Non Recourse Loan Agreement Template for the United Arab Emirates

A non-recourse loan agreement is a specialized financing arrangement that protects you as a borrower by limiting the lender's ability to seek repayment beyond specific collateral assets. Unlike traditional loans, if you default, the lender cannot pursue your other assets or personal guarantees—they can only claim the designated security. This structure makes it an attractive option for high-value transactions where you want to limit your financial exposure while securing necessary funding.

When do you need this document?

You'll need a non-recourse loan agreement when undertaking project finance for infrastructure developments, real estate acquisitions where the property serves as sole security, or asset-based lending for equipment purchases. This document is essential for offshore companies seeking UAE-based financing, international investors acquiring UAE property, and businesses wanting to ring-fence specific projects from their broader corporate liability. The agreement is particularly valuable when you're developing new business ventures and want to protect your existing assets from potential project risks.

Key legal considerations

The non-recourse nature must be clearly defined to prevent future disputes about the lender's recovery rights. You must ensure the collateral valuation and security perfection procedures comply with UAE requirements, particularly regarding mortgage registration and asset documentation. Interest rate structures, drawdown conditions, and default triggers need careful drafting to balance lender security with borrower protection. Cross-default provisions should be limited to avoid unintended consequences across your other financing arrangements. Environmental and legal due diligence requirements must be clearly specified, especially for real estate and industrial projects. Insurance and maintenance obligations for the secured assets require detailed provisions to protect both parties' interests.

Legal requirements in United Arab Emirates

UAE Federal Law No. 18 of 1993 (Commercial Code) governs the commercial aspects of your loan agreement, while UAE Federal Law No. 14 of 2018 (UAE Central Bank Law) regulates banking activities and lending operations. You must ensure compliance with UAE Federal Law No. 20 of 2016 (Mortgage Law) when using movable property as security. For Islamic financing structures, UAE Federal Law No. 6 of 1985 (Islamic Banking Law) may apply, requiring Shariah-compliant terms. Real estate security must comply with local emirate property laws and RERA registration requirements. The agreement must specify governing law, jurisdiction clauses, and dispute resolution mechanisms acceptable to UAE courts. Documentation must be in Arabic or include certified translations, and certain provisions may require notarization or registration with relevant UAE authorities.