UAE Law and Practice Contributed by: Arsalan Tariq, Nil Acar and Ahmed Kamran, BSA LAW
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, pro- vided proper structuring and registration protocols are followed. 8.5 Structuring Deals 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 pro- ject assets, accounts, receivables and shares in com- pliance with local perfection rules; and accounting for tax implications in light of the UAE’s corporate tax regime introduced in 2023 and evolving transfer pric- ing 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 allo- cation 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 com- pany. These SPVs are commonly incorporated as LLCs under Federal Law No 32 of 2021 (the “Com- mercial Companies Law”), private joint stock compa- nies (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 rev- enues. They must also comply with any applicable foreign ownership restrictions, particularly for projects involving sensitive sectors or government participa- tion. 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 explora- tion, utilities, telecoms). For strategic sectors or con- cession-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 com- panies, but its rules affect project financing in several ways. Foreign lenders must structure cross-border lending carefully to avoid conducting unlicensed bank- ing 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 consid- eration for foreign investors and lenders. The UAE is party to more than 90 bilateral investment trea- ties (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 member- ship in the WTO and Arab Free Trade Area supports regional investment strategies.
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