Data Privacy Due Diligence Requirements Under UAE Federal Decree Law

Blog Article

With the global rise of digital transformation and data-driven business operations, data privacy has become an increasingly critical area of compliance and risk management. In the United Arab Emirates (UAE), the legal framework governing data protection has seen substantial advancements, especially with the introduction of the Federal Decree-Law No. 45 of 2021 on the Protection of Personal Data (PDPL). This legislation represents a significant shift toward aligning the UAE’s data privacy landscape with international standards such as the EU’s GDPR.

For businesses operating in or entering the UAE market, understanding and complying with the PDPL is essential—particularly during corporate transactions like mergers and acquisitions (M&A), where data handling and privacy risks can significantly impact valuation, legal exposure, and post-transaction integration. Hence, due diligence services for mergers & acquisitions in Dubai are now increasingly emphasizing data privacy compliance as a core area of review.

The Legislative Framework: UAE Federal Decree-Law No. 45 of 2021

The UAE's PDPL, which came into effect on January 2, 2022, is the first comprehensive data protection law at the federal level. Issued under the UAE Data Protection Law (PDPL), it introduces various requirements for the processing, storing, and sharing of personal data within the UAE and across its borders.

The law applies to:

All companies that process personal data of individuals located in the UAE, regardless of the entity’s physical location.

All processing activities conducted within the UAE, even if the data subjects reside outside the country.

The PDPL also established the UAE Data Office, the national supervisory authority responsible for overseeing compliance, issuing guidelines, and ensuring that data protection measures are effectively implemented.

Why Data Privacy Due Diligence Matters

M&A transactions frequently involve the transfer of sensitive personal data—such as employee records, customer databases, and proprietary user information. Without proper compliance with data protection laws, these transfers can pose significant legal and reputational risks.

Organizations offering due diligence services for mergers & acquisitions in Dubai now consider data privacy assessments indispensable. They examine whether target companies comply with the PDPL’s mandates on consent, cross-border data transfers, data minimization, breach notification, and data subject rights.

A failure to identify privacy risks can lead to post-deal complications such as regulatory fines, litigation, and data breaches—consequences that can derail integration and value creation.

Key Data Privacy Due Diligence Requirements Under PDPL

When conducting a due diligence review under UAE Federal Decree Law, the following components are critical:

1. Data Mapping and Inventory

Understanding what data is being collected, processed, and stored is foundational. The acquiring entity should request detailed documentation from the target company outlining:

Types of personal data held

Data processing purposes

Data sources

Storage locations (including cloud services)

Third-party data sharing arrangements

A proper data inventory not only helps in assessing risk but also in identifying whether the processing activities comply with the principle of data minimization and purpose limitation.

2. Legal Basis for Processing

PDPL mandates that personal data must be processed based on a lawful basis, such as consent, contractual necessity, or legal obligations. During due diligence, it's crucial to evaluate:

Whether consent was obtained where required

If consent mechanisms align with PDPL requirements (e.g., opt-in versus opt-out)

Whether the data subject was informed about their rights

If the target company cannot demonstrate legal grounds for its data processing activities, the acquiring company could inherit liabilities post-acquisition.

3. Cross-Border Data Transfers

One of the more complex areas of compliance involves international data transfers. Under the PDPL, data can only be transferred outside the UAE if:

The recipient country provides an adequate level of protection (as determined by the UAE Data Office), or

Appropriate safeguards such as Standard Contractual Clauses (SCCs) or Binding Corporate Rules (BCRs) are in place

Due diligence services for mergers & acquisitions in Dubai often highlight cross-border data risks, especially for multinational targets operating in sectors like finance, healthcare, and e-commerce, where international data flows are routine.

4. Data Security Measures

Companies must implement appropriate technical and organizational measures to secure personal data. During due diligence, it is important to examine:

Information security policies and procedures

Incident response and breach notification protocols

Regularity of risk assessments

Access controls and encryption standards

A lack of robust cybersecurity measures can lead to data breaches, which must be reported under PDPL within a specified timeframe—adding another layer of legal obligation.

5. Data Subject Rights and Response Protocols

The PDPL gives individuals a suite of rights including the right to access, correct, delete, and restrict the processing of their data. Due diligence must assess:

Whether the target has mechanisms to respond to data subject requests

How often such requests are made and how they are handled

If data portability and objection rights are respected in the system design

Non-compliance with data subject rights can result in administrative penalties and legal claims, particularly in a post-acquisition context where data management changes might prompt customer inquiries.

6. Third-Party Contracts and Vendor Management

Many organizations outsource data processing to third parties. Under the PDPL, data controllers must ensure that processors provide sufficient guarantees for data protection.

During due diligence, it’s essential to review:

Third-party contracts to verify inclusion of data protection clauses

Sub-processing arrangements

Audit rights and performance tracking

This becomes even more relevant for cross-sectoral deals involving technology vendors, SaaS platforms, and outsourced HR services.

Enforcement and Penalties

The UAE Data Office has the authority to issue administrative sanctions for non-compliance with the PDPL. These can include:

Warnings

Corrective orders

Suspension of data processing activities

Financial penalties (to be defined in executive regulations)

Although the law is still relatively new, the expectation is that enforcement will ramp up over time as businesses adjust to the new regulatory environment. Hence, risk assessment in M&A deals must now treat data privacy compliance as a major determinant of deal feasibility and integration planning.

Strategic Importance for Investors and Acquirers

In the evolving digital economy, personal data is both an asset and a liability. Strategic investors must not only value data for its commercial use but also scrutinize the legal implications tied to its handling. As a result, due diligence services for mergers & acquisitions in Dubai are becoming more integrated with legal, IT, and compliance expertise to provide a 360-degree view of privacy risks.

Additionally, local firms planning to scale globally or partner with European or US companies must demonstrate robust data governance practices. Failure to do so may limit market access or weaken negotiating positions during cross-border collaborations.

Best Practices for Effective Privacy Due Diligence

To strengthen due diligence processes under the PDPL, businesses should consider adopting the following best practices:

Engage interdisciplinary teams: Combine legal, IT, HR, and compliance expertise to holistically assess privacy risks.

Use checklists and risk matrices: Develop standardized templates for evaluating data privacy readiness and red-flag issues.

Assess readiness for regulatory audits: Examine whether the target company has been audited by regulators and how it responded.

Plan for integration: Ensure that post-deal strategies consider data harmonization, consent refreshment, and policy alignment.

Above all, data privacy should be treated as a strategic priority rather than a checkbox exercise. Companies that excel in this domain will not only minimize risk but also build trust and long-term value.

As data continues to shape the business landscape in the UAE and beyond, compliance with data privacy regulations like the PDPL is no longer optional—it is a legal and strategic imperative. Whether you are a domestic business scaling operations or a foreign investor entering the UAE market, data privacy due diligence is a key component of successful corporate transactions.

In today’s regulatory environment, due diligence services for mergers & acquisitions in Dubai must evolve to include thorough assessments of data handling practices. This approach ensures both legal compliance and business resilience in an increasingly data-centric world.

DATA PRIVACY DUE DILIGENCE REQUIREMENTS UNDER UAE FEDERAL DECREE LAW

Data Privacy Due Diligence Requirements Under UAE Federal Decree Law