In brief
- Post-termination restrictions are under the microscope in a number of jurisdictions and continue to face challenges in enforcement.
- Regional roles make conventional country-based geographical restrictions difficult to apply.
- Territorial scope should be supported by evidence of the employee’s clients, responsibilities and access to confidential information.
- Employers should review restrictions when roles change, rather than waiting for a dispute.
Why does territorial scope matter now?
Many restrictive covenants were drafted for a simpler model of employment: one employing entity, one place of work, one defined market and one set of clients. That model no longer reflects the reality of how many senior employees in the UAE, and the wider region, actually work.
A regional sales lead based in Dubai may manage relationships in Saudi Arabia, Qatar and Egypt. A senior executive employed by a UAE regional headquarters may sit on regional committees, access group strategy and travel frequently across the Gulf Cooperation Council (the "GCC"). An employee may be based in the DIFC but spend most of their time supporting clients outside the UAE. In each case, the question is no longer simply whether a non-compete or non-solicit is enforceable (in theory) in the place where the employee is based. The more difficult question is: where should the restriction apply?
Territorial scope is one of the most common pressure points in a restrictive covenant dispute. A territory that is too narrow may fail to protect the business in the markets where the employee could cause harm. One that is too wide risks looking like an attempt to prevent competition generally, rather than a measured protection of a legitimate business interest.
How wide is too wide?
Unfortunately, there is no universal answer. For UAE mainland employers, restrictions must be approached through the lens of the UAE Labour Law framework, particularly Article 10, which recognises post-termination restrictions in defined circumstances, where an employee has access to clients or confidential information. Any restriction should be limited by time, place and type of work. A broadly drafted GCC-wide non-compete may be difficult to justify if the employee’s role was, in reality, confined to Abu Dhabi or Dubai.
The DIFC and ADGM have a different legal architecture and a more common law-influenced approach. Analysis is likely to focus on whether the covenant protects a legitimate interest and goes no further than is reasonably necessary. The vocabulary may be different, but the practical question is similar: can the employer explain why this territory, for this employee, is necessary?
That is often where generic drafting comes unstuck. A restriction preventing an employee from competing “in the UAE, GCC, MENA or any other territory in which the group operates” or "wherever the company operates worldwide" may feel commercially attractive. However, unless the employer can link that wording to the employee’s actual responsibilities, the clause is vulnerable. It is rarely enough to say that the business operates across the region. The real question is whether the employee had influence, client connection or access to confidential information in the territory in question.
What should employers map before drafting?
The starting point should be a factual analysis of the employee’s role, including:
- where the employee is physically based;
- which clients they manage or materially influence;
- which jurisdiction(s) they support;
- which business lines they work across;
- what confidential information they use or access;
- whether their role is local, UAE-wide, GCC-wide or genuinely regional; and
- whether their responsibilities have changed, or are likely to change, over time.
This exercise is particularly important for employees who move between group entities, take on secondments or are promoted into regional roles. A covenant drafted at the start of employment may no longer reflect the role the employee holds at the point of departure. Employers should therefore treat covenant review as part of promotion, mobility and exit processes, not merely as a point-of-hire issue.
Should territory be defined by geography, clients or activity?
Geography is not always the most effective basis for defining territorial scope. A client non-solicit limited to clients with whom the employee had material dealings may be more defensible than a broad territorial non-compete. A restriction tied to a specific business line may be more precise than one covering all group activities in the region. Confidentiality obligations may carry much of the protective weight where the real risk is the misuse of sensitive information rather than direct client poaching. In the UAE, confidentiality obligations carry additional weight given the broad protections afforded by the UAE Penal Code.
Territorial restrictions nonetheless have an important role to play, particularly for senior employees with genuine regional responsibility. However, the territory should be capable of explanation. Why the UAE? Why the GCC? Why MENA? Why certain countries and not others? If those questions cannot be answered at the drafting stage, they will be harder to answer under the pressure of a dispute.
What about mainland, DIFC and ADGM differences?
The local regime matters. UAE mainland employers must be particularly attentive to statutory requirements and the way in which local courts may assess the reasonableness and specificity of a restriction. DIFC and ADGM employers may have more familiar common law concepts available to them, but broad clauses will not be automatically enforced. In all three regimes, the practical enforceability of a covenant will depend heavily on whether the drafting is sufficiently tailored.
Employers operating through multiple entities should avoid assuming that a single template will work equally well across the mainland, DIFC and ADGM. The commercial objective may be consistent, but the drafting may need to be adapted accordingly.
What should employers do now?
The best territorial restriction is not necessarily the widest one. It is the one the employer can justify throughout the employment lifecycle, especially when pressure-tested.
Employers should regularly review existing covenants for regional and senior employees to ensure the wording remains consistent with the employee's current role and the broader legal and market landscape. Where it does not, a promotion, contract variation, bonus award or secondment (for example) can provide an opportunity to update the covenant accordingly.
A well-drafted restriction should leave a clear paper trail showing what the employer was trying to protect, why the relevant territory was chosen, and why the clause was proportionate for that employee. This can help establish reasonableness, and may prove invaluable if the restriction is ever challenged.
In a cross-border workforce, the discipline of maintaining a record and conducting regular reviews is no longer optional.
How Mishcon de Reya can help
Our Employment team advises employers across the UAE and the wider region on the drafting, review and enforcement of restrictive covenants, including for senior executives, regional roles and cross-border workforces. We work with employers to identify the interests that need protection and to develop practical, enforceable covenant strategies across UAE mainland, DIFC, ADGM and wider regional structures.