International Arbitration, Foreign Governing Law and Criminal Jurisdiction in the UAE: Can Contractual Clauses Prevent Criminal Proceedings?

Introduction

A foreign governing-law clause or international arbitration agreement does not stop UAE proceedings when the alleged act falls under UAE criminal jurisdiction. Criminal jurisdiction derives from the State and cannot be waived, transferred or excluded by a contract. In cross-border deals, parties often think that choosing English law and arbitration in London means that every dispute from the contract will be resolved abroad. This idea may apply to commercial disputes but it does not cover criminal acts such as fraud, breach of trust, forgery, bribery or money laundering.

Thus, an international contract can follow foreign law and foreign arbitration while the same act can still be investigated and prosecuted under UAE criminal law.

Foreign Governing Law and the Application of UAE Criminal Law

A governing-law clause decides which law applies to the contract, how obligations are interpreted, how a breach is assessed and what damages may be awarded. It does not decide which State has the power to prosecute offences. Under Article 17 of Federal Decree-Law No. 31 of 2021 (Crimes and Penalties Law) UAE criminal law applies where an offence is committed inside the UAE. An offence is also treated as committed in the UAE if one of its parts happens in the country or if its results happen or are intended to happen in the UAE.

Consequently a contract signed abroad can still bring UAE jurisdiction when for example:

• Fraudulent statements are made during a meeting in Dubai.
• Forged documents are handed to a UAE bank.
• Funds obtained through alleged conduct are received or handled in the UAE.

Further, Articles 20--24 of the Crimes and Penalties Law cover situations where UAE criminal law may apply to crimes committed outside the country including crimes that involve the UAE or specific extraterritorial offences. Article 27 of the Civil Transactions Law limits the use of foreign law when it clashes with UAE public order.

Can an Arbitration Agreement Prevent Criminal Proceedings?

The answer is no. An arbitration agreement does not stop UAE authorities from investigating fraud, forgery, breach of trust or money laundering.

Under Article 4(2) of the Arbitration Law criminal matters cannot be settled through arbitration. A tribunal can decide on consequences of alleged misconduct, such as contractual damages, rescission or compensation but it cannot decide criminal guilt or impose criminal penalties. For instance a London-based tribunal applying English law may find that a contract was induced by fraudulent misrepresentation and award damages. Whether that same conduct is criminal fraud under Article 451 of the Crimes and Penalties Law remains a question for UAE authorities where jurisdiction exists.

The same rule applies to forgery under Article 251 and to breach of trust under Article 453. Money laundering is especially important. Federal Decree-Law No. 10 of 2025 on Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation Financing creates a criminal and regulatory framework. Allegations involving proceeds of offences, transfers through UAE financial institutions or the use of UAE-based entities may therefore be examined separately under UAE law. Neither an arbitration clause nor the parties’ contract preferences can stop the authorities from exercising their powers.

Can Criminal Proceedings Continue Independently of International Arbitration?

Yes. UAE criminal proceedings and international arbitration are legally separate although events in one can affect the other. Criminal proceedings derive their power from the State and are carried out by the Public Prosecution and the competent criminal courts.

Arbitration derives its power from the parties’ agreement and decides contractual rights and remedies.

The main differences are:

• Decision-making: Criminal liability is decided by UAE authorities and courts; contractual liability is decided by the tribunal.
• Settlement: Arbitration can usually end by agreement; criminal proceedings can only be stopped according to the law.
• Evidence: Documents, witness statements and expert reports obtained during investigations may become relevant to arbitration, subject to applicable confidentiality and admissibility rules.
• Enforcement: Criminal authorities possess investigative and coercive powers, including the ability to seek asset freezes and travel bans, which are distinct from arbitral interim measures.

Article 29 of the Criminal Procedure Law provides for the suspension of certain civil proceedings before UAE courts pending determination of the related criminal proceedings. This does not automatically suspend a foreign-seated arbitration, which remains subject to the arbitral framework and the tribunal’s procedural discretion. Accordingly parties should anticipate evidentiary overlap and ensure that their positions in criminal proceedings and arbitration remain consistent.

When Can the Same Conduct Give Rise to Both Civil and Criminal Liability?

The same set of facts may give rise to civil liability and criminal liability simultaneously. For example consider an agent who receives client funds under an agency agreement governed by English law with disputes subject to LCIA arbitration in London and subsequently diverts those funds. The conduct may give rise to:

• A claim for breach of contract and fiduciary obligations in arbitration; and
• A criminal complaint for breach of trust under Article 453 of the Crimes and Penalties Law provided the statutory elements and jurisdictional requirements are established.

The distinction between a breach and a criminal offence is particularly important. A failure to pay, perform obligations or refund money does not automatically constitute fraud or breach of trust. The specific elements of the offence including the required criminal intent and nature of the transaction must be established.

Article 29 of the Criminal Procedure Law also reflects the principle that related proceedings before UAE courts may be stayed pending the final criminal judgment. A final criminal judgment may have binding consequences for UAE proceedings concerning facts necessarily determined by the criminal court subject to the applicable statutory provisions.

However an acquittal does not necessarily extinguish civil liability. A finding that criminal intent has not been established does not automatically determine whether a contractual obligation was breached.

Considerations for Legal Practitioners

For clients considering criminal proceedings in the UAE in connection with international transactions the following matters should be examined before filing:

1. Identify the offence: Determine whether the conduct potentially constitutes fraud, breach of trust, forgery, bribery or money laundering under UAE law.
2. Establish the UAE nexus: Identify where the relevant representations, payments, transfers, communications and other constituent acts occurred and where the consequences of the alleged offence materialised or were intended to materialise.
3. Assess the evidence: Examine contracts, bank statements, SWIFT transfers, emails, WhatsApp communications, corporate records, witness statements and any relevant expert reports.
4. Distinguish civil from criminal liability: Establish the specific statutory elements of the alleged offence rather than relying solely on contractual non-performance or financial loss.
5. Consider procedural requirements: Determine whether the offence is complaint-based under Article 11 of the Criminal Procedure Law and identify the competent Police Department and Public Prosecution.
6. Coordinate parallel proceedings: Ensure that criminal complaints, arbitration submissions and civil claims adopt consistent factual and legal positions.

For parties facing complaints the existence of an arbitration agreement should not be treated as a defence to criminal jurisdiction. The appropriate response is to demonstrate, through the documentation, where the dispute is genuinely contractual and why the elements of the alleged criminal offence have not been established.

At the drafting stage parties should also recognise that no governing-law or arbitration clause can exclude the application of UAE criminal law. Appropriate anti-bribery, anti-money laundering, audit and compliance provisions can however help mitigate the risk of disputes developing into criminal matters.

Conclusion

Foreign governing-law and arbitration clauses remain important mechanisms for allocating civil and commercial disputes but they cannot displace UAE criminal jurisdiction.

Under Article 17 of the Crimes and Penalties Law UAE criminal law may apply where a constituent act or the result of an offence occurs or is intended to occur in the UAE. The existence of a foreign governing-law clause or international arbitration agreement does not prevent the Public Prosecution from investigating and prosecuting conduct falling within UAE jurisdiction.

An international commercial transaction may therefore give rise to parallel proceedings: arbitration determining contractual rights and financial remedies and UAE criminal proceedings determining whether an offence has been committed.

For practitioners advising on cross-border transactions the critical task is to identify the distinction between a dispute connected to the UAE and criminal conduct that establishes a legally sufficient basis for UAE jurisdiction.

For guidance on a cross-border dispute involving arbitration and alleged criminal conduct in the UAE, speak to AY Advocates about jurisdiction, evidence and the appropriate legal response.