1. Introduction

Loss of profit means the profit that a person or business would reasonably have earned but for another party's breach of contract, wrongful act, or other legally compensable conduct.

In UAE civil-law analysis, a claim for loss of profit is not established merely by showing that:

“I expected to earn money.”

The claimant generally has to establish a legally compensable loss, a sufficient causal connection between the defendant's conduct and the loss, and a sufficiently reliable basis for quantifying the amount.

UAE jurisprudence has recognised that lost earnings may be recoverable where the expectation of profit is based on reasonable grounds, while the claimant bears the burden of proving the loss. Dubai Court of Cassation authorities cited by the DIFC Courts have also stated that the court has discretion in assessing damages but must identify the elements of damage supporting its award.

Because the UAE's Federal Decree by Law No. 25 of 2025 (new Civil Transactions Law) became effective on 1 June 2026, current mainland analysis should be based on that law, while many older reported cases applying the 1985 Civil Transactions Law are now best treated as historical authorities for principles, subject to the new law's transitional provisions.

2. Basic Principle

The fundamental calculation can be expressed as:

Recoverable Lost Profit = Expected Revenue − Avoided/Variable Costs − Other Appropriate Adjustments

For example:

• expected sales: AED 5,000,000
• costs that would have been incurred: AED 3,200,000
• avoided costs: AED 300,000
• reasonably established lost profit: approximately AED 1,500,000

The calculation is not automatically:

Expected sales = loss of profit.

Revenue is not profit.

The claimant must generally distinguish:

Revenue → Expenses → Net profit → Legally recoverable loss

3. Legal Requirements for Loss of Profit

A useful UAE framework has six components:

1. Existence of a legal wrong

There must be a breach, wrongful act, or other legally recognised basis for liability.

2. Actual or sufficiently certain loss

The claimant must demonstrate that the profit was lost or that the future loss is sufficiently established.

3. Causation

The defendant's conduct must have caused the lost profit.

4. Reasonable foreseeability / legal recoverability

The claimed loss must fall within the legally recoverable consequences of the relevant wrong.

5. Reasonable certainty of calculation

The amount cannot simply be speculative.

6. Mitigation / avoided loss

The claimant should not recover amounts that it avoided by not having to incur corresponding expenditure.

4. Method 1 — Historical Profit Method

This is one of the most straightforward methods.

The claimant examines its actual historical performance before the breach.

Formula

Expected profit = Historical average profit × affected period

Example:

A company earned:

• Year 1: AED 1.0 million
• Year 2: AED 1.2 million
• Year 3: AED 1.4 million

Average:

AED 1.2 million

If a defendant's breach prevented operations for six months:

Indicative lost profit = AED 600,000

The court would still consider whether the historical period is genuinely comparable.

Useful evidence

• audited accounts;
• tax records;
• sales invoices;
• bank statements;
• customer contracts;
• previous margins;
• accounting records.

This method is particularly persuasive where the business was already operating and had a stable profit history.

5. Method 2 — Before-and-After Method

The court can compare:

Profit before the wrongful conduct

with:

Profit after the wrongful conduct.

For example:

The claimant must still show that the AED 1.2 million reduction was caused by the defendant rather than:

• market decline;
• inflation;
• management problems;
• competition;
• seasonal variation;
• unrelated business losses.

6. Method 3 — Projected Profit Method

This method is used where the business had not yet generated the relevant profits.

The claimant presents a business projection based upon:

• expected customers;
• expected sales;
• market prices;
• operating costs;
• capacity;
• comparable branches;
• existing contracts;
• industry data.

The court then assesses whether the projection is sufficiently reliable.

This method was important in Theron Entertainment LLC v MAG Financial Services LLC [2015] DIFC CFI 021.

The claimant calculated lost restaurant profits by considering projected sales, costs and depreciation. The court accepted a projection based on the performance of the claimant's Abu Dhabi restaurant because the projections were prepared by the same consultant and were not successfully challenged at trial. The court awarded AED 6,282,933 for the relevant seven-month period.

The Court of Appeal later considered the lost-profit award in MAG Financial Services LLC v Theron Entertainment LLC [2017] DIFC CA 006.

Principle

A projection can be used where it rests on reliable comparative evidence rather than mere speculation.

7. Method 4 — Comparable Business Method

Where the claimant has no reliable historical figures, a court may consider a comparable business.

Examples:

• another branch;
• comparable restaurant;
• similar store;
• comparable project;
• similar production facility.

Example

A new Dubai restaurant has not yet opened because of a landlord's breach.

Its Abu Dhabi branch generated:

AED 800,000 monthly net profit.

Evidence shows:

• same brand;
• same business model;
• same consultant;
• similar capacity;
• comparable customer base.

A court could consider the comparable branch as evidence of what the Dubai operation might reasonably have earned.

This was essentially the evidentiary approach accepted in Theron v MAG.

8. Method 5 — Lost Margin Method

Sometimes the claimant has reliable sales figures but needs to establish the lost profit margin.

Formula

Lost sales × normal profit margin = estimated lost profit

Example:

Lost sales:

AED 4,000,000

Normal net profit margin:

20%

Therefore:

AED 4,000,000 × 20% = AED 800,000

But the court should consider whether the margin would actually have remained constant.

For example, additional production could require:

• additional labour;
• additional rent;
• additional transportation;
• financing;
• marketing;
• raw materials.

Therefore, a simple percentage calculation may require adjustments.

9. Method 6 — Contract-by-Contract Calculation

Where the claimant has specific contracts that would have produced identifiable profits, the calculation can be made contract by contract.

Example

Contract A:

Revenue = AED 1,000,000
Cost = AED 700,000
Profit = AED 300,000

Contract B:

Revenue = AED 600,000
Cost = AED 450,000
Profit = AED 150,000

Total lost profit:

AED 450,000

This is generally stronger than a vague assertion that:

“Our business would have been more profitable.”

10. Method 7 — Churn / Rotation Method

This is particularly relevant to trading and commodity businesses.

A claimant may argue:

“Because the defendant prevented us from using an asset for 30 days, we could not rotate our inventory through the normal number of transactions.”

In Rada Trading LLC FZC v Arya Petroleum FZE [2020] DIFC CFI 112, the claimant alleged that it lost profits because it was deprived of a storage tank for approximately one month and therefore could not rotate cargoes in its ordinary business cycle. The pleaded loss of profit was approximately USD 287,676 after reduction from a larger amount in light of expert evidence.

Calculation concept

Number of lost transactions × average profit per transaction

This method is particularly relevant to:

• commodity trading;
• shipping;
• warehousing;
• logistics;
• inventory businesses.

11. Method 8 — Wasted Expenditure / Lost Profit Analysis

Loss of profit does not always require proof of an exact lost sale.

A business may have spent resources that would normally have generated profit but did not because of the defendant's conduct.

This issue was considered in Amira C Foods International DMCC & AK Global Business FZE v IDBI Bank Ltd & Karan A Chanana [2018] DIFC CFI 027.

The court considered the DIFC Contract Law provisions concerning certainty and foreseeability of damages and discussed situations where loss may be established through wasted expenditure and diversion of staff resources.

Principle

The law does not necessarily demand mathematical precision impossible to achieve in the circumstances.

But the claimant still needs a reasonable evidential foundation.

12. Method 9 — Loss of Opportunity / Probability Method

Sometimes the claimant cannot demonstrate that the profit would definitely have been earned.

Instead, there may have been a probability of obtaining the profit.

This is different from simply claiming an uncertain future profit.

The analysis can be:

Value of opportunity × probability of successful outcome

Example:

Potential profit:

AED 1,000,000

Reasonably established probability:

40%

Potential loss:

AED 400,000

This approach is particularly relevant where the claim concerns an opportunity rather than an already concluded transaction.

The DIFC Contract Law provision discussed in Amira C Foods expressly contemplated compensation for loss of an opportunity in proportion to its probability, where the relevant requirements were satisfied.

13. Method 10 — Expert Accounting Method

Complex loss-of-profit claims frequently require expert evidence.

An expert may reconstruct:

1. expected revenue;
2. expected costs;
3. variable costs;
4. fixed costs;
5. capacity;
6. market conditions;
7. seasonal fluctuations;
8. taxes and duties where relevant;
9. financing costs;
10. alternative income.

The final calculation might look like:

The court is not automatically bound by the expert's number.

The expert supplies evidence; the court determines the legally recoverable amount.

14. Case Law 1 — Globemed Gulf Healthcare Solutions LLC v Oman Insurance Company PSC [2017] DIFC CFI 051

This is one of the most useful UAE-related authorities for the general principle.

The DIFC Court referred to Dubai Court of Cassation Cases Nos. 46 and 49 of 2006 (Commercial).

Those authorities stated that compensation may include lost earnings where they are a consequent result of the wrongful act and the loss has occurred or will certainly occur. They also recognised that expected profits can be recoverable where the expectation rests on reasonable grounds, with the claimant bearing the burden of proof.

Principle

Reasonable expectation + causation + proof = potentially recoverable lost profit.

15. Case Law 2 — Theron Entertainment LLC v MAG Financial Services LLC [2015] DIFC CFI 021

The restaurant claimant claimed more than AED 11 million in lost profits.

The court ultimately accepted a projection based on the performance of another branch and awarded AED 6,282,933 for the relevant period.

Importance

This case demonstrates the comparable-business/projected-profit method.

It shows that a new business does not necessarily lose its claim merely because it has no historical profit figures.

16. Case Law 3 — MAG Financial Services LLC v Theron Entertainment LLC [2017] DIFC CA 006

The Court of Appeal reviewed the first-instance award of lost profits in the restaurant dispute.

The appeal concerned, among other matters, whether the claimant was entitled to terminate the tenancy and whether the lost-profit award was properly made.

Importance

The case demonstrates that:

• calculation methodology can be challenged on appeal;
• the legal entitlement to damages and the amount of damages are separate questions;
• accounting assumptions must be examined.

17. Case Law 4 — Rada Trading LLC FZC v Arya Petroleum FZE [2020] DIFC CFI 112

The claimant alleged that deprivation of a storage tank prevented it from rotating cargoes and caused loss of profit.

The claim was supported by an expert calculation and reduced from the originally pleaded amount.

Importance

This is a useful authority for transaction-cycle/rotation calculations.

18. Case Law 5 — Hepher Associates Ltd & Trevor Anscombe v Rasana Engineering Industries Co LLC [2017] DIFC CFI 043

The claimants sought AED 498,789.36 as loss of profit.

The court noted that the legal theory of recovering lost profits under the UAE Civil Transactions Law was permissible, but that the claimants had to prove the amount on the balance of probabilities.

Importance

The case establishes the critical distinction:

Legal entitlement to claim lost profit ≠ automatic entitlement to the amount claimed.

The amount still requires proof.

19. Case Law 6 — Amira C Foods International DMCC v IDBI Bank Ltd [2018] DIFC CFI 027

The case involved complex commercial damages.

The court considered:

• certainty of harm;
• future loss;
• loss of opportunity;
• foreseeability;
• lost profit;
• wasted expenditure.

The court recognised that the law does not require impossible mathematical precision where the nature of the loss makes exact calculation difficult, while still requiring a reasonable evidential foundation.

Importance

This is particularly useful for uncertain commercial profit calculations.

20. Case Law 7 — Mipil v Miwert & Merob [2023] DIFC SCT 223

The claimant sought loss of profit allegedly resulting from a travel ban that prevented attendance at investor meetings in Saudi Arabia.

The claimant asserted that the meetings would have led to an education venture, but the court found insufficient evidence that a formal position or definite opportunity existed requiring the claimant's physical attendance.

Importance

This illustrates the other side of the principle:

A speculative business possibility is not automatically a compensable lost profit.

The claimant must establish a sufficient factual connection between the defendant's conduct and the claimed profit.

21. Case Law 8 — Nyoka v Nunzio [2024] DIFC SCT 098

The defendant claimed AED 174,000 for anticipated profit allegedly lost because premises were not opened on time.

The defendant calculated the amount using a minimum daily sales figure.

However, the contract expressly excluded liability for anticipated profits and pure economic loss, and the court rejected the claim.

Importance

This demonstrates an essential point:

Even a mathematically calculable profit may be contractually excluded from recovery.

Therefore:

Calculation comes after determining whether the loss is legally recoverable.

22. Important Distinction: Revenue vs Profit

Suppose a company expected:

AED 10 million revenue.

Its expected costs were:

• materials: AED 4 million;
• labour: AED 2 million;
• logistics: AED 1 million;
• other costs: AED 1 million.

Expected profit:

AED 2 million.

The claimant cannot ordinarily claim AED 10 million merely because AED 10 million in sales were lost.

The relevant economic loss is closer to:

AED 10m − AED 8m = AED 2m

subject to legal adjustments.

23. Deduction of Avoided Costs

A fundamental calculation principle is:

The claimant should not be compensated for expenses it no longer had to incur.

Suppose:

Expected revenue = AED 5m
Expected costs = AED 3m

Expected profit = AED 2m.

If the breach prevented the transaction and therefore saved AED 1m of costs, the calculation must account for that avoided expenditure.

This prevents overcompensation.

24. Fixed Costs and Variable Costs

This distinction is particularly important.

Variable costs

Costs that increase with production/sales:

• raw materials;
• shipping;
• transaction fees;
• commissions;
• packaging.

Fixed costs

Costs that may continue regardless of sales:

• rent;
• certain salaries;
• insurance;
• software subscriptions.

A loss-of-profit expert must determine which costs would actually have been incurred.

25. Mitigation of Loss

The claimant cannot simply allow losses to accumulate.

For example:

A supplier breaches a contract and prevents production.

The claimant may have an obligation to consider:

• alternative suppliers;
• alternative premises;
• substitute products;
• alternative customers;
• temporary operations.

If the claimant could reasonably have reduced its loss but failed to do so, the recoverable amount may be affected.

This is why a calculation often becomes:

Gross expected profit − avoided loss − reasonably avoidable loss = potentially recoverable loss.

26. Foreseeability

The fact that a claimant actually suffered a loss does not necessarily mean the defendant is responsible for every resulting profit.

The court may consider whether the relevant loss was sufficiently connected to the defendant's obligation and foreseeable within the applicable legal framework.

The Amira C Foods judgment is particularly useful because it discusses certainty and foreseeability of contractual loss.

27. Speculative Profit vs Reasonably Expected Profit

Speculative

“If everything had gone perfectly, we might have earned AED 20 million.”

This is weak evidence.

Reasonably expected

“We had signed contracts worth AED 8 million, our historical margin was 20%, production capacity was available, and the defendant's breach prevented delivery.”

This provides a much stronger basis.

28. New Business Claims

A new business faces greater difficulty because it may lack:

• historical profits;
• established customers;
• stable margins;
• proven demand.

But this does not automatically eliminate the claim.

Evidence can include:

• signed customer contracts;
• comparable branches;
• industry benchmarks;
• independent business plans;
• actual pre-breach sales;
• confirmed purchase orders;
• expert analysis.

Theron v MAG is an important example of a projection supported by a comparable existing business.

29. Loss of Profit in Construction

Construction disputes commonly involve claims for:

• delayed completion;
• lost rental income;
• lost sales;
• additional project profits;
• business interruption.

The calculation may use:

Daily expected profit × period of delay

But the claimant must establish:

1. entitlement to the underlying profit;
2. responsibility for delay;
3. causal connection;
4. actual delay period;
5. reasonable profit margin;
6. mitigation.

30. Loss of Profit in Trading

For trading businesses, the calculation can involve:

Lost transaction volume × expected margin

For example:

10 lost trades × AED 100,000 average profit

= AED 1,000,000.

But the claimant must establish that the trades would actually have occurred.

This is why Rada Trading is useful: the court considered evidence concerning the ordinary rotation of cargo and expert calculation of the claimed profit.

31. Loss of Profit in Digital Businesses

Digital businesses create special problems.

Possible calculations include:

• lost subscriptions;
• lost transactions;
• lost advertising revenue;
• lost platform fees;
• lost customers;
• lost recurring revenue.

For example:

10,000 lost subscriptions
× AED 100 annual contribution margin
= AED 1 million.

But the calculation must account for:

• customer churn;
• acquisition costs;
• refunds;
• server costs;
• payment processing;
• alternative sales channels.

32. Loss of Profit and AI/Automated Systems

Where an AI or automated system causes business interruption, the claimant might calculate:

Normal expected profit during outage

minus

actual profit

minus

avoided costs

plus/minus

mitigation and other adjustments.

However, establishing causation becomes critical.

The claimant must show that the system failure caused the lost business rather than:

• market conditions;
• customer choice;
• another supplier;
• unrelated technical problems.

33. Role of Experts

Experts can assist with:

• financial reconstruction;
• accounting;
• market evidence;
• forecasting;
• causation;
• industry margins;
• alternative scenarios.

But an expert should not simply say:

“The claimant would have earned AED 5 million.”

The report should explain:

Why?

The calculation should be reproducible.

A good expert model should identify:

1. assumptions;
2. source documents;
3. historical figures;
4. forecast period;
5. expected revenue;
6. expected costs;
7. margins;
8. mitigation;
9. alternative scenarios;
10. sensitivity analysis.

34. Sensitivity Analysis

Courts may face competing assumptions.

Example:

The court can evaluate the evidentiary strength of each scenario.

This is preferable to presenting the highest possible number as though it were certain.

35. Discounting Future Profits

Where damages concern a long future period, the calculation may require consideration of:

• inflation;
• discount rate;
• business growth;
• declining profitability;
• probability of continuation;
• replacement income.

For example, AED 1 million expected five years in the future is not necessarily valued identically to AED 1 million payable immediately.

The precise treatment depends on the applicable law, claim type and evidentiary circumstances.

36. Contractual Exclusion of Lost Profits

The parties may attempt to exclude:

• consequential loss;
• indirect loss;
• anticipated profit;
• business interruption;
• loss of goodwill.

Nyoka v Nunzio [2024] DIFC SCT 098 demonstrates the practical importance of such contractual wording: the court rejected the anticipated-profit claim because the agreement excluded that category and did not impose the claimed obligation.

Therefore, before calculating damages, ask:

Does the contract permit recovery of this type of loss?

37. Loss of Profit vs Loss of Opportunity

These are not identical.

Loss of profit

The claimant says:

“I would have earned AED 1 million.”

Loss of opportunity

The claimant says:

“I lost an opportunity that had a 40% chance of producing AED 1 million.”

The second claim requires probability analysis.

This distinction is particularly important where the future transaction was not certain.

38. Burden of Proof

The claimant normally has to establish:

• liability;
• loss;
• causation;
• amount.

In Globemed, the DIFC Court's discussion of Dubai Court of Cassation authorities expressly notes that the burden rests on the claimant to prove lost earnings.

Therefore:

The defendant does not normally have to prove that the claimant did not lose the claimed profit before the claimant establishes a credible prima facie calculation.

39. Practical Calculation Framework

A UAE loss-of-profit calculation can be organised as follows:

Step 1 — Identify the breach

What did the defendant do or fail to do?

Step 2 — Identify the affected business activity

Which contract, project, product or transaction was affected?

Step 3 — Establish the counterfactual

What would probably have happened without the breach?

Step 4 — Calculate expected revenue

Use:

• historical records;
• contracts;
• comparable businesses;
• market data;
• expert projections.

Step 5 — Deduct costs

Remove costs that would have been incurred.

Step 6 — Deduct avoided losses

Account for costs or losses the claimant did not incur.

Step 7 — Account for mitigation

Consider whether alternative opportunities reduced the loss.

Step 8 — Test causation

Was the defendant's conduct actually responsible?

Step 9 — Test certainty

Is the calculation sufficiently reliable?

Step 10 — Test contractual/legal recoverability

Is this type of profit recoverable under the applicable law and contract?

Step 11 — Apply appropriate judicial assessment

The final figure is determined by the court, not simply by the claimant's spreadsheet.

40. Master Formula

A useful study formula is:

Recoverable Loss of Profit = Expected Revenue − Expected Avoidable Costs − Mitigated/Recovered Amounts ± Appropriate Adjustments

Subject to:

Liability + Causation + Certainty + Foreseeability/Recoverability + Proof

41. Case-Law Comparison Table

42. Key Distinctions for UAE Civil Law

Lost revenue ≠ lost profit

Revenue must be adjusted for costs.

Expected profit ≠ speculative profit

Reasonable evidence is necessary.

Mathematical precision ≠ legal certainty

A spreadsheet can be precise but based on unsupported assumptions.

Expert evidence ≠ binding determination

The court ultimately determines the legally recoverable amount.

Potential opportunity ≠ established profit

A mere possibility may be insufficient.

Contractual entitlement ≠ automatic damages

The claimant must establish the actual loss.

DIFC authority ≠ mainland binding precedent

DIFC cases are highly useful comparative authorities but must be distinguished from mainland UAE judicial precedent.

43. Exam-Oriented Conclusion

Loss of profit under UAE civil law is principally concerned with restoring the claimant for profit that was sufficiently established, causally connected to the defendant's wrongful conduct and legally recoverable.

The principal calculation methods include:

1. Historical profit method
2. Before-and-after method
3. Projected profit method
4. Comparable-business method
5. Lost-margin method
6. Contract-by-contract method
7. Trading/transaction-rotation method
8. Loss-of-opportunity/probability method
9. Expert accounting reconstruction
10. Wasted-expenditure/lost-return analysis

The leading practical lesson from the case law is:

UAE courts can award lost profits, but the claimant must establish a reasonable factual and financial foundation for the amount claimed.

The strongest claims normally combine documentary evidence, actual business records, contractual evidence, expert financial analysis, causation evidence and a transparent calculation methodology. Conversely, claims based only on optimistic projections or hypothetical future business are vulnerable, as illustrated by Mipil v Miwert & Merob.

Revision formula:

Loss of Profit = Reasonably Established Expected Profit − Avoided Costs − Mitigated Losses, subject to Causation, Certainty, Foreseeability/Recoverability and Proof.