Dubai Overhauls Construction Sector with New Law to Regulate Contracting Activities: What Employers Need to Know—Part 2

Dubai has issued Law No. 7/2025 establishing a comprehensive regulatory framework for contracting activities across the Emirate, including its free zones and special development areas.  The new law introduces important registration and classification requirements aimed at enhancing standards, ensuring quality, and fostering investment.

In the second of our two-part series on the new law, we look at what employers need to know to understand the law’s key provisions, to update their procurement processes, and to ensure compliance to avoid penalties and disruptions to their projects.

Registration and classification of contractors

The new law provides for the establishment of a unified system for the registration of contractors across Dubai.

There are two key elements to the new system:

1. Registration: All contractors operating in Dubai will be required to be registered in this system to carry out contracting activities (including civil, architectural, electrical, mechanical, industrial, building, construction, infrastructure and more);
2. Classification: Contractors will be classified into categories based on their experience, financial, technical, and administrative capabilities.

Contractors may only carry out permitted contracting activities in line with their registration and within the limits of their classification.  Contractors must also employ a minimum number of qualified and properly certified technical staff.  Contractors must maintain compliance with the registration, classification and certification requirements throughout the duration of their projects.  Contractors must keep them up-to-date and notify any changes affecting their status or that of their technical staff.

These requirements apply to contractors, subcontractors and parties acting in joint ventures or consortiums.  Airport-related contracting activities are exempted from these requirements (as also will be any other specifically expected activities).

Implications for employers

While the registration and certification requirements apply only to contractors, it is important that employers are familiar with them.  This is because employers are prohibited from engaging contractors who do not satisfy those requirements.

This means that employers must verify that their contractors are registered and classified appropriately for the scope of work, and that their technical personnel are likewise appropriately certified.  This verification should take place, not only during the tender process, but also throughout a project's duration to ensure continued compliance.

If employers fail to ensure that only properly registered and classified contractors are engaged, they risk project delays, legal disputes, and potential liability.  Violations can result in fines of up to AED 100,000, with repeat offences subject to doubled penalties up to AED 200,000.  Additional measures include suspension from practice, downgrading of classification, cancellation of registration, and revocation of competency certificates.  Designated officials have judicial powers to inspect contractor premises and project sites, and employers may be subject to investigation if found to have engaged non-compliant contractors.

Transitional arrangements and next steps

The new law will take effect in January 2026, following which, contractors will have one year to meet the new registration and classification requirements.

Employers should update their procurement procedures and standard contracts during this transitional period to reflect the new requirements and to avoid disruptions or penalties.  Employers should update their tender documentation and standard contracts:

1. to include requirements that tenderers demonstrate proper registration, classification and technical certification prior to contract award;
2. to include requirements that contractors demonstrate continued satisfaction of those requirements during project execution;
3. to allow the employer / engineer to verify that those requirements continue to be satisfied during project execution, including through maintenance of and access to project records; and
4. to provide remedies to the employer for any non-compliance that adversely impacts project execution (for example, termination and step-in rights).

During the transitional period, employers should ensure their procurement and projects teams are trained to use the registration system and to keep records of contractor compliance checks as part of their due diligence.  Further, employers should review their current and upcoming projects to ensure all engaged contractors are in the process of being registered.