Resolving Business Compliance Advisory Disputes Effectively
Advice is a snapshot rather than a standing position, and when it is later tested the outcome turns on the engagement terms and the file kept at the time, not on who now says what was asked for.
A complaint about a compliance adviser starts as a regulator's letter, a rejected filing or a diligence finding, and two clocks then run at once. Read here why the regulatory objection is dealt with first, how engagement terms settle scope, update duties and liability caps, why a penalty does not simply pass through to whoever gave the advice, and which contemporaneous records decide the claim.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
A dispute with a compliance adviser almost never starts as a dispute with the adviser. It starts with a letter from a regulator, a rejected filing, a failed audit or a buyer's due diligence report, and the argument about who is responsible comes second. By then the client has two problems running at once, on different clocks: a regulatory problem with a deadline, and a commercial claim that can wait. Confusing the two, or dealing with them in the wrong order, is what turns a recoverable situation into an expensive one.
What these disputes are actually about
Complaints against compliance advisers in the UAE fall into a small number of recognisable families.
Advice that went out of date. This is the largest category, and it is a product of how quickly UAE legislation has moved. Memoranda still circulate stating that a mainland company needs a UAE national holding 51% of its shares, although Federal Decree-Law No. 26 of 2020 removed that requirement and 100% foreign ownership is now permitted for most mainland activities, subject to the strategic-impact list. Structures are still maintained by reference to the Economic Substance Regulations, which were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024 and now bite only for FY2019 to FY2022. Manuals still cite Federal Law No. 2 of 2015 rather than the Commercial Companies Law, Federal Decree-Law No. 32 of 2021, or Federal Law No. 8 of 1980 rather than the employment law that replaced it, Federal Decree-Law No. 33 of 2021. Advice is a snapshot; the trouble comes when it is treated as a standing position.
Scope gaps. The client believed it had retained someone to keep it compliant. The adviser believed it had been retained to deliver a specific report, register a specific entity, or answer a specific question. Both can be true at the same time, and the engagement letter usually decides which one the tribunal accepts.
Missed filings and deadlines. Corporate tax registration and returns under Federal Decree-Law No. 47 of 2022, VAT filings, licence renewals, beneficial ownership records, data protection obligations under Federal Decree-Law No. 45 of 2021 — the question in dispute is rarely whether the filing was missed but whether the adviser had been instructed to make it, had the information needed, and warned the client when it did not.
The engagement letter is most of the case
These claims are decided on documents, and the central document is the engagement terms. What matters is whether the scope is described by outcome or by task; whether the adviser assumed any monitoring or update duty after delivery; what assumptions and information the advice depended on, and who supplied them; whether liability is capped, and whether the cap is expressed against fees; what is excluded, including consequential loss and third-party reliance; and how disputes are to be resolved. Advisers write these terms; clients sign them without reading. Having the terms reviewed before signature is the cheapest intervention available and sits squarely within routine contract and agreement review.
The same point applies at the other end of the relationship. Compliance advice obtained during a company formation, where activity codes, ownership and licensing category are chosen, and advice obtained in the course of an acquisition, where a diligence report is relied on by a buyer, are the two engagements most likely to be tested later. Scope for company formation work and for compliance diligence in acquisitions should be written knowing that someone may read it back in a claim.
Who pays the penalty?
Clients tend to assume that a fine imposed by an authority is passed straight through to whoever gave the wrong advice. It is not that simple. A tribunal will ask what the adviser was engaged to do, whether the advice fell below the standard of a reasonably competent adviser in that field, whether the client's own conduct — late instructions, incomplete disclosure, ignoring a warning — caused or contributed to the outcome, and whether the loss claimed is the kind the engagement made the adviser responsible for. Recovering a public penalty from a private party also raises causation and public policy questions that do not arise with ordinary financial loss.
The practical consequence is that the strength of the claim is usually fixed before the claim is brought, by what was recorded at the time.
Deal with the regulator first
Where a finding, assessment or penalty has landed, that process has its own route and its own deadline: an objection or reconsideration to the issuing authority within the period the decision specifies, supported by evidence, and where appropriate a voluntary disclosure correcting the underlying position. Reducing or reversing the regulatory outcome reduces the loss, which is a better result than proving whose fault it was. It also produces a documented record of what went wrong, which is precisely the evidence a later claim needs. Advisers should be told in writing at this stage, both to give them the opportunity to assist and because their own insurers usually require early notification.
Where the claim will be heard
Forum is decided by the engagement terms, and by where the parties sit. An advisory firm licensed in the DIFC or ADGM will normally contract for the courts of that centre, which apply their own common-law regimes. An onshore engagement without a dispute clause goes to the local courts of the emirate concerned.
Where arbitration is chosen, the governing regime is Federal Law No. 6 of 2018 as amended in 2023. Two changes need checking in older engagement letters: the DIFC-LCIA was abolished by Dubai Decree No. 34 of 2021 and its caseload moved to DIAC, so clauses naming it should be updated, though the DIFC remains available as a seat; and ADCCAC was restructured as arbitrateAD from 2024. A clause pointing at an institution that no longer exists is an argument the parties do not need.
For technical disagreements — whether a filing position was defensible, whether a control was adequate — expert determination is often faster and cheaper than either court or arbitration, provided the clause says who appoints the expert and whether the determination binds.
The evidence that decides it
Keep the instructions as given, not as remembered. Keep the information provided to the adviser and the date it was provided. Keep the advice in its delivered form, including caveats. Keep the record of what was done in response, and by whom. Keep the internal note of any oral advice, made at the time. Clients who lose these claims are rarely wrong on the merits; they are unable to show what they asked for and what they were told.
Reducing the odds
Three habits prevent most of these disputes. Date the advice and diarise a review, particularly for anything touching tax, ownership or licensing. Separate the adviser who designs a compliance framework from whoever tests it, so that a weakness is found internally rather than by a regulator. And define the scope of every engagement in terms of specific deliverables, so that neither side is relying on an assumption the other never made. Structured corporate governance advisory support does this as a matter of course.
Related services: compliance and governance advisory and corporate and commercial representation for businesses in the UAE.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
