Civil Law and UAE: Public Compensation Schemes vs Private Liability

1. Introduction

In UAE civil law, public compensation schemes and private civil liability are two different mechanisms for responding to loss or injury.

A private liability claim generally requires the claimant to establish a legally recognised basis of liability—such as breach of contract, a harmful act/tort, negligence, or another source of obligation—and then establish the resulting damage and causal connection.

A public compensation scheme, by contrast, is normally created by legislation or a public authority to provide benefits or compensation according to specified statutory conditions. It may operate even where the traditional elements of private liability are difficult to establish, or it may provide a statutory benefit alongside another legal remedy.

The distinction is particularly important in the UAE because civil obligations can arise from contract, unilateral act, harmful act, beneficial act, or law under Article 112 of the new Civil Transactions Law.

The current framework is the Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law, which entered into force on 1 June 2026 and repealed the 1985 Civil Transactions Law.

2. Meaning of Public Compensation Schemes

A public compensation scheme is a statutory or publicly administered mechanism under which an eligible person receives money or another benefit because a defined event has occurred.

Examples can include:

• pension and social-security benefits;
• statutory employment-related benefits;
• compensation connected with particular public programmes;
• insurance or guarantee mechanisms created by legislation;
• statutory victim-support arrangements;
• compensation connected with death, disability or specified social risks.

The essential characteristic is that the entitlement comes from the scheme and its governing legislation, rather than solely from proving that another private person committed a civil wrong.

Example

Suppose an employee becomes entitled to a statutory pension benefit.

The employee's entitlement does not necessarily depend on proving that the employer negligently caused a particular loss.

The claim is instead based upon:

statutory eligibility + qualifying event + compliance with scheme requirements.

That is fundamentally different from:

wrongful conduct + damage + causation → private compensation.

3. Meaning of Private Civil Liability

Private liability is primarily concerned with making the legally responsible party answer for loss caused to another person.

Under the new Civil Transactions Law, harmful acts are expressly recognised as a source of obligations. The current law contains a detailed harmful-act regime.

Article 246 provides the general basis that a person who causes harm to another may be required to compensate for that harm. Article 253 deals with multiple persons responsible for harm and contributory conduct, while Article 255 provides that compensation is assessed according to the loss and lost profit that are natural consequences of the harmful act.

Therefore, private liability normally revolves around:

1. Duty or legally protected interest
2. Wrongful act/breach
3. Damage
4. Causation
5. Attribution of liability
6. Assessment of compensation

The important point is that damage alone does not automatically establish private liability.

4. Fundamental Difference

5. Public Compensation Is Not Necessarily an Admission of Fault

This is one of the most important distinctions.

Receiving a statutory benefit does not necessarily mean that another person has been legally found liable.

For example, a pension or social-security payment may arise because:

• the person satisfies the statutory definition of an insured person;
• the qualifying period has been completed;
• retirement or disability has occurred; or
• another statutory event has taken place.

The scheme may therefore function independently from the question:

“Who legally caused the person's loss?”

This is why courts must distinguish between a statutory entitlement and damages arising from private liability.

6. Public Compensation Can Coexist With Private Liability

The distinction does not mean that a person must always choose one or the other.

Depending on the applicable legislation, a person may receive a statutory benefit while also having a separate civil claim against a legally responsible party.

The new Civil Transactions Law itself recognises the possibility of additional compensation in cases involving death or injury.

Article 259 provides that where blood money or assessed compensation is payable, the court may, upon the injured party's request, award additional compensation where death or injury produces material or moral damage that is not covered by that blood money or compensation.

This demonstrates an important principle:

A statutory or legally predetermined payment does not necessarily exhaust every form of civil compensation.

The exact relationship, however, depends on the relevant special legislation and the nature of the payment.

7. Private Liability Requires Proof of Causation

Private compensation is strongly connected with causation.

In BAM Higgs & Hill LLC v Affan Innovative Structures LLC [2021] DIFC CFI 106, the DIFC Court emphasised that compensation requires the relevant elements of liability to coexist and that breach alone is insufficient. The court discussed the necessity of damage and causal connection.

This reflects the traditional UAE civil-liability structure:

Wrong → Damage → Causal connection → Compensation

A public scheme may operate differently:

Qualifying event → Statutory eligibility → Scheme payment

Therefore, the evidential burden can be fundamentally different.

8. Assessment of Private Compensation

Article 255 of the new Civil Transactions Law states that compensation is assessed according to the extent of the loss suffered and lost profit, provided that the loss is a natural consequence of the harmful act.

Article 256 further permits compensation to be assessed in money and, depending on circumstances, permits restoration of the previous position or performance of a specific act connected with the harmful act. Compensation may also be payable by instalments or as periodic income.

Thus private liability is generally concerned with the claimant's legally compensable loss.

A public scheme may instead provide:

• a fixed amount;
• a formula-based amount;
• periodic payments;
• benefits linked to salary or contribution history;
• medical or rehabilitation benefits; or
• other statutory benefits.

9. Case Law

Case 1: Hana Al Herz v DIFC Authority [2013] DIFC CA 004

This case is particularly useful for understanding the distinction between statutory/social-security benefits and ordinary contractual entitlements.

The DIFC Court considered the interaction between an employer's pension scheme and end-of-service gratuity. The Court noted that the statutory framework contemplated an employee choosing between participation in the pension scheme and receiving the applicable gratuity, rather than receiving both automatically. It also discussed the UAE federal pension framework for UAE nationals.

Principle

A statutory compensation or pension mechanism is governed by its own legislative framework and cannot simply be treated as an ordinary contractual damages claim.

Case 2: Marwan Lutfi v DIFC Authority [2013] DIFC CA 003

The Court again examined the relationship between a pension scheme and end-of-service gratuity.

The judgment considered the statutory requirement concerning pension registration for UAE nationals and the interaction between pension entitlement and employment benefits.

Principle

Where legislation creates a statutory social-security or pension mechanism, the employee's entitlement depends upon the statutory scheme rather than merely the general law of damages.

Case 3: Noah v Neveah LLC [2023] DIFC SCT 233

This case provides a useful modern example.

The claimant was a UAE national and the Court considered the employer's obligation to register her with the General Pension and Social Security Authority (GPSSA).

Because the employer had failed to register her, the Court awarded an amount equivalent to the entitlement she would have received had she been registered.

Principle

A statutory social-security entitlement can become the basis of a monetary claim against a private employer when the employer's failure to comply with the statutory obligation causes the employee to lose that entitlement.

This is a hybrid situation:

public statutory scheme + private employer obligation.

Case 4: Mustak v Mubrag [2023] DIFC SCT 233

The DIFC Court considered employment and GPSSA-related issues involving a UAE national employee.

The case illustrates that statutory pension/social-security requirements can operate alongside ordinary employment rights.

Principle

A statutory benefit does not necessarily become an ordinary contractual benefit merely because the employee claims it against a private employer.

Case 5: BAM Higgs & Hill LLC v Affan Innovative Structures LLC [2021] DIFC CFI 106

This is an important authority on private liability.

The Court stressed that compensation cannot be awarded merely because a contractual breach has been established. Damage and causation must also be established. The judgment also referred to Dubai Commercial Appeal 445/2020/1034, which treated fault, damage and causal connection as essential components of liability.

Principle

Private civil compensation is responsibility-based.

The claimant must connect the defendant's legally actionable conduct to compensable loss.

Case 6: Larmag Holding B.V. v First Abu Dhabi Bank PJSC [2019] DIFC CFI 054

The Court discussed the UAE Civil Code's harmful-act provisions and the requirement that harm, the relevant conduct and causal relationship support liability.

Although this case applied the former Civil Code, it remains useful as historical authority for understanding the UAE approach to private civil liability.

Principle

A private damages claim is not simply a mechanism for distributing financial hardship. The claimant must establish a legally recognised harmful act and the connection between that act and the claimed loss.

Important: the 1985 Civil Code was repealed from 1 June 2026, so this case should be treated as an authority under the former regime rather than as an automatic interpretation of the new Article 246 framework.

Case 7: Alawwal Capital JSC v Rasmala Investment Bank Ltd [2023] DIFC CFI 038

This case concerned claims for compensation arising from alleged misrepresentations, negligence and breach of duties in connection with an investment.

The Court dealt with whether the alleged misconduct caused compensable financial loss. The claim involved approximately USD 7.6 million in alleged losses and opportunity costs; the Court ultimately entered judgment for a lower quantified amount following its findings on the claim.

Principle

Private compensation depends on establishing the particular loss legally attributable to the defendant, rather than simply demonstrating that the claimant suffered an overall financial disadvantage.

Case 8: Khaled Salem Musabeh Humad Al Mheiri v John Cameron [2025] DIFC CA 008

This case involved personal injury arising from a parasailing activity and arguments concerning contractual exclusion of liability.

The DIFC Court considered when a principal can be liable for an agent's conduct and emphasised that contractual limitations cannot override mandatory legal provisions or public order.

Principle

Private liability can coexist with contractual allocation of risk, but contractual provisions cannot necessarily eliminate liability where mandatory legal rules apply.

Case 9: Ithmar Capital v 8 Investments Inc [2007] DIFC CFI 008

The Court discussed compensation principles requiring loss to be established with a reasonable degree of certainty and considered foreseeable loss and mitigation.

Principle

Private damages are compensatory rather than an automatic financial benefit. The claimant must establish legally recoverable loss with sufficient certainty.

10. Public Scheme vs Private Tort: Causation

This distinction can be represented as follows:

Public scheme

Qualifying event

↓

Statutory eligibility

↓

Administrative/judicial determination

↓

Scheme benefit

Private tort

Wrongful act

↓

Damage

↓

Causal connection

↓

Legal responsibility

↓

Compensation

The difference is particularly important where a person has suffered a loss but cannot establish who caused it.

A public compensation scheme can potentially provide assistance without requiring the same proof of individual fault.

Private liability generally cannot.

11. Role of the State

The State may establish compensation mechanisms for policy reasons such as:

• social protection;
• rehabilitation;
• economic security;
• protection of vulnerable persons;
• spreading particular risks;
• ensuring minimum benefits;
• public welfare.

This means public compensation has a risk-distribution function, whereas private liability has a stronger responsibility-and-reparation function.

Simple distinction

Public compensation distributes socially recognised risk.

Private liability assigns legally attributable loss.

12. Is Public Compensation Punishment?

Normally, no.

A compensation scheme is generally intended to provide a benefit or repair a defined social loss.

Private civil compensation is also generally compensatory rather than punitive.

The current Civil Transactions Law reinforces the compensatory character of damages by linking assessment to the actual loss and naturally resulting lost profit.

Therefore:

Compensation ≠ punishment

unless a separate statutory provision expressly creates a punitive or regulatory consequence.

13. Double Recovery Problem

A major issue arises when a person receives both:

1. a public compensation/payment; and
2. private damages for the same loss.

The law may need to determine whether the two payments:

• address different heads of loss;
• are cumulative;
• must be offset;
• are alternative;
• are subject to subrogation; or
• cannot both be recovered.

The correct approach is therefore not:

“Every public payment must be deducted from private damages.”

Nor is it:

“Every public payment is automatically additional.”

Instead, the court must examine:

1. the statute creating the public benefit;
2. the purpose of the payment;
3. the particular loss it covers;
4. whether the private claim covers the same loss;
5. any express offset/subrogation provision;
6. whether double recovery is permitted.

14. Public Compensation and Insurance

Insurance creates another important distinction.

Public scheme

Usually established by law or public policy.

Private insurance

Created by an insurance contract, although heavily regulated by legislation.

Tort liability

Created by the defendant's harmful act.

Therefore, three different legal relationships may exist simultaneously:

Victim ↔ State/Scheme

Victim ↔ Insurer

Victim ↔ Wrongdoer

Each relationship can have a different legal basis.

15. Employer Liability and Public Benefits

Employment disputes provide a good illustration.

An employee may have:

• statutory pension/social-security rights;
• contractual salary rights;
• end-of-service benefits;
• statutory insurance or workplace protection;
• a separate tort claim for personal injury;
• contractual claims against the employer.

The existence of one entitlement does not automatically eliminate the others.

However, special legislation controls the interaction between the various benefits.

The DIFC pension cases demonstrate this principle particularly well: statutory pension participation and end-of-service gratuity cannot simply be treated as unlimited cumulative benefits.

16. Public Compensation Where Private Defendant Cannot Pay

One policy justification for public compensation schemes is that private liability may be practically ineffective where:

• the wrongdoer is insolvent;
• the wrongdoer cannot be identified;
• insurance is unavailable;
• enforcement is unsuccessful;
• the victim lacks resources to litigate;
• the statutory scheme is designed to cover a particular social risk.

But the existence of such a scheme does not automatically transfer every private liability to the State.

There must be a statutory basis for the public payment.

17. Public Compensation Does Not Automatically Establish Private Liability

Suppose:

• Person A receives a statutory disability benefit.
• Person B is alleged to have caused the underlying injury.

The receipt of the disability benefit does not itself prove:

• B was negligent;
• B breached a legal duty;
• B caused the injury;
• B must pay damages.

Those questions must be separately determined under the applicable liability law.

This is consistent with the reasoning in BAM Higgs & Hill, where the Court treated breach, damage and causation as distinct requirements of private compensation.

18. Public Scheme and Private Liability Can Have Different Valuation Methods

Public scheme

May use:

• statutory formula;
• salary history;
• contribution period;
• fixed benefit;
• statutory percentage;
• defined categories of disability.

Private damages

May consider:

• actual financial loss;
• lost profit;
• future loss;
• medical expenses;
• rehabilitation expenses;
• property damage;
• moral damage;
• loss directly caused by the harmful act.

The current Civil Transactions Law expressly recognises moral harm and provides for compensation in appropriate circumstances.

19. Relationship With the Principle of Full Reparation

The objective of private civil compensation is generally to place the injured person, as far as legally possible, in the position they would have occupied without the harmful event.

Article 255's reference to loss and naturally resulting lost profit reflects this compensatory approach.

A public compensation scheme can have a different objective.

For example:

A statutory benefit may guarantee a minimum level of financial protection even though it does not equal the victim's complete economic loss.

Therefore:

Public benefit ≠ necessarily full civil damages.

20. Relationship With Blood Money and Statutory Compensation

The new Civil Transactions Law is particularly significant because Article 259 expressly contemplates additional compensation where death or injury produces material or moral damage not fully covered by blood money or assessed compensation.

This supports an important analytical distinction:

Statutory/assessed compensation

A legally predetermined or specially regulated payment.

Civil damages

A judicially assessed remedy addressing additional legally compensable loss.

Thus, courts must identify what loss the first payment actually compensates before determining whether another civil award would constitute duplication.

21. Burden of Proof

Public compensation

The claimant normally establishes:

• identity/status;
• qualifying event;
• statutory eligibility;
• required documents;
• contribution or employment history, where relevant.

Private liability

The claimant normally has to establish:

• defendant's legal responsibility;
• breach/wrongful conduct;
• damage;
• causation;
• amount or nature of recoverable loss.

The distinction is clearly illustrated by Ithmar Capital, where compensation depended upon sufficiently established loss, and BAM Higgs & Hill, where breach alone was insufficient.

22. Important UAE Legal Principle

The safest way to analyse a compensation claim is to ask:

Question 1

What is the legal source of the payment?

Is it:

• Civil Transactions Law?
• Labour legislation?
• Pension/social-security legislation?
• Insurance legislation?
• Consumer legislation?
• A special compensation statute?

Question 2

What event triggers entitlement?

Question 3

Does fault have to be proved?

Question 4

What loss does the payment cover?

Question 5

Is additional private compensation legally permitted?

Question 6

Would additional recovery compensate a different loss or duplicate the same loss?

23. Key Case-Law Principles — Quick Revision

24. Mainland UAE vs DIFC

An important examination point is that the DIFC authorities above should not automatically be treated as binding precedents on UAE mainland courts.

They are useful for:

• illustrating civil-liability principles;
• understanding statutory benefits;
• comparing approaches to damages;
• explaining the relationship between statutory schemes and private claims.

For a mainland UAE dispute, the court will primarily apply the applicable Federal legislation and relevant local procedural/substantive legislation, together with applicable binding or persuasive UAE judicial authorities.

The UAE Government confirms that the UAE Legislation platform contains federal legislation and judicial/legal materials, and the new Civil Transactions Law is now the operative general civil code.

25. Practical Examples

Example 1 — Pension

An employee satisfies the statutory conditions for pension.

Result: entitlement arises from the pension legislation.

No negligence claim is required.

Example 2 — Employer's failure to register employee

An employer fails to perform a statutory pension-registration obligation and the employee loses a statutory benefit.

Result: the employee may have a private claim against the employer measured by the lost statutory entitlement, as illustrated by Noah v Neveah.

Example 3 — Road accident

A victim receives a statutory payment under a relevant scheme.

Separately, the victim alleges that another driver negligently caused additional loss.

Result: the statutory payment and private tort claim must be analysed separately, including any applicable offset or anti-double-recovery rule.

Example 4 — Workplace injury

A worker receives a statutory employment-related benefit.

The worker also alleges that an employer or third party committed a separate civil wrong.

Result: receipt of the statutory benefit does not itself establish or extinguish private liability. The applicable employment, insurance and civil-liability statutes must be examined together.

26. Core Legal Distinction

The easiest way to remember the topic is:

Public Compensation = Eligibility-Based Protection

Private Liability = Responsibility-Based Compensation

And:

Public scheme asks: “Does the claimant qualify?”

Private liability asks: “Who is legally responsible for the loss?”

27. Conclusion

UAE law distinguishes between compensation as a statutory/social benefit and compensation as a private civil remedy.

Public compensation schemes are generally designed to distribute or manage specified social or statutory risks. Private liability, in contrast, is concerned with assigning responsibility for legally attributable loss.

Under the current Civil Transactions Law, the distinction remains important because the law separately recognises harmful acts as a source of obligations and provides a detailed framework for damage, causation, apportionment and compensation. Articles 253–256 are particularly relevant to the assessment and allocation of private compensation.

The most important principle is:

A statutory benefit does not automatically prove private liability, and private liability does not automatically eliminate a statutory benefit. The two must be analysed according to their separate legal sources, purposes, qualifying conditions and rules against duplication of recovery.

Quick Revision Formula

Public Compensation Scheme

Statutory Event → Eligibility → Scheme Rules → Benefit

Private Civil Liability

Wrong/Breach → Damage → Causation → Legal Responsibility → Damages

Where Both Exist

Identify Legal Source → Identify Loss Covered → Check Liability → Check Overlap → Apply Anti-Duplicate-Recovery Rules → Determine Final Entitlement

Note: Because the new Civil Transactions Law came into force on 1 June 2026, older UAE cases applying the repealed 1985 Civil Code should be used as historical/illustrative authorities rather than automatically treated as interpretations of the corresponding provisions of the 2025 Law.