A UAE construction contract signed in 2024 or 2025 was almost certainly priced before Dubai Municipality began withholding the Building Completion Certificate over a missing Sustainable Materials Passport, and before the 2026 Al Sa'fat update tightened the thermal targets a permit is granted on. Contracts drafted in that window carry a question they never answered. When a finished project misses its Al Sa'fat Silver or Estidama Pearl rating, who pays for it, the developer or the contractor?
The answer turns on the contract, and most UAE contracts are drafted as if green building rules sat outside them. A missed rating can stop completion, lock retention, and expose the responsible entity to fines under federal climate law. Where the contract does not say who carries that risk, a tribunal decides it years later, and the party that pays is often the one the drafting forgot to name. For construction lawyers in Dubai, this is the recurring gap in UAE construction documents heading into 2026.
Why green building obligations now decide who gets paid
Three layers of obligation now bear on every UAE build, and each one can reach the contract.
The first is emirate-level green building regulation. In Dubai, the Al Sa'fat green building system run by Dubai Municipality is mandatory for new buildings, with a minimum Silver rating required at permit stage. The 2026 update adds a Sustainable Materials Passport, enforced from the first quarter of 2026, which logs structural materials, quantities, suppliers, and embodied carbon data to the municipal digital registry. Dubai Municipality will not issue the Building Completion Certificate until that passport is filed. In Abu Dhabi, the Estidama Pearl Rating System requires a minimum 1 Pearl for new developments and 2 Pearls for government-funded buildings, assessed through the permit process. Ras Al Khaimah applies its own Barjeel regulations.
The second layer is federal. Federal Decree-Law No. 11 of 2024 on the reduction of climate change effects came into force on 30 May 2025, with full compliance required by 30 May 2026. It binds every public and private entity that generates greenhouse gas emissions, including free zone companies, and requires them to measure, report, and reduce those emissions. Construction and real estate sit among the most exposed sectors. Article 15 sets fines from AED 50,000 to AED 2 million, doubled for repeat violations within two years. We set out the enforcement detail in our article on ESG obligations for private companies under the UAE Climate Law.
The third layer is the contract. A FIDIC contract pulls the first two layers in through its compliance with laws provision, which obliges the contractor to comply with applicable laws. That clause makes the contractor responsible for following green building rules. It does not, on its own, make the contractor guarantee a specific Al Sa'fat or Estidama outcome, allocate the cost of a missed rating, or say who produces the Materials Passport. Those questions need express words. Where the contract leaves them open, UAE courts and tribunals fall back on general Civil Code principles, and the result is slow, costly, and hard to predict.
The clauses a UAE construction contract should carry
A construction contract that takes ESG seriously names the standard, names the party responsible for it, and names the consequence of missing it. The table below shows what tends to happen when each clause is present against when the contract omits it.
The most contested of these is the first. If the contract makes a green rating a condition of the Taking Over Certificate, the contractor does not earn handover, retention release, or the end of delay damages until the rating is achieved. That is a heavy obligation, and a contractor pricing a fixed lump sum should resist accepting it without a matching design mandate. A developer, by contrast, has every reason to want it, because the rating protects its own permit and sale programme. The negotiation sits in exactly that tension, which is why a deliberate clause beats a default rule.
Where standard FIDIC leaves a gap
FIDIC remains the base for most large UAE projects, and the 2017 editions widened the contractor's obligations around health, safety, and sustainability. FIDIC also published a Climate Change Charter in 2021, signalling the direction of travel. None of this turns a standard FIDIC form into a green building contract on its own. The form gives a compliance with laws duty and a changes in legislation mechanism. It does not name a target rating, allocate embodied carbon reporting, or set the consequence of a failed certification. Those belong in the Employer's Requirements, the Specification, and the Particular Conditions, drafted for the specific project.
Who carries the rating obligation depends on who holds the design. Under a Red Book where the employer designs, the contractor builds to a specification it did not write, so a clause that makes the contractor guarantee an energy rating shifts a design risk onto a party that cannot control it. Under a Yellow Book or a Silver Book where the contractor designs, a rating warranty fits more naturally, because the contractor controls the choices that produce the rating. A developer that copies a green warranty from a design-build precedent into a build-only contract creates a clause the contractor will fight, and a tribunal may decline to enforce. We compare these forms in our article on FIDIC versus bespoke contracts in the UAE.
The change in legislation point matters in 2026 because the rules moved mid-cycle. A contract signed before the Sustainable Materials Passport requirement took effect did not price it. FIDIC's changes in legislation clause can give the contractor time and cost relief for rules introduced after the base date, but only if the contract keeps that mechanism and the contractor serves notice within the contractual window. A contractor who absorbs the new obligation without claiming, or who misses the notice, funds the regulator's policy change out of its own margin.
What happens when a green rating fails
The consequences of a missed rating run wider than a single fine, and they compound.
At completion, a withheld Building Completion Certificate or a disputed Taking Over Certificate stops the developer using or selling the asset and keeps the contractor's retention locked. This is the same machinery that drives ordinary completion disputes, and the green trigger does not change the legal stakes, which we explain in our guide to the Taking Over Certificate in UAE construction projects. What changes is that the cause now sits in a body of regulation many contracts never addressed.
On the regulatory side, the Climate Law exposes the responsible entity to fines from AED 50,000 to AED 2 million, and persistent non-compliance can affect future approvals and access to government work. The Ministry of Climate Change and Environment oversees the federal regime, while Dubai Municipality and the Abu Dhabi authorities enforce the emirate rating systems. A developer cannot pass a regulator's penalty to a contractor unless the contract says so, which returns the question to drafting.
One point often misread is decennial liability. Article 880 of the UAE Civil Code makes contractors and supervising engineers liable for ten years for defects that threaten the stability or safety of a building. A failure to hit an energy rating or to file a materials passport is generally not a stability defect, so the ten-year decennial regime usually does not capture it. The remedy for a missed green obligation comes from the contract, from warranties, indemnities, and completion conditions, not from decennial liability. A contract that relies on decennial liability to cover green performance is relying on the wrong tool. We address the broader allocation question in our note on construction contract risk management in the UAE.
How should UAE developers and contractors handle ESG clauses in 2026?
ESG and sustainability clauses in UAE construction contracts have moved from optional to load-bearing. Al Sa'fat, Estidama, and Federal Decree-Law No. 11 of 2024 each create obligations that can stop a project at completion, and a contract that does not allocate them leaves the parties to argue the point after the cost has landed.
The most time-sensitive gap to close is the contract signed before 2026 that runs into the new Materials Passport and tighter rating requirements without a change in legislation route or a clear allocation of the green obligation. Parties to live contracts should check what their forms say now, before a certificate is withheld, rather than after. Parties drafting new contracts should name the rating, name the responsible party, and name the consequence in plain terms.
For developers, contractors, and consultants weighing how to allocate green building risk on a specific project, our construction lawyers in Dubai draft and negotiate ESG and sustainability provisions and act on the disputes that arise when those provisions are missing.
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