Special Purpose Vehicles (SPV) and the Architecture of Bankruptcy Remoteness: A Comparative Insolvency-Law Study of the UAE, the United States and Luxembourg

A Special Purpose Vehicle (SPV) is a legal entity created for a single, narrowly defined purpose, most often to hold assets or receivables that support financing. Its commercial value depends on bankruptcy remoteness: the likelihood that those assets will stay beyond the reach of the originator’s creditors and that the vehicle itself will not be drawn into insolvency proceedings. This article asks whether UAE law secures that result when the originator becomes insolvent and identifies the insolvency-law mechanisms capable of undoing it: recharacterization of the transfer as a secured loan, avoidance of the transfer as a transaction at an undervalue or in fraud of creditors, substantive consolidation, and the refusal to enforce non-petition undertakings. Using doctrinal analysis and the functional method of comparative Law, it examines the three UAE tiers (the common-law financial free zones of ADGM and DIFC, the onshore federal regime, and the wider free zones) against the United States’ judicial-opinion model and Luxembourg’s statutory model. The UAE offers interest beyond its borders: by combining a civil-law onshore system with two common-law financial free zones under a single state, market and federal regulator, it shows how far bankruptcy remoteness depends on the common law’s trust and on the separation of legal from beneficial ownership, a question that confronts any civil-law jurisdiction seeking to host SPV structures. The UAE has no single SPV regime; it has three, each with a different structure. The free zones provide robust separation within English-derived insolvency law. Onshore, SCA Chairman’s Decision No. 25/RM of 2024 on Special Purpose Vehicles and Federal Decree-Law No. 31 of 2023 concerning Trusts have strengthened the separation of SPV and trust assets. Neither instrument, however, displaces the avoidance rules of Federal Decree-Law No. 51 of 2023 or gives statutory force to true sale, limited recourse and non-petition, as Luxembourg law does. The article proposes targeted reforms, including a safe harbour that treats an arm’s-length financing transfer as a transfer for full value.