In July, Dubai implemented a new piece of legislation, Law No. 7 of 2025, focusing on the regulation of contracting activities within the Emirate.
The new law aims to streamline and modernize existing regulations, aligning the industry with global best practices. A key provision of the law is that all contractors must register, classify, and comply with its requirements, or face penalties.
Under the law, all contractors are required to obtain a license from Dubai Municipality, allowing them to operate only within their designated classification category for contracting activities.
The forthcoming Evaluation System for Contracting Companies and Engineering Consultancy Offices, set to be launched alongside the law, will assess contractors based on a wider array of criteria, including financial health, adherence to safety standards, innovation, and punctuality in project delivery.
Contractor Ratings Made Public on a Digital Platform
Contractor evaluations will be publicly available on a digital platform for government procurement bodies, private developers, and financial institutions, likely influencing the pre-qualification process for tenders. Any unauthorized trading in different or higher categories is strictly prohibited. These changes signal the Emirate’s commitment to enhancing accountability and elevating performance standards within the sector.
Turnkey contracts, where a single contractor manages an entire project from design to completion, are acknowledged by the law. Dubai Municipality will specify which project types can utilize turnkey contracts and the associated requirements. Additionally, consortium agreements, where multiple contractors combine efforts for a project, will also need all involved parties to be classified within the relevant category established by the municipality. The consortium must also receive pre-approval from both the employer and the municipality, marking a significant development to the framework in Dubai.
The legislation also addresses subcontracting, permitting it only with prior approval from Dubai Municipality.
While specific operational details remain undisclosed, this move is anticipated as a positive change for many within the industry, who have faced challenges related to subcontractor delays, subpar workmanship, and cash flow issues.
Furthermore, subcontractors must hold a license and be registered with Dubai Municipality, confirming that the primary contractor retains overall responsibility for oversight.
The new law establishes the Committee for Regulating and Developing Contracting Activities, a task force led by the municipality that will maintain a central registry, coordinate with supervising government bodies, and draft an industry-wide code of ethics.
This centralized oversight is expected to effectively address and prevent regulatory overlaps, particularly on large-scale projects that may cross various free zones and development areas in Dubai.
Consequences of Non-Compliance
Penalties for violating the law range significantly, with basic infractions incurring fines from Dhs1,000 to Dhs100,000, which may double for repeat offenders within a year, reaching up to Dhs200,000.
Authorities have the power to suspend operations for up to a year, downgrade a contractor’s classification, freeze licenses, and even revoke professional certificates from engineers who certify substandard work.
The law is set to take effect on January 8, 2026, and contractors will have a year to comply with new regulations.
Upon registration, contractors must submit annual license renewals at least 30 days before expiration to maintain their certification.
Failure to renew in a timely manner will lead to automatic suspension from the registry, which may hinder a contractor’s ability to bid on new projects and impede payment for ongoing work during the suspension period.
For an industry that has long operated under a patchwork of separate regulations, Law No. 7 marks a significant step towards consolidation in Dubai’s construction sector.
This law pledges to create a more transparent and structured marketplace, founded on robust health, safety, and environmental standards.
Such initiatives are expected to foster continuous growth in the industry and attract further investments into Dubai.