Resolving Transactions Compliance Advisory Disputes Effectively

Disputes over transactions compliance advice come in two forms. In the first, a business and its adviser disagree about what the adviser was retained to check: the deal completed, a regulator later took a different view, and the engagement letter is read closely for the first time. In the second, two commercial parties disagree about which of them carried a compliance obligation — who was responsible for screening the counterparty, filing the return, or obtaining the approval that turns out to be missing.

Both are avoidable, and both are decided largely by documents written before anyone anticipated an argument: the scope section of the engagement letter, the compliance warranties in the transaction agreement, and the record of what information was given to the adviser and when. This article sets out what those documents need to say, which obligations most often generate the dispute, and how the matter is resolved once it has started.

The engagement letter decides most of it

An adviser is liable for the work it agreed to do, judged against the information it was given. Disputes arise where the agreement is silent. A compliance advisory engagement should state:

• Scope. Which entities, which jurisdictions, which regimes — anti-money laundering, sanctions, tax, sectoral licensing, data protection — and which transactions or period are covered.
• Exclusions. What is expressly not being reviewed. This matters more than the inclusions, because the excluded item is usually the one that fails.
• Assumptions and sources. That the advice is based on documents and instructions supplied by the client, identified in a schedule, and that it does not extend to verifying their accuracy unless separately agreed.
• Deliverable and reliance. Whether the output is a written report, and who may rely on it — the client only, or also a lender, buyer or regulator.
• Currency of the advice. That it speaks as at its date, and whether the adviser is engaged to update it if the rules change before completion.
• Liability. Any cap, any exclusion of indirect loss, and the period within which a claim must be brought.

The same discipline applies on the transaction side. Compliance warranties should identify the specific registration, filing or approval warranted, rather than a general statement that the seller "has complied with all applicable laws". A warranty in those terms is either uninformative or unlimited, depending on who is reading it. Structured aml compliance uae workstreams should have their own scope, timetable and sign-off within the deal timetable.

The obligations that generate the disputes

Anti-money laundering and sanctions. Customer due diligence, identification of beneficial ownership, source of funds enquiries, ongoing monitoring and the reporting of suspicious transactions to the Financial Intelligence Unit. Arguments here are usually evidential: the enquiry was made but not recorded, or the file does not show what the adviser was told about the counterparty's ownership.

Tax. Value added tax applies at 5% under Federal Decree-Law No. 8 of 2017, as amended in 2022, and the treatment of a transaction is frequently what the parties argue about after completion. Corporate tax was introduced by Federal Decree-Law No. 47 of 2022 for financial years starting on or after 1 June 2023, with no tax on taxable income up to AED 375,000 and 9% above that figure. A free zone entity is not automatically exempt, and its position has to be checked against the conditions set out in the legislation rather than assumed from its address. Advice given on the basis that free zone status means "tax-free" is a common source of claims, and vat compliance uae and corporate tax positions should be documented in the transaction file.

Economic substance. The Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024. Obligations remain only for the financial years from 2019 to 2022. Both continuing to file and ignoring the earlier periods entirely have produced disagreements between businesses and their advisers.

Data. Federal Decree-Law No. 45 of 2021 on the protection of personal data applies onshore, while the DIFC and the ADGM operate their own regimes. Transferring customer databases as part of an asset sale without addressing this is a recurring gap.

Contract formation and dealings. Commercial dealings onshore are governed by Federal Decree-Law No. 50 of 2022 on Commercial Transactions, which replaced the 1993 legislation. Advice prepared against the old text still circulates.

Governance sits underneath all of it. Clear allocation of who signs off on what, recorded in board minutes and delegations, is the least expensive form of business compliance advisory a company can adopt.

Resolving the dispute

Where the engagement letter or transaction agreement contains an arbitration clause, arbitration seated onshore is governed by Federal Law No. 6 of 2018, as amended in 2023. In Dubai, DIFC-LCIA was abolished by Decree No. 34 of 2021 and its caseload moved to the Dubai International Arbitration Centre; in Abu Dhabi, ADCCAC was restructured as arbitrateAD, operating under that name since 2024. The DIFC remains available as a seat for arbitrations administered by other institutions.

Litigation runs either in the onshore courts of the relevant emirate, in Arabic and with heavy reliance on court-appointed experts, or in the DIFC or ADGM courts, in English and on common-law lines, where the parties or the transaction are connected to those centres or have agreed to their jurisdiction in writing. Choose the forum with enforcement in mind: an award or judgment against an entity whose assets sit elsewhere is worth what it can be enforced for.

Practical steps for UAE businesses

• Read the scope and exclusions of every compliance engagement before signing, and ask for anything material that is missing to be added.
• Keep a dated record of the documents and instructions given to advisers; it decides the case if one arises.
• Replace general "compliance with all laws" warranties with warranties identifying the specific registrations and filings that matter to the deal.
• Confirm the tax position of any free zone entity against the qualifying conditions rather than its address.
• Assign each continuing compliance obligation to a named internal owner at completion, not after the first notice from a regulator.
• Check that the dispute clause in the engagement letter and in the transaction agreement point to the same forum.

Related Services: Explore our transactions compliance advisory and insurance disputes services for practical legal support in this area.

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

Additional Resources

Explore more of our insights on related topics:

• Resolving Aml Compliance Advisory Disputes Effectively
• Resolving Business Compliance Advisory Disputes Effectively
• Resolving Web3 Compliance Legal Advisory Disputes Effectively
• Resolving Insurance Disputes Disputes Effectively