In 2025, the UAE loan market continued to grow steadily. The Central Bank reported total banking assets above AED4.7 trillion as of the first quarter of 2025, showing resilience despite global challenges and higher interest rates. Banks remained profitable, as wider interest margins balanced slower lending in some areas. Regulators kept a close focus on Basel III standards, liquidity coverage and stress testing.

Economic activity was supported by stable oil revenues, OPEC+ production policies, and major government spending on housing, infrastructure and renewable energy projects. Real estate financing stayed strong, with both residential and commercial lending continuing to expand. Looking ahead, fiscal spending and diversification plans are expected to sustain demand for structured and project financings, even as global markets remain uncertain.

Global conflicts have directly influenced the UAE loan market in 2025. The UAE has remained a hub for high net worth individuals, leading to new incorporation and financing activity in free zones. In parallel, local lenders have tightened compliance protocols in line with international sanctions regimes.

In general, the uncertainty in other regions has reinforced the UAE’s position as a market offering regulatory certainty. Funds flowing into the UAE have increased transactional activity while strengthening the capital base of the UAE banks, supporting their ability to underwrite larger syndications and project financings.

The high-yield bond segment continues developing in the UAE. While sukuk issuance across the GCC continued to rise in 2025, particularly among sovereign and quasi-sovereign entities, a significant portion of the domestic corporate lending still primarily relies on conventional and Islamic loans. While the financing terms and structures remain the same for conventional and Islamic loans for the most part, the high-yield bond/sukuk structures adopt different financing terms and structures with more robust security packages and leveraged finance covenant packages depending on the risk assessment of the transactions.

Private credit and alternative lenders remain marginal compared to the dominant role of commercial banks, yet continue to evolve rapidly. Regional private credit funds and global investment managers are increasingly exploring UAE mid-market and acquisition financings, particularly where banks are constrained by regulatory limits.

While such activity accounts for a smaller portion of overall lending, it is common to see a covenant shift in these types of financings especially towards adopting more robust security packages and high-yield type leveraged finance covenant packages depending on the risk structure of the transaction.

UAE financing techniques continue to evolve. Holdco structures in the DIFC and the Abu Dhabi Global Market (ADGM) are frequently used to consolidate debt and simplify cross-border security packages. Preferred equity and shareholder loans are deployed alongside senior debt, particularly in sponsor-led deals. It is also common to come across call options and convertible structures as methods to secure conventional and Sharia compliant debt financing. Sharia compliant structures remain important, with hybrid financings combining murabaha and ijara tranches. On the retail side, fintech adoption accelerated in 2025, driven by the Central Bank’s open banking framework and its support for digital payment service providers.

ESG lending has recently gained momentum. UAE banks began integrating sustainability-linked margin ratchets into syndicated loans, with pricing tied to key ESG indicators such as emissions reduction, renewable energy capacity, or green building certifications. The Central Bank has also issued guidance encouraging lenders to monitor climate risk exposure. The most active ESG financings are in renewable energy, utilities and real estate. This trend is expected to deepen as the UAE pursues its Net Zero by 2050 strategy.

Under the Federal Law No 14 of 2018, namely the Banking Law, only institutions licensed by the UAE Central Bank may engage in commercial lending onshore. Licensed institutions include commercial banks, Islamic banks, finance companies and exchange houses. These entities are authorised to provide loans, accept deposits and engage in related banking activities.

Foreign lenders may provide loans to UAE corporates on a cross-border basis without a licence, provided they do not establish a local presence, actively solicit the public, engage in promotional activities or accept deposits. In practice, many international banks operate through representative offices or use DIFC/ADGM platforms for regional coverage.

Within the DIFC and ADGM, the DFSA and FSRA respectively license firms to provide “credit” or “providing finance”. Both regimes operate under common law principles and allow both bank and non-bank institutions to extend financing to corporate borrowers. Intercompany loans within corporate groups are not regulated, provided they do not amount to carrying on a lending business.

Foreign banks may lend to UAE borrowers without triggering a local licence requirement. A local licence is required in order to maintain an ongoing presence and to carry out active promotion or solicitation towards the UAE residents.

There is no prohibition for foreign lenders to receive guarantees, although these must be in writing and specify the secured obligations.

Security Interests

The status changes depending on the type of the security.

Under the Federal Law No 4 of 2020 on Securing the Rights in Moveables (the “Moveables Security Law”), security over movable assets can be granted directly to foreign creditors. Such movable assets include receivables, accounts, equipment and work tools, inventory and any other movable assets. Perfection is achieved through the Emirates Integrated Registries Company (EIRC).

Real Estate Mortgages

Only locally licensed banks may be registered as mortgagees, so foreign lenders typically appoint a local security agent to hold real estate security. 

A business/commercial mortgage (over the entirety or defined parts of a commercial enterprise) may only be granted in favour of locally licensed banks.

Share Pledges

Whether foreign lenders can hold the share pledge directly changes as depending on whether the concerned company is incorporated onshore or in a free zone. The rules in free zones change depending on the free zone. In DIFC and ADGM, it is possible for foreign lenders to hold share pledges directly. In onshore UAE, the share pledges will need to be held by local security agents.

There are no foreign exchange restrictions in the UAE. The dirham (AED) is freely convertible and is maintained at a long-standing fixed exchange rate against the US dollar (AED 3.6725). Capital and current account transfers can be made in and out of the country without regulatory approvals.

Borrowers are not subject to statutory restrictions on how loan or bond proceeds are applied, unless the financing is structured under Islamic principles. In such cases, the application of funds must comply with Sharia requirements, meaning that the proceeds can only be directed toward transactions and activities that are permissible under the Sharia principles.

The facility agent and security agent concepts are well recognised in the UAE. The trust concept is not recognised in the UAE. Parallel debt structures are commonly used to replicate trust-like security arrangements.

Loans may be transferred by novation, assignment or sub-participation. Novation requires borrower consent and results in a clean substitution of parties. Assignment of rights is permitted, though security interests may need to be re-registered unless held through a security agent. Sub-participation remains common, especially for lenders seeking to avoid re-perfection of security.

It is legally possible for a borrower or its sponsor to repurchase outstanding debt, provided that the underlying loan documents do not prohibit or restrict this. The permissibility and mechanics are typically a matter of contractual negotiation, and lenders may impose conditions or consents before allowing a buyback.

There is no statutory “certain funds” requirement in UAE law for public acquisition financings. Acquisition financings are privately negotiated.

Key developments include the widespread adoption of Secured Overnight Financing Rate (SOFR) and other risk-free rates in place of London Inter-Bank Offered Rate (LIBOR), requiring adjustments to loan agreements.

As a matter of judicial practice, UAE courts often limit the enforceability of excessive interest. In particular, compound interest and interest that exceeds the principal amount are generally not upheld, and commercial interest is typically reduced if it is considered above customary thresholds (12% per annum). However, Dubai courts have occasionally departed from these limitations and enforced higher rates in commercial contexts. Islamic financings remain subject to Sharia prohibitions on riba, meaning that charging or paying conventional interest is not permissible.

Loan and security agreements are private contracts and are not subject to public disclosure. Public companies must disclose material financings under stock exchange rules, but such disclosures do not expand to the disclosure of full agreements.

Under the current tax regime in the UAE, applicable withholding tax rate is set at 0%, therefore there is no withholding tax imposed on payments of principal or interest to lenders, whether domestic or foreign. While interest paid to non-resident lenders is considered state-sourced income and could, in principle, fall within the scope of withholding tax, no tax is actually withheld at this time. This applies to both conventional loans and Islamic finance structures. Consequently, payments of interest or similar financing returns (eg, profit in murabaha arrangements) can be made free of any UAE withholding tax obligations.

This position may change if the UAE government amends the withholding tax rate in the future, but as of now, no withholding tax applies to such payments.

The UAE remains a tax-efficient jurisdiction for both lenders and borrowers. There are no stamp duties, registration taxes, or documentary taxes imposed on loan agreements or the creation of guarantees and security interests. However, lenders should be mindful of certain practical costs and regulatory considerations that may arise in the course of structuring and documenting such transactions.

• Registration fees – where security is taken over assets such as shares, real estate or movable property, it may need to be registered with the relevant authority. Registration typically attracts nominal administrative fees, which vary depending on the asset type and the emirate.
• Notarisation requirements – some documents, notably real estate mortgages and personal or corporate guarantees, may need to be notarised, particularly in onshore UAE. Notarisation fees differ between emirates and are usually calculated based on the value of the obligations secured or guaranteed.
• Corporate tax considerations – as of June 2023, the UAE has implemented a federal corporate tax regime. While lenders are generally not subject to UAE corporate tax merely by receiving interest payments from UAE borrowers, borrowers must consider whether interest expenses are tax-deductible. Deductions are subject to a the general interest deduction limitation rules (eg, 30% of EBITDA threshold and AED12 million de minimis threshold), and additional rules may apply where the lender is a related party, including transfer pricing and arm’s length documentation requirements.
• VAT – the UAE levies VAT at a standard rate of 5%. Most financial services, including interest on loans, are exempt from VAT. However, VAT may be chargeable on certain transaction-related fees such as arrangement fees, commitment fees or agency services if they fall within the scope of taxable supplies.

Foreign lenders face minimal direct tax exposure in the UAE, as the UAE jurisdiction currently imposes a 0% withholding tax on outbound payments, including interest, to non-resident lenders, provided the interest is not attributable to a UAE permanent establishment of the lender. The law allows for the withholding tax rate to be changed by Cabinet Decision. If the rate increases in the future, interest payments to foreign lenders could become subject to withholding tax, increasing the cost of borrowing.

Accordingly, there are no specific UAE tax concerns associated with foreign or non-money centre bank lenders from a purely domestic perspective.

The UAE has an extensive Double Taxation Agreements (DTA) network. If the foreign lender’s jurisdiction has a DTA with the UAE, the treaty may limit the UAE’s right to tax interest or provide relief from double taxation.

However, several indirect considerations arise.

• Corporate tax nexus risk – a key concern for foreign lenders is avoiding a permanent establishment (PE) or “nexus” in the UAE that could trigger UAE corporate tax liabilities. This is generally not an issue where the lender operates entirely offshore and deals at arm’s length. However, caution is warranted where lending activity is structured through UAE branches or involves repeat transactions within the UAE.
• Transfer pricing compliance – where the lender is a related party to the UAE borrower, transfer pricing rules under the UAE corporate tax law may apply. This requires arm’s length pricing and potential documentation obligations under OECD-aligned principles.
• Local regulatory restrictions – non-UAE licensed entities must ensure compliance with the UAE Central Bank regulations when lending into the UAE, particularly where lending to consumers or in local currency. Although these are regulatory rather than tax concerns, failure to comply could have indirect financial and tax implications.

Mitigation Strategies:

• structure loans through special purpose vehicles (SPVs) based in tax treaty jurisdictions, where applicable;
• ensure documentation of arm’s length terms for related-party transactions;
• avoid operational presence to reduce the risk of tax nexus creation;
• review the relevant DTA between the UAE and the lender’s jurisdiction to confirm the applicable withholding tax rate and relief mechanisms; and
• avoid using related-party loans for transactions that could trigger the specific anti-avoidance rule unless the lender is taxed at a sufficient rate or the main purpose is not to obtain a tax advantage.

Security may be created over real estate, movable assets, shares, receivables, bank accounts, cash deposits and intellectual property.

• Real estate mortgages must be registered with the relevant land department. Registration is mandatory for validity and priority, and fees are typically calculated as a percentage of the secured amount. Mortgages may cover freehold, leasehold or usufruct rights.
• Moveable pledges under the Moveables Security Law include inventory, equipment, receivables, deposits, IP and contractual rights. Perfection is achieved by registration in the EIRC. Registration gives priority over unregistered interests and enables limited self-help remedies.
• Shares in LLCs are pledged via notarised agreements registered with the relevant departments of economic developments where such LLCs are incorporated (eg, Dubai Economic Department for onshore Dubai LLC shares); PJSC shares are pledged through the clearing systems. Free zone share charges follow the rules of the relevant free zone – usually requiring registration with the corporate register of that relevant free zone.
• Receivables may be assigned or pledged under the Moveables Security Law. As a matter of perfection, notice is sent out to the creditors of the underlying contracts including such receivables, and such security is registered with the EIRC.
• Accounts can be pledged under the Moveables Security Law. Perfection can be achieved through the account bank, the pledgee and the pledgor entering into a tri-partite control agreement and registration of the account pledge with the EIRC.
• Cash deposits are pledged by pledging the account where such cash deposits are held.
• Promissory notes are widely used as negotiable instruments to evidence indebtedness. Promissory notes provide an enforceable payment obligation that can be executed through a fast-track court process. Promissory notes may also be pledged as part of a commercial pledge or registered under the Moveables Security Law.
• Guarantees must be in writing and specify the secured obligation or amount. Corporate and personal guarantees are enforceable, including downstream, upstream and cross-stream guarantees, subject to constitutional authorisation and board/shareholder approvals. PJSCs are restricted from providing financial assistance for acquisition of their own shares, but LLCs are exempt.

• Business/commercial mortgage is another type of security that can be established over movable assets. Such a mortgage may extend over the entirety of a commercial enterprise (or defined parts thereof), including goodwill, trade name, contracts, equipment and other intangible rights of a business. It must be registered with the relevant Department of Economic Development’s Commercial Register in the emirate of incorporation, and once registered is valid for five years (renewable). A commercial mortgage can only be granted in favour of banks and financial institutions. Owing to these limitations, it is less flexible, and following the introduction of the Moveables Security Law it has become more common in practice to establish security over movable assets under the Moveables Security Law framework.

Failure to comply with the relevant perfection requirements typically renders security unenforceable against third parties and reduces priority against subsequent security interests.

The Moveables Security Law allows pledges to be established over present and future assets, providing functional equivalents to all-assets charges. It is common practice in respect of future assets for parties to enter into an addendum to the moveables security agreement and to register the future secured assets with the EIRC once such future assets crystallise. DIFC and ADGM expressly permit floating charges.

There is no prohibition on a parent company to provide a downstream guarantee, provided that its constitutional documents permit this, and the relevant corporate approvals are obtained.

In respect of upstream and cross-stream guarantees, in addition to the permissibility under the constitutional documents and the relevant corporate approvals, and subject to the financial assistance restrictions set out in 5.4 Restrictions on the Target, the guarantor can provide a corporate guarantee, provided that the guarantor demonstrates the corporate benefit. As a method to mitigate the risk of challenge by minority shareholders and during insolvency proceedings, the guarantor may introduce a liability cap as well.

Financial assistance rules apply to public joint stock companies (PJSCs), which are prohibited from providing loans, guarantees or security for the acquisition of their own shares. LLCs are exempt and may provide such assistance if properly authorised.

Under the Companies Law, companies are prohibited from extending loans to their directors, they are prohibited from guaranteeing the obligations of their directors and they are prohibited from extending a loan to another company if their director holds more than 20% of the share capital (including the shares of their immediate and second-degree family) of the borrower company. Regulated entities may require regulatory approvals before granting security. Mortgages over UAE real estate may only be held by locally licensed entities, so foreign lenders appoint a local security agent.

Releases depend on asset type. Real estate mortgages are discharged through deregistration at the land department. Moveables pledges are released online in the EIRC. Share pledges require registrar filings or clearing system releases. Account and receivable pledges are released by notice to counterparties and the EIRC de-registration.

Priority is established by the time of perfection – whether it be registration or possession. Under the Moveables Security Law, the first registered security prevails. Real estate mortgages rank according to registration date at the land department.

Contractual subordination relies on contractual arrangements between lender groups. Intercreditor agreements and contractual subordination are enforceable and recognised in insolvency proceedings to the extent of the waterfall of payments in an insolvency. However, if the court adopts a preventive settlement procedure or a restructuring procedure under the UAE law, there is a possibility that the court may terminate any agreement between the debtor and a third party, including loan agreements. This may affect the enforceability of the intercreditor agreements.

Certain statutory liens take precedence over contractual security, including landlord’s liens, contractors’ liens, and maritime liens. While it is not so common for these to be enforced, they can rank ahead of secured creditors in insolvency. Lenders manage this risk through covenants, direct agreements and contractual undertakings from borrowers.

In the UAE (onshore jurisdiction), a secured lender may enforce its collateral upon the occurrence of an event of default as defined under the loan or security agreement. The method and process of enforcement depend on the type of collateral and whether the security interest has been duly perfected and registered.

Enforcement Procedures

• Movables assets – under the Moveables Security Law, a secured creditor may enforce a registered security interest over movable assets (eg, receivables, bank accounts, inventory) through extra-judicial enforcement (ie, without court intervention), provided this right is expressly stipulated in the security agreement. Enforcement typically requires prior notice to the debtor and registration of the enforcement notice with the EIRC.
• Immovable property (real estate) – enforcement is judicial in nature and must proceed through the UAE courts, generally requiring a court order for auction and sale.
• Shares and commercial pedge – enforcement of pledged shares requires compliance with the UAE Commercial Companies Law and the articles of association of the pledged entity. Share pledges are enforceable through UAE courts, though some share pledges in free zones (eg, DIFC or ADGM) may allow for contractual enforcement if agreed.
• Guarantees – personal or corporate guarantees can be enforced through judicial means. UAE courts recognise both absolute and conditional guarantees, provided they are in writing and signed by the guarantor.

Restrictions and Concerns

• Public order concerns – UAE courts may strike down enforcement provisions deemed contrary to public policy.
• Practical delays – judicial enforcement of security may involve procedural delays, especially in the enforcement of real estate mortgages or share pledges not governed by special regimes.

UAE courts generally recognise and uphold foreign governing law clauses, subject to the limitations set out below.

Foreign Law Recognition

UAE courts (onshore) may accept foreign law as the governing law of a contract in commercial matters, provided the choice does not contravene public order or morality. However, the UAE court may disregard the chosen foreign law if its application would violate mandatory provisions of UAE law.

Jurisdiction Clauses

A contractual submission to a foreign jurisdiction may be recognised, but it does not oust the jurisdiction of UAE courts entirely, particularly if the dispute involves UAE-based parties, assets located in the UAE, or if the performance of the contract is linked to the UAE.

Waiver of Sovereign Immunity

Waivers of immunity may be upheld, especially in commercial transactions involving state-owned enterprises or governmental bodies, but enforcement may be complex and require scrutiny under UAE sovereign immunity principles.

Free Zones

DIFC and ADGM courts, which are based on common law systems, provide greater flexibility in recognising and enforcing foreign law and jurisdiction clauses, making them attractive venues for cross-border financings.

Foreign Judgments

The enforcement of foreign court judgments in the UAE is governed by Article 222 of Federal Decree-Law No 42 of 2022. This provision sets out the conditions under which a foreign judgment may be recognised and enforced by the UAE courts. In essence, the judgment must be final and binding, issued by a competent court, and must not conflict with UAE public order or an existing UAE judgment. The parties must also have had proper notice and an opportunity to be heard. One of the most important conditions is reciprocity; the UAE courts must be satisfied that a UAE judgment would be similarly enforceable in the foreign court’s jurisdiction.

In 2023, the UAE and the UK signed a Memorandum of Guidance confirming reciprocal enforcement of judgments between UAE onshore courts and the courts of England and Wales. This formal recognition removes historical uncertainty around reciprocity and has been cited in UAE court decisions to support the enforcement of English court judgments. While the MoG is not a binding treaty, it reflects an alignment in enforcement approaches and is expected to streamline cross-border recognition processes between the two jurisdictions.

Even in the absence of a treaty, UAE courts may consider enforcement based on principles of international comity, particularly where it can be demonstrated that UAE judgments would be reciprocally enforced in the foreign court’s jurisdiction. However, this route is less predictable and subject to stricter judicial scrutiny, including a detailed review of the foreign court’s procedures, jurisdiction and whether due process was followed. The burden of proof rests with the party seeking enforcement, and UAE courts retain discretion to refuse enforcement if any of the statutory conditions are not clearly met.

The DIFC courts have an independent legal framework that permits the recognition and enforcement of foreign court judgments under Article 24 of DIFC Law No 10 of 2004 and Article 7(4) of Dubai Law No 12 of 2004 (the “Judicial Authority Law”). Where the underlying matter has a sufficient connection to the DIFC, such as assets or parties located within the jurisdiction, the DIFC courts may ratify a foreign judgment without re-examining the merits. However, recent decisions by the Joint Judicial Tribunal have narrowed the ability to use the DIFC courts as a “conduit jurisdiction” for enforcement where no such connection exists, reinforcing the general principle that foreign judgments concerning assets outside the DIFC should be enforced through the Dubai onshore courts.

Similarly, the ADGM courts operate under a common law system and have adopted a legal framework that allows for the recognition and enforcement of foreign judgments with minimal formality. Under ADGM Courts Regulations 2015, the ADGM courts may enforce judgments from foreign jurisdictions without rehearing the case, provided the judgment is final, conclusive and not contrary to ADGM public policy. The ADGM has also entered into mutual recognition agreements with various jurisdictions and benefits from the Abu Dhabi Judicial Department’s co-operation protocol, which facilitates the onward enforcement of ADGM judgments in Abu Dhabi onshore courts. Like the DIFC, however, the use of ADGM as a conduit jurisdiction may face practical limitations unless a genuine connection to the ADGM exists.

Arbitral Awards

The UAE is a signatory to the New York Convention (1958) and has domesticated its provisions through Federal Law No 6 of 2018 on Arbitration, providing a clear pathway for enforcing foreign arbitral awards without re-examining the merits. The award must be final, issued by a properly constituted tribunal, and not in conflict with UAE public policy or morality. In addition to the New York Convention, the UAE is also party to several regional and bilateral treaties, such as the Riyadh Arab Convention (1983) and the GCC Convention (1996), which can offer alternative legal bases for recognition and enforcement of arbitral awards, particularly in disputes involving regional counterparties. In practice, arbitral awards tend to be enforced more efficiently than foreign court judgments, especially when the arbitration is seated in a jurisdiction with a strong rule of law tradition and procedural compatibility with UAE standards.

In practice, arbitral awards tend to be enforced more efficiently than foreign court judgments, especially when the arbitration is seated in a jurisdiction with a strong rule of law and procedural compatibility with UAE standards. However, UAE courts retain discretion to refuse enforcement if the award or foreign court judgment violates public policy or morality. The concept of public policy in the UAE has historically been interpreted broadly and may include matters such as compliance with Sharia principles (in relevant contexts), procedural fairness, or the validity of interest provisions. While recent judicial trends indicate a narrowing interpretation of this defence, aligned with international best practices, public policy remains a potential hurdle and is often raised by parties resisting enforcement. The risk of non-enforcement on this basis is higher where the award arises from a dispute involving government entities, sensitive sectors or issues governed by substantive UAE laws.

There is no legal restriction on foreign lenders enforcing their rights under a loan or security agreement in the UAE. However, in practice, certain procedural and regulatory considerations may affect enforcement such as Arabic translation requirements, the need for local security agents, potential limitations arising from UAE public policy, and sovereign immunity concerns in transactions involving government-related entities.

The UAE’s insolvency framework is governed by Federal Decree Law No 51 of 2023 on Financial Restructuring and Bankruptcy, which came into effect on 1 May 2024, replacing the previous Federal Decree Law No 9 of 2016. The new law introduces several important reforms aimed at modernising the UAE’s insolvency regime and enhancing creditor protections. In parallel, the Specialised Bankruptcy Court was established in July 2025 under Federal Decision No 39 of 2025, providing a dedicated judicial forum for insolvency matters.

The Bankruptcy Law applies to commercial companies, civil companies with professional licences, and individual traders, but excludes entities regulated by the UAE Central Bank, as well as DIFC and ADGM entities, which are subject to their own legal regimes.

Main Procedures Under the New Bankruptcy Law

Preventive settlement

Replacing the former “preventive composition”, this process allows debtors who are facing financial difficulties but are not yet insolvent to restructure debts via a court-supervised process. Debtor in possession control is retained, and creditor enforcement actions are typically stayed during this process, subject to limited exceptions with court approval.

Restructuring proceedings

Available where the debtor is insolvent but restructuring remains viable, a court-appointed trustee oversees the process, including preparation of a restructuring plan, negotiation with creditors, and potential asset sales. A moratorium applies, and enforcement by secured creditors may be restricted, depending on the asset’s role in the reorganisation.

Liquidation

If restructuring is not feasible, the court may order liquidation. A trustee is appointed to dispose of the debtor’s assets and distribute proceeds to creditors in accordance with statutory priorities. While secured creditors have priority over the proceeds of their collateral, enforcement generally occurs through the liquidation estate rather than direct action.

Additional considerations for lenders

In respect of temporary moratoria, preventive settlements and restructuring proceedings trigger automatic stays on creditor enforcement, including secured claims, unless otherwise authorised by the court.

Secured creditors’ rights

While secured lenders retain priority over collateral proceeds, enforcement may be delayed and subject to judicial supervision, particularly where the asset is essential to the debtor’s operations.

Clawback and avoidance

The law includes provisions for the invalidation of preferential, undervalued or fraudulent transactions made prior to the onset of insolvency. These may include guarantees or security granted shortly before proceedings.

Director and officer liability

Managers may face civil or criminal liability for wrongful trading, mismanagement or failure to initiate proceedings in a timely manner.

Specialised bankruptcy court

The newly established court is expected to streamline insolvency procedures, ensure consistency in rulings, and provide a dedicated forum for complex creditor-debtor disputes. This is anticipated to improve transparency and predictability for both domestic and foreign lenders.

Under Federal Decree Law No 51 of 2023 on Financial Restructuring and Bankruptcy, the statutory order of priority in liquidation proceedings is as follows.

• Secured creditors – paid from the proceeds of the secured asset, up to the value of their security. Any unsecured shortfall ranks alongside general unsecured claims.
• Preferential creditors, which include:
1. judicial fees, trustee expenses and costs necessary to preserve or realise the bankruptcy estate;
2. government dues and taxes;
3. employee wages and end-of-service benefits (typically limited to entitlements for up to three months); and
4. experts’ fees incurred during restructuring or liquidation, where authorised.
• Unsecured creditors – these rank below secured and preferential creditors and share pro rata in any remaining assets.
• Subordinated creditors and shareholders – any distributions to subordinated lenders or shareholders are made only after all higher-ranking claims are satisfied in full.

The duration and effectiveness of insolvency proceedings in the UAE vary considerably depending on the type of procedure (preventive composition, restructuring or liquidation), the complexity of the debtor’s operations, and the level of co-operation from creditors and other stakeholders. The introduction of Federal Decree Law No 51 of 2023 on Financial Restructuring and Bankruptcy and the establishment of a dedicated Bankruptcy Court in 2025 are expected to improve procedural efficiency, though practical implementation is still evolving.

While the UAE’s formal insolvency framework is governed by Federal Decree Law No 51 of 2023, there is no codified regime for out-of-court corporate rescue or reorganisation. Nevertheless, informal workouts and consensual restructurings are widely used in practice as a pre-insolvency solution, especially in large, multi-creditor or cross-border scenarios.

Informal Workouts and Standstill Agreements

Companies in financial distress often enter into voluntary negotiations with creditors to restructure debt obligations without initiating formal court proceedings. Common techniques include:

• standstill agreements to halt enforcement or litigation;
• rescheduling or refinancing of loan terms;
• debt-for-equity swaps (typically among shareholder-affiliated creditors);
• asset sales to raise liquidity; and
• partial settlements or write-downs negotiated bilaterally or with a steering committee of lenders.

These arrangements are generally contractual and not regulated by statute. Their enforceability depends on mutual agreement and the good faith co-operation of creditors. There is no formal court oversight, although parties may use mediation or expert facilitation in some cases.

Central Bank or Government-Led Resolutions (Sector-Specific)

In regulated sectors such as banking and insurance, distressed financial institutions may be subject to regulatory resolution mechanisms under the authority of the UAE Central Bank or other sector-specific regulators. These may involve supervisory interventions, forced mergers or asset transfers, though such mechanisms are not transparent or commonly applied outside systemic risk cases.

DIFC and ADGM Practices

It is worth noting that DIFC and ADGM offer greater legal flexibility for consensual restructurings, including:

• schemes of arrangement under English law-derived frameworks;
• the use of administration-like processes; and
• greater support for pre-pack arrangements and out-of-court agreements.

Some UAE onshore companies with links to DIFC/ADGM entities or governing law clauses may explore such frameworks as part of a group-level restructuring strategy.

Common Practice and Limitations

Out-of-court restructuring is widely used in the UAE, especially in:

• family-owned conglomerates;
• real estate and construction sectors; and
• SMEs with concentrated bank debt.

However, challenges include:

• lack of creditor co-ordination in multi-lender situations;
• absence of binding mechanisms outside court processes;
• risk of individual creditor enforcement disrupting informal negotiations; and
• difficulty in reaching consensus with diverse stakeholders.

Even though the UAE’s new Bankruptcy Law (Federal Decree Law No 51 of 2023) provides a streamlined restructuring framework, lenders still face noteworthy risks if a borrower, security provider or guarantor becomes insolvent.

Suspension of Claims (Moratorium Periods)

A moratorium automatically takes effect upon admission to Preventive Settlement (initially three months, extendable to six) during which lenders, including secured creditors, are prevented from enforcement actions unless the court permits otherwise.

Trustee Authority and Asset Disposal Timeframes

While earlier law imposed a one-month deadline for sale of secured assets, the new law emphasises speed and judicial supervision but does not specify identical timeframes, raising uncertainty for lenders expecting quick recovery.

Initial Deposit Requirement

Under the new UAE Bankruptcy Law, lenders seeking to initiate insolvency proceedings against a defaulting borrower should be aware of a key procedural change – a mandatory initial deposit equal to 5% of the debtor’s total debts or assets is now required at the time of filing. This requirement, set out in Article 25 and implemented through Cabinet Resolution No 94 of 2024 (Executive Regulations), introduces a significant upfront cost for creditor-initiated applications. While courts may waive or reduce the deposit in cases of demonstrated hardship, this procedural hurdle adds a new layer of financial and strategic consideration for lenders contemplating enforcement through bankruptcy proceedings.

The United Arab Emirates (UAE) continues to witness a strong level of project finance activity, driven by ambitious government-led infrastructure development, energy transition goals, and regional economic diversification strategies. The project finance market remains active across both onshore and free zone jurisdictions, with a mix of domestic and international lenders, multilateral institutions, and export credit agencies participating in large-scale financings.

The energy and power sector, particularly renewable energy, remains the most active, with large-scale IPP and PPP projects tendered by DEWA, EWEC and SEWA. Flagship projects include the 2 GW Al Dhafra Solar IPP, the Hassyan clean coal-to-gas plant, and green hydrogen pilot ventures. In water and wastewater, desalination and sewage treatment projects (such as Taweelah IWP and Jebel Ali STP) are increasingly structured under PPP models.

Transport and infrastructure projects, including Etihad Rail, Dubai Metro expansion, and major port developments, continue to attract syndicated bank financing and ECA support. In the oil, gas and petrochemical sectors, ADNOC has led innovative transactions through pipeline monetisation and joint ventures, often with limited recourse financing structures. Meanwhile, industrial and logistics projects within zones like KIZAD, JAFZA and Dubai Industrial City draw capital from regional banks and DFIs, often involving Islamic financing tools and structured leasing.

PPPs are a key component of the UAE’s infrastructure strategy, especially in capital-intensive sectors such as energy, water, healthcare, transport and waste management.

While there is no single unified PPP law at the federal level for all Emirates, the Federal Law No 12 of 2023 on Public-Private Partnerships now governs federal-level PPP projects, providing a dedicated legal framework for partnerships between private entities and federal ministries or authorities. The law establishes the Ministry of Finance as the main regulatory body for federal PPPs and outlines key provisions related to risk allocation, procurement procedures and private sector engagement.

At the Emirate level, Abu Dhabi’s PPP regime is governed by Law No 2 of 2019 and implemented by the Abu Dhabi Investment Office (ADIO), which acts as the central granting and supervising authority for PPP projects within the Emirate. ADIO maintains a transparent procurement process and publishes project pipelines to attract both local and international investors.

In Dubai, PPPs are governed by Dubai Law No 22 of 2015, with the Department of Finance (DOF) serving as the key granting authority in co-ordination with sector-specific government bodies (such as RTA for transport and DEWA for utilities). Projects require approval from the Supreme Committee for PPPs in Dubai for large-scale or strategic initiatives.

PPP projects are typically structured through concession agreements, availability payment models or build-operate-transfer (BOT) schemes. SPVs are commonly used to ring-fence project risks and liabilities. Approval processes often require co-ordination across multiple authorities, particularly where land use, foreign ownership or sector-specific licensing is involved.

In the UAE, project documents such as construction contracts, power purchase agreements (PPAs), and offtake agreements are not mandatorily required to be governed by UAE law. Parties are generally free to choose a foreign governing law, commonly English or New York law and international arbitration as the dispute resolution mechanism, particularly in large-scale, cross-border project finance transactions. This flexibility is grounded in the principle of freedom of contract under Federal Law No 5 of 1985 (the Civil Code), provided that the choice of foreign law does not contradict UAE public order or morality and the subject matter is commercial in nature.

However, there are exceptions where UAE law may apply mandatorily. These include contracts related to UAE real estate and employment relationships. Additionally, contracts involving sovereign assets, infrastructure concessions or state-owned entities may be subject to Emirate-level rules requiring the application of UAE law or resolution of disputes in local courts. In practice, many transactions adopt a split-documentation approach, with finance documents governed by foreign law, while project security documents are governed by UAE laws (eg, mortgages, pledges over local assets) to ensure validity, perfections and enforceability.

International arbitration is widely used in UAE-based project finance transactions. The UAE is a party to the New York Convention (1958), and foreign arbitral awards are recognised and enforced under Federal Law No 6 of 2018 on Arbitration, subject to compliance with UAE public policy and procedural safeguards. Arbitral seats such as DIFC, ADGM, London, Paris and Singapore are frequently selected, especially in contracts involving international sponsors, EPC contractors or lenders.

Parties may also opt for DIFC or ADGM courts as the forum for resolving disputes. These courts apply common law and permit the use of English law-governed contracts. Judgments issued by DIFC or ADGM courts are enforceable onshore through co-operation protocols with the UAE local judiciary. This mechanism offers greater predictability, procedural efficiency and international investor confidence – making it an increasingly popular choice in UAE project finance transactions.

In most government-led or PPP projects in the UAE, land ownership is not transferred to the project company or foreign investor. Instead, land use rights are typically granted through concession agreements, usufruct rights or long-term lease arrangements, depending on the Emirate and the nature of the project.

The underlying land remains owned by the government or a government-related entity, including in structures where the project company is a joint venture between a state-owned entity and a foreign investor. This approach ensures that the sovereign ownership of land and strategic assets is preserved, while allowing private and foreign participants operational control for the duration of the project term.

Water access, utility connections and subsurface usage (if applicable) are generally addressed within the concession or usufruct agreement, rather than being treated as stand-alone proprietary rights. Foreign sponsors typically hold long-term rights of occupation and use, sufficient for financing purposes, but without acquiring title to the land itself.

From a financing perspective, lenders usually take security over the concession rights, project contracts and shares in the project company, rather than direct mortgages over the land. In practice, this is widely accepted and can be enforced under UAE law, provided proper structuring and registration protocols are followed.

From a practical perspective, deal structuring in UAE project finance transactions must address several key issues. These include allocating construction, offtake and regulatory risks through robust contractual arrangements (eg, EPC, O&M, PPA and concession agreements); structuring security packages over project assets, accounts, receivables and shares in compliance with local perfection rules; and accounting for tax implications in light of the UAE’s corporate tax regime introduced in 2023 and evolving transfer pricing standards. Dispute resolution strategy is another core consideration, with many sponsors and lenders preferring international arbitration or selecting DIFC/ADGM courts, depending on governing law, asset location and enforcement needs.

Structuring project finance transactions in the UAE involves navigating a complex but well-developed legal and regulatory environment. Success hinges on careful SPV structuring, compliance with foreign ownership and sectoral regulations, proper risk allocation and selecting appropriate dispute resolution mechanisms. The evolving tax and investment treaty landscape also plays an increasingly important role in structuring considerations.

Most UAE project finance transactions involve the establishment of an SPV to act as the project company. These SPVs are commonly incorporated as LLCs under Federal Law No 32 of 2021 (the “Commercial Companies Law”), private joint stock companies (PJSCs) for larger or strategic ventures, or as free zone entities within industrial or logistics hubs such as JAFZA, KIZAD, or RAK ICC.

For holding or financing functions, SPVs may also be established in the DIFC or ADGM, leveraging their common law frameworks. These vehicles must be licensed in the relevant Emirate or free zone and are typically ring-fenced to isolate project risks and revenues. They must also comply with any applicable foreign ownership restrictions, particularly for projects involving sensitive sectors or government participation.

Foreign Investment

Following the liberalising reforms under Federal Decree Law No 26 of 2020, 100% foreign ownership is now permitted for many business activities onshore, subject to Emirate-level approvals and provided the activity is not on the “Negative List” (eg, oil exploration, utilities, telecoms). For strategic sectors or concession-based projects, UAE national participation or government-linked partnerships may still be required. Free zones continue to allow full foreign ownership, though operational limitations may apply outside the zone unless additional licensing is obtained.

UAECB Perspective

From a regulatory perspective, the UAE Central Bank does not directly regulate non-financial project companies, but its rules affect project financing in several ways. Foreign lenders must structure cross-border lending carefully to avoid conducting unlicensed banking activity within the UAE. Onshore bank accounts used by project companies are subject to anti-money laundering and KYC oversight. Large repatriations or cross-border payments may be scrutinised under AML/CFT regulations and economic substance rules.

Treaties

Treaty protection is an important structuring consideration for foreign investors and lenders. The UAE is party to more than 90 bilateral investment treaties (BITs), many of which offer protections such as protection against expropriation, fair and equitable treatment, and access to international arbitration (eg, ICSID or UNCITRAL). The UAE is also a signatory to the New York Convention (1958), enhancing the enforceability of arbitral awards. Over 130 double tax treaties (DTTs) further reduce tax friction, even though the UAE does not currently impose withholding tax on dividends or interest. In addition, the UAE’s membership in the WTO and Arab Free Trade Area supports regional investment strategies.

Overall, the UAE offers a flexible and increasingly sophisticated legal environment for structuring complex, cross-border project finance transactions.

Project finance transactions in the UAE are typically structured using a combination of syndicated bank loans, export credit agency (ECA) support, and increasingly, alternative capital sources such as private equity, green bonds and commodity-backed facilities. Senior debt is most commonly provided by UAE-based and international banks through syndicated or club deals, with Islamic financing (eg, murabaha, ijara, sukuk) often incorporated, especially in energy and infrastructure projects. ECA support plays a significant role in large-scale transactions involving imported equipment or international sponsors, with institutions like Euler Hermes, UKEF, SACE and KEXIM offering direct loans, buyer credit guarantees and risk insurance – often blended with uncovered commercial bank tranches.

The UAE’s project bond market is developing, particularly in the context of sovereign and quasi-sovereign issuers, with green and sustainability-linked bonds gaining traction. However, regulatory constraints, limited rating history and underdeveloped platforms remain challenges for broader market access by private SPVs. Alternative financing sources are also expanding. Private equity and infrastructure funds – particularly from sovereign investors like Mubadala and ADQ, or global platforms like Brookfield and Actis – frequently invest alongside senior lenders. In sectors like oil and gas and mining, commodity traders (eg, Glencore, Vitol) offer structured trade and offtake-backed financing, while development finance institutions (eg, IFC, AIIB, IsDB) provide long-tenor debt, political risk cover and ESG structuring.

Most UAE project financings are structured as limited or non-recourse transactions, with lenders relying on project cash flows and robust security packages over assets, accounts, shares and contracts. Deal structures often include multiple tranches, such as senior debt, subordinated loans, and equity or quasi-equity. Security is held by a local security agent (often a UAE bank), with intercreditor arrangements regulating rights and enforcement. The UAE’s mature legal and banking ecosystem supports increasingly sophisticated financing models, with growth in green infrastructure, digital projects, and energy transition initiatives helping to diversify the market beyond traditional bank-led models.

Natural resources in the UAE are considered sovereign assets, with ownership and control vested in each individual Emirate rather than the federal government. Resource exploration and development are typically conducted through concession agreements, production-sharing contracts (PSCs), or joint ventures between state-owned enterprises, such as ADNOC, SNOC or RAK Gas, and international investors.

Each Emirate regulates its own resources independently: for example, Abu Dhabi’s regime is governed by the Supreme Petroleum Council and ADNOC policies, while Sharjah and Dubai operate through SNOC and the Dubai Supreme Council of Energy, respectively.

There is no overarching federal natural resources law. Instead, licensing requirements include Emirate-issued exploration permits, environmental approvals under Federal Law No 24 of 1999, and land access arrangements with local authorities. While export of hydrocarbons and minerals is generally permitted, it is contractually regulated and subject to Emirate-level control, especially in relation to long-term offtake agreements and destination restrictions aligned with international sanctions and dual-use export control regimes.

The UAE encourages local value creation through initiatives like ADNOC’s In-Country Value (ICV) programme, which rewards local manufacturing, employment of UAE nationals and engagement with UAE-based suppliers. Although beneficiation (domestic processing) is not legally required, state-linked developers often prioritise projects that support industrial diversification and downstream integration – such as refining, smelting and petrochemical development.

Foreign investment in upstream sectors is typically restricted or subject to state partnerships, while downstream activities (eg, refining, logistics and processing) are generally open to 100% foreign ownership, particularly in free zones. Infrastructure such as pipelines, terminals and storage facilities is usually government-owned, with third-party access governed by concession and throughput agreements. Successful participation in UAE natural resources projects requires close alignment with national priorities in energy security, industrial development and environmental stewardship.

In the UAE, environmental, health and safety (EHS) laws apply at both federal and emirate levels, with specific requirements depending on the nature and location of the project. Environmental regulation is primarily governed by Federal Law No 24 of 1999 (as amended), which covers pollution control, biodiversity protection, waste management and environmental impact assessments (EIAs). EIAs are mandatory for major infrastructure, energy and industrial projects and require approval from the relevant authority before project commencement.

Health and safety standards are set out under the UAE Labour Law (Federal Decree-Law No 33 of 2021), along with accompanying ministerial resolutions, which require employers to implement workplace safety measures such as risk assessments, safety training and reporting of workplace incidents.

Regulatory oversight is split between federal and local authorities. At the federal level, the Ministry of Climate Change and Environment (MOCCAE) oversees environmental regulation, while the Ministry of Human Resources and Emiratisation (MOHRE) handles occupational health and safety. At the emirate level, key authorities include the Environment Agency – Abu Dhabi (EAD) and OSHAD in Abu Dhabi, as well as Dubai Municipality and Trakhees in Dubai. Other emirates operate through their respective environmental or municipal departments. These bodies are responsible for issuing permits, conducting inspections and enforcing EHS compliance.