The UAE corporate resilience: operating through regional tension

The UAE has historically been regarded as a stable and predictable jurisdiction for international business and investment. However, ongoing geopolitical tensions in the Middle East, particularly the current conflict involving Iran, have caused a geopolitical transition.

With its characteristic foresight, resilience and decisive governance, the UAE has demonstrated its capacity to navigate complex regional challenges while safeguarding the interests of all stakeholders within its economy. Whilst the authorities have acted swiftly to maintain economic stability, businesses operating in or connected to the UAE are facing increasing pressure. Disruption to operations, constrained liquidity and shifting investor behaviour are creating a more complex risk environment.

This article outlines the key legal and commercial considerations for businesses navigating the current landscape.

What is happening in the UAE?

Despite efforts to preserve normal market conditions, the impact of the conflict is becoming increasingly apparent across several sectors.

Key pressures include:

• Reduced commercial activity in sectors such as hospitality, tourism and real estate;
• Cash flow constraints, including delayed or disputed payments;
• Rising operational costs, driven by inflationary pressures; and
• Increased counterparty risk, particularly where businesses are highly leveraged.

At the same time, the UAE continues to attract international capital. Certain global investors have reaffirmed their long-term commitment to the region, while others are exploring alternative jurisdictions offering greater perceived stability.

This divergence is contributing to a more volatile commercial environment, increasing the likelihood of disputes.

The position of banks and financial institutions

The UAE authorities have introduced a range of measures to support economic stability, including:

• Significant liquidity injections into the banking system;
• A targeted economic support package aimed at businesses; and
• Fee reductions and trade facilitation measures.

Notwithstanding these interventions, financial institutions remain focused on managing risk exposure.

In practice, this may result in:

• More selective lending practices;
• Enhanced scrutiny of borrower financial positions; and
• A cautious approach to restructuring and repayment deferrals.

Certain sectors, particularly real estate, are expected to face heightened scrutiny due to their exposure to market fluctuations.

Legal considerations

Businesses should review financing arrangements carefully, with particular focus on:

• Financial covenants and the risk of breach;
• Material adverse change provisions;
• Default and enforcement rights; and
• Lender discretion clauses.

Early engagement with financial institutions or private lenders is advisable in circumstances where financial pressure is anticipated.

To begin with, businesses should initiate discussions with their primary banking partners to seek temporary relief measures, such as interest payment pauses, lower borrowing costs or revisions to existing project financing terms. Positioning these requests within the broader context of regional economic challenges may improve the likelihood of a positive response.

Additionally, working closely with investors and creditors to restructure repayment timelines can offer a more feasible payment schedule.

Finally, businesses should assess available support options, including state-supported liquidity schemes or emergency funding programmes offered by central banking authorities or local economic agencies.

Force majeure and contractual performance

A key issue arising from the current situation is whether parties can rely on force majeure provisions to excuse non-performance.

Applicability of force majeure

Force majeure is governed primarily by the terms of the contract existing between the parties. Its application will depend on the specific wording of the applicable clause, whether the relevant event falls within its scope and whether the event has directly prevented performance.

It is important to note that, typically, mere economic hardship or reduced profitability does not suffice to trigger contractual relief. The threshold for invoking such clauses is generally one of strict impossibility, rather than mere inconvenience or increased cost.

Parties are usually required to demonstrate that they have taken all reasonable steps to mitigate the impact of the event, rather than simply allowing the situation to prevent performance.

Procedural requirements

Contracts often impose strict requirements, including:

• Timely notice of the force majeure event;
• Ongoing updates regarding its impact; and
• Evidence supporting the inability to perform.

Failure to comply with these requirements may invalidate reliance on the clause.

Emerging dispute risks

Current market conditions are likely to give rise to a range of disputes, particularly in the following areas:

• Non-payment and debt recovery;
• Termination of contracts;
• Delay-related claims in construction and real estate;
• Supply chain disruption; and
• Cross-border investment disputes.

These disputes are expected to be highly fact-specific and will turn on contractual interpretation and the conduct of the parties.

Practical steps for businesses

In the current environment, a proactive and structured approach is essential. Possible steps to be taken include:

1. Review contractual arrangements

Businesses should undertake a comprehensive review of key contracts to:

• Identify force majeure provisions;
• Assess termination and suspension rights; and
• Confirm governing law and dispute resolution mechanisms.

2. Manage counterparty relationships

Early and transparent communication is critical. Where performance issues are anticipated:

• Engage with counterparties at an early stage;
• Document all discussions and agreed variations; and
• Avoid informal arrangements that may create uncertainty.

3.  Assess financial exposure

Ensure ongoing financial stability by:

• Monitoring loan covenant compliance;
• Reviewing liquidity and cash flow projections; and
• Assessing restructuring options as needed.

4. Review Insurance Policies

Review your insurance policies in consultation with your insurers and brokers to confirm whether any coverage may respond to business interruption or delay-related losses arising from the current regional situation.

5. Preserve legal position

Before taking any formal steps, such as invoking force majeure, suspending performance or terminating agreements, businesses should seek legal advice to mitigate the risk of unintended breach.

Conclusion

The UAE continues to demonstrate resilience, supported by proactive Government intervention and sustained investor interest. However, the current geopolitical environment introduces a level of uncertainty that cannot be disregarded.

For businesses, the key challenge is managing short-term disruption while maintaining long-term strategic positioning.

The evolving situation in the Middle East presents a complex set of legal and commercial challenges for businesses operating in or connected to the UAE.

While support measures are in place, the risk of contractual disputes, financial strain and operational disruption remains elevated.

A clear understanding of contractual rights and obligations, combined with early and informed decision-making, will be critical in navigating the months ahead.

How can Gherson help?

Gherson advises on navigating complex, high-value international disputes and ensuring regulatory compliance. This includes work across immigration, litigation and arbitration, with advice provided according to specific circumstances of each matter.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2026