How Do UAE Contractors Recover Retention and the Final Account?

Under Sub-Clause 14.9 of the FIDIC 2017 Red Book, the employer releases the first half of the retention money once the Taking-Over Certificate for the Works is issued. The second half follows after the last Defects Notification Period expires. The final account closes later, through the Final Statement, the contractor’s written discharge and the Final Payment Certificate. A contractor that misses a step in that sequence can lose claims that were valid on the merits.

• Retention is the contractor’s money. It is part of the contract price held back as security for defects, so the employer has no right to keep it once the contractual release conditions are met.
• Close-out follows fixed periods. The FIDIC 2017 conditions give 84 days after taking over for the Statement at Completion and 56 days after the Performance Certificate for the draft Final Statement.
• Unlisted claims are lost. Under Sub-Clause 14.14, the employer is released from any claim the contractor did not include in its Final Statement, subject to narrow exceptions.
• The discharge must exclude disputes. The contractor’s written discharge under Sub-Clause 14.12 can carve out only matters already before a dispute board or in arbitration.
• UAE law fills the gaps. Where the contract is silent, the UAE Civil Code requires the employer to pay the price on delivery of the work. It also allows each party to withhold performance while the other fails to perform.
• The court expert carries great weight. In onshore litigation the court appoints an engineering or accounting expert, and the contractor’s records are what that expert examines.

Who this applies to

This applies to commercial directors, quantity surveyors and finance directors of main contractors, subcontractors and MEP contractors on completed or nearly completed projects in the UAE. It also concerns developers and employers closing out construction projects and real estate developments who need to know what they may lawfully keep.

Our construction disputes lawyers in the UAE advise contractors and employers on final account negotiations, retention claims and close-out disputes. This article covers the end of the contract only. Our guide to the Taking-Over Certificate explains handover, and our article on unpaid interim payment certificates covers payment during the works.

The legal framework

• FIDIC Conditions of Contract for Construction, 2017 and 1999 editions. The FIDIC Red Book governs retention, the Performance Certificate, the Final Statement, the discharge and the Final Payment Certificate on large UAE projects, subject to the particular conditions the parties agree.
• The UAE Civil Code, Federal Law No. 5 of 1985. Its muqawala provisions govern construction contracts concluded before 1 June 2026, including the employer’s duty to pay on delivery of the work.
• The Civil Transactions Law, Federal Decree-Law No. 25 of 2025. The new law applies to contracts concluded from 1 June 2026 and replaced the 1985 Civil Code for those contracts.
• The Law of Evidence, Federal Decree-Law No. 35 of 2022. It governs the appointment and reports of court experts, who examine final account disputes in the onshore courts.

The supervising courts and tribunals:

• The onshore courts of each emirate. They hear final account claims where the contract has no arbitration clause, and they appoint experts to examine quantities, valuations and defects.
• Arbitral tribunals. Where the contract refers disputes to arbitration, the tribunal decides the final account, and some contracts require a dispute board decision first.

How retention is released

Sub-Clause 14.9 of the FIDIC 2017 Red Book releases retention in two halves. The employer must release the first half once the Engineer issues the Taking-Over Certificate for the Works, and the second half after the latest Defects Notification Period expires.

The first half on taking over

Where the Works are taken over in sections, FIDIC releases a proportion of the first half for each section. Under the 2017 edition, the contractor must include the released amount in a Statement for an interim payment, so payment follows the normal interim payment cycle. The 1999 edition treated release as a separate certification, which meant faster payment.

The second half after the defects period

The Defects Notification Period, also called the defects liability period, is the period in which the contractor must return to fix notified defects. The contract sets its length, for example twelve months for building works and a longer period for mechanical and electrical works. The second half of the retention falls due once the last of these periods expires.

When the employer may keep retention

The employer may deduct from retention the cost of remedying defects the contractor failed to fix after proper notice. That deduction must follow the contract’s procedure and be supported by evidence of the defect and the cost. A general assertion that defects exist does not justify keeping the whole amount. Our article on payment disputes in UAE construction covers set-off in more detail.

Replacing retention with a guarantee

The FIDIC 2017 forms include an optional retention money guarantee, which the parties may adopt in the particular conditions. It allows the contractor to replace cash retention with a bank guarantee, which improves cash flow during the defects period. A contractor negotiating a new contract should ask for this option, because a guarantee that expires on its stated date is easier to recover than cash the employer holds.

How the final account closes under FIDIC

The FIDIC close-out procedure turns every open claim into one figure. Each step has a fixed period, and a step missed by the contractor can end a claim.

The Statement at Completion

Under Sub-Clause 14.10, the contractor submits a Statement at Completion within 84 days after the Taking-Over Certificate for the Works. It lists the value of all work done and any further sums the contractor considers due, including claims before the Engineer or a dispute board. It also estimates anything else the contractor expects to become due.

The Performance Certificate

Under Sub-Clause 11.9, the Engineer issues the Performance Certificate within 28 days after the latest Defects Notification Period expires, once the contractor has completed its remaining work and remedied defects. Only the Performance Certificate counts as acceptance of the Works.

The Final Statement and the discharge

Under Sub-Clause 14.11, the contractor submits a draft Final Statement within 56 days after receiving the Performance Certificate. The Engineer and the contractor then agree it, or agree the parts they can, which produces a Partially Agreed Final Statement. With the Final Statement, the contractor must give the written discharge required by Sub-Clause 14.12, confirming that the statement is a full settlement of all sums due.

The Final Payment Certificate

Under Sub-Clause 14.13, the Engineer issues the Final Payment Certificate within 28 days after receiving the Final Statement and the discharge. Under Sub-Clause 14.7, the employer pays it within 56 days after receiving it.

What the discharge means under UAE law

Under Sub-Clause 14.12, the discharge confirms that the Final Statement is a full and final settlement, and it takes effect once the contractor is paid. The 2017 edition allows the contractor to exclude only matters already referred to a dispute board or to arbitration. Claims still with the Engineer cannot be excluded.

UAE courts give effect to clear written releases between commercial parties. A contractor that signs a full and final settlement without listing its open claims will struggle to argue later that it meant to keep them. Under Sub-Clause 14.14, the employer is also released from any matter not included in the Final Statement, unless the contractor raises a claim within 56 days after receiving the Final Payment Certificate. The exceptions cover indemnities, fraud, deliberate default and reckless misconduct.

Some employers replace the FIDIC discharge with their own final account settlement agreement, which may contain broader waiver language. The contractor should read each clause against its list of open claims before signing.

How a contractor recovers retention or the final balance

Where the employer refuses to release retention or certify the final account, the contractor’s route depends on the dispute clause. A contract with a dispute board requires a referral to the board before arbitration. A contract with an arbitration clause goes to the named institution, and a contract with no clause goes to the onshore courts.

Withholding and suspension

Under the UAE Civil Code, each party to a bilateral contract may withhold its own performance while the other fails to perform. A contractor still on site during the defects period may rely on that principle, or on the suspension right in the contract, but it must follow the notice requirements first.

The role of the court expert

In onshore proceedings, the court appoints an engineering or accounting expert to examine the measurements, variations and defects behind the final account. The expert’s report carries great weight in the court’s decision. Our article on court-appointed experts in UAE litigation explains how to prepare for the expert and challenge the report.

Securing the claim

Where the employer is moving assets or nearing insolvency, the contractor may apply for a precautionary attachment over the employer’s bank accounts or property. Our article on precautionary attachment in the UAE explains the test and the deadlines.

Common mistakes at close-out

Leaving claims out of the Statement at Completion. A claim that is not listed at completion becomes harder to add later, and under the 2017 edition it may be lost entirely at the final stage.

Signing a full discharge with open claims. A contractor that signs a discharge or settlement agreement without excluding disputed items may release those items. The exclusion should name each claim and its value.

Waiting for the Performance Certificate to raise disputes. Variations and delay claims that are still unresolved at taking over should go to the Engineer, the dispute board or arbitration before the final statement, so they can be excluded from the discharge.

Accepting a retention deduction without evidence. An employer that keeps retention for defects should identify each defect, the notice given and the cost of remedy. A contractor should ask for that evidence in writing.

Losing the project records. Measurements, approved variations, site instructions and correspondence decide the final account before a court expert or tribunal. A contractor that demobilises its commercial team before close-out loses the evidence it needs.

What contractors should do next

• Diarise every close-out date. Record the taking-over date, the end of each defects period and the FIDIC deadlines that follow, adjusted for the particular conditions.
• Submit a complete Statement at Completion. List every claim, variation and disputed deduction with its value, because this statement sets the base for the final account.
• Refer open disputes before the final statement. Move unresolved claims to the dispute board or arbitration so they can be excluded from the discharge.
• Review the discharge wording before signing. Compare each clause of the discharge or settlement agreement with your list of open claims.
• Demand evidence for retention deductions. Ask the employer in writing for the defects, notices and costs behind any deduction.
• Keep the commercial team until the account is closed. Retain the quantity surveyor and the records until the Final Payment Certificate is paid.

How do contractors recover retention and close the final account in the UAE?

Contractors recover retention by meeting the release conditions in the contract and following the close-out procedure to the Final Payment Certificate. Under FIDIC that means a complete Statement at Completion, a Final Statement that lists every claim and a discharge that excludes the disputes still open.

The main risk is the discharge. A contractor that signs a full and final settlement while claims are still with the Engineer can lose those claims, even where the employer owed the money.

The commercial consequence is direct. Retention deducted from every interim payment, together with unpaid variations and delay claims, can amount to more than the profit on the project. A careful close-out keeps that money recoverable.

For contractors and employers closing out UAE projects, our construction law team advises on final statements, discharge wording and claims for unpaid retention and final accounts.

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