Navigating Uncertainty: Emergency Circumstances and Contractual Rebalancing in Dubai PPP Projects

Issued towards the end of 2025 and published in the Official Gazette on 30 December 2025, Dubai Department of Finance’s Administrative Decision No. 135 of 2025 introduces an important framework for addressing emergency circumstances in public–private partnership (PPP) contracts. The Decision provides mechanisms for compensation and controlled contractual adjustments where extraordinary events impact a project’s financial equilibrium.

In this blog, we break down the key takeaways of the Decision and explain what it means in practice for public authorities, sponsors, and contractors involved in PPP projects in Dubai.

Introduction

PPP projects are premised on the assumption that risk can be identified, allocated, and priced at the outset. In reality, that assumption only holds to a point. Long-term infrastructure and public-service projects in Dubai, particularly in sectors such as healthcare, utilities, and sustainability, are inherently exposed to economic, regulatory, and geopolitical developments that cannot always be anticipated when parties commit to decades-long contractual arrangements.

Recognising this reality, Dubai has introduced a regulatory framework to address how PPP contracts should respond when exceptional circumstances arise. This framework provides much-needed clarity on when intervention may be justified, how compensation is assessed, and the procedural safeguards governing contractual rebalancing.

Emergency circumstances: thresholds and qualifying conditions

Article 2 of the Decision identifies the circumstances in which a PPP contract may be amended due to the occurrence of emergency events. These fall into two principal categories.

First, where general exceptional and unforeseen circumstances arise that render performance of the PPP contract onerous, provided that all of the following conditions are met:

1. performance becomes excessively burdensome, but not impossible;
2. performance results in a substantial loss exceeding what the parties could reasonably have anticipated at the time of contracting; and
3. the circumstances are unpredictable and unavoidable.

Second, where the performance of the project is hindered by force majeure events that prevent the private partner from meeting its contractual obligations, without any fault or default on its part.

Importantly, the framework is concerned with hardship rather than impossibility. It is designed to address situations where a project remains technically capable of performance, yet continuing under the original contractual terms would impose an excessive and abnormal burden on the private partner. This reflects a familiar reality in PPP disputes: the project has not failed, but the economic assumptions underpinning it have been fundamentally disrupted by events that neither party could reasonably have foreseen at the time of contracting.

Compensation and damages: entitlement, limits, and mechanisms

Article 3 of the Decision sets out a structured framework for assessing compensation in PPP contracts. In particular, it provides that:

1. compensation must be assessed in accordance with the mechanism agreed in the relevant PPP contract;
2. due regard must be given to the percentage of project completion, as well as any breach attributable to the private partner; and
3. The compensation must be paid from the budget approved to the relevant government body in accordance with the applicable financial regulations.

Importantly, relief under the Decision is not automatic. The framework reinforces the expectation that the private partner acts with due care, takes reasonable steps to mitigate the impact of the exceptional event, and ensures that losses are not allowed to escalate unnecessarily. Entitlement to compensation is therefore closely linked to conduct, not merely outcome.

This behavioural dimension is likely to play a central role in future PPP disputes. Claims will turn not only on whether an external event qualifies as an emergency circumstance, but also on how the affected party responded; namely, whether it acted appropriately, took reasonable steps to mitigate loss, and avoided exacerbating the disruption through delay or inaction.

Amendment of Contract: Conditions and Procedures

Article 4 of the Decision regulates how PPP contracts may be amended in response to emergency circumstances. Any contractual rebalancing is subject to governance controls and prior approvals by the competent authority, reinforcing that adjustment is a formal legal process, not an informal renegotiation between the contracting parties.

The Decision imposes additional conditions, including that:

• the amendment must not prejudice the private partner’s entitlement to compensation under the relevant contract;
• any amendment must be documented in writing, signed by both parties, and formally annexed to the original PPP contract; and
• the amendment must not prejudice the project’s overall financial balance as originally agreed.

These requirements underscore the emphasis on procedural discipline and financial integrity when addressing emergency circumstances in Dubai’s PPP framework.

Conclusion

As Dubai continues to deliver ambitious PPP projects across multiple sectors, this framework provides important guidance on how exceptional disruption is to be addressed within long-term partnership arrangements.

Crucially, the framework operates expressly without prejudice to the provisions governing emergency circumstances under applicable UAE legislation. This confirms that the administrative approach is intended to align with, rather than displace, the established doctrine of hardship under UAE law, under which intervention is permitted where contractual obligations become excessively onerous due to exceptional and unforeseeable events.

	Hasan ElShafiey Partner hasan.elshafiey@galadarilaw.com
	Omar Masadeh Associate o.masadeh@galadarilaw.com