Civil Law and UAE: Private Law Replacing Public Law Functions

1. Introduction

The expression “private law replacing public law functions” describes a phenomenon in which traditionally public or regulatory functions are increasingly performed through private contracts, private standards, private dispute-resolution mechanisms, corporate governance, self-regulation, platform rules, and privately created institutions.

In the UAE, this issue is particularly interesting because the legal system combines:

federal legislation;

Emirate-level legislation;

civil and commercial private law;

regulated private enterprises;

free-zone legal systems;

arbitration;

contractual governance;

professional and industry regulation.

However, an important qualification is necessary:

UAE private law does not literally replace the State's public-law authority.

Rather, private law can perform functions that resemble public regulation, while ultimately operating within a framework established, recognized, or limited by legislation and judicial authority.

The current Civil Transactions Law expressly recognizes public order, governance systems and other fundamental matters as matters outside unrestricted private autonomy. Article 3, for example, treats provisions concerning systems of governance and certain fundamental societal matters as public order. (UAE Legislation)

2. Meaning of “Private Law Replacing Public Law Functions”

Traditionally:

Public law

Deals with:

government;

taxation;

licensing;

administrative regulation;

public security;

public services;

governmental powers;

public enforcement.

Private law

Deals primarily with:

contracts;

property;

obligations;

torts;

companies;

private relationships;

compensation;

private dispute resolution.

The boundary is increasingly less rigid.

For example, a private company may establish contractual rules governing:

access to a platform;

cybersecurity;

data use;

payment systems;

professional standards;

supply chains;

environmental commitments;

dispute resolution.

These rules can have effects resembling regulation.

3. The UAE Constitutional Starting Point

Private actors cannot simply assume governmental powers.

The UAE Constitution allocates legislative and executive competences between the Federation and the Emirates. Article 116 provides that an Emirate exercises powers not assigned to the Federation, while Article 117 identifies functions concerning security, order, public utilities and social/economic development. Articles 120 and 121 allocate specified matters to federal legislative and executive jurisdiction. (UAE Legislation)

Therefore:

Private ordering operates within a constitutional and legislative structure.

A contract cannot normally transform a private company into a governmental authority.

4. Why the Phenomenon Is Increasing

Several developments encourage private-law governance in the UAE.

A. Complex commercial transactions

Modern commercial relationships are too complex to be governed entirely by detailed statutory rules.

B. Technology

Digital platforms create their own:

terms of service;

user standards;

dispute mechanisms;

data rules;

technical standards.

C. Arbitration

Parties can move substantial dispute-resolution functions from ordinary courts to private arbitral tribunals.

D. Free zones

The DIFC and ADGM provide specialized legal systems for commercial activity.

E. Corporate governance

Large companies establish internal rules concerning:

compliance;

ethics;

risk;

ESG;

cybersecurity;

reporting.

F. Industry standards

Private technical and professional standards can influence contractual obligations and judicial assessment of reasonable conduct.

5. Private Ordering

The central concept is private ordering.

Private ordering occurs when parties themselves establish rules governing their relationship rather than relying entirely on default statutory rules.

Examples include:

governing-law clauses;

arbitration clauses;

technical specifications;

industry standards;

compliance manuals incorporated into contracts;

shareholder agreements;

private dispute-resolution procedures.

Example

Two multinational companies agree that:

English law governs;

DIFC Courts have jurisdiction;

ICC rules govern arbitration;

an international technical standard governs quality.

A significant part of their legal relationship has been structured privately.

But that private structure remains subject to mandatory law and public policy.

6. Contract as a Private Regulatory Instrument

A sophisticated contract can function almost like a regulatory document.

For example, a supply agreement may impose:

anti-bribery obligations;

cybersecurity standards;

environmental standards;

audit requirements;

employee-protection requirements;

sanctions compliance;

reporting obligations;

data-protection requirements.

The parties thereby create a private regulatory regime.

However:

Contractual regulation creates obligations between the contracting parties; it does not automatically create generally applicable public law.

7. Private Standards as Quasi-Regulatory Rules

Private organizations increasingly create:

technical standards;

accounting standards;

certification requirements;

ESG standards;

cybersecurity standards;

professional codes.

When incorporated into a contract, those standards can become legally enforceable contractual obligations.

This produces an important transformation:

Private standard → contractual incorporation → contractual obligation → judicial enforcement

Thus, a private standard may acquire legal significance without becoming legislation.

8. Arbitration as a Private Adjudicative Function

Arbitration is one of the clearest examples of private law performing a function traditionally associated with public institutions.

Instead of having a state judge decide the dispute, parties may agree to:

appoint arbitrators;

select procedural rules;

select a seat;

select governing law;

conduct confidential proceedings.

Nevertheless, arbitration does not eliminate state authority.

Courts retain functions concerning:

appointment assistance;

interim measures;

evidence;

annulment;

recognition;

enforcement;

public policy.

The DIFC Courts themselves operate as a statutory judicial institution and have jurisdiction over civil and commercial matters; they are not simply private arbitral bodies. (DIFC Courts)

9. Case Law 1 — The Industrial Group Ltd v Abdelazim El Shikh El Fadil Hamid [2022] DIFC CA 005 & 006

This is one of the most important authorities for understanding the boundary between private legal development and public legislative authority.

The DIFC Court of Appeal emphasized that although the DIFC Courts are common-law courts, their jurisdiction and law-making authority ultimately derive from a statutory framework.

The Court specifically rejected the idea that judges could simply create new causes of action where the statutory framework did not authorize them. It held that incorporating new torts into DIFC law through judicial decision would amount to impermissible judicial legislation. (DIFC Courts)

Principle

Private-law development by courts has limits.

Importance

This case demonstrates:

Private-law flexibility ≠ unlimited judicial law-making.

It is directly relevant to the question of private law replacing public functions because the court recognized that the creation of generally applicable legal rules is ultimately constrained by legislative authority.

10. Case Law 2 — Fiske & Firmin v Firuzeh [2014] DIFC

The case concerned the relationship between DIFC law and UAE federal legislation.

The Court explained that Federal Law No. 8 of 2004 created the legal framework allowing financial free zones to operate under their own civil and commercial legislation. It rejected the argument that every UAE federal civil or procedural provision automatically applied inside the DIFC. (DIFC Courts)

Principle

A specialized private/commercial legal environment can operate under a distinct statutory framework authorized by public law.

Importance

This is an excellent illustration of:

Public law authorizes a specialized private-law regime.

The private-law system therefore does not replace the state; it operates because the state has legally created space for it.

11. Case Law 3 — Investment Group Private Ltd v Standard Chartered Bank [2015] DIFC CA 004

The DIFC Court of Appeal examined the statutory foundations of DIFC jurisdiction.

The Court emphasized that the DIFC Courts' jurisdiction is derived from the Judicial Authority Law and the DIFC statutory framework. It rejected arguments that general UAE procedural legislation could automatically displace the specialized DIFC framework. (DIFC Courts)

Principle

Private/commercial legal autonomy inside the DIFC operates within a statutory jurisdictional architecture.

Relevance

It shows that private legal ordering depends on a public-law foundation.

12. Case Law 4 — Lural v Listran & Lokhan [2021] DIFC CA 003

The Court of Appeal considered the relationship between DIFC jurisdiction and the wider UAE judicial system.

The Court emphasized that DIFC jurisdiction is determined by the Judicial Authority Law and that the UAE Civil Procedure Law does not automatically apply within the DIFC. (DIFC Courts)

Principle

Different legal institutions within the UAE may operate under distinct procedural and jurisdictional regimes.

Importance

This demonstrates the UAE's sophisticated model of institutional pluralism.

Private commercial actors can choose specialized legal forums, but the legitimacy of those forums ultimately derives from public legislation.

13. Case Law 5 — Taleem PJSC v National Bonds Corporation PJSC & Deyaar Development PJSC [2010] DIFC CFI 014

The Court described the DIFC Courts as a common-law court operating within a wider UAE system in which the ordinary Dubai Courts administer a civil-law system.

The case concerned whether non-DIFC law should apply to particular issues and how such law should be established. (DIFC Courts)

Principle

Different private-law methodologies can coexist within the UAE's broader legal order.

Relevance

This case demonstrates that private-law pluralism does not necessarily mean legal fragmentation; courts determine which legal system applies through recognized jurisdictional and conflicts principles.

14. Case Law 6 — Earlene v Earl [2014] DIFC CFI 011

The Court examined freedom of contract and the freedom to choose applicable law within the DIFC.

It recognized contractual freedom but emphasized that the chosen law remains subject to restrictions where it conflicts with public policy or public morals. (DIFC Courts)

Principle

Party autonomy is powerful but not unlimited.

Importance

This is central to the theory of private law replacing public law.

Parties can create extensive private legal arrangements, but they cannot contract away fundamental public-policy constraints.

15. Case Law 7 — Nihan v Nicholas & Niaz [2024] DIFC CA 012

This modern case concerned arbitration, arbitrability and UAE public policy.

The Court examined arguments that certain matters involving real estate registration were matters of UAE public policy and therefore incapable of private arbitration.

The Court's analysis demonstrates that the classification of a matter as “public policy” requires careful examination rather than simply assuming that every mandatory statutory rule is a public-policy rule. (DIFC Courts)

Principle

Private dispute resolution can operate extensively even where the underlying subject matter is regulated by mandatory legislation, subject to genuine public-policy limitations.

Importance

It illustrates the boundary between:

private adjudication

and

public regulatory interests.

16. Case Law 8 — Pearl Petroleum Company Ltd v Kurdistan Regional Government of Iraq [2017] DIFC ARB 003

This authority is important for understanding the institutional nature of the DIFC Courts.

Later DIFC appellate authority, including Industrial Group, cited Pearl Petroleum for the proposition that although the DIFC Courts operate as common-law courts, their jurisdiction is fundamentally statutory. (DIFC Courts)

Principle

The common-law methodology used by a court does not make the court a private institution.

Relevance

This distinction prevents an important conceptual mistake:

Private-law methodology is not the same thing as private governmental authority.

17. Private Governance Through Corporate Law

Companies increasingly regulate themselves through:

board policies;

shareholder agreements;

internal compliance programs;

audit committees;

codes of conduct;

whistleblowing procedures;

risk-management systems.

These arrangements may resemble public regulation.

For example, a multinational company may require every supplier to comply with:

anti-corruption standards;

labor standards;

environmental requirements;

cybersecurity requirements.

The supplier may effectively face a private compliance regime.

But the enforcement mechanism remains contractual unless public legislation separately applies.

18. Private Governance Through Digital Platforms

Digital platforms are perhaps the clearest modern example.

A platform may establish:

user rules;

content restrictions;

identity verification;

account suspension procedures;

dispute procedures;

payment rules;

data policies.

Millions of users may effectively live under the platform's private rules.

This creates a phenomenon sometimes described academically as:

private ordering or private governance.

But the platform cannot simply acquire sovereign authority.

Its rules remain subject to applicable:

contract law;

consumer law;

data-protection law;

competition law;

employment law;

public-policy rules;

judicial review where available.

19. Private Law and Public Services

Private entities may also perform functions traditionally associated with public services.

Examples include:

privately operated infrastructure;

healthcare services;

education;

transportation;

utilities;

payment services;

digital identity systems.

The legal relationship can involve a combination of:

public regulation + private contract.

A private operator may therefore exercise significant practical control without possessing sovereign authority.

20. Private Law and Regulatory Compliance

Compliance contracts are another important example.

A financial institution can contractually require:

Know Your Customer procedures;

anti-money-laundering controls;

reporting;

audit rights;

sanctions compliance;

cybersecurity requirements.

These requirements may mirror public regulatory standards.

Thus:

Public regulation → incorporated into private contract → private enforcement

This produces a hybrid regulatory structure.

21. Private Law and ESG

ESG illustrates the same development.

A company may voluntarily promise contractual:

carbon-reduction targets;

environmental reporting;

supply-chain standards;

sustainability requirements.

Once incorporated into a binding agreement, these promises may become enforceable contractual obligations.

The important distinction is:

Public ESG regulation

Created and enforced by the state.

Private ESG governance

Created through:

contracts;

shareholder resolutions;

financing conditions;

private standards.

22. Private Law and Financial Markets

Financial institutions frequently impose private conditions concerning:

lending;

collateral;

reporting;

risk;

disclosure;

capital requirements;

default.

A loan agreement can therefore operate as a sophisticated private regulatory system.

For example:

Borrower must maintain specified financial ratios.

Failure may trigger:

increased interest;

additional security;

acceleration;

termination.

This resembles regulatory supervision but is based on contractual consent.

23. Private Law and Arbitration

Arbitration illustrates three levels:

Level 1 — Private agreement

Parties agree to arbitrate.

Level 2 — Private adjudication

Arbitrators decide the dispute.

Level 3 — Public enforcement

State courts may recognize and enforce the award.

Thus:

Private adjudication ultimately depends on public enforcement.

This is why arbitration cannot accurately be described as completely replacing public judicial authority.

24. Private Law and Alternative Dispute Resolution

Similar reasoning applies to:

mediation;

expert determination;

dispute boards;

adjudication;

negotiated settlement.

Parties may resolve disputes without a traditional court judgment.

Yet state law determines:

enforceability;

capacity;

procedural safeguards;

public policy;

enforcement mechanisms.

25. Private Law as “Quasi-Public” Governance

The phrase quasi-public governance can describe private rules that have effects extending beyond an ordinary bilateral relationship.

Examples:

platform rules affecting millions of users;

private financial standards affecting markets;

certification systems affecting market access;

exchange rules governing participants;

industry standards affecting entire supply chains.

The scale of private governance can therefore resemble public regulation.

But legal authority and social influence should not be confused.

26. The Limits of Private Law

There are important areas where private law cannot simply replace public law.

1. Criminal punishment

Private parties cannot create criminal offences or impose state criminal sentences.

2. Taxation

A contract cannot create or eliminate sovereign taxing authority.

3. Immigration

Private contracts cannot replace immigration legislation.

4. Public security

Private agreements cannot override governmental security powers.

5. Fundamental constitutional matters

Private arrangements cannot displace constitutional allocation of governmental powers.

6. Public order

Private agreements remain subject to fundamental public-order rules.

The current Civil Transactions Law expressly recognizes systems of governance and other fundamental matters as public-order concerns. (UAE Legislation)

27. Public Law as the Foundation of Private Governance

The most accurate theoretical model is therefore not:

Public law → disappears → private law takes over

but:

Public law → creates legal space → private actors exercise autonomy → courts enforce private arrangements → public law retains ultimate boundaries

This can be called regulated private ordering.

28. The UAE's Special Position

The UAE provides a particularly interesting example because of its combination of:

federal law;

Emirate law;

specialized free zones;

civil-law courts;

DIFC common-law courts;

ADGM common-law structures;

arbitration;

extensive commercial contracting.

The DIFC Courts themselves describe their system as a common-law, English-language jurisdiction operating alongside the UAE's established civil-law judicial system. (DIFC Courts)

This means that private actors have significant opportunities to select:

forum;

governing law;

arbitration;

contractual standards.

But those choices remain legally structured.

29. Private Law and Public Order

Public order is the principal safety valve.

The current Civil Transactions Law provides that matters concerning systems of governance and other fundamental interests are public-order matters. (UAE Legislation)

Consequently:

Freedom of contract cannot become freedom to contract out of fundamental public law.

A contractual clause may therefore be ineffective where it conflicts with an overriding legal rule or public policy.

30. Private Law and Judicial Function

Courts play an especially important balancing role.

They must determine:

whether the private rule is legally valid;

whether consent was genuine;

whether the contract violates mandatory law;

whether the rule is contrary to public policy;

whether private standards were incorporated;

whether damages are available;

whether arbitration clauses are enforceable.

The Industrial Group decision is particularly significant because it demonstrates that even a common-law court cannot create new law without a proper statutory foundation. (DIFC Courts)

31. Private Law and Rule of Law

Private ordering can actually strengthen the rule of law where:

rules are clear;

parties consent;

courts remain available;

enforcement is predictable;

mandatory legislation remains effective.

It can become problematic where private rules:

lack transparency;

affect third parties;

evade mandatory law;

create unequal bargaining power;

exercise excessive control over individuals.

Thus, private governance requires legal supervision.

32. Third-Party Effects

One of the most important limitations of private law is:

A contract generally binds the parties, not the entire public.

Suppose Company A and Company B agree to an environmental standard.

That contract can govern their relationship.

But it does not automatically impose the same standard upon:

competitors;

consumers;

unrelated companies;

the general public.

Public law is different because legislation can create generally applicable obligations.

33. Private Standards and Courts

A court may use private standards to determine:

reasonable care;

contractual performance;

industry practice;

professional negligence;

technical compliance.

But incorporation or judicial use does not necessarily transform the standard into legislation.

The court must distinguish:

evidence of reasonable conduct

from

legally binding statutory requirements.

34. Private Law and Regulatory Capture Risk

Private regulatory systems can create risks.

For example:

dominant companies may establish rules favoring themselves;

platforms may impose unilateral conditions;

industry bodies may create standards that exclude competitors;

private certification may become necessary for market access.

This is why public competition, consumer and regulatory law remain important.

Private law can supplement regulation, but should not automatically displace it.

35. Public Law → Private Law → Hybrid Governance

The evolution can be represented as:

Traditional model

State → Regulation → Citizens/businesses

Private-ordering model

State → Legal framework → Private rules → Contractual enforcement

Hybrid model

State regulation + private standards + contractual enforcement + judicial supervision

The UAE increasingly demonstrates the third model.

36. Case-Law Synthesis

37. Key Legal Formula

For examination purposes:

Public Law Foundation + Private Autonomy + Contractual Rules + Judicial Enforcement − Mandatory/Public-Order Limits = Regulated Private Ordering

Another useful formula is:

State Creates Legal Space → Private Actors Create Rules → Courts Enforce Rules → Public Law Sets Boundaries

38. Difference Between Replacement and Supplementation

It is more accurate to speak of supplementation rather than complete replacement.

The two systems increasingly interact rather than one completely replacing the other.

39. Examination Example

Problem

A multinational platform operates in the UAE. It creates:

user rules;

dispute-resolution procedures;

privacy policies;

algorithmic standards;

seller requirements.

A seller argues that the platform has effectively created a private regulatory system.

Analysis

The court should ask:

Were the rules incorporated into the contract?

Did the seller consent?

Are the terms valid?

Do mandatory UAE laws apply?

Does consumer or competition law intervene?

Are third-party interests affected?

Does the platform's rule conflict with public policy?

Is the dispute subject to arbitration or court jurisdiction?

Conclusion

The platform can exercise significant contractual governance, but it does not acquire sovereign legislative power.

40. Important UAE Legal Principle

The current Civil Transactions Law itself demonstrates why private law cannot completely replace public law.

Article 1 establishes a hierarchy for resolving matters where legislation does not expressly or implicitly provide an answer, including reference to Sharia principles, custom, and ultimately principles of natural law and justice. Article 3 separately identifies fundamental public-order matters. (UAE Legislation)

This shows that UAE private law operates within a broader normative structure rather than as an autonomous substitute for government.

41. Conclusion

Private law replacing public law functions in the UAE should be understood as the growth of private governance, private ordering and contractual regulation, rather than the disappearance of public law.

Contracts, arbitration, corporate governance, private standards, digital-platform rules, financial covenants and specialized free-zone legal systems can perform functions that resemble public regulation or adjudication.

However, the UAE cases demonstrate a consistent institutional boundary:

Private autonomy operates because public law recognizes and structures it.

The Industrial Group case shows that courts cannot create new law merely through judicial creativity; Fiske, IGPL, Lural and Taleem demonstrate the coexistence of specialized legal regimes; Earlene and Nihan demonstrate the limits imposed by public policy; and Pearl Petroleum confirms the statutory foundation of DIFC judicial authority. (DIFC Courts)

Final revision line:

UAE private law does not abolish public law; it increasingly performs regulatory, governance and dispute-resolution functions within a legal space created, supervised and ultimately limited by public law.