Mastering Contract Drafting Strategy for UAE Legal Excellence
A contract drafted with one UAE system in mind and litigated in the other seldom performs the way the parties assumed.
The UAE gives contracting parties a real choice of system — onshore federal law, or DIFC or ADGM law with their own common-law courts — and it has to be settled in the same conversation as the forum. Then come the clauses that behave differently onshore, from agreed damages a court may adjust to termination that should say it takes effect on notice, plus the Arabic text and signing authority.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Most contract disputes in the UAE do not turn on a drafting subtlety. They turn on two decisions taken early and taken casually: which law governs the agreement, and who decides a dispute about it. Get those wrong and the rest of the document does less work than the parties assumed.
The UAE gives contracting parties a real choice here. An agreement can sit under onshore federal law, applied by the courts of the emirate concerned, or under the law of the Dubai International Financial Centre or the Abu Dhabi Global Market, applied by their own common-law courts. Onshore commercial dealings are governed by the Commercial Transactions Law, Federal Decree-Law No. 50 of 2022, which replaced Federal Law No. 18 of 1993, together with the Civil Code for general contract principles. The DIFC and ADGM have their own statute books, their own judges and their own procedural rules. A contract drafted with one system in mind and litigated in the other seldom performs as expected.
Fix the governing law and the forum in the same conversation
Governing law and forum are separate clauses that have to be decided together. Choosing DIFC law but leaving disputes to the onshore courts, or choosing onshore law with an arbitration seat whose rules assume common-law disclosure, produces a contract that works on paper and stalls in practice. Two practical points come up repeatedly in commercial contract drafting:
- Where the counterparty's assets and licence actually are. A judgment or award has to be enforced against something, which is why the enforcement question belongs at the start of the drafting exercise rather than the end. If the debtor's operating company is licensed onshore in Sharjah, a clause pointing everything to a foreign forum adds an enforcement step rather than removing one.
- Whether the free zone forum has a connection to the deal. The financial free zones are open to parties who choose them, but the choice should be made deliberately and recorded clearly, not inherited from a template drafted for another transaction.
Related: Our consent letter drafting work often sits alongside the main agreement, where a third party's approval is a condition of performance.
What the onshore courts will actually read
Proceedings before the onshore courts are conducted in Arabic, and documents in another language are filed with a legal translation. That has a drafting consequence: a bilingual agreement should state which language prevails, and the Arabic text should be prepared by someone who understands the deal rather than translated at the last minute. A prevailing-language clause that points to English does not remove the need for an accurate Arabic version; it only decides which text wins if the two diverge.
Signing authority is the second recurring problem. The person who signs must be authorised under the company's constitutional documents, its trade licence or a power of attorney, and for certain commitments a specific power is expected. Checking the signatory's authority is part of reviewing the agreement, not an administrative afterthought, because an unauthorised signature is a defence the counterparty will use later.
Clauses that behave differently onshore
These are the points where drafting for the UAE departs most sharply from an English-law precedent.
Agreed compensation. A liquidated damages figure is not automatically applied as written onshore. The court may adjust the agreed sum to reflect the loss actually suffered if a party asks it to. Drafting should therefore support the figure with a genuine estimate of loss, and the file should keep the evidence that supports it.
Caps and exclusions. Limitation of liability clauses are usable but not unlimited in effect; clauses that attempt to exclude liability for a party's own serious misconduct are vulnerable. Cap the quantum, exclude defined heads of loss, and do not rely on a single sweeping exclusion.
Termination. Say expressly that termination for a defined breach takes effect on notice, without the need for a court order, and set out the notice mechanics. Silence invites an argument that the contract can only be brought to an end judicially.
Force majeure and hardship. List the triggering events, state what each party must prove, impose a notification requirement, and separate suspension from termination. A clause that simply says performance is excused in circumstances beyond a party's control leaves the whole question to be argued afterwards.
Late payment. Interest and late-payment charges are treated differently onshore and in the financial free zones. Do not assume that a rate carried over from a template drafted elsewhere will be applied as it stands.
Arbitration clauses need checking against the current institutions
Arbitration seated in the UAE is governed by Federal Law No. 6 of 2018, as amended in 2023. Two institutional changes matter for older templates. Dubai Decree No. 34 of 2021 abolished the DIFC-LCIA and moved its caseload to the Dubai International Arbitration Centre, so a clause still naming DIFC-LCIA should be revisited rather than copied forward. The DIFC itself remains available as a seat. In Abu Dhabi, ADCCAC was restructured as arbitrateAD from 2024, and clauses naming the former body should be updated on the next amendment.
A workable clause names the institution, the seat, the number of arbitrators, the language and the governing law of the arbitration agreement. It also confirms that the person agreeing to arbitrate on each side had authority to do so, which onshore is a live point and is best addressed at signature rather than at the first hearing.
Before signature
- Governing law, forum and enforcement route are consistent with one another and with where the counterparty's assets sit.
- The Arabic text, where there is one, has been read and the prevailing-language clause is deliberate.
- The signatory's authority is documented and on file.
- Definitions, payment triggers and deliverables are specific enough that a third party could tell whether they have been met.
- The dispute clause names an institution that still exists under that name.
None of this is exotic. It is the difference between a contract drafted for the UAE and one adapted from a precedent written for somewhere else.
Related Services: See our contract drafting and agreement drafting services for support on the documents described above.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
