Wrong AI Advice Can Cost Your Business: Who Is Legally Liable Under UAE Law?
If your business relies on an artificial intelligence tool to issue financial advice, guide commercial decisions, or automate customer operations, software failure will not shield your company from legal liability.
Under UAE framework, deploying AI as an operational tool does not legalise or insulate a company from damages if those automated decisions cause financial harm, regulatory breaches, or injury to an individual. Legal practitioner Ashish Mehta highlights that accountability in AI-assisted decisions relies on standard civil liability rules, contractual terms, and sector-specific regulations across the Emirates.
The framework rests on Federal Decree-Law No. 25 of 2025, which promulgates the Civil Transactions Law. Article 245(1) establishes that general liability rules apply to any harmful act committed by a natural or legal person, subject to specific legislation. Furthermore, Article 246 sets a clear boundary: every act causing harm obligates the perpetrator to pay compensation, even if the perpetrator lacks discernment.
Under Article 247, the law distinguishes between direct harm and harm caused by causation. Direct harm triggers mandatory compensation without additional conditions. If the harm occurs by causation, liability arises if the entity acted intentionally, committed a transgression, or directly initiated the act that caused the damage. Simply blaming an algorithm does not satisfy the legal requirement for safety oversight.
How legal accountability applies across corporate roles
Corporate entities using AI systems carry primary responsibility when automated outputs lead to external damage. Liability typically attaches to the business if the harm stems from corporate acts or omissions, such as failing to conduct proper risk assessments, omitting necessary safeguard protocols, or neglecting to monitor the system’s operational outputs. Contractual obligations and standard industry regulations also dictate the degree of financial risk the company must bear.
Professional companies face explicit standards under the same framework. Article 645 defines a professional company as one established by licensed professionals to practice a liberal profession. For these entities, contractual terms and professional duties govern accountability, meaning licensed firms cannot offload their professional duty of care to third-party software products when advising clients.
Employees and AI software developers face liability grounded in their specific operational roles, conduct, and contractual agreements. While companies bear direct responsibility to damaged third parties, internal recourse against staff or system vendors depends on employment contracts, gross negligence, or intentional misconduct during the software’s deployment.
