Energy Disputes in UAE PPAs Explained

UAE PPA disputes turn on five pressure points and each one runs on its own contractual machinery that has to be activated within days

A 25-year PPA carries roughly 9,000 days of performance risk for each side. Most of that risk sits dormant in the contract text. When a dispute crystallises, it does so because one party has triggered an availability deduction, served a force majeure notice, claimed a change-in-law adjustment, or issued a termination notice. The five pressure points are capacity payment availability, change in law, force majeure, currency, and termination. The clauses that govern each one are dense, condition-precedent driven, and unforgiving on notice. UAE PPAs follow the regional offtaker template closely, but the disputes that arise under them have a distinct UAE flavour shaped by the Civil Code, the federal Climate Change Law, the 2026 corporate tax regime, and the arbitration clauses that send most of these disputes outside the UAE courts.

• UAE PPAs use a two-part tariff in which capacity payments cover fixed costs, and the most common dispute is whether an outage was excused.
• Federal Decree-Law No. 11 of 2024 has triggered a wave of change-in-law claim notices as IPPs assess whether new emissions costs qualify for tariff pass-through.
• Most utility-scale UAE PPAs route disputes to arbitration in London or Paris under English law, with limited UAE court intervention except for emergency relief.
• A termination event followed by an Early Termination Payment is the highest-stakes dispute and the calculation methodology can drive nine-figure differences between parties.

Who this applies to

The article is written for the legal teams of IPPs, IWPPs, sponsors, project finance lenders and their advisers, EPC contractors with PPA exposure through liquidated damages flow-down, O&M contractors, government offtakers, and counsel advising any of the above. It covers utility-scale PPAs awarded under the IPP and IWPP programmes administered by EWEC in Abu Dhabi, DEWA in Dubai, SEWGA in Sharjah, and EWE in the northern emirates.

The article does not cover corporate PPAs between private generators and corporate offtakers, distributed solar net-metering arrangements such as Shams Dubai, or virtual PPAs and I-REC certificate transactions, which operate under different regulatory and contractual frameworks. Readers who need the underlying PPA structure rather than dispute mechanics should start with the UAE energy transition piece.

The single-buyer market and the legal framework around UAE PPAs

The UAE operates a single-buyer model for utility-scale electricity. All generation in Abu Dhabi sells exclusively to Emirates Water and Electricity Company (EWEC) under Abu Dhabi Law No. 2 of 1998 and the regulatory framework administered by the Abu Dhabi Department of Energy. Dubai operates the same single-buyer structure under Law No. 6 of 2011, with DEWA acting as offtaker under PPAs awarded through the Dubai Electricity and Water Authority's IPP programme. Sharjah and the northern emirates run smaller variants. The market structure means an IPP has one possible counterparty in its emirate and no alternative offtaker, which controls how disputes are commercially managed even before the contract clauses are read.

UAE PPAs typically have a 20- to 30-year term from Commercial Operation Date (COD), use a take-or-pay structure, and are denominated and indexed in US dollars to mitigate the Generator's currency risk against AED-denominated tariffs. They are usually project-financed at gearing levels of 75 to 85 per cent, which puts the Lender's Direct Agreement and step-in rights at the centre of any dispute. The Abu Dhabi PPAs are generally governed by English law with London-seated arbitration, while Dubai-based PPAs may use English law with London or DIFC seats. The choice of seat carries practical consequences for emergency relief, evidence, and enforcement that are usually under-appreciated until a dispute starts.

The two-part tariff is the source of more disputes than any other clause:

• Capacity (or availability) payment covers the Generator's fixed costs, including debt service, equity return, and fixed operating costs. It is paid against declared or tested availability, regardless of how much energy the Offtaker dispatches.
• Energy payment covers variable costs, including fuel pass-through for gas-fired plants, and is paid only for energy delivered to the grid.

The economic split matters because the Generator's debt is repaid out of the capacity payment. Anything that reduces capacity payment, whether an availability deduction, a forced outage, or a curtailment treated as the Generator's risk, hits the project's debt service before it hits equity return. That is why availability disputes are existential, not commercial.

Availability deductions and forced outage disputes

The most frequent PPA dispute is whether a particular outage was excused, counted as a forced outage, or counted against contracted availability. The contract distinguishes between:

• Scheduled outages: planned maintenance, usually with a per-year cap, which do not reduce availability if taken within the schedule.
• Forced outages: unplanned trips and breakdowns, which reduce availability and trigger deductions unless the Generator can show an excusing event.
• Excused outages: outages caused by Offtaker actions, grid events outside the Generator's control, force majeure, or change in law, which do not reduce availability.

The dispute almost always sits at the boundary between forced and excused. A grid disturbance that trips the plant might be a grid event excused under the Offtaker's transmission obligations, or it might be a generator protection failure under the Generator's risk. The contractual machinery for resolving this is typically a notice from the Generator within a short window, an Offtaker response, an investigation, and if no agreement, escalation to expert determination or arbitration. Generators that fail to issue the notice within the window lose the argument before it begins, regardless of the underlying technical position.

A second recurring availability dispute is the deemed availability claim. Where the plant is technically available but the Offtaker has declined to dispatch energy, the PPA usually deems availability for capacity payment purposes. Whether dispatch was "declined" is the question, and Offtakers will sometimes argue that grid conditions, system economic dispatch order, or planned transmission outages mean the plant was not in fact available. The Generator's response is grounded in the plant's metered availability and the dispatch instructions issued at the time. Documentary discipline at the time of the event determines who wins this claim months later.

Change-in-law claims under UAE PPAs

UAE PPAs include detailed change-in-law provisions because Generators and Lenders cannot price every regulatory eventuality across a 25-year term. The clause typically distinguishes between:

• General change in law: changes that affect the project at the same level as other businesses in the UAE. These usually do not trigger relief.
• Discriminatory change in law: changes targeting the project, the project type, or a narrow class of similar projects. These typically trigger tariff pass-through.
• Project-specific change in law: changes in the licence, approvals, or specific regulatory consents for the project. These trigger pass-through and may also trigger termination rights for the Generator.

Three regulatory developments have created live change-in-law exposure on UAE PPAs in the last 24 months:

The federal Climate Change Law, Federal Decree-Law No. 11 of 2024, came into force on 30 May 2025 and imposes binding GHG measurement, reporting, and reduction obligations on all UAE entities, with the first compliance deadline on 30 May 2026. For gas-fired IPPs above the 0.5 million tonnes CO2e threshold, registration with the National Carbon Register is mandatory. The compliance cost, the carbon credit purchase obligation if reductions are not met, and the potential application of a sectoral emissions cap to power generation are all candidates for change-in-law relief. The dispute is whether these costs were foreseeable at PPA signing and whether the law is "discriminatory" in the contractual sense.

The 2026 federal corporate tax regime creates a 9 per cent corporate tax exposure on project company profits. Older PPAs signed before the 2022 corporate tax law was enacted typically include change-in-law tariff pass-through for new direct taxes. PPAs signed after enactment usually carve corporate tax out of the pass-through definition. Whether a particular PPA falls inside or outside the carve-out is a drafting question that turns on definitions, side letters, and the corporate tax law's date of effect relative to PPA execution.

The e-invoicing mandate under Cabinet Decision No. 106 of 2025, with a phased rollout starting in July 2026, imposes new system, integration, and ongoing compliance costs on IPPs above the AED 50 million revenue threshold. Whether these costs are recoverable through the PPA's change-in-law mechanism depends on the threshold definition of "law" in the contract and whether technical regulations and ministerial decisions count.

A change-in-law claim is not won at the regulator. It is won by the Generator preserving its position from the day the law is gazetted: serving the contractual notice within the window, documenting the cost, attributing it specifically to the change in law rather than to general operating cost inflation, and presenting the calculation in the form the PPA's pass-through formula requires.

Force majeure under UAE PPAs

UAE PPAs use detailed contractual force majeure regimes rather than relying on Articles 273 or 287 of the UAE Civil Transactions Law. The contractual definition controls. PPAs typically distinguish three categories:

• Natural force majeure: extreme weather, earthquakes, fire, flood, and similar events not caused by either party.
• Political force majeure: war, civil unrest, embargo, expropriation, government action, and similar political risks. These often have asymmetric consequences, with the Offtaker bearing more political risk than the Generator because political risk in the UAE attaches to the State.
• Other force majeure: a residual category covering events outside the parties' control that cannot be classified as natural or political.

The disruption to Strait of Hormuz traffic and Middle East fuel logistics from March 2026 onwards has driven a wave of force majeure notices on gas-fired IPPs whose fuel supply runs through affected shipping lanes. The legal question on each notice is the same: did the event prevent or only make more expensive the Generator's performance, did the notice machinery comply with the PPA's strict conditions precedent, and is the relief available time only or time and cost?

UAE PPAs typically allocate force majeure relief as follows. The Generator is excused from liquidated damages and termination triggers attributable to the event, the Offtaker continues to pay capacity payments in full or in part during the FM period, and prolonged FM beyond a stated period (often 180 days or 365 days) becomes a termination trigger. The Lender steps into the Direct Agreement during prolonged FM to protect debt service. The dispute is rarely whether an event is force majeure. It is almost always whether the Generator complied with the conditions precedent in the notice clause, particularly the requirement to notify within a specified short window from the date the Generator became aware of the event.

The UAE Civil Code does not require a contractual notice for the doctrine of force majeure to apply, but UAE arbitral tribunals applying English-law-governed PPAs have consistently treated PPA notice provisions as conditions precedent where the drafting is clear. A Generator that misses the notice window has no contractual claim, regardless of the underlying force majeure event. This treatment is in line with English law authority and is now settled UAE practice on offshore-seated PPA arbitrations.

Termination triggers and the early termination payment

Termination is the highest-value dispute on a PPA. The events that trigger early termination usually include:

• Generator default: failure to achieve COD by the long-stop date, prolonged failure to meet contracted capacity, abandonment, insolvency, breach of fundamental representations, and unremedied payment default.
• Offtaker default: prolonged failure to make capacity or energy payments, repudiation, and breach of fundamental obligations.
• Prolonged force majeure: continuous FM beyond the contractual long-stop period.
• Prolonged change in law: where a change in law renders the project unviable and the parties cannot agree pass-through.
• Government default or political event: expropriation, change of law affecting the offtaker's payment obligations, or revocation of project approvals.

Each trigger carries a different Early Termination Payment (ETP) calculation. The ETP is the financial settlement on termination and is the most heavily negotiated number in the PPA. A typical ETP framework provides:

Termination disputes turn on three questions. First, did the triggering event occur, which is often itself a contested factual question. Second, did the terminating party comply with the notice and cure machinery in the PPA, which is unforgiving on procedure. Third, what is the correct ETP calculation, which involves valuation methodology, discount rate selection, and treatment of forex and inflation indexation across the remaining term.

Currency and tariff indexation disputes

UAE utility-scale PPAs are usually denominated in US dollars or in a USD-indexed AED tariff. The pegged AED-USD rate at AED 3.6725 per USD has held for decades, which has made currency a relatively quiet contractual issue compared with PPAs in jurisdictions with floating rates. The active currency issues on UAE PPAs are narrower and more technical:

• Indexation against US CPI or a similar inflation index for the fixed component of the tariff, with the typical dispute being whether a lookup date or formula was applied correctly.
• Fuel cost pass-through on gas-fired plants, where the dispute is whether the indexation reflects the actual fuel cost paid under the Generator's gas supply agreement or a deemed fuel cost.
• Tax pass-through where a new direct tax is recoverable through the tariff and the indexation formula has to be applied retrospectively.

Currency disputes on PPAs are usually arithmetic rather than legal, but the arithmetic operates on amounts that compound across long periods. A 0.1 per cent error in CPI application across a 25-year term on a USD 1 billion contract is material money. These disputes are often resolved through expert determination rather than full arbitration because the issue is calculation methodology, not contract interpretation.

The interaction between the PPA tariff and the Generator's gas supply agreement creates a separate dispute pattern for gas-fired plants. The Generator's gas supply agreement defines the cost base. The PPA defines the recovery base. A mismatch between the two, whether on indexation reference, take-or-pay obligations, or interruption rights, exposes the Generator to a margin squeeze that is not always recoverable through the PPA's change-in-law or hardship mechanisms.

Curtailment and dispatch disputes

Curtailment is the Offtaker's right to instruct the Generator to reduce or stop generation for system reasons, even when the plant is available. PPAs typically distinguish:

• System curtailment: ordered for grid stability or technical reasons. Usually deemed availability for capacity payment purposes, so the Generator continues to be paid.
• Economic curtailment: ordered because the Offtaker prefers to dispatch a cheaper plant. Usually also deemed availability, particularly on take-or-pay PPAs.
• Force majeure curtailment: ordered because of grid force majeure events affecting transmission or distribution. Usually treated as Offtaker force majeure with continued capacity payment.

The disputes are about classification rather than entitlement. The Offtaker has an interest in classifying a curtailment as Generator-side, which reduces capacity payment. The Generator has an interest in the opposite. Each curtailment instruction carries its own justification, and the Generator's response within the PPA's notice period determines whether the classification can later be challenged.

For solar IPPs, curtailment risk is increasing as Abu Dhabi's solar capacity rises toward 18 GW by 2035 and Dubai's solar fleet at the Mohammed bin Rashid Solar Park scales further. System operators face midday over-generation challenges that did not exist when the early PPAs were signed at sub-3 cents/kWh in 2017 to 2019. The PPAs signed at those tariff levels were drafted on the assumption that solar generation would always be dispatched. The growing fleet means that assumption may be tested, and the curtailment risk allocation in the original PPAs becomes a live commercial issue rather than a theoretical one.

Liquidated damages and performance shortfalls

UAE PPAs use liquidated damages mechanically across multiple stages of the project life. The most material LD provisions are:

• Delay LDs for late COD: a daily or weekly amount payable by the Generator if Commercial Operation Date is missed past the contractual long-stop, capped at a percentage of the project value, often 10 to 20 per cent.
• Performance LDs for capacity shortfall: payable by the Generator if tested net capacity falls below the contracted capacity at COD or during operations.
• Performance LDs for heat rate or efficiency shortfall: payable by the Generator on gas-fired plants if the plant fails to meet declared efficiency.
• Availability LDs: built into the capacity payment formula as deductions rather than separate payments.

UAE law treats liquidated damages as enforceable provided they represent a genuine pre-estimate of loss rather than a penalty. Article 390 of the Civil Transactions Law allows a court or tribunal to adjust the agreed compensation to match actual damage suffered. PPA arbitral tribunals applying English law tend to enforce LDs as agreed, but the Article 390 issue can arise where enforcement is sought through UAE onshore courts. For more on how LDs are tested under UAE law, see our liquidated damages guide.

The interaction between the PPA's delay LDs and the Generator's EPC contract delay LDs is where most COD delay disputes crystallise. The Generator passes through PPA delay LDs to the EPC contractor up to the EPC LD cap. When PPA LDs exceed EPC LDs, the Generator absorbs the difference on equity. When the EPC contractor disputes responsibility for the delay, the Generator is squeezed in the middle.

Lender direct agreements and step-in rights

The Lender's Direct Agreement is a separate contract between the Generator's Lenders and the Offtaker. It carries three core mechanisms that come alive in disputes:

• Notification: the Offtaker must notify Lenders of any Generator default or termination event before exercising remedies, giving Lenders an opportunity to cure.
• Cure rights: Lenders have an extended cure period beyond the Generator's own cure period, usually 30 to 90 days additional.
• Step-in rights: Lenders can step into the Generator's position, usually through the appointment of a substitute project company or operator, to preserve the asset and the debt repayment stream.

Step-in is rarely exercised in practice. Its function is to give Lenders leverage in restructuring negotiations when the Generator runs into difficulty. The Direct Agreement usually requires the substitute operator to be acceptable to the Offtaker and to assume all the Generator's obligations under the PPA, which makes the step-in slow in practice. Where step-in is exercised, the disputes that follow are about the conditions on which the substitute operator can run the plant, the cure of accumulated defaults, and the treatment of any LDs already accrued.

For IPPs financed by Chinese policy banks, the Direct Agreement architecture has additional layers. Chinese lender policies on step-in, sanctions exposure, and substitute operator nomination differ from those of European and Japanese lenders, and the dispute outcome can be shaped by which lender consortium holds the senior debt at the time the trigger occurs.

Where UAE PPA disputes go for resolution

Almost all utility-scale UAE PPAs include arbitration clauses, with the most common combinations being LCIA arbitration seated in London under English law, ICC arbitration seated in Paris or London, and, more recently, DIAC arbitration seated in Dubai for some emerging projects. The choice of forum has practical consequences:

• London-seated LCIA: predictable, English-law-driven, and supported by the English Arbitration Act 2025. Awards are enforceable in the UAE under the New York Convention, with limited grounds for refusal.
• Paris-seated ICC: similar enforceability but with French procedural law as the curial law. Familiar to French sponsors and Mediterranean-Asian consortiums.
• DIAC: closer to home, with onshore UAE court support. Useful for emergency relief involving UAE-located assets but with a less developed body of PPA case law than LCIA or ICC.
• DIFC or ADGM-seated arbitration: increasingly relevant for newer projects, particularly where one party wants the predictability of common law without London or Paris.

The choice of seat affects emergency relief. UAE PPA disputes often need urgent measures, including injunctions to prevent termination, conservatory measures over project assets, or interim relief preserving payment streams. London-seated arbitration relies on English court support under section 44 of the Arbitration Act 1996, with parallel emergency arbitrator procedures under LCIA Rules. UAE onshore courts can support arbitrations seated in the UAE and, in some cases, foreign-seated arbitrations involving UAE assets, but the procedural pathway is different. For a deeper look at forum choice between DIAC and ArbitrateAD for UAE-seated arbitration, see our arbitration clause checklist.

A live procedural issue across all UAE PPA arbitrations is the law governing the arbitration agreement itself. The English Arbitration Act 2025 introduces a statutory rule that the law of the arbitration agreement is the law of the seat unless the parties expressly agree otherwise. PPAs that pre-date the Act, or that have not been re-papered, may face arguments about whether English law or UAE law governs the validity and scope of the arbitration clause. This affects who decides arbitrability and how challenges to the arbitration agreement are routed.

Common defects in PPA dispute notices

A surprising number of PPA disputes are lost on notice rather than substance. The recurring defects are:

• Generic notices that do not identify the specific event, the specific clause, and the specific relief claimed. PPAs require precision because the notice is the document that triggers downstream consequences.
• Notices served on the wrong recipient or in the wrong form. UAE PPAs often require notices to be served on a particular individual, at a particular address, by a particular method. Email may not satisfy the formal requirement.
• Late notices. Most PPA notice clauses operate as conditions precedent. A late notice does not save itself with substance.
• Reservations of rights without action. A reservation of rights letter does not preserve a claim that requires a specific notice. The contractual notice has to be served separately.
• Joint notices from multiple parties on the Generator side. Where the project company is the contractual counterparty, only the project company can serve notice. Notices from sponsors or sub-contractors do not bind the Offtaker.

Each of these defects is curable at the time of the event, and incurable afterwards.

What an effective PPA dispute response looks like

The pattern that produces successful PPA dispute outcomes for Generators, sponsors, and Lenders is:

• Daily contemporaneous documentation of plant operations, dispatch instructions, grid events, and counterparty communications. This documentation is the evidence base for every claim.
• A live notice tracker that diaries every PPA notice deadline against the events that might require notice. Most dispute losses are calendar failures.
• Pre-prepared notice templates for the most common events (force majeure, change in law, availability dispute, deemed availability claim) that can be issued within hours of an event rather than drafted from scratch.
• Coordinated escalation between project company, sponsors, and Lenders, with clear mandate on who has authority to issue notices and engage in correspondence.
• Early instruction of arbitration counsel when an event has the potential to crystallise into a dispute, before positions harden in correspondence.

The cost of these disciplines is modest compared with the cost of a single missed notice. The cost of a missed notice on a USD 500 million PPA can run into tens of millions of dollars in lost capacity payments, lost ETP value, or unrecoverable change-in-law costs.

How should UAE IPPs and IWPPs approach PPA disputes in 2026?

PPA disputes are the most concentrated form of legal risk in the UAE energy sector. The contracts run for decades, the amounts at stake are large, and the recovery mechanisms are unforgiving on procedure. The 2026 climate compliance deadline, the geopolitical disruption to fuel supply, the rollout of e-invoicing and other tax changes, and the accumulation of an aging IPP fleet entering the second half of its term all mean the volume of PPA disputes in the UAE is rising.

The Generators that handle these disputes well are the ones that treat their PPAs as living documents administered daily, not as filing-cabinet contracts read only when something has gone wrong. The same applies to Lenders, whose Direct Agreement rights only protect debt service if they are exercised within the contractual windows.

For IPPs, IWPPs, sponsors, and lenders facing capacity deduction disputes, change-in-law claims, force majeure notices, or termination triggers, our energy disputes team advises on UAE PPAs from the day a notice is contemplated through arbitration before LCIA, ICC, and DIAC tribunals. Generators who are negotiating new PPAs or amendments should also review the broader compliance position set out in our UAE energy transition piece.

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