Introduction
The United Arab Emirates has entered a new era of private law with the implementation of Federal Decree-Law No. 25 of 2025 Concerning the Civil Transactions Law, which repealed and replaced the Civil Transactions Law that governed the nation for more than four decades. Although the Decree-Law was issued on 1 October 2025 and published in the Official Gazette on 14 October 2025, it officially came into force on 1 June 2026, marking one of the most significant reforms of the UAE’s legal framework since the establishment of the modern civil law system.
The enactment of the new Civil Transactions Law is far more than a legislative update. It represents a comprehensive modernization of the legal principles governing private rights and obligations in the UAE. As the country continues to strengthen its position as a leading global business, financial, and investment hub, the introduction of a modernized civil code demonstrates the UAE’s commitment to maintaining a legal environment that is sophisticated, commercially practical, internationally competitive, and firmly rooted in the principles of justice.
The Civil Transactions Law serves as the cornerstone of private law in the UAE. It regulates contractual relationships, civil liability, property rights, mortgages, guarantees, leases, agency arrangements, ownership rights, insurance obligations, and numerous other aspects of everyday legal and commercial life. Consequently, the new legislation affects virtually every individual, investor, entrepreneur, company, developer, financial institution, and professional operating within the country.
Why the UAE Introduced a New Civil Transactions Law
When the original Civil Transactions Law was enacted in 1985, the UAE was a young federation with an emerging economy. Since then, the country has undergone an extraordinary transformation, becoming one of the world’s leading destinations for international investment, global trade, innovation, technology, and finance.
Modern commercial transactions now involve sophisticated corporate structures, international financing arrangements, digital assets, cross-border investments, multinational supply chains, and highly complex contractual relationships. The legal framework governing these transactions must evolve accordingly.
Federal Decree-Law No. 25 of 2025 addresses this reality by introducing a comprehensive and modern legal structure capable of supporting the UAE’s economic vision while providing greater clarity, predictability, and legal certainty.
The legislation reorganizes and modernizes the law governing:
- Contracts and obligations.
- Civil liability and compensation.
- Property ownership and rights.
- Commercial and civil transactions.
- Mortgages and security interests.
- Lease agreements.
- Agency relationships.
- Construction contracts.
- Insurance arrangements.
- Guarantees and creditor protection.
Preserving Legal Heritage Through Islamic Jurisprudence
One of the defining characteristics of the UAE legal system is its successful integration of modern civil law principles with Islamic jurisprudence.
The new law expressly confirms that legislative provisions are to be applied according to their wording and purpose. Where legislation does not provide a direct answer to a legal issue, courts must refer to the principles of Islamic Sharia and select the solution that best serves justice and public interest. If no applicable rule exists within either legislation or Sharia, courts may rely upon established custom and, ultimately, principles of natural law and equity.
The legislation further confirms that the interpretation of legal provisions must be guided by the principles and foundations of Islamic jurisprudence.
This approach preserves the UAE’s legal identity while ensuring sufficient flexibility to address contemporary legal and commercial challenges.
Public Policy Remains the Foundation of Legal Validity
The law expressly identifies matters considered part of the UAE’s public order and public policy framework.
These include:
- Definitive principles of Islamic Sharia.
- Constitutional and governmental structures.
- Personal status matters relating to Muslims.
- Mandatory legal provisions that parties cannot contractually exclude or amend.
The significance of this provision cannot be overstated. Regardless of the freedom afforded to contracting parties, agreements that violate public policy may be deemed void or unenforceable by UAE courts.
Accordingly, businesses and investors must ensure that contractual arrangements remain compliant with mandatory legal provisions and public policy considerations.
Enhancing Legal Certainty in International Transactions
As a global commercial centre, the UAE routinely encounters disputes involving foreign nationals, multinational corporations, overseas assets, and international contractual arrangements.
Recognizing this reality, the new law provides a detailed framework governing conflict-of-law situations and private international law matters, including:
- Personal status and legal capacity.
- Marriage and family-related civil matters.
- Inheritance and succession.
- Ownership of movable and immovable assets.
- Contractual obligations.
- Civil liability.
- Procedural and jurisdictional issues.
Most importantly, the legislation recognizes the principle of party autonomy, allowing contracting parties to select the governing law applicable to their contractual relationship, subject to UAE public policy requirements.
This significantly enhances legal predictability for foreign investors and international businesses conducting transactions in the UAE.
Codifying Timeless Legal Principles
One of the most fascinating aspects of the new legislation is the incorporation of well-established jurisprudential principles directly into statutory law.
The law codifies several foundational legal maxims, including:
- No harm and no reciprocal harm.
- Harm must be removed.
- Necessity permits exceptions to prohibitions.
- Custom is authoritative.
- Certainty cannot be displaced by doubt.
- Benefit carries corresponding responsibility.
- Prevention of harm takes precedence over securing benefits.
- Private harm may be tolerated to avoid greater public harm.
These principles have historically guided judicial reasoning and continue to provide courts with valuable interpretative tools when resolving complex legal disputes.
Their formal codification enhances consistency, transparency, and predictability in judicial decision-making.
Modernizing Contract Law for Contemporary Business Practices
Contracts remain the foundation of commercial activity, and the new Civil Transactions Law devotes extensive attention to regulating every stage of the contractual relationship.
The legislation addresses:
- Contract formation.
- Contract interpretation.
- Negotiations and disclosure obligations.
- Representation and agency.
- Legal capacity.
- Defects affecting consent.
- Contract validity and invalidity.
- Contractual conditions.
- Contract termination and dissolution.
Particularly noteworthy is the inclusion of provisions regulating pre-contractual negotiations and disclosure obligations, reflecting the growing importance of transparency and good faith in modern business dealings.
This development aligns UAE law with international best practices and promotes greater confidence in commercial transactions.
Greater Protection Against Unfair Contractual Conduct
The law provides a detailed framework addressing circumstances in which consent may be impaired or improperly obtained.
Specific provisions regulate:
- Mistake.
- Duress.
- Fraud and misrepresentation.
- Exploitation.
- Unfair advantage.
In today’s commercial environment, where transactions may involve substantial information asymmetry and unequal bargaining power, these provisions strengthen protections against abusive conduct and enhance contractual fairness.
A Stronger Framework for Civil Liability and Compensation
The law maintains and modernizes the legal framework governing civil liability.
It regulates liability arising from:
- Personal injury.
- Property damage.
- Wrongful acts.
- Liability for acts committed by others.
- Buildings, animals, and dangerous objects.
- Public facilities and infrastructure.
These provisions continue to provide the legal basis for compensation claims involving negligence, accidents, professional misconduct, construction defects, and other civil wrongs.
As commercial and professional activities become increasingly sophisticated, a clear and predictable liability regime remains essential for legal certainty and economic stability.
Strengthening Creditor Rights and Commercial Confidence
The new legislation places significant emphasis on protecting creditors and ensuring the enforceability of financial obligations.
The law provides creditors with various legal mechanisms, including:
- Direct enforcement rights.
- Compensation claims.
- Indirect actions.
- Challenges to sham transactions.
- Actions to invalidate transactions intended to prejudice creditors.
- Rights of retention and security.
These provisions reinforce commercial confidence and support the integrity of the UAE’s financial and business environment.
For lenders, investors, suppliers, and financial institutions, the strengthened creditor protection framework represents a particularly significant development.
Comprehensive Regulation of Property Rights
The new Civil Transactions Law contains extensive provisions governing ownership and real property rights.
The legislation regulates:
- Ownership rights.
- Joint ownership.
- Apartment and strata ownership.
- Easements and rights of passage.
- Possession and possessory protection.
- Usufruct rights.
- Surface rights.
- Neighbouring property rights.
These provisions are especially important given the continued expansion of the UAE’s real estate sector and the increasing sophistication of property ownership structures throughout the country.
Supporting Key Economic Sectors
Beyond general legal principles, the law provides detailed regulation of numerous contractual relationships that are fundamental to economic activity.
Sale Contracts
The law governs ownership transfer, delivery obligations, warranties, hidden defects, payment obligations, and specialized forms of sale.
Lease Agreements
Detailed provisions regulate tenancy duration, rent, maintenance obligations, termination rights, and landlord-tenant responsibilities.
Construction Contracts
The legislation comprehensively regulates contractor obligations, employer rights, subcontracting arrangements, and termination of construction agreements.
Agency Relationships
Modern provisions govern powers of attorney, authority, agency obligations, and termination of representation arrangements.
Insurance Contracts
The law provides a comprehensive framework governing insurance policy, takaful arrangements, life insurance, fire insurance, and related claims.
Together, these provisions support the efficient functioning of the UAE’s commercial ecosystem and provide legal certainty across numerous sectors.
What This Means for Businesses and Investors
Since the law has been in force from 1 June 2026, businesses operating in the UAE should ensure that their contractual practices, internal policies, financing arrangements, risk management procedures, and dispute resolution mechanisms align with the updated legal framework.
Particular attention should be given to:
- Contract drafting.
- Disclosure obligations.
- Liability allocation clauses.
- Governing law provisions.
- Security arrangements.
- Creditor protection mechanisms.
- Real estate and leasing documentation.
- Agency and representation agreements.
Organizations that proactively review and update their legal documentation will be better positioned to mitigate risk and take advantage of the enhanced certainty provided by the new legislation.
Conclusion: A Defining Moment in the Evolution of UAE Private Law
The implementation of Federal Decree-Law No. 25 of 2025 Concerning the Civil Transactions Law marks a defining milestone in the development of the UAE legal system. Since coming into force on 1 June 2026, the legislation has become the principal legal framework governing civil transactions, contractual relationships, property rights, obligations, guarantees, and civil liability throughout the country.
More than a legislative reform, the new Civil Transactions Law represents a carefully balanced synthesis of modern legal principles and the enduring foundations of Islamic jurisprudence. It strengthens legal certainty, enhances investor confidence, promotes commercial fairness, and equips the UAE’s legal system to meet the demands of an increasingly sophisticated and interconnected global economy.
As the UAE continues its remarkable economic and legal development, Federal Decree-Law No. 25 of 2025 will undoubtedly serve as one of the most important legal foundations supporting the nation’s future growth, competitiveness, and global influence.
If you require further clarification or legal assistance concerning the matters discussed in this article, please do not hesitate to contact KH Legal Advocates & Legal Consultants LLC. Our lawyers would be happy to assist you
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