Adam Gray
Al Tamimi & Co, United Arab Emirates
a.gray@tamimi.com

The United Arab Emirates (UAE) has long been a jurisdiction where the law said one thing about maritime limitation of liability, but practice often delivered another. That gap is narrowing. With the advent of the new UAE maritime law in 2024, the UAE appears poised to move from a system which recognised limitation in theory to one that can operationalise it in practice, most notably by enabling the constitution of limitation funds before the courts. This shift matters to shipowners, salvors, liability insurers, port operators, cargo interests, and financiers alike, because a functioning limitation regime determines both the predictability and the efficiency of multi-claimant casualty resolution.

Background: ratification without implementation

The UAE ratified the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) in 1997 and later ratified the 1996 Protocol in 2020, which substantially increases the liability caps across tonnage bands. Yet, for years after ratification, defendants could invoke limitation as a defence but could not actually constitute a limitation fund in the UAE, an essential mechanism to centralise claims and crystallise a capped quantum.

Two institutional obstacles blocked implementation. First, the Federal Transport Authority (now the Ministry of Energy & Infrastructure) established that it, not the courts, was the competent authority under Article 11 of the LLMC for fund-constitution. Second, there was no domestic legislative or administrative framework at the authority level to accept deposits or guarantees and administer a fund. The Fujairah Court of Appeal in 2018 accepted this position, and, in practical terms, no limitation fund was constituted in the UAE.

This created a paradox. Defendants faced multi-front security applications in the form of arrests, account freezes, and attachments; precisely the fragmentation a fund is designed to avoid. It also triggered forum shopping. Owners might prefer jurisdictions with modern limitation practice and claimants might seek fora with higher limitation caps or better access to security.

The resulting status quo generated divergent judicial experiments. The Dubai World Tribunal (DWT), applying UAE law in a specialised forum, was prepared in The Centaurus to accept a Club Letter of Undertaking (LOU) in principle. But that approach diverged from onshore practice and was confined to Dubai World matters. Onshore courts remained resistant to Club LOUs as acceptable guarantees or constituting a fund at all.

The new law: court‑constituted funds and a clearer path forward

The new UAE Maritime Law broadly incorporates the LLMC 1976 as amended by the 1996 Protocol and, critically, empowers parties to constitute a limitation fund ‘before the court’. This is a marked policy pivot, shifting operational responsibility from the executive authority to the judiciary. The law contemplates that the court will ‘determine the guarantees to be approved and their value’, with implementing details to be set in much-anticipated Executive Regulations.

If implemented as drafted, this should end the long-standing impasse. Defendants would be able to establish a fund in the UAE promptly, centralising claims and curbing the proliferation of security measures across multiple assets and jurisdictions. In turn, claimants would gain a single forum to prove and rank claims against a defined fund, improving efficiency and predictability.

That said, several practical questions remain for the yet-to-be-published Executive Regulations and early court practice to answer. These include:

• The new law’s list of persons entitled to limit appears narrower than the LLMC’s Article 1. Notably, it does not explicitly extend limitation to parties liable for claims for which the shipowner or salvor is responsible, nor does it explicitly grant liability insurers the same rights as the assured. Clarification will be needed on whether insurers may constitute a fund on behalf of the assured.
• The law does not explicitly provide for payment of interest in the way LLMC Article 11 addresses it. It remains to be seen whether courts will treat ‘value of the guarantee’ as including accrued interest.
• The acceptable form of guarantee is not specified for limitation funds. While ship arrest practice now contemplates LOUs, there is no specific recognition of P&I Club LOUs for limitation funds. Courts may initially prefer cash or first-class bank guarantees, at least until the Executive Regulations clarify acceptance criteria, potentially limiting Club LOUs to those from International Group clubs if they are to be admitted at all.
• Procedurally, courts will need to develop a framework for constituting the fund; how to notify potential claimants; how to admit, rank, and distribute claims; how to handle challenges to limitation; and how to coordinate parallel proceedings across emirates. Without uniform regulations, practice could diverge among courts.

Implications for stakeholders

For owners and salvors, the ability to invoke limitation in the UAE and to constitute a fund domestically will increase the practical value of ratification and reduce incentives to litigate elsewhere on purely tactical grounds. In a major casualty such as an anchor dragging across subsea pipelines, a crane‑toppling berth allision, or a multi-claimant personal injury event, the speed and predictability of fund constitution can materially cap downside and rationalise settlement dynamics.

For claimants and their insurers, a functioning fund means a single, accessible pot against which to bring claims without the delay and cost of piecemeal security applications. It should also curtail the race to arrest in multiple jurisdictions, particularly where the UAE is the natural forum or the locus of the casualty.

For the courts, the shift presents an opportunity to align with the mainstream international limitation regime while developing consistent national practice. Early clarity on acceptable guarantees, interest, insurer standing, and procedural timelines will be critical to avoid fragmented emirate-by-emirate approaches.

What to watch for

• Executive Regulations – Their publication will determine the operational ‘how’ of fund constitution, admissible security, and claim administration. In their absence, courts may adopt interim practices, potentially defaulting to bank guarantees and conservative interpretations of standing and interest.
• Initial test cases – The earliest petitions to constitute funds will set practical precedents. Expect judicial caution, especially on Club LOUs and insurer‑led funds.
• Convergence with past jurisprudence – Onshore courts historically resisted non‑cash guarantees, while the DWT was more permissive. The new law’s court‑centric model should facilitate convergence toward internationally recognisable procedures.

Conclusion

The UAE has moved from a period of full ratification but partial implementation to a statutory framework which places limitation funds within reach of litigants and within the authority of the courts. The architecture broadly mirrors the LLMC 1976 as amended by the 1996 Protocol, but success will turn on the Executive Regulations and the courts’ case management. If the details land well, the UAE can continue to position itself as a modern Gulf forum for maritime casualties, capable of swift fund constitution, credible security, and orderly distribution, thereby delivering the certainty that both claimants and defendants have long sought.