According to Sujith Mathew, Partner at ALBM Excello Law and IBPC Dubai Member, evolving geopolitical risks and economic uncertainty are fundamentally reshaping how businesses in the UAE approach contracts, compliance, and workforce strategy. From highly customised force majeure clauses and rising restructuring frameworks to stricter regulatory enforcement and agile employment models, companies are being compelled to adopt more proactive, legally resilient approaches to navigate an increasingly complex operating environment.

How are force majeure clauses evolving in the UAE?
Recent regional and economic uncertainty has moved the force majeure clause to an actively negotiated provision.
Article 273 of the UAE Civil Transaction Law provides the framework for unforeseeable events stating that “in contracts binding on both parties, if force majeure supervenes which makes the performance of the obligation impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled. In the case of partial impossibility, that part of the contract which is impossible shall be extinguished, and the same shall apply to temporary impossibility in continuing contracts, and in those two cases it shall be permissible for the obligee to cancel the contract provided that the obligor is so aware.”

As a result, we are seeing an evolution towards highly specific, bespoke clauses. Where contracts were once listed as generic ‘Acts of God,’ there is shift towards naming events as “war,” “armed conflict,” “sanctions,” “airspace closures,” and “disruption to shipping lanes.” This is a direct response to recent disruptions, as parties seek to remove ambiguity.

A significant legal evolution is the upcoming Federal Decree-Law No. 25 of 2025, the new Civil Code, effective from June 2026. It modernises the concept of hardship, granting courts the power to adjust, not just terminate, contractual obligations that have become excessively onerous. This provides a more flexible remedy for long-term agreements.

Businesses may strategically draft the clauses to allocate risk with precision, documenting the direct impact of any disruptive event, and understanding the differences between the Civil Code, and the common law doctrines of frustration applied in the DIFC and ADGM financial free zones.

Are commercial disputes and restructurings on the rise?
There are still no clear indications that disputes and restructurings are on the rise following the current uncertainty. On general trends, the DIFC Courts reported a total claim value of AED 18.6 billion across more than 1,500 cases in 2025, while the Small Claims Tribunal seeing a 68% year-on-year increase in cases.

Simultaneously, restructuring is gaining prominence too. While the foundational Federal Decree-Law on Bankruptcy remains key, the landscape was significantly enhanced by the launch of a dedicated Federal Bankruptcy Court in August 2025. This specialized court is designed to bring greater efficiency and legal clarity to insolvency proceedings, a move that will strengthen investor confidence.

While the UAE’s core economic indicators remain strong, the recent regional instability prompts companies to proactively address financial weaknesses and review counterparty risks. The Central Bank’s proactive AED 1 trillion Financial Institution Resilience Package, launched in March 2026, underscores the focus on maintaining systemic stability, providing a crucial support for the financial sector as these restructurings unfold.

What legal risks are emerging from ongoing supply chain disruptions?
The recent disruptions, particularly in vital trade arteries such as the Strait of Hormuz, have exposed businesses to a new wave of legal risks that extend far beyond just delays. The declaration of force majeure by major players like QatarEnergy in early March 2026 has triggered a domino effect, highlighting the interconnectedness of modern supply chains.

The primary legal risks now emerging include claims for liquidated damages due to missed delivery deadlines in procurement and construction contracts. There are also reports of an increase in complex insurance disputes, as logistics providers and cargo owners enquire with insurers over the interpretation of war risk and political risk exclusion clauses.

Also, as companies seek alternative shipping routes to avoid conflict zones, they face increased compliance risks, probably having to deal with restricted entities or jurisdictions. There is also the significant risk of ‘cascading’ force majeure declarations, where a single event at the top of a supply chain triggers a series of defaults downstream.

Companies must now meticulously review their contractual chains, assess their exposure to each link, and understand their obligations to preserve their rights, while navigating the complexities of dual-use goods regulations and export controls.

How can companies strengthen resilience amid economic uncertainty?
Strengthening resilience in the current climate calls for a multi-faceted approach that integrates financial prudence, operational agility and legal preparedness. Economically, the UAE has robust fundamentals; its non-oil sector now accounts for over 70% of GDP, and the IMF has estimated strong growth through 2026 prior to the current situation.

A key strategy is diversifying dependencies, not just in supply chains, but also in capital structures. We advise clients to establish multi-jurisdictional banking relationships to ensure easier access to liquidity.

Legally, businesses must conduct a thorough review of force majeure, hardship, and dispute resolution clauses to ensure they are fit for purpose in the current geopolitical environment. Opting for arbitration in a neutral, well-regarded jurisdiction like the DIFC or ADGM can provide more predictable outcomes.

Operationally, having a tested business continuity plan is extremely important. Finally, companies should leverage the UAE’s legal tools. The recent amendments to the Commercial Companies Law, for instance, allow for easier corporate restructuring and re-domiciliation between free zones and the mainland, offering a strong tool for structural flexibility in response to market shifts.

What UAE employment law changes are impacting workforce strategies?
Workforce strategies in the UAE are being reshaped by new employment legislation focused on flexibility, accountability and Emiratisation. The ongoing implementation of the 2021 Labour Law, updated through 2025, has introduced codified work models such as part-time, temporary, and remote work, allowing companies to build more agile and blended teams.

However, this flexibility comes with stricter employer obligations. The window for employees to file labour claims has doubled to two years, and penalties for non-compliance have increased significantly, reaching up to AED 1 million. This brings a strategic shift towards rigorous compliance and proactive employee relations. Simultaneously, the government’s Emiratisation (Nafis) program is a major driver of hiring strategy.

With quotas tightening further for 2026 and a new minimum wage for Emiratis in the private sector, companies are now strategically developing local talent pipelines. This involves investing in training and creating meaningful career paths. The result is a more dynamic, but also more demanding, legal framework that requires employers to be both flexible in their workforce design and meticulous in their HR governance.

How can businesses stay compliant in an increasingly complex regulatory landscape?
The UAE’s regulatory landscape is undergoing a profound transformation, moving decisively away from a ‘light-touch’ approach to a robust, enforcement-led model. Staying compliant now requires a proactive and integrated strategy. The cornerstone of this new complexity is the enhanced Anti-Money Laundering (AML) framework, under Federal Law No. 10 of 2025.

The law places direct, personal liability on senior management for compliance failures. This means boards and C-suite executives can no longer delegate this risk. Beyond AML, businesses must navigate new legislation, including amendments to the Commercial Companies Law and upcoming requirements for e-invoicing and climate-related disclosures. The key to staying compliant is to embed it into the corporate DNA.

This involves investing in dedicated compliance resources, conducting regular, forward-looking risk assessments that anticipate new regulations, and leveraging technology for monitoring and reporting. With a crucial FATF mutual assessment anticipated in mid-2026, regulatory scrutiny will only intensify. Compliance is today a strategic imperative for sustainable business in the UAE.