The UAE legal system is seeing a major change with the issuance of Federal Decree-Law No. 25 of 2025 on Civil Transactions Law, effective 1 June 2026. It repeals and replaces in full the long-standing Federal Law No. 5 of 1985.
The Civil Code of 1985 generally left it to the courts in their broad discretion to create construction contracts. The 2026 CTL aims to improve certainty by better defining the rules on notice obligations, remedies for defective work, liquidated damages and decennial liability, and to facilitate more predictable risk allocation in project agreements.
Apart from specific provisions on contract for work agreements, the 2026 Civil Transactions Law contains more general changes of broad application, which might have a material impact on the formation and execution of project agreements. Article 121 expressly regulates the pre-contractual phase and states that the initiation, conduct, and termination of negotiations shall be in accordance with good faith. The parties negotiating are not obliged to enter into a contract. A party negotiating or terminating negotiations in bad faith may be liable for actual damages suffered by the other party. The article also limits the compensation to exclude expected benefits from a contract that was never concluded, and lost opportunities to obtain such benefits, unless otherwise agreed. Importantly, when a material fact relating to the validity of the contract is knowingly concealed, it constitutes an act of bad faith. Additionally, Article 84 also states that the age of majority shall be 18 Gregorian years (reduced from 21 lunar years).
Under the Civil Code of 1985, contracts for work were governed by Articles 872 to 896. Now they are dealt under Articles 812 to 839 with the implementation of the 2026 Civil Transaction Law. This change maintains the spirit of the pricing and performance of the agreements, while introducing structural flexibility and lessening the need for court involvement. The operational distinction between these two statutory frameworks is most apparent in several key legal areas:
When construction disputes escalate, many major project disputes are resolved through binding arbitration, particularly where the underlying contract contains an arbitration clause, utilizing the procedural framework of Federal Law No. 6 of 2018 (the “UAE Arbitration Law”) and the 2022 Arbitration Rules of the Dubai International Arbitration Center (DIAC).
The UAE Arbitration Law is based on the UNCITRAL Model Law and provides strong support for complex infrastructure disputes. Article 6 of the Federal Law No. 6 of 2018 further codifies the principle of separability, by which the invalidity, cancellation or termination of the main contract does not affect the validity of the underlying arbitration agreement. However, parties must comply with severe requirements regarding capacity under Article 4, which states that an arbitration agreement can only be entered into by a natural person with the capacity to dispose of his or her rights, or by an authorized representative of a legal person.
The 2022 DIAC Rules also provide for contemporary procedures such as electronic filings, virtual hearings and electronic signatures on awards under Article 34.6, while Article 41(6) of the UAE Arbitration Law separately provides for electronic signing of arbitration awards.
The UAE Arbitration Law sets out the main procedural framework for challenging and enforcing arbitration awards at the enforcement stage. Articles 53 to 55 are interconnected in that they limit the grounds of annulment, govern the time and manner of filing an application for annulment, and lay down the procedure for recognition and enforcement before the competent court.
To avoid disputes and protect commercial positions, stakeholders may incorporate few changes to their practices for contract administration, procurement and risk management:
The 2026 Civil Transactions Law represents an important point in the UAE construction law framework, shifting from general judicial discretion to more specific statutory provisions on notice, defective works, liquidated damages, termination and decennial liability. The reform is not just technical for contractors, employers, engineers, and subcontractors. It directly affects the drafting, administration, and enforcement of construction contracts.
As the 2026 Civil Transactions Law comes into force, parties that review their contracts and strengthen their internal project-management processes early will be better placed to reduce disputes, preserve claims, and manage construction risk with greater certainty.
