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Non-Compete and Non-Solicit Clauses in UAE Commercial Agreements

Restrictive covenants are clauses that limit what a party may do after a deal ends. In commercial agreements, they usually restrict competing with a business, soliciting its customers or staff, or using its confidential information.

This guide focuses on business-to-business and owner-level covenants such as those in share sales and shareholder agreements. Employee covenants are treated differently and are covered separately in employee non-compete clauses.

Why buyers and investors ask for them

A buyer paying for goodwill wants assurance that the seller will not set up a competing business next door the next day. Investors in founder-led companies similarly want the founders to stay committed. The clause protects value but restricts someone's freedom to trade, so it must be carefully framed.

What makes a covenant easier or harder to uphold

UAE courts look at the clause in light of the Civil Transactions Law and the agreement as a whole. Broad wording that is not tied to a legitimate interest is more vulnerable than a clause that is limited and justified. Points that tend to matter are:

Duration: shorter, justified periods are generally easier to defend
Geography: limited to where the business actually operates
Activity: limited to the business being protected
Consideration: whether the restricted party received something for the restriction

Drafting alternatives

Parties sometimes combine a narrower non-compete with confidentiality undertakings, customer non-solicitation, or deferred payments conditional on compliance. These can protect the same interest with less exposure to challenge.

How a consultation can help

A review can assess whether a covenant is clearly drafted, whether it is consistent with the rest of the agreement and what practical risks it carries for either side. Enforcement steps in a court would involve a licensed advocate where representation is required.

Frequently asked questions

Are non-compete clauses enforceable in the UAE?

They can be, but enforceability depends on the clause's scope, justification and the circumstances. There is no guarantee either way, so each clause needs to be read on its terms.

Can a non-compete apply outside the UAE?

A contract can attempt it, but enforcing it abroad depends on the laws and courts of the other country as well.

Is a penalty clause for breach valid?

Agreed compensation clauses are recognised, but a UAE court may adjust an amount it considers disproportionate to the actual loss.

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General information only. Please read our Legal Disclaimer.