Images: Supplied
In July, Dubai introduced a new law, Law No. 7 of 2025 Regulating Contracting Activities in the Emirate of Dubai (the law).
The law is a welcome consolidation and update to current regulations and brings the industry in line with best practice. At the heart of the law is a simple message: contractors must register, classify and comply, or face the consequences.
The law provides that each contractor must secure a Dubai Municipality licence and only practice within its official classification tier for contracting activities.
The new Contracting Companies and Engineering Consultancy Offices Evaluation System, due to be launched to coincide with the implementation of the law, is expected to grade contractors on a broader set of objective metrics, such as financial solvency, safety compliance, innovative practices and meeting project delivery times, amongst others.
Contractors’ rating to be published on a digital platform
Contractors’ ratings will be published on a digital platform accessible to government procuring entities, private developers and financial institutions and are likely to influence tender pre-qualification decisions. Any attempts to trade in a different or higher category without promotion is expressly forbidden. Such changes mark the emirate’s desire to drive increased accountability and performance standards in the sector.
Turnkey contracts, in which a single contractor is responsible for delivering an entire project, from design and procurement to construction and commissioning are recognised under the law. Dubai Municipality shall determine the types of projects that turnkey contracts may be used for and applicable requirements. It also permits consortiums. Where two or more contractors agree to carry out a project as a consortium, they will all need to be classified in the municipality’s relevant category associated with the nature of the project. The consortium itself must also be pre-approved by both the employer and the municipality. These are significant and welcome changes to the existing framework in Dubai.
The law also contains provisions relating to subcontracting. In particular, it allows subcontracting only with prior approval from the Dubai Municipality.
No details have been provided as to how this will operate in practice, however, this will be a welcome development to many in the industry who are becoming tired of subcontractor delays, poor quality workmanship and liquidity issues.
The law further requires that subcontractors are licenced and registered with Dubai Municipality and confirms that the main contractor remains responsible for oversight.
To ensure enforcement of the new rules, the law creates the Committee for Regulating and Developing Contracting Activities; a taskforce chaired by the municipality that will maintain a master registry, coordinate supervising government authorities and draft a sector-wide code of ethics.
Such single point oversight should help prevent and respond to any gaps between regulators, especially on mega-projects which overlap Dubai’s various free zones and special development areas.
Penalties for non-compliance
Penalties for non-compliance with the law vary, with basic breaches attracting a fine of between Dhs1,000 and Dhs100,000, doubling for repeat offenders within a year up to Dhs200,000.
Authorities can also suspend operations for up to a year, downgrade a firm’s classification, freeze contractor licences and even strip professional competency certificates from engineers who sign off on shoddy work.
The law is scheduled to come into force on January 8, 2026 and contractors have 12 months from that date to bring their houses in order.
Once registered, contractors must file annual licence renewals no later than 30 days before expiry to maintain their status.
Failure to renew on time will trigger automatic suspension from the registry, running the risk that the contractor is prevented from being able to bid on new projects and, crucially, from receiving payments on ongoing works during the suspension period.
For an industry long governed by a series of separate decrees, Law No. 7 represents a consolidating moment for construction in Dubai.
It promises a more transparent, professionally tiered marketplace built on rigorous health, safety and environmental benchmarks.
This will help support the continued growth of the industry and encourage further investment in Dubai.
Joy-Emma Martin is an associate and Chris Edwards is counsel at Reed Smith.
