UAE Civil Code: Understanding the Civil Transactions Law in the UAE and Its Modern Implications

UAE Civil Code: The Backbone of Civil Transactions Law in the UAE

Estimated reading time: 12 minutes

Key Takeaways

• The UAE Civil Code (Federal Law No. 5 of 1985) remains the foundational framework for non‐criminal civil transactions across all Emirates.
• Article 390 empowers parties to stipulate liquidated damages but allows courts to adjust amounts to reflect actual loss.
• Legal professionals, business leaders and investors must factor in the Civil Code when drafting and enforcing contracts.
• The Civil Code operates alongside federal statutes like Commercial Transactions Law and UAE Labour Law, filling gaps and ensuring consistency.

Understanding the UAE Civil Code and Its Modern Relevance

In the ever-evolving legal landscape of the United Arab Emirates, the single most significant piece of legislation governing civil and commercial conduct across all Emirates is the UAE Civil Code—officially known as Federal Law No. 5 of 1985 on the Civil Transactions Law of the United Arab Emirates. As of October 2025, with the UAE in the global spotlight for its pace of regulatory modernization, this law underpins not just private obligations, but the entire economic architecture of the nation. The scope, adaptability, and contemporary vitality of the Civil Transactions Law, together with its symbiotic relationship with key sectoral statutes, make understanding the UAE Civil Code not only intriguing but also essential for legal professionals, business leaders, and anyone transacting within the UAE.

In this comprehensive guide, we delve deeply into the UAE Civil Code, charting its historical context, core pillars, latest amendments, practical applications, and the critical nuances that ensure it remains the foundational civil legislation of the Emirates, with hyperlinks to authoritative legal sources for each point.

The Official Status and Centrality of Federal Law No. 5 of 1985

The UAE Civil Code, formally titled Federal Law No. 5 of 1985 (as amended), is universally applicable—governing every Emirate from Dubai and Abu Dhabi, to Sharjah, Ras Al Khaimah, Ajman, Fujairah, and Umm Al Quwain. Despite the UAE’s rapid legislative reforms in recent years, this cornerstone statute has not been repealed nor wholly replaced. Instead, it stands as the continuous framework for non‐criminal, non‐personal status, and non‐labor civil transactions. While numerous amendments and sectoral laws have been promulgated—adapting the law to evolving local and international standards—Federal Law No. 5 of 1985 remains unequivocally in force.

The resilience and adaptability of the UAE Civil Code are visible in its ongoing amendments. Rather than static code, it is a living document—refined by specific legislative interventions that bring targeted modernity, without stripping it of foundational authority. As verified by up-to-date legal practice guides, there is no federal legislation that has revoked or replaced the Civil Transactions Law as of Q4 2025.

Scope of the UAE Civil Transactions Law

At its heart, the Civil Transactions Law orchestrates regulation for nearly all civil relationships in the country. Its domains encapsulate:

• Contracts: Lawful formation, validity standards, obligations, enforceability, interpretation, and nullity.
• Obligations and Liability: General rules for liabilities, calculation and apportionment of damages, standards for default and due diligence, and overarching concepts of tort (non-contractual liability).
• Property Law: Definitions, rights, and obligations in relation to real and movable property, including transfers and security interests.
• Agency and Security: Regulation of agency relations, pledge, mortgage, and other forms of security.
• Tort and Fault-Based Claims: Non-contractual liability for harm, damages, and causation.

The Civil Code’s underpinnings are dual: rooted firmly in Islamic Shari’a principles while seamlessly incorporating the main features of international civil law, borrowing much from continental European (civil law) systems. This hybridization is deliberate, offering a system both globally familiar and locally contextualized.

Key Features and Recent Trends: Practical Focus

Contract Law & Liquidated Damages (Article 390)

Perhaps one of the most operationally significant provisions for businesses and individuals alike, Article 390 of the Civil Code addresses “liquidated damages”—that is, sums contractually agreed between parties as compensation should a breach occur.

• Article 390(1): Parties entering contracts in the UAE may expressly stipulate a specific sum as agreed damages for breach.
• Article 390(2): Critically, UAE courts hold discretion to review the amount claimed as liquidated damages. Under Article 390(2), upon a party’s request, UAE courts may increase or reduce the agreed sum so that compensation equals the actual loss, and any agreement to the contrary is void. Courts can decrease (or, notably, increase) the stipulated sum if required to match the actual loss suffered, regardless of what the contract says. This prevents punitive liabilities and entrenches fairness, putting the spotlight on genuine loss, not merely contractual language.

For practitioners, this means:

• Parties cannot “contract out” of judicial scrutiny on damages—UAE public policy always prevails.
• Every commercial contract must account for potential court intervention.

Modernization and Amendments: Laws in Motion

The UAE’s transformation as a global commercial hub is matched by corresponding legal agility. The Civil Code is routinely updated via amendments that infuse global standards, respond to economic realities, and carve out exceptions for specialized matters.

A prime example:

• Federal Decree-Law No. 41 of 2022—In 2024, the UAE enacted Federal Decree-Law No. 41 of 2024 (Personal Status), which replaced Federal Law No. 28 of 2005 and entered into force six months after publication (per Article Five). The non-Muslim regime under Federal Decree-Law No. 41 of 2022 continues to apply to non-Muslims.
• While this significant reform introduced progressive changes affecting family and personal status matters, it does not override the main Civil Code. Instead, it creates tailored exceptions, with the Civil Code remaining applicable for general civil matters.  

The Emirates also allow localized legislation:

• For instance, Dubai Law No. 7 of 2025 (issued 8 July 2025) regulates contracting activities across the Emirate, enhancing regulatory oversight at the local level; effective and transition periods follow its publication, with compliance windows for contractors. However, these Emirate-level interventions do not trump the general Civil Code unless expressly stated by federal authority.

Integration with Other Key Laws

The Civil Code does not exist in isolation—it operates in tandem with an array of federal statutes that regulate commercial, employment, real estate, and specific sector fields.

• Commercial Transactions: The Civil Code works in parallel with the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), which repealed Federal Law No. 18 of 1993 and took effect on 2 January 2023. Where questions arise, the Commercial Law generally prevails in matters of commerce, but the Civil Code applies to fill in gaps (source).
• Labor and Employment: Separately, the UAE Labour Law—currently Federal Decree-Law No. 33 of 2021, as amended by Federal Decree-Law No. 20 of 2023 and Federal Decree-Law No. 9 of 2024 (effective 31 August 2024)—is the primary statute for all employer-employee relationships. Yet, Civil Code principles supplement this where applicable, especially where labor law is silent or ambiguous.
• Sectoral Laws: High-volume sectors (construction, real estate) have their specialized rules, but these often reference the Civil Code as the baseline, unless a direct departure is stated.

Dispute Resolution: When the Rubber Meets the Road

When disputes arise—be it for contract breaches, claims for damages, or arguments on contractual interpretation—the UAE’s courts default to the Civil Code as the guiding doctrine. This ensures both uniformity of interpretation and due process. Key highlights:

• Courts rely on the Civil Code to assess the intent of parties, causal links, standards of diligence, and apportionment of liability.
• Most significantly, liquidated damages are subject to reduction or enhancement, regardless of private agreement—a judicial safety net against unfair contracts.
• Where explicit legal provision is absent, custom and ultimately Shari’a may be referenced, demonstrating the legal system’s commitment both to written statutes and local traditions.

Confirmed Validity: The Civil Code Stands Firm (As of October 2025)

As of October 2025, Federal Law No. 5 of 1985 (Civil Transactions Law) remains in force and is the default framework for civil obligations across the Emirates. In commercial matters, the current Commercial Transactions Law is Federal Decree-Law No. 50 of 2022 (effective 2 January 2023), which repealed the 1993 law and confirms that civil provisions apply where no commercial custom governs (Art. 2(2)). Labour relations are governed by Federal Decree-Law No. 33 of 2021, amended by No. 20 of 2023 and No. 9 of 2024 (effective 31 August 2024). In personal status, Federal Decree-Law No. 41 of 2024 replaced Law 28 of 2005 (entry into force six months after publication), while Federal Decree-Law No. 41 of 2022 continues to govern non-Muslim civil personal status. Local legislation (e.g., Dubai Law No. 7 of 2025 regulating contracting activities) operates alongside, subject to federal supremacy.

This is of paramount importance: for every property transaction, business deal, loan, agency agreement, or tort claim, the Civil Code is the default law, unless a more specific or superseding law provides otherwise.

Practical Implications: Expert Insights for Stakeholders

For Contract Drafting and Review

• Every contract executed within the UAE, whether by local or foreign parties, is directly impacted by the Civil Code.
• Explicit provisions on liability, damages, and default are subject to court review, based on Civil Code guidance.
• Article 390(2)’s prohibition on “contracting out” of judicial review means even the most sophisticated parties are subject to potential revision by the courts where liquidated damages are concerned.

For Remedies and Dispute Resolution

• The Code arms the judiciary with flexibility—increasing fairness and discouraging abuse of contractual power. In commercial disputes, expect courts to seek factual equity over procedural formality.
• Agreed remedies are valid, but not inviolable.
• Consideration of intent, actual loss, causation, and proportionality are far more likely than in many pure common law jurisdictions.

For International Parties

• The UAE Civil Code’s continental roots make it familiar for global investors, but its unique Shari’a flavor (e.g., usury prohibitions, strict agency and suretyship rules) require clear-headed, locally-savvy legal advice. Best Expat Lawyers in Dubai
• Particular caution should be paid in cross-border transactions and in sectors (like banking or construction) where specialized statutes may overlay or depart from the principal code.

Comparing the UAE Civil Code with Other Key Legislation

Civil Code vs. Commercial Transactions Law

While both laws co-exist elegantly, the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), which repealed Federal Law No. 18 of 1993 and took effect on 2 January 2023, is primary in all matters classified as “commercial.” Still, many areas—such as general agency, assignment of debt, pledges—remain reliant on the Civil Code for interpretation unless clarified in the Commercial Law.

Civil Code vs. Labour Law

The UAE Labour Law establishes a designated statutory arena for employment-related disputes. Yet, where contractual construction or remedies are silent under the Labour Law, the Civil Code fills the interpretative and remedial gaps.

Family and Personal Status Law

Sweeping changes in 2024-2025 through Federal Decree-Law No. 41 of 2022 and beyond carve out a distinct sphere for family and personal status issues. These operate separately, with the Civil Code playing a subsidiary role only where express provisions are lacking.

DIFC and ADGM Laws

Why the UAE Civil Code Still Matters: Strategic and Legal Takeaways

The enduring force of Federal Law No. 5 of 1985 is not just in its legislative text—it is the broad interpretative authority and judicial flexibility enshrined within. This guarantees that the UAE legal ecosystem, while modernizing at record pace, never forfeits the certitude or predictability that international commerce demands.

• Risk and Opportunity: Parties enjoy the opportunity to craft sophisticated agreements, but must do so against the backdrop of flexible judicial review.
• Certitude in Liability: Liability is structured on fairness, not just formalistic adherence.
• Alignment with International Standards: The UAE’s civil legal system is shaped for both local and global comportment—with transparency and reliability at its heart.

Final Thoughts: The UAE Civil Code as the Guardian of Civil Transactions

As the UAE cements its role at the crossroads of East and West, its steadfast commitment to an agile, robust, and fair civil code system is why it is ranked among the top jurisdictions for legal certainty in the region. The UAE Civil Code, emanating from Federal Law No. 5 of 1985 and continuously refreshed to meet contemporary needs, is the unsung hero of every contract, every remedy, and every act of due diligence carried out in the Emirates.

For legal professionals and business actors alike, there is no substitute for rigorous attention to its provisions—especially in a climate defined by legislative dynamism and judicial prudence. Always anchor your civil or commercial endeavor with expert advice that is fully attuned to the current status and practical impact of the UAE Civil Code.

Frequently Asked Questions

• Is the UAE Civil Code still in force? Yes. Federal Law No. 5 of 1985 remains the primary statute for civil transactions and has not been repealed or wholly replaced.
• Can courts adjust liquidated damages? Absolutely. Under Article 390(2), UAE courts can increase or decrease stipulated sums to align with actual loss.
• How does the Civil Code interact with other laws? It supplements the Commercial Transactions Law and Labour Law, filling interpretative gaps and ensuring uniformity unless a specific law prevails.
• Where can I find official texts? The Civil Transactions Law is published on the UAE Legislation Portal.