Disputes, arbitration and closing a company in the UAE
Three court systems, modern arbitration, a new civil code since June 2026 and an orderly route out. Here is how to choose the forum, get paid and close a company properly.
Onshore civil law, two common-law islands
The UAE runs three court systems side by side. The onshore courts, federal courts in most emirates and local courts in Dubai, Abu Dhabi and Ras Al Khaimah, apply UAE civil law, work in Arabic and hear most commercial disputes on the mainland and in ordinary free zones. The DIFC Courts in Dubai and the ADGM Courts in Abu Dhabi are English-language common-law courts, created for their financial centres but open to other parties who agree to use them in their contracts. A Judicial Tribunal resolves conflicts of jurisdiction between the DIFC Courts and the Dubai Courts.
For a foreign business, the practical consequence is that the forum is a choice made at signing. A contract silent on disputes between two mainland companies will go to the onshore courts. A clause choosing the DIFC or ADGM Courts, or arbitration seated in the DIFC or ADGM, puts the dispute into a common-law system with English-language proceedings. Each route has different costs, speed and enforcement paths, and the right one depends on the counterparty and where its assets are.
What changed on 1 June 2026
The substantive law governing contracts onshore changed in 2026. Federal Decree-Law No. 25 of 2025 on Civil Transactions came into force on 1 June 2026, repealing and replacing the Civil Code of 1985 that had governed contracts, obligations, liability and property for four decades. The new code replaces much broad judicial discretion with more specific statutory rules on notices, defects, liquidated damages, termination and the allocation of risk, and introduces express provisions for situations the old law left to the courts, such as the employer's right to withdraw from a contract for works and the compensation then payable to the contractor.
Contracts in force
Contracts signed before 1 June 2026 are generally governed by the law in force when they were made, but disputes arising now will be heard by courts applying the new code's approach. Long-term contracts deserve a review.
Liquidated damages
The new code addresses agreed compensation more specifically, which affects how penalty and delay clauses are drafted and enforced.
Construction
Decennial liability for buildings remains, with clarifications, and contractor recourse against subcontractors sits outside the statutory warranty.
Templates
Standard terms drafted under the 1985 code should be checked against the new provisions on notice, termination and limitation of liability.
Seat, institution, enforcement
Onshore arbitration is governed by Federal Law No. 6 of 2018 on Arbitration, based on the UNCITRAL Model Law and amended in 2023 to tighten conflict-of-interest rules for arbitrators connected to an institution's governing bodies. Arbitration seated in the DIFC follows the DIFC Arbitration Law, and in ADGM the ADGM Arbitration Regulations. The UAE has been party to the New York Convention since 2006, so foreign awards are enforceable on its limited grounds, and UAE awards are enforceable abroad.
The institutional landscape changed in 2021. Dubai Decree No. 34 of 2021 abolished the DIFC-LCIA Arbitration Centre and the Emirates Maritime Arbitration Centre and transferred their functions to the Dubai International Arbitration Centre (DIAC), whose 2022 Rules make the DIFC the default seat where the parties have not chosen one. In Abu Dhabi, arbitrateAD replaced the earlier centre with its 2024 Rules, which default to an ADGM seat. Clauses that still refer to DIFC-LCIA have generally been treated by UAE courts as transferring to DIAC, but foreign courts have been less predictable, so they are worth amending before a dispute arises.
| Choice | Typical use |
|---|---|
| Onshore courts | Local counterparties, smaller claims, assets onshore, Arabic documents |
| DIFC or ADGM Courts by agreement | International contracts wanting English-language common-law courts in the UAE |
| DIAC arbitration, DIFC seat | Dubai-centred international contracts wanting confidentiality and a common-law supervisory court |
| arbitrateAD, ADGM seat | Abu Dhabi-centred contracts, energy and government-related work |
| ICC, LCIA or SCCA arbitration | Cross-border contracts where parties want a non-UAE institution; several have case management offices in the UAE |
From cheque to execution
Cheques
Since the 2022 Commercial Transactions Law reforms, a bounced cheque can be enforced directly before the execution judge for the unpaid amount, without first suing on the debt; the criminal route is now largely limited to fraud.
Payment orders
For liquid, documented debts, a summary payment order procedure in the onshore courts is faster than ordinary litigation.
Foreign judgments
Under the Civil Procedure Law, foreign judgments can be enforced subject to conditions including reciprocity; UAE courts have in recent years recognised judgments from jurisdictions such as England on that basis.
Interim measures
Precautionary attachment of assets and travel bans on debtors in specific circumstances are available where there is a real risk of dissipation.
As in Saudi Arabia and Qatar, a judgment or award is only as good as the assets it can reach. Know where the counterparty's assets are, take security or cheques where commercially possible, and choose a forum whose decisions can be enforced there.
Voluntary liquidation and its loose ends
Shareholder decision
Resolve to dissolve and appoint a liquidator registered with the relevant authority, then notify the licensing authority.
Creditors
Publish the liquidation notice and allow the statutory period for creditor claims; collect receivables and pay debts.
Employees and visas
Settle salaries, leave and end-of-service gratuity, cancel work permits and residence visas, and close the establishment card.
Tax
File final VAT and corporate tax returns and apply to deregister with the FTA; deregistration requires all returns filed and liabilities paid.
Bank and contracts
Terminate leases and contracts, settle utilities, and close the bank account after final payments.
Licence cancellation
With clearances from the FTA, immigration and other authorities, cancel the licence and remove the company from the register.
Free zone companies follow their authority's procedure, which mirrors these steps. A company that cannot pay its debts must not be wound up as if it were solvent; the Financial Reorganisation and Bankruptcy Law, Federal Decree-Law No. 51 of 2023, provides preventive settlement, restructuring and bankruptcy procedures, and directors who continue trading or prefer creditors when insolvent face personal exposure.
A supplier's unpaid invoices
A UAE free zone supplier delivers equipment worth AED 1.8 million to a mainland contractor under a purchase order with no dispute clause. The contractor pays AED 600,000 and issues post-dated cheques for the balance, two of which bounce. The supplier can take the bounced cheques directly to the execution judge for AED 800,000, which is fast. For the remaining AED 400,000, not covered by cheques, it needs a payment order or a claim in the onshore courts, in Arabic, with the purchase order, delivery notes and invoices as evidence.
Had the supplier's terms provided for DIAC arbitration seated in the DIFC, the uncovered balance could have gone to arbitration in English, at higher cost but with a confidential process and an award enforceable through the DIFC and onshore courts. For a claim of this size against a local counterparty, the cheques and the onshore courts are often the more practical route. The real lesson is earlier: secure payment with cheques or guarantees, and put a dispute clause in the terms, chosen for the dispute most likely to arise.
How the common-law courts take jurisdiction
The DIFC and ADGM Courts hear cases connected with their centres automatically, but parties elsewhere can also choose them. A written agreement, in the contract or after a dispute has arisen, to submit to the DIFC Courts or the ADGM Courts generally gives those courts jurisdiction even where neither party is based in the centre. The DIFC's courts law was updated in 2025, and both systems have small claims tracks, commercial lists and procedures designed for international parties, with judges drawn from common-law jurisdictions.
Opting in suits contracts between international parties that want English-language litigation, published precedent and judges familiar with common-law commercial practice, without going abroad. Judgments of the DIFC and ADGM Courts can be enforced onshore through the onshore execution process, and abroad under treaties and reciprocity arrangements the courts have built. The clause should name the court precisely and state that it has exclusive jurisdiction; vague references to Dubai or Abu Dhabi courts can send a case onshore instead.
Questions we get asked first
What court systems exist in the UAE?
Onshore federal and local courts applying UAE civil law in Arabic, and the DIFC Courts and ADGM Courts, which are English-language common-law courts that parties can choose by contract.
What is the new UAE Civil Transactions Law?
Federal Decree-Law No. 25 of 2025, in force since 1 June 2026, replacing the 1985 Civil Code with more specific rules on contracts, notices, liquidated damages, termination and liability.
Are old DIFC-LCIA arbitration clauses still valid?
Dubai Decree No. 34 of 2021 abolished the DIFC-LCIA centre and transferred its cases to DIAC. UAE courts have generally upheld such clauses as DIAC arbitrations, but foreign courts have been less predictable, so they should be amended.
Can foreign arbitral awards be enforced in the UAE?
Yes. The UAE is party to the New York Convention, and awards are enforced through the onshore courts or, where relevant, the DIFC or ADGM Courts.
What happens with a bounced cheque in the UAE?
Since the 2022 reforms, it can be enforced directly before the execution judge for the unpaid amount; criminal liability is now largely limited to fraud.
How do I close a UAE company?
By shareholder resolution and a registered liquidator, creditor notice, settling employees and cancelling visas, FTA deregistration after final returns, and cancelling the licence. Insolvent companies follow Federal Decree-Law No. 51 of 2023.
Choose the forum when you sign, and secure payment
The UAE gives you real choice: onshore courts, common-law courts in the DIFC and ADGM, and modern arbitration. Since June 2026 a new Civil Transactions Law governs contracts onshore. Choose the forum for the dispute you are most likely to have, review old DIFC-LCIA clauses and templates, secure payment where you can, and close companies in order.
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This article is general information, current as of 2026, and is not advice for any specific situation. Confirm current rules with the MOIC, the NBR or the relevant authority before acting.