Dentons Outlines Contractual Safeguards for Managing Sanctions and AML Risks in UAE

Global law firm Dentons reported that standard compliance clauses requiring parties to merely comply with applicable laws are frequently inadequate to protect businesses during long-term commercial relationships. According to the firm, compliance risks evolve over time as customers, counterparties, beneficial owners, subcontractors, or destination jurisdictions become subject to sanctions, anti-money laundering (AML), or bribery concerns.

Dentons illustrated the dispute risks arising when a UAE- or UK-based company performs a contract governed by local law while its counterparty faces foreign designations, such as US sanctions. When continued performance remains lawful under the governing domestic law, a unilateral refusal to perform based solely on foreign designations may lack contractual backing, exposing the company to breach-of-contract litigation or arbitration damages unless foreign sanctions regimes are expressly incorporated into the agreement.

For financial institutions and suppliers, Dentons emphasized that standard terms must address secondary sanctions, US-dollar clearing, and correspondent banking exposures, granting institutions broad discretion to act even if an activity is not strictly banned under local statutes. For suppliers and project developers, the analysis highlighted risks associated with product diversion, end-use changes, and subcontractor conduct, advising entities to establish clear flow-down obligations across procurement and engineering, procurement, and construction (EPC) chains.