Civil Law and UAE Cross-Border Sovereign Disputes

1. Introduction

Cross-border sovereign disputes arise when a civil or commercial dispute involves a foreign state, an Emirate, a governmental authority, a state-owned entity, a sovereign fund, a central bank, or an allegedly sovereign governmental act occurring outside the UAE.

Typical examples include:

a foreign government being sued by a UAE company;

a UAE company bringing contractual claims against a foreign state;

enforcement of an award against a state-owned enterprise;

attachment of assets allegedly belonging to a foreign state;

disputes involving sovereign wealth funds;

contracts entered into by ministries or governmental authorities;

allegations that a foreign government unlawfully interfered with a commercial transaction;

recognition of a foreign judgment involving a sovereign entity;

arbitration involving a state or state-controlled company;

disputes involving foreign governmental regulatory decisions.

The subject requires separating several concepts that are often confused:

State immunity ≠ jurisdiction ≠ act of state ≠ diplomatic immunity ≠ immunity from execution.

The UAE/DIFC jurisprudence is particularly interesting because the courts have addressed both foreign states and the special relationship between the seven Emirates forming the UAE federation.

2. Meaning of Sovereign Dispute

A sovereign dispute can involve three broad categories.

Category 1 — State as a litigant

Example:

A UAE company sues a foreign government for breach of a commercial supply agreement.

Category 2 — State-owned entity

Example:

A government-owned electricity authority refuses to pay under a commercial contract.

The question becomes whether the entity is legally separate from the state and whether it can claim immunity.

Category 3 — Sovereign governmental act

Example:

A foreign government cancels a licence or nationalises property inside its own territory.

The question may become whether a UAE court or tribunal can examine the validity of that governmental act.

These categories require different legal analyses.

3. State Immunity

State immunity is the principle that one state should generally not subject another sovereign state to the jurisdiction of its courts without an appropriate legal basis.

The classical concept is based upon:

equality and independence of sovereign states.

Modern state-immunity systems, however, commonly distinguish between:

Jure imperii

Acts performed in the exercise of sovereign governmental authority.

Examples:

taxation;

military decisions;

diplomatic activity;

regulatory sovereign powers.

Jure gestionis

Commercial or private-law activities.

Examples:

purchasing goods;

commercial financing;

construction contracts;

ordinary commercial services.

This distinction becomes important because a state may be treated differently when acting as a commercial participant rather than exercising sovereign authority.

4. UAE Constitutional Structure

The UAE is a federation consisting of:

Abu Dhabi;

Dubai;

Sharjah;

Ajman;

Umm Al Quwain;

Fujairah;

Ras Al Khaimah.

This creates an unusual issue:

Can one Emirate claim sovereign immunity against another Emirate's courts?

This question was directly considered in FAL Oil Company v Sharjah Electricity and Water Authority.

The DIFC Court examined Article 99 of the UAE Constitution, which gives the Union Supreme Court jurisdiction over disputes between Emirates and conflicts of jurisdiction between judicial authorities of different Emirates. (DIFC Courts)

The Court concluded that the Constitution did not establish a general principle that one Emirate is immune from proceedings in another Emirate's courts. (DIFC Courts)

5. Federalism and Cross-Border Sovereignty

This means that the phrase “cross-border sovereign dispute” has a special UAE dimension.

There are potentially two different situations:

Foreign state

Example:

UAE company v Republic of Iraq.

Inter-Emirate dispute

Example:

Private company v Sharjah governmental authority in DIFC proceedings.

The second situation is not simply an ordinary foreign-state-immunity case.

The UAE Constitution governs the relationship among the Emirates.

6. Major Case Law

Case 1 — FAL Oil Company v Sharjah Electricity and Water Authority, ENF 221/2019

This is one of the most important UAE authorities concerning sovereign immunity.

FAL had obtained a substantial judgment against Sharjah Electricity and Water Authority (SEWA) in the Sharjah courts.

The judgment was subsequently sought to be recognised and enforced in the DIFC.

SEWA argued that it was protected by sovereign immunity.

The DIFC Court rejected the objection.

A. Sovereign immunity exists as a procedural principle

The Court accepted that general principles of sovereign immunity form part of the procedural law applied by the DIFC Courts. (DIFC Courts)

B. No general inter-Emirate immunity

The Court then considered whether each Emirate enjoys immunity from proceedings in the courts of another Emirate.

It concluded that the UAE Constitution did not establish such a general immunity.

Article 99 instead provides a mechanism for disputes between Emirates and conflicts of jurisdiction to be dealt with at Union level. (DIFC Courts)

C. Separate governmental entity

The Court also considered whether SEWA should automatically receive the same immunity as Sharjah.

It held that a separate juridical entity does not automatically become the state merely because the state controls it.

Its:

constitution;

control;

functions;

management;

budget;

actual conduct

must be examined. (DIFC Courts)

D. Commercial transaction

The underlying dispute concerned the supply of petroleum products.

The Court treated the underlying transactions as commercial in character and therefore rejected the immunity objection. (DIFC Courts)

Key principle

Government ownership or governmental status does not automatically transform every commercial activity into a sovereign act.

7. Case 2 — Pearl Petroleum Company Ltd v Kurdistan Regional Government of Iraq [2017] DIFC ARB 003

This is the leading UAE/DIFC authority concerning state immunity and arbitration.

The Kurdistan Regional Government (“KRG”) was involved in an LCIA arbitration seated in London.

The underlying contract expressly contained a waiver of immunity.

The KRG subsequently argued sovereign immunity in the DIFC proceedings.

The Court examined whether sovereign immunity prevented the DIFC Court from considering the issue.

Important principle

The Court held that questions concerning sovereign immunity could be treated as procedural questions for the purposes of the DIFC proceedings.

More importantly, the Court concluded that the KRG had waived immunity through the contractual arrangements. (DIFC Courts)

The Court also explained that the judiciary could determine the scope of a contractual waiver rather than treating the issue as exclusively one for the executive branch. (DIFC Courts)

Arbitration significance

A state entering a commercial arbitration agreement should therefore carefully examine:

jurisdiction;

arbitration clause;

applicable law;

seat;

enforcement;

immunity waiver;

immunity from execution.

Core rule

Agreement to arbitrate and express waiver provisions can materially affect a state's ability to rely on immunity.

8. Case 3 — Korek Telecom Company LLC v Iraq Telecom Ltd [2024] DIFC CA 016

This is an important recent authority involving the foreign act of state doctrine.

The arbitration concerned allegations that a decision of Iraq's Communications and Media Commission had been procured through bribery and corruption.

The appellants argued that the tribunal could not examine the conduct of a foreign governmental authority because of the foreign act of state doctrine and UAE public policy. (DIFC Courts)

The DIFC Court of Appeal conducted an extensive examination of:

sovereign immunity;

act of state;

foreign governmental acts;

UAE public policy;

common-law principles;

corruption;

arbitral jurisdiction.

Important distinction

The Court distinguished between:

challenging the validity of a foreign sovereign act

and

considering that governmental act as part of the factual background to a private-law claim.

The Court concluded that, in the circumstances before it, the foreign act of state doctrine did not prevent arbitration of the question whether private parties had caused loss by bribing a foreign public authority. (DIFC Courts)

Key principle

A tribunal may be able to consider the factual consequences of a foreign governmental act without directly declaring that governmental act legally invalid.

This is highly relevant to modern corruption, investment, telecom, energy and infrastructure disputes.

9. Case 4 — Lahela v Lameez [2020] DIFC CA 007

This case involved service of proceedings and the application of the Riyadh Convention.

Although the case was not principally a sovereign-immunity dispute, it is relevant to cross-border sovereign litigation because the Court distinguished between:

proceedings against a foreign state; and

ordinary proceedings between parties located in different states.

The Court noted that proceedings against a foreign state involve special considerations concerning:

comity;

state immunity;

diplomatic channels. (DIFC Courts)

The Court explained that those considerations do not necessarily apply in the same manner to ordinary proceedings between residents of different states.

Principle

Cross-border litigation is not automatically sovereign litigation.

The identity of the defendant and the nature of the claim matter.

10. Case 5 — Lural v Listran & Lokhan [2021] DIFC CA 003

This case concerned recognition and jurisdiction involving judgments from another UAE jurisdiction.

The DIFC Court emphasised the special nature of the relationship between the DIFC Courts and the courts of other Emirates.

The Court considered:

the Judicial Authority Law;

private international law principles;

recognition of judgments;

public policy;

comity;

the relationship between DIFC and onshore UAE courts. (DIFC Courts)

Significance

A dispute involving another UAE Emirate is not necessarily equivalent to litigation involving a foreign sovereign state.

The legal relationship between the Emirates is governed by the UAE constitutional and judicial framework.

11. Case 6 — YYY Ltd v ZZZ Ltd [2017] DIFC ARB 005

This authority is important for the relationship between:

foreign judgments;

sovereign immunity;

public policy;

recognition proceedings.

The DIFC jurisprudence recognised that conflict-of-laws principles may include restrictions on recognising foreign judgments where recognition would violate public policy or principles of sovereign immunity.

This approach was later discussed in FAL Oil v SEWA. (DIFC Courts)

Principle

Recognition is not merely an administrative exercise.

The enforcing court must consider whether recognition is legally permissible under its own procedural and conflict-of-laws framework.

12. Case 7 — Federal Supreme Court Judgment No. 714/2018

This UAE Federal Supreme Court authority became particularly important in the later Korek litigation.

The case concerned the ability of UAE courts to challenge or review decisions of foreign governmental/administrative authorities.

In the Korek proceedings, expert evidence differed over the precise scope of this decision.

One interpretation was that a foreign administrative resolution could not be challenged before another country's administrative judiciary because of the principle of state sovereignty. Another interpretation distinguished between directly challenging the validity of a foreign governmental decision and considering that decision as part of a private-law claim. (DIFC Courts)

Importance

The case should therefore be used cautiously.

It does not necessarily establish that UAE courts can never consider facts involving a foreign government.

The distinction is:

Direct judicial review of foreign sovereign action

versus

Private-law adjudication in which a foreign governmental act is merely part of the factual background.

That distinction became central to Korek v Iraq Telecom. (DIFC Courts)

13. Case 8 — Dubai Court of Cassation Case No. 87/2009

This case is important for international-law and treaty questions.

It was relied upon in Pearl Petroleum v KRG for the proposition that international conventions ratified by the UAE acquire domestic legal force and must be given effect by UAE judges. (DIFC Courts)

This principle becomes particularly important where a cross-border sovereign dispute is governed by:

bilateral treaties;

multilateral conventions;

arbitration conventions;

judicial-assistance conventions;

recognition and enforcement treaties.

Principle

A ratified international convention can form part of the UAE legal framework applicable to a cross-border dispute.

14. Foreign State Immunity and Commercial Contracts

A common problem occurs when a government enters into an ordinary commercial contract.

Example:

Ministry of Energy of State X purchases equipment from a UAE company.

The government later refuses to pay.

The question is:

Is the dispute sovereign or commercial?

The answer depends on the nature of the transaction, the applicable law and the relevant immunity framework.

The FAL Oil case is particularly useful because the Court considered the underlying petroleum supply transaction to be commercial. (DIFC Courts)

Therefore:

Government party ≠ automatically sovereign transaction.

15. State-Owned Companies

A state-owned company presents another problem.

Suppose:

State owns 100% of an electricity company.

The company enters a commercial construction contract.

The contractor obtains a judgment.

Can the company say:

“We are owned by the government, therefore we are immune”?

Not automatically.

FAL Oil illustrates the importance of examining:

separate legal personality;

constituting legislation;

management;

financial independence;

functions;

actual conduct;

nature of the transaction. (DIFC Courts)

The general principle is:

Separate legal personality should ordinarily be respected unless the applicable legal framework provides a basis for treating the entity differently.

16. Sovereign Immunity Is Different From Immunity From Execution

This distinction is fundamental.

Immunity from jurisdiction

Question:

Can the court hear the claim?

Immunity from execution

Question:

Even if the claimant wins, can the claimant seize the state's assets?

These are separate questions.

FAL Oil expressly recognised that the rules governing immunity of particular assets can differ from the question whether the defendant itself has immunity from proceedings. (DIFC Courts)

Therefore:

Jurisdictional immunity ≠ execution immunity.

17. State Assets

Not every government asset should automatically be treated identically.

Potentially different categories include:

diplomatic property;

military assets;

central-bank assets;

public-service infrastructure;

commercial bank accounts;

commercial property;

shares in commercial enterprises.

The function and legal character of the asset may matter.

FAL Oil emphasised that asset immunity should be considered by reference to the specific asset and the function for which it is used rather than simply assuming that all assets of a governmental entity are immune. (DIFC Courts)

18. Express Waiver of Immunity

A state may expressly waive immunity.

Examples include contractual provisions stating that the state:

submits to jurisdiction;

waives immunity;

agrees to arbitration;

waives immunity from enforcement;

consents to particular courts.

Pearl Petroleum v KRG is the leading UAE/DIFC example.

The KRG's contract contained an express waiver concerning immunity for itself and its assets, and the Court treated the waiver as effective in the circumstances. (DIFC Courts)

Important drafting distinction

A clause saying:

“The state waives immunity from jurisdiction”

may not necessarily be identical to:

“The state waives immunity from execution against its assets.”

Therefore, sophisticated sovereign contracts often distinguish:

jurisdictional immunity;

arbitration immunity;

recognition immunity;

enforcement immunity;

attachment immunity.

19. Arbitration and Sovereign Disputes

International arbitration is frequently used where one party is a state or state-owned entity.

A typical structure is:

State

↓

Commercial contract

↓

Arbitration agreement

↓

International arbitration

↓

Award

↓

Recognition

↓

Enforcement

The arbitration agreement may establish consent to arbitration, but enforcement against state assets raises an additional question.

Therefore:

Consent to arbitration should not automatically be assumed to equal unlimited consent to execution.

The precise language of the waiver matters.

20. Act of State Doctrine

The act of state doctrine is different from state immunity.

State immunity

The state says:

“You cannot exercise jurisdiction over me.”

Act of state

The argument is more like:

“The court should not adjudicate upon the validity of a sovereign governmental act performed within another state.”

This distinction became central in Korek v Iraq Telecom. (DIFC Courts)

21. Foreign Government Decision as Evidence

Suppose a foreign government cancels a licence.

A private company then sues another private company for damages, alleging that the defendant bribed officials to obtain the cancellation.

The court may need to consider:

whether the government actually cancelled the licence;

what the decision said;

what consequences it had.

But that does not necessarily require the court to declare:

“The foreign government's decision was legally invalid.”

This distinction was important in Korek.

The DIFC Court of Appeal concluded that the arbitration could consider whether private parties caused loss through bribery of the foreign authority without treating the foreign governmental decision itself as legally invalid. (DIFC Courts)

22. Sovereignty and Corruption

Modern sovereign disputes frequently involve allegations of:

bribery;

corruption;

procurement manipulation;

political interference;

regulatory capture.

The act-of-state doctrine cannot automatically be treated as a shield against every private-law claim involving a governmental decision.

Korek is particularly important because the Court considered the relationship between foreign governmental acts and allegations of corruption. (DIFC Courts)

The key question becomes:

Is the claimant asking the court to invalidate the sovereign act, or merely relying upon the circumstances surrounding that act to establish liability against another party?

23. Public Policy

Public policy can become relevant when:

recognising a foreign judgment;

enforcing an arbitral award;

considering a foreign governmental decision;

enforcing against certain assets.

The concept should not be confused with ordinary disagreement with foreign law.

The issue is whether the requested judicial action conflicts with fundamental principles recognised by the relevant UAE legal system.

The Korek litigation demonstrates how foreign governmental acts, corruption and UAE public policy can intersect. (DIFC Courts)

24. Cross-Border Sovereign Disputes and Jurisdiction

A UAE court may need to answer:

Question 1

Is the defendant actually a state?

Question 2

Is it a separate state entity?

Question 3

What is the nature of the transaction?

Question 4

Has immunity been waived?

Question 5

Is the claim directed against the state or against another private party?

Question 6

Does the dispute require invalidation of a sovereign act?

Question 7

Is there a treaty?

Question 8

Is there an arbitration agreement?

Question 9

Where are the relevant assets?

Question 10

Does execution involve immune property?

25. UAE Sovereign Dispute Decision Tree

A useful legal test is:

Step 1 — Identify the defendant

Foreign state?

↓

Government department?

↓

State-owned corporation?

↓

Separate legal entity?

Step 2 — Identify the conduct

Commercial?

or

Sovereign/regulatory?

Step 3 — Identify the consent

Jurisdiction clause?

Arbitration clause?

Express waiver?

Step 4 — Identify the claim

Contract?

Tort?

Recognition?

Enforcement?

Challenge to governmental act?

Step 5 — Identify the asset

Commercial asset?

Diplomatic asset?

Military/public-service asset?

Central-bank/public financial asset?

Step 6 — Apply relevant law

UAE legislation + applicable treaty + relevant DIFC/onshore rules.

26. Inter-Emirate Sovereign Disputes

The UAE presents an unusual constitutional structure.

FAL Oil demonstrates that the seven Emirates cannot simply be treated as independent foreign states after federation.

The Court reasoned that the Constitution governs their relationships and specifically provides a Union Supreme Court mechanism for disputes between Emirates. (DIFC Courts)

Therefore:

Inter-Emirate disputes must be analysed through the UAE constitutional structure rather than simply importing foreign-state-immunity principles.

27. Foreign Sovereign Versus UAE Emirate

28. Cross-Border Sovereign Contract

Consider:

UAE company contracts with a foreign ministry to build infrastructure.

The contract contains:

UAE governing law;

arbitration in London;

LCIA arbitration;

express waiver of immunity;

waiver of immunity from execution.

A dispute arises.

The legal sequence is:

Contract

↓

Arbitration agreement

↓

State consent

↓

Award

↓

Seat proceedings

↓

UAE recognition

↓

Immunity analysis

↓

Asset-specific execution

This is why sovereign contracts require much more careful drafting than ordinary commercial contracts.

29. Sovereign Wealth Funds

A sovereign wealth fund can create difficult questions.

Government ownership alone does not necessarily determine immunity.

The court may examine:

establishing legislation;

separate legal personality;

purpose;

management;

commercial functions;

statutory powers;

financial independence;

nature of the particular transaction.

The FAL Oil reasoning concerning separate governmental entities is useful by analogy: governmental ownership and control are relevant, but they are not necessarily decisive by themselves. (DIFC Courts)

30. Central Banks

Central-bank assets present particularly sensitive issues.

A central bank may have:

sovereign functions;

monetary-policy functions;

foreign-exchange reserves;

commercial banking relationships;

investment portfolios.

The immunity analysis should therefore distinguish:

identity of the institution

from

nature and use of the particular asset.

This reinforces the distinction between:

immunity from jurisdiction

and

immunity from execution.

31. Cross-Border Recognition of Sovereign Judgments

Suppose:

Foreign state obtains a judgment in Country X.

It seeks recognition in the UAE.

The UAE court may consider:

jurisdiction of the foreign court;

finality;

due process;

public policy;

reciprocity/treaty;

immunity;

nature of the defendant;

whether recognition is compatible with UAE law.

The FAL Oil litigation demonstrates that recognition of a judgment and subsequent execution are separate stages. (DIFC Courts)

32. Cross-Border Enforcement Against a State

Winning a judgment is only the beginning.

A creditor may still need to determine:

Is the state immune from execution?

Was execution immunity waived?

Is the asset commercial?

Is it used for sovereign functions?

Is it diplomatic property?

Is it central-bank property?

Is there a treaty?

Is there a statutory restriction?

Is the asset legally owned by a separate state entity?

Therefore:

Judgment + enforcement entitlement ≠ automatic seizure of every state asset.

33. Evidentiary Issues

Sovereign disputes frequently involve evidence from:

ministries;

governmental agencies;

foreign regulators;

embassies;

public procurement records;

state-owned enterprises;

foreign administrative decisions.

The court may have to consider:

authenticity;

privilege;

public-interest immunity;

sovereignty;

foreign law;

judicial cooperation.

The Korek case demonstrates how evidence concerning foreign governmental decisions can become central to a private arbitration without necessarily requiring the court to invalidate the governmental decision itself. (DIFC Courts)

34. International Treaties

Treaties can materially change the analysis.

Pearl Petroleum is particularly important because the DIFC Court noted that UAE-ratified international conventions form part of the applicable UAE legal framework and must be given effect. (DIFC Courts)

Relevant treaties may concern:

arbitration;

recognition of judgments;

judicial assistance;

service of process;

diplomatic relations;

consular relations;

investment protection.

Therefore:

Always check the treaty position before relying solely on domestic civil procedure.

35. Six Core Principles From the Case Law

Principle 1 — Sovereign immunity is not necessarily absolute

Pearl Petroleum demonstrates the significance of waiver. (DIFC Courts)

Principle 2 — Government ownership does not automatically create immunity

FAL Oil demonstrates the importance of separate legal personality and actual functions. (DIFC Courts)

Principle 3 — Commercial transactions may receive different treatment

The petroleum transactions in FAL Oil were treated as commercial. (DIFC Courts)

Principle 4 — Immunity from jurisdiction differs from immunity from execution

FAL Oil expressly distinguishes the two. (DIFC Courts)

Principle 5 — Foreign governmental acts are not necessarily beyond all judicial consideration

Korek demonstrates the distinction between challenging the validity of a foreign sovereign act and considering it as part of a private-law claim. (DIFC Courts)

Principle 6 — UAE federalism matters

FAL Oil indicates that immunity between Emirates cannot simply be assumed; Article 99 of the Constitution is important. (DIFC Courts)

36. Case Law Summary

37. Practical Legal Checklist

When handling a UAE cross-border sovereign dispute, ask:

A. Identity

Is the defendant a foreign state?

Ministry?

Government agency?

State-owned corporation?

Sovereign wealth fund?

Central bank?

B. Conduct

Commercial?

Regulatory?

Military?

Diplomatic?

Public-service activity?

C. Consent

Arbitration clause?

Jurisdiction clause?

Express immunity waiver?

Waiver of execution immunity?

D. Procedure

UAE court?

DIFC Court?

ADGM Court?

Foreign court?

Arbitration tribunal?

E. Treaty

New York Convention?

Judicial-assistance treaty?

Bilateral investment treaty?

Judgment-recognition treaty?

F. Enforcement

What assets exist?

Who owns them?

What are they used for?

Are they commercial or sovereign?

Is execution immunity separately applicable?

38. Important 2026 Perspective

The UAE legal position should not be reduced to a single proposition such as:

“States are immune.”

The modern case law demonstrates a much more differentiated approach.

The relevant questions include:

Who is the defendant?

↓

What did the defendant do?

↓

Was the conduct sovereign or commercial?

↓

Did the state consent to jurisdiction/arbitration?

↓

Was immunity waived?

↓

What remedy is sought?

↓

Is the court being asked to invalidate a foreign sovereign act?

↓

Or is the sovereign act merely factual background to a private-law claim?

↓

What asset is targeted for enforcement?

This analytical approach is particularly visible across FAL Oil, Pearl Petroleum and Korek. (DIFC Courts)

39. Conclusion

UAE cross-border sovereign disputes sit at the intersection of civil law, constitutional law, private international law, arbitration, state immunity and international judicial cooperation.

The most important distinctions are:

Foreign state vs state-owned entity

Sovereign act vs commercial transaction

Jurisdictional immunity vs execution immunity

State immunity vs act of state

Foreign state vs UAE Emirate

Arbitration consent vs execution waiver

Government ownership vs separate legal personality

Invalidating a sovereign act vs considering its consequences in a private dispute

The UAE/DIFC authorities demonstrate that sovereign status is significant but does not provide an automatic answer to every cross-border civil dispute. Pearl Petroleum highlights contractual waiver; FAL Oil addresses governmental entities, commercial transactions and inter-Emirate immunity; and Korek provides a modern analysis of foreign governmental acts, public policy and private-law claims. (DIFC Courts)

Core Formula

Identify State → Determine Sovereign/Commercial Character → Check Jurisdiction → Check Waiver → Separate Immunity From Execution → Examine Asset → Consider Treaty/Public Policy → Apply UAE/DIFC Procedural Law → Determine Remedy.