful transition to these jurisdictions. Essential criteria include: Compliance with Original Jurisdiction: Adherence to the legal requirements of the original jurisdiction is fundamental. Valid Purpose: Companies must demonstrate a legitimate business purpose for re-domiciliation. Legal Framework: The original jurisdiction’s laws must permit the transfer of incorporation. Navigating the Re-Domiciliation Process in the UAE  Given its relatively novel status in the UAE, businesses contemplating re-domiciliation must fully understand eligibility requirements and procedural nuances. Engaging with legal and tax professionals familiar with both the original and UAE jurisdictions is crucial.  Re-domiciliation involves a complex process distinct from establishing foreign branches or subsidiaries. Key considerations include: Legal Compliance: The re-domiciled company must comply with UAE law and relevant free zone regulations. Operational and Tax Implications: The process impacts various operational and tax aspects. Free Zone Selection: Choosing the appropriate free zone requires careful consideration of business activities, residency requirements, and compliance obligations. Conclusion  Re-domiciliation presents a powerful strategic tool for companies, offering the advantage of retaining their legal identity while adapting to new regulatory and tax environments. With its diverse options and substantial potential, the UAE stands out as an appealing destination for re-domiciliation. However, businesses must approach the process with diligence, conducting thorough due diligence and seeking expert guidance to ensure a smooth and successful transition. Author:   Ziad  Chebli Partner – Corporate Department , Hamdan AlShamsi Lawyers & Legal Consultants