The Strategic Importance of Financial Experts in Legal Disputes and UAE Arbitration

Introduction: Advisory Briefing on the Critical Role of Financial Experts in UAE Legal and Arbitration Cases

In the rapidly evolving regulatory and business environment of the United Arab Emirates, the involvement of seasoned financial experts in legal and arbitration matters is not merely advantageous—it has become a strategic necessity. Recent regulatory reforms, such as the Federal Decree–Law No. 47 of 2022 on Corporate Tax and ongoing updates from the Federal Tax Authority (FTA), have dramatically expanded the scope of compliance, dispute resolution, and financial due diligence required from organisations operating in the UAE. Against this backdrop, the expertise of certified auditors and financial consultants is invaluable, not only for transactional clarity but also in forensic accounting, dispute resolution, and unbiased expert testimony within legal and arbitral proceedings. This consultancy insight, prepared by the Shokr Auditing & Accounting team, unpacks the intersection of financial expertise and legal frameworks, offering actionable guidance for business owners, CFOs, compliance officers, and legal advisors navigating the complexities of UAE litigation, commercial arbitration, and regulatory reviews.

Table of Contents

• The Legal and Regulatory Context
• Financial Experts and the UAE Legal/Arbitration Framework
• Technical Analysis: The Functions of Financial Experts in Dispute Resolution
• Comparative Review: Regulatory Evolution and Casework Impacts
• Consultancy Case Studies and Practical Insights
• Risk Analysis: Non-Compliance and Dispute Escalation
• Actionable Compliance Strategies for CFOs and Business Leaders
• Conclusion: Strategic Recommendations and the Value of Expert Partnership

The Legal and Regulatory Context: Why Financial Expertise Matters in UAE Legal & Arbitral Proceedings

The UAE’s pro-business regulatory landscape is underpinned by robust legal frameworks and an ever-evolving tax regime designed to establish global credibility and economic resilience. The introduction of Corporate Tax (CT) in 2023 and the sustained application of Value Added Tax (VAT) underpins an environment where precise financial reporting, dispute resolution, and compliance are paramount. The Federal Tax Authority (FTA) and Ministry of Finance have issued comprehensive guidelines—such as the Cabinet Decision No. 97 of 2023—to clarify ambiguities, but disputes inevitably arise, whether over tax assessments, transfer pricing, or contract performance. When such disputes enter legal or arbitral forums, unbiased financial investigation and interpretation become central to fair and swift resolution.

This criticality has intensified following recent FTA updates, which empower regulators to conduct deeper audits and empower parties to present expert evidence within arbitration and court settings. Financial experts, hence, serve not only as accountants or auditors, but as strategic interpreters and advisors whose analysis directly influences case outcomes, settlement negotiations, and compliance postures.

Financial Experts and the UAE Legal/Arbitration Framework

Legal Foundations for Financial Expert Involvement

UAE Law grants substantial weight to expert evidence in both civil and commercial disputes, with judges and arbitral tribunals routinely appointing, or allowing parties to appoint, financial experts. These individuals are typically drawn from certified auditing and accounting backgrounds, ensuring credibility and technical mastery. The significance of such expert testimony is heightened in sectors governed by intricate regulation—banking, real estate, energy, and cross-border trade, to name a few.

Key regulatory references include:

• Federal Decree–Law No. 47 of 2022 on Corporate Tax: Mandates transparent recordkeeping and empowers the FTA to demand detailed financial evidence in disputes.
• Federal Decree–Law No. 8 of 2017 on VAT & FTA VAT Public Clarifications: Formalises the use of independent financial analysis in VAT audits and legal challenges.
• UAE Civil Procedures Law and Arbitration Law (Federal Law No. 6 of 2018): Explicitly reference ‘expert witnesses’ and the right to introduce specialist financial evidence.
• UAE Commercial Companies Law (CCL): Codifies directors’ reporting responsibilities and the expectation of independent audit in event of disputes.

Role of Financial Experts in UAE Arbitration and Litigation

Financial experts are commonly retained to:

• Assess and quantify damages (e.g., loss of profit, contract breach impacts)
• Interpret complex accounting standards (including IFRS implementation advisory)
• Trace asset movements or verify alleged frauds (forensic accounting)
• Prepare defensible financial reports accepted in court/arbitral settings
• Advise on compliance with FTA requirements and regulatory responses

Technical Analysis: The Functions of Financial Experts in Dispute Resolution

Core Competencies in Legal Settings

Expert auditors and financial consultants operate within a defined methodology when assisting with legal and arbitration cases:

1. Financial Documentation Collection and Validation: Scrutinising ledgers, contracts, tax returns, and relevant correspondences in line with FTA and MoF standards.
2. Forensic Accounting Application: Leveraging forensic techniques to detect understated revenue, concealed liabilities, transfer pricing manipulation, or VAT evasion.
3. Quantitative Damage Analysis: Deploying calculation models that comply with UAE taxation laws (especially recent CT and VAT rules) to estimate contractual or tort damages.
4. IFRS-Based Financial Reporting: Interpreting and presenting accounts under International Financial Reporting Standards, as required by most UAE commercial courts/arbitration panels.
5. Preparation of Expert Witness Statements: Drafting court-compliant reports, capable of withstanding cross-examination and regulatory scrutiny.

Application of Relevant UAE Laws and FTA Guidelines

Financial expert evidence must always trace back to current legislation and regulatory circulars. For instance, under Cabinet Decision No. 97 of 2023 (CT Executive Regulations), experts must determine whether accounting treatments in dispute align with FTA CT return guidelines from 2023 onwards. Similarly, VAT assessments are governed by ongoing FTA circulars (see FTA official website).

Case Example: Tax Dispute Mediation

Scenario: A mid-sized Dubai manufacturer, subject to FTA audit, faces a contested VAT penalty based on alleged under-reporting. Shokr Auditing’s experts are retained to:

• Forensically reconstruct transaction trails using approved FTA VAT reconciliation templates.
• Prepare a rebuttal report referencing Federal Decree–Law No. 8 of 2017 provisions on input tax recoverability.
• Serve as expert witnesses during the FTA’s administrative review and subsequent arbitration, resulting in significant reduction of the penalty.

Comparative Review: Old vs. New UAE Regulatory and Dispute Resolution Frameworks

Both legal and regulatory frameworks have undergone significant changes, amplifying the importance and complexity of financial expert work in disputes.

These developments necessitate that both litigants and arbitrators rely heavily on certified financial experts, both to interpret statutory requirements and defend or challenge claims involving sophisticated accounting treatments.

Consultancy Case Studies and Practical Insights

Scenario 1: Contractual Profit Loss Dispute (Construction Sector)

An Abu Dhabi construction company enters arbitration after project delays allegedly caused by a subcontractor. Shokr Auditing provides:

• Quantitative damage analysis adhering to accepted UAE methods for calculating lost profit under the UAE Civil Transactions Law and FTA tax reporting standards.
• Review of VAT and CT documentation to identify over-claimed input tax linked to disputed contract revenues.
• Expert report submitted to the tribunal, resulting in balanced award and minimising future audit risks.

Scenario 2: Cross-Border Tax Controversy

A UAE free zone entity faces corporate tax reassessment due to transfer pricing queries. Our intervention includes:

• Application of OECD-aligned UAE CT transfer pricing rules under the new Decree–Law and FTA guidelines.
• Preparation of a robust transfer pricing file, narrative, and submission for FTA review.
• Testimonial at mediation using accepted international best practices, securing a reduction in proposed tax liabilities.

Scenario 3: Fraud and Misappropriation Dispute

Following employee fraud, a retail chain seeks litigation. Shokr Auditing’s certified forensic accountants:

• Trace asset flows using MoE-compliant audit programs and FTA guidelines.
• Deliver chain-of-custody evidence and reconciliation statements admissible in court.
• Provide neutral testimony in both court and arbitral forums, strengthening the client’s recovery prospects.

Risk Analysis: Consequences of Failing to Engage Financial Experts and Ensure Compliance

The risks of suboptimal or non-compliant financial evidence in legal/arbitral disputes are severe and multi-layered:

• Regulatory Sanctions: Incomplete or inaccurate submissions can result in FTA penalties, compliance downgrades, and even criminal liability under the UAE Tax Procedures Law.
• Adverse Legal Outcomes: Courts and arbitral panels may discount unsupported claims, issue punitive judgments, or shift legal costs.
• Reputational Impact: Public or sectoral disclosure of legal non-compliance damages creditor, investor, and government relationships.
• Operational Disruption: Seizure of assets, business license suspension, and frozen bank accounts—common in VAT/CT disputes—can paralyze operations.

Mitigation requires proactive engagement of licenced financial experts, maintenance of FTA- and MoF-compliant records, and routine review of emerging guidance from regulators.

Step-by-Step Compliance Recommendations for UAE CFOs and Business Leaders

To ensure resilient legal positioning and regulatory compliance, Shokr Auditing recommends the following actionable steps:

1. Early Engagement: Retain qualified auditors/financial consultants immediately upon dispute emergence—not just at litigation/arbitration stage.
2. Comprehensive Record-keeping: Maintain full, FTA-compliant financial records (including VAT returns, CT statements, audit reports, transfer pricing files) as mandated under Federal Decree–Law No. 47/2022 and FTA VAT Guidelines.
3. Regulatory Review: Routinely review MoF, FTA, and sector circulars for evolving dispute/settlement frameworks (see latest at Ministry of Finance and FTA websites).
4. Expert Testimony Readiness: Instruct independent experts to review and, if needed, reconstruct accounts under adversarial scrutiny—with strict adherence to UAE Evidence and Arbitration Law.
5. Risk Diagnostics: Conduct regular internal audits, simulated dispute stress-tests, and compliance health checks.
6. IFRS and International Alignment: Ensure all published financial statements, audit opinions, and tax returns are fully IFRS-compliant and ready for scrutiny under cross-border standards.
7. Continuous Training: Equip finance/legal teams with up-to-date knowledge of UAE tax compliance 2025, FTA corporate tax updates, and dispute-handling best practices.

Conclusion: Strategic Recommendations and The Value of Partnership with Shokr Auditing

The UAE’s progressive legal and regulatory landscape, while fostering global competitiveness, imposes significant compliance obligations and risk exposures for corporations. In this intricate environment, the judicious deployment of certified financial experts—whether in preparation for, or in the midst of, legal and arbitration cases—delivers distinct advantages. These include unbiased quantification of claims, robust defense against regulatory challenge, and sustained operational resilience amidst dispute or review.

Key takeaways for UAE business leaders and financial professionals:

• The integration of expert financial analysis into legal and arbitral processes is now best practice, not an option.
• Up-to-date legal and regulatory expertise is mandatory in a regime spanning CT, VAT, and global reporting standards.
• Prevention, through robust compliance systems, is always less costly than reactive defense in legal proceedings.
• Shokr Auditing’s multidisciplinary advisory extends from initial diagnostics to expert witness provision—ensuring your organization remains compliant, transparent, and confident in every forum.

Partnering with Shokr Auditing brings decades of licensed regulatory, financial, and forensic expertise to bear on your most complex disputes or compliance challenges—reinforcing your legal stance and protecting your future in the dynamic UAE business ecosystem.