UAE Revises Finance Lease Laws

December 17, 2023by Amy Denny0

Federal Decree-Law No. (32) of 2023 on Finance Lease comes into effect on 29 March 2024

Bilateral and tripartite leasing includes sale-leaseback arrangements

Registration of a finance lease agreement is no more mandatory; but needed to ensure enforceability with third parties

In a tripartite lease arrangement, the risk of loss concerning the leased asset is transferred to the lessee; in a bilateral lease, the liability for loss falls upon the lessor.

The United Arab Emirates (UAE) is on the verge of implementing substantial changes to the existing finance law—the Federal Law No. (8) of 2018 on Finance Lease (“2018 Law”)— concerning financial leasing. This transformation is set to be realized through the introduction of the new Federal Decree-Law No. (32) of 2023 on Finance Lease (the “New Law”), scheduled to come into effect on 29 March 2024, following a six-month period of publication in the Official Gazette. Until the New Law is enacted, the 2018 Law will remain in operation. However, upon the enforcement of the New Law, the 2018 Law will be repealed.

UAE Cabinet Decision No. 76 of 2020 plays a pivotal role as a substantial implementing regulation within the existing legal framework concerning finance leasing. This decision has proven to be instrumental, offering crucial support to court-appointed experts involved in resolving disputes related to finance leases. Its significance is especially notable in matters pertaining to rental calculations and claims adjudicated within the jurisdiction of UAE Courts.

The New Law encompasses several noteworthy features. The main features are as follows:

Ownership of Asset

The New Law provides for a definition of the term Finance Lease as a lease where the lessor leases the asset to the lessee for a specified term, with the lessee potentially having the option to acquire ownership of the asset. An important modification introduced by the New Law is the elimination of the necessity for the lessor to possess ownership of the asset and engage in a distinct contractual arrangement with the lessee.

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Scope of Application

The provisions outlined in the New Law have a broad application, encompassing all finance lease contracts governed by the UAE law or otherwise, irrespective of the lessee’s licensing status with the Central Bank. In summary, the New Law acknowledges assets situated onshore in the UAE or in free zones where specific regulations for finance leases do not apply. It’s important to note that the New Law does not extend its application to aircraft, helicopters, aircraft engines, marine vessels, and other assets registerable in “special registers” under UAE law or in accordance with international treaties or conventions adopted by the UAE; cash; investment bonds; and land granted by the UAE government.

Bilateral and Tripartite Finance Leases

The New Law introduces two distinct categories of finance leases: (a) a bilateral finance lease, characterised by an agreement between a lessor and a lessee, incorporating a purchase option for the leased asset, either in its entirety or partially; and (b) a tripartite finance lease, involving a lessor, lessee, and a supplier. In this arrangement, the lessee has the autonomy to choose both the asset and the supplier, while the lessor maintains ownership of the asset, leasing it to the lessee. The concept of a tripartite finance lease aligns with the prevalent practice of sale and (finance) leaseback observed in the asset finance industry. This conventional approach often involves the collaboration of the supplier (manufacturer), the lessor (the financing entity), and the lessee (the ultimate user of the asset). Notably, the New Law also encompasses sale-leaseback arrangements, a common occurrence in asset finance transactions. In such scenarios, the supplier sells the leased asset to the lessor and concurrently enters into a lease agreement to lease it back from the lessor.

Licensing Requirements

The imperative for obtaining a license to conduct finance lease activities, along with the imposition of penalties for non-compliance with licensing requirements, will continue to be overseen by the UAE Central Bank, mirroring the provisions of the 2018 Law. The UAE Central Bank is slated to issue additional regulations concerning the licensing framework and regulatory authority. In cases involving natural persons or entities seeking involvement in finance lease activities beyond the purview of the Central Bank’s regulation, it is anticipated that the UAE Federal Cabinet, following the Minister of Finance’s proposal, will identify the relevant authority responsible for supervising and regulating finance lease activities. The Federal Cabinet is expected to issue further regulations applicable to these individuals or entities, outlining the parameters and requirements for engaging in finance lease endeavors.


The New Law eliminates the provision for establishing a distinct register dedicated to recording finance lease contracts. Instead, finance lease contracts are now required to be registered in the register specific to the leased asset within the UAE. A significant evolution is the removal of the stringent mandate for the registration of a finance lease agreement as a prerequisite for its validity, a departure from the 2018 Law, which deemed such agreements void if not registered. However, registration remains imperative for ensuring enforceability concerning third parties under the provisions of the New Law.


The New Law dictates that the enforcement of rights pertaining to movable assets under a finance lease shall adhere to the stipulations set forth in the Movable Asset Security Law (Law No. (4) of 2020), which specifically addresses the guaranteeing of rights related to movables. Under the provisions of the New Law, any transfer of a lessor’s entitlement to collect rent and other amounts payable under a lease shall be governed by the regulations outlined in the Movable Asset Security Law.

Allocation of risk

In a tripartite lease, unless otherwise stipulated by mutual agreement between the lessor and the lessee, the risk of loss concerning the leased asset is transferred to the lessee. This transfer occurs unless the asset remains undelivered, either in whole or in part, to the lessee. Conversely, in a bilateral lease arrangement, the onus of liability for loss falls upon the lessor. Importantly, this liability cannot be shifted to the lessee unless the loss is directly attributable to the lessee.

In conclusion, the further regulations to be issued pursuant to the New Law are expected to provide further clarity. We are awaiting to see the regulations for further details.

About ATB Legal

ATB Legal is a full-service legal consultancy in the UAE providing services in dispute resolution (DIFC Courts, ADGM Courts, mainland litigation management and Arbitrations), corporate and commercial matters, IP, business set up and UAE taxation. We also have a personal law department providing advice on marriage, divorce and wills & estate planning for expats. Please feel free to reach out to us at for a non-obligatory initial consultation.

by Amy Denny

Amy is a legal consultant at ATB Legal, with a unique blend of skills for corporate, commercial and litigation matters. She is a law graduate and certified in Intellectual Property from the World Intellectual Property Organization.

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