U.S., EU and UK Sanctions in the UAE: How Far Do They Really Reach?

01 – IntroductionIntroduction

The United Arab Emirates (“UAE”) historically sits at the centre of global trade flows. Those flows have been reconfigured since 2022, when the conflict in Ukraine flared up.

After Western governments introduced unprecedented restrictive measures in response to the conflict, the UAE absorbed a wave of relocated businesses, redirected trade and rerouted payments. That wave came with difficult sanctions questions. Businesses incorporated in the UAE – banks, traders, contractors, joint-venture parties – suddenly had to face the issue of what effect foreign sanctions may have on them.

The answer has two layers that are often confused. In strict legal terms, unilateral U.S., EU and UK sanctions are not part of the federal UAE law nor the law of individual Emirates. The UAE implements United Nations sanctions and enacts its own, but that is all. In 2025, Dubai courts gave two notable judgments that Office of Foreign Assets Control (“OFAC”) designations have no force of law in the UAE unless adopted by UAE authorities. However, as a matter of commercial reality of doing business in the Emirates, U.S., EU and UK measures reach far and wide through a combination of personal liability, the U.S. dollar clearing system, secondary sanctions and anti-circumvention listings aimed directly at third-country operators, and expansive sanctions clauses that now permeate commercial contracts.

This article considers both layers: who is actually bound by each regime, what UAE law itself requires, what the UAE courts have said, and where the practical pressure points lie.

02 – RegimesThree regimes, three jurisdictional anchors

Sanctions are not rules of international law of general application. Each regime binds only the persons over whom the sanctioning state asserts jurisdiction, and the scope of that assertion differs in important ways.

A “U.S. person” includes any entity organised under U.S. law (including its foreign branches, but excluding, with limited exceptions, its separately incorporated non-U.S. subsidiaries), any U.S. citizen or lawful permanent resident (“green card” holder) wherever located, and any person physically present in the United States.^[1]

A “United Kingdom person” includes any body incorporated under the law of any part of the UK and any UK national wherever located (extending to certain categories of British nationality connected with the overseas territories); in addition, UK sanctions apply to conduct by any person – of whatever nationality – that takes place within the UK.^[2]

The EU regime applies within EU territory, to nationals of EU Member States wherever located, to legal persons incorporated under the law of a Member State, and to any legal person in respect of business done in whole or in part within the EU.^[3]

Two practical consequences follow for the UAE. First, a company incorporated in the UAE (onshore, in the Dubai International Financial Centre (“DIFC”) or the Abu Dhabi Global Market (“ADGM”) free zones, or in other free zones) is not, as such, a U.S., EU or UK person. Holding a UAE residence visa or work permit does not make an individual a U.S., EU or UK person, but personal liability created by their nationality will follow them to the UAE. A British or French national employed by a Dubai trading house remains personally bound by UK or EU sanctions wherever he or she works; a U.S. green card holder who sits on the board of an Abu Dhabi company carries personal U.S. sanctions exposure into the boardroom.

Second, those “exposed” persons cannot lawfully participate in, approve or authorise transactions that their home nationality regime prohibits, even where the transaction is executed entirely by non-U.S./EU/UK colleagues or affiliates: the U.S. regime prohibits “facilitation” of transactions by foreign persons that would be prohibited for U.S. persons,^[4] and the EU and UK regimes prohibit knowing and intentional participation in activities whose object or effect is to circumvent the restrictions.^[5] In practice this requires affected individuals to recuse themselves explicitly and completely from decision-making or execution associated with sanctioned transactions; that is an important governance point that UAE companies with international management teams sometimes overlook.

03 – United StatesUnited States: the widest net

Primary sanctions and the U.S. nexus

U.S. “primary” sanctions apply to U.S. persons and to any transaction with a “U.S. nexus”. Once a party is designated on the Specially Designated Nationals and Blocked Persons List (“SDN List”), U.S. persons are generally prohibited from virtually any dealing, direct or indirect, involving that party, and all property and interests in property of the designated party within U.S. jurisdiction or in the possession or control of U.S. persons must be “blocked” and reported to OFAC.^[6] “Property” and “interest” are defined about as broadly as language allows, covering money, debts, obligations, contracts of any nature and contingent interests, and OFAC guidance confirms that, absent an OFAC license, even entering into negotiations with, or signing contracts involving, a blocked person is prohibited for U.S. persons.^[7]

Under OFAC’s “50 Percent Rule”, these blocking restrictions extend automatically to any entity that is 50 percent or more owned, directly or indirectly, individually or in the aggregate, by one or more blocked persons – even if that entity is never itself named on the SDN List.^[8] An entity that is less than 50 percent owned by an SDN is not automatically blocked, although OFAC “urges caution” in dealings with entities significantly owned by blocked persons, which may themselves become targets of future designations.^[9]

Critically for the UAE, primary sanctions liability does not stop at U.S. borders. A non-U.S. person that “causes” a U.S. person to violate sanctions, most commonly by routing a U.S. dollar payment through a U.S. correspondent bank, is itself exposed to civil and criminal enforcement by the U.S. authorities.^[10] Because cross-border U.S. dollar payments are cleared through correspondent accounts at U.S. banks, even a “local” UAE transaction denominated in U.S. dollars will acquire a U.S. nexus the moment it is initiated.

Secondary sanctions: risk without a U.S. nexus

Separately, U.S. “secondary” sanctions expose non-U.S. persons to the risk of being designated themselves (not prosecuted, but listed) for conduct in which there is no U.S. nexus at all. For example, under E.O. 14024, non-U.S. persons risk designation if they are determined to have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” a person blocked under that order.^[11] In assessing whether dealings cross the “significance” threshold, OFAC weighs the size, number and frequency of transactions, their nature, management’s awareness, nexus to the blocked party, impact on policy objectives, and presence of deceptive practices.^[12] Non-U.S. persons also face designation risk for operating, for example, in designated sectors of the Russian economy, including the energy sector.^[13] Under E.O. 14114, foreign financial institutions (a category that includes UAE banks) risk sanctions for conducting or facilitating “significant transactions” involving “Russia’s military-industrial base”, which OFAC has defined to include any person blocked under E.O. 14024.^[14]

The practical effect on the UAE banking sector has been visible since early 2024, when UAE banks started restricting Russia-related payments and closing accounts in response to the threat of secondary sanctions.

General licences and wind-down windows

OFAC routinely tempers designations with general licences (“GL”) that authorise defined categories of transactions for limited periods.

Three features of the GL framework matter most for UAE counterparties. First, although GLs are addressed to U.S. persons, OFAC guidance confirms that non-U.S. persons do not face secondary sanctions risk for engaging in activity that would be authorised for U.S. persons under a GL: so a UAE company can rely on a wind-down licence to close out positions with a designated counterparty during the licence window.^[15] Second, OFAC guidance on wind-down licences indicates that completing pre-designation contracts (including making and receiving payments), processing wind-down payments through U.S. banks, and even entering new contracts in furtherance of pre-existing ones are generally within the licence.^[16] Third, the blocked-account condition on its face governs payments by U.S. persons; where a payment to a blocked party is made by a non-U.S. person entirely through non-U.S. financial institutions, non-U.S. persons generally do not maintain “blocked accounts” within the meaning of the U.S. regulations at all. For UAE businesses, tracking the precise wording and expiry of each licence version is not an academic exercise: it frequently determines whether, when and into what account a counterparty can be paid.

04 – United KingdomUnited Kingdom: asset freezes, “control” and designation risk

Designation under the UK sanctions (e.g., under the UK Russia Regulations) triggers an asset freeze: UK persons may not deal with funds or economic resources owned, held or controlled by the designated person, and may not make funds or economic resources available, directly or indirectly, to or for the benefit of the designated person.^[17] These prohibitions follow UK persons abroad: a British national employed in Dubai must comply personally, wherever the transaction occurs.^[18]

The freeze extends automatically to entities “owned or controlled” by a designated person. For example, under reg. 7 of the UK Russia Regulations, that test is met where the designated person holds, directly or indirectly, more than 50 percent of an entity’s shares or voting rights or the right to appoint or remove a majority of the board, or where “it is reasonable, having regard to all the circumstances, to expect that the designated person would… be able, in most cases or in significant respects, by whatever means and whether directly or indirectly, to achieve the result that affairs of the entity are conducted in accordance with the designated person’s wishes”.^[19] This second limb, sometimes called the “wishes test”, is far broader and vaguer than the U.S. 50 Percent Rule, and it has generated significant litigation.

The relevance of this analysis to UAE businesses is direct and immediate: minority stakes held by designated persons in UAE joint ventures do not fail the UK test merely because they sit below 50 percent. Veto rights, unanimity requirements, blocking thresholds at shareholder level and rights to appoint key officers can all feed a “wishes” or “shots” analysis by counterparties, banks and ultimately the UK Office of Financial Sanctions Implementation (“OFSI”). As a result, the design of governance for UAE ventures with sanctioned-party minority shareholders has become a sanctions issue rather than a purely corporate one.

The UK regime contains no formal equivalent of U.S. secondary sanctions, and a UAE company is not, in general, exposed to UK liability for dealing with a UK-designated person outside UK jurisdiction. But the designation power itself performs a similar function. For example, the UK Russia Regulations permit the designation of persons who provide financial services, or make available funds, economic resources, goods or technology, to designated persons, or who otherwise assist the circumvention of the restrictions. The UK Russia Regulations are capable of reaching third-country operators,^[23] and are relied on for successive UK actions against shadow-fleet enablers and oil traders in third countries.

Like OFAC, OFSI often accompanies major designations with wind-down general licences permitting UK persons to conclude existing transactions (with payments owed to the designated companies normally routed into frozen accounts).

05 – European UnionEuropean Union: territorial scope with growing extraterritorial edges

EU restrictive measures (e.g., Regulation (EU) No 269/2014) freeze all funds and economic resources belonging to, owned, held or controlled by listed persons, and prohibit making funds or economic resources available to them, directly or indirectly.^[24] The regime applies within the territorial and personal scope described in Section 2; enforcement and penalties are left to Member States, although Directive (EU) 2024/1226 now obliges Member States to criminalise serious sanctions violations under harmonised definitions.^[25]

To answer the question of when a non-listed entity is “controlled” by a listed person, the EU Council’s Best Practices point to the right or power to appoint or remove a majority of the management body, dominant influence pursuant to agreements or constitutional documents, the right to use all or part of an entity’s assets, and de facto exercise of dominant influence through front persons. These come with illustrative red flags including largest-shareholder positions, buy-back options and transfers of shares close in time to a designation.^[26] If any criterion is satisfied, the entity is presumed to be controlled unless the contrary is established. As with the UK wishes test, the EU control analysis can capture sub-50-percent structures that would pass the U.S. arithmetical test.

Although EU restrictive measures are framed territorially, recent EU practice creates implications for the UAE. Successive packages list third-country operators, including UAE-based companies, for trading in Russian oil, supplying Russia’s military-industrial complex or enabling circumvention. In parallel, Article 12g of Regulation (EU) No 833/2014 obliges EU exporters of certain sensitive goods to include a contractual “no re-export to Russia” clause, with adequate remedies for breach, in contracts with importers in third countries, including the UAE.^[27] UAE distributors and traders therefore increasingly encounter EU sanctions not as foreign regulation but as binding contractual terms in their own supply agreements.

06 – UAE LawWhat UAE law requires: the lists that bind

The UAE maintains its own targeted financial sanctions framework (“TFS”) with a perimeter that is deliberately narrower than the Western regimes. While unilateral foreign sanctions are not automatically part of domestic law in the UAE, United Nations sanctions and the UAE’s own designations clearly are, and compliance with them is mandatory, implemented without delay and closely supervised.

The framework rests on Federal Decree-Law No. (20) of 2018 (“Federal Decree-Law No. 20”)^[28] and on Cabinet Resolution No. (74) of 2020 (“Cabinet Resolution No. 74”),^[29] which regulate the UAE’s Local Terrorist List and implement UN Security Council resolutions on terrorism and proliferation financing. It is built around two lists: the UN Consolidated List,^[30] comprising all individuals and entities designated by the UN Security Council and its sanctions committees across the active country and thematic regimes; and the UAE Local Terrorist List,^[31] the national designation list issued by the UAE Cabinet.

Unilateral sanctions of foreign states are conspicuously absent from this architecture. The Central Bank of the UAE made the point expressly in its January 2021 Guidance on Targeted Financial Sanctions, which walks financial institutions through a worked example: where screening reveals that a customer is subject to “international sanctions” but the customer does not appear on the UN Consolidated List or the UAE Local Terrorist List, the institution is not required to apply TFS measures against that customer.^[32] In other words, a designation by OFAC, OFSI or the EU does not, of itself, oblige a UAE institution to freeze anything.

That said, UAE regulators plainly expect institutions to manage foreign sanctions exposure as a matter of risk. For instance, the Dubai Financial Services Authority (“DFSA”), the financial regulator of the DIFC, requires relevant persons within the DIFC, under the Anti-Money Laundering, Counter-Terrorist Financing and Sanctions Module, to remain informed of, and take required measures with regard to, resolutions and sanctions issued by the UN Security Council “and other applicable national and international competent authorities”, and to notify the DFSA of sanctions exposures.^[33] The ADGM imposes comparable AML and sanctions-compliance expectations on the firms incorporated in that free zone.^[34]

Implementation of UN listings is designed to be rapid and closely aligned with the timing of UN decisions. Cabinet Resolution No. 74 requires targeted financial sanctions to be applied “without delay”, which means within 24 hours of the listing decision being issued by the UN Security Council, the relevant Sanctions Committee or the UAE Cabinet. The operative trigger for UAE compliance purposes is the existence of the relevant UN (or Cabinet) listing, promptly disseminated through UAE channels, not any additional domestic act of implementation.^[35] The system is administered by the Executive Office for Control and Non-Proliferation (“EOCN”), the UAE’s national authority for targeted financial sanctions: it disseminates listing and de-listing decisions, and financial institutions and designated non-financial businesses and professions (“DNFBPs”) are required to register on its website to receive automated notifications of changes to both lists.^[36]

The Local Terrorist List follows a domestic designation process. By way of implementation of UN Security Council Resolution 1373 (2001), these listings are approved by the UAE Cabinet on the proposal of the Supreme Council for National Security; designation may be made without prior notice to the person concerned and does not depend on the existence of criminal proceedings.^[37] Once listed, a person is subject to freezing and prohibition measures that are aligned with those applicable to UN-designated persons.

The resulting freezing and prohibition obligations apply to any person in the UAE who holds or controls funds or economic resources of listed persons, not only regulated financial institutions. All regulated persons, including financial institutions and DNFBPs, must screen their customers, counterparties and transactions against the two lists; on a confirmed match, they must freeze the relevant funds and economic resources immediately, without delay and without prior notice, and must refrain from making any funds, other assets, transactions or services available, directly or indirectly, to the listed person. Freezing measures, attempted transactions and partial (potential) name matches must be reported through the UAE Financial Intelligence Unit’s goAML platform under the unified mechanism established by the Central Bank in coordination with the EOCN.^[38] DFSA and FSRA^[39] require regulated firms in the DIFC and ADGM to comply with UAE federal TFS rules and to notify the regulator promptly of sanctions exposures.

A final distinction underpins the analysis above: unilateral U.S., EU and UK sanctions have no legal force in the UAE, and the restrictions they contemplate will only be effective to the extent that a UN Security Council designation is implemented under UAE law. Otherwise, the unilateral sanctions will affect the Emirates, if at all, through the commercial and contractual pressures described in this article. It is a crucial discipline in UAE sanctions compliance to keep the distinction well in mind.

07 – The CourtsUAE courts: foreign sanctions are not the law of the land

Two Dubai judgments given in 2025 had to engage head-on with the issue of what happens when a UAE bank relies on U.S. sanctions to freeze customer funds, and both went against the bank.

These rulings align precisely with the Central Bank’s guidance described above, and together they establish the position with clarity and economy: unilateral foreign sanctions, though facts of life, have no force of law in the UAE. Three caveats are nonetheless essential.

• No binding precedent. The onshore UAE legal system has no doctrine of binding precedent: judgments of the Dubai courts, however persuasive, do not bind other courts or even later panels of the same court.^[42]
• Dubai only. Both decisions were decided by the courts of Dubai; courts of other Emirates, and the DIFC and ADGM courts, are not bound by Dubai judgments, though these no doubt will be of interest and of persuasive force.
• Prudential pressure remains. Neither judgment relieves UAE banks of the very real prudential pressures described in Sections 2 and 3. A bank that must comply with a UAE court order to release funds may very well face U.S. secondary sanctions for doing so and suffer consequences from its correspondent banks. That very real risk suggests that disputes of this kind will continue to arise.

08 – ContractsContracts, “applicable law” and sanctions clauses under UAE law

It follows that, in an onshore UAE dispute, a party seeking to excuse non-performance by reference to U.S., EU or UK sanctions usually cannot point to a UAE rule of law that the performance would violate. Take a deliberately simple example: a payment obligation in UAE dirhams, payable by a UAE entity from one UAE bank to an account of a non-U.S./UK/EU entity at a second UAE bank. By their own terms, the U.S. prohibitions attach to U.S. persons and U.S.-nexus transactions, and the UK/EU prohibitions to UK/EU persons and conduct in the UK/EU; a purely domestic dirham transfer between UAE banks involves neither.^[43] Whether the paying party may nonetheless withhold or redirect payment then becomes a question of contract – and of the interpretation of a sanctions clause which the contract will likely include.

This is where drafting quality is tested. Modern UAE-law contracts routinely contain definitions of “Sanctions”, “Sanctions Lists” and “Applicable Law”, and clauses excusing or modifying performance where it would breach them. Definitions that sweep in “all applicable national and international laws” without specifying which laws count are an invitation to dispute. Under the UAE Civil Code, interpretation starts from the primacy of the parties’ true common intention over the literal meaning of words, but where the wording is clear, courts may not depart from it under the guise of interpretation; where wording is ambiguous, courts interpret it in light of the nature of the transaction, custom and good faith; and words that are incapable of being given any meaning are to be disregarded.^[44] Each of those principles can prove decisive when a tribunal decides whether a foreign sanctions regime was adopted into the parties’ bargain as “applicable law”, or denied entry and merely lurks outside it as a commercial risk one party must face alone.

The distinction between legal prohibition and commercial risk deserves particular emphasis. As explained in Section 2, U.S. secondary sanctions impose no prohibition on non-U.S. persons: they create a risk of discretionary designation. A contractual carve-out excusing performance that would place a party “in violation of applicable law” is not naturally apt to capture secondary sanctions exposure, since there is no law the non-U.S. party would violate by performing.

Parties who intend secondary-sanctions risk to excuse or modify performance should say so expressly; parties who intend the opposite should provide for express and precise mechanisms, such as escrow mechanics, blocked-account or licence-conditioned payment terms, compensation formulas triggered by designation events, and deadlines tracking the wind-down periods of applicable general licences. Where such disputes proceed to arbitration seated in the UAE, tribunals will apply UAE-law interpretation principles to these clauses, and will take expert evidence on the content and operation of the foreign sanctions regimes; and any award will ultimately face scrutiny at the enforcement stage, where sanctions-related arguments tend to reappear dressed as public policy objections.

09 – TakeawaysPractical takeaways

For businesses operating in or through the UAE, a responsible and disciplined approach requires constant vigilance:

• Map your persons and your nexus: identify the U.S., EU and UK nationals embedded in your management and the points (currency, correspondent banks, insurers, parent guarantees) at which foreign jurisdiction attaches to your transactions.
• Run the control analysis under each regime separately: a 49 percent stake that passes the U.S. 50 Percent Rule may be captured by the UK “wishes test” or the EU control criteria, particularly where veto rights and unanimity provisions are in play.
• Treat the U.S. dollar as a jurisdictional trigger rather than a mere currency choice.
• Track general licences in real time, because wind-down windows, blocked-account conditions and amendments determine what can lawfully be done and when.
• Draft sanctions clauses thoroughly: define which sanctions count, distinguish prohibitions from designation risk, and build payment mechanics that anticipate both. If the matter ever reaches a UAE court or tribunal, the contract, interpreted under UAE law, is likely to matter far more than the foreign designation itself.

10 – ConclusionConclusion

The UAE’s legal order draws a principled line that surprises many international counterparties: unilateral U.S., EU and UK sanctions are not law in the Emirates, and banks that treated OFAC’s lists as self-executing have recently been put to rights by the Dubai courts. However, the sledgehammer of extraterritorial retribution in the form of secondary sanctions, foreign financial institution measures, transaction bans and anti-circumvention listings has hit hard at some third-country operators, with UAE-based companies repeatedly among the targets. Navigating these treacherous waters requires the captain and officers of the corporate ship to keep the gear of governance, banking arrangements and contracts in good order well before the reef of a sanctions designation is called from atop the main mast.

The law is stated as at the date of publication. Sanctions regimes are subject to rapid change without prior consultation; always take care to consult up-to-date legislation or take up-to-date professional advice. The information contained in this document is provided for general informational purposes only, does not constitute legal advice, and does not purport to be an exhaustive analysis of the issues addressed herein. Neither AKTA nor any of its employees accept any responsibility for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this document, and in no event shall they be liable for any losses resulting from reliance on or use of this information. For advice on specific circumstances, please contact AKTA.