"%uXXXX" is a non-standard scheme for URL-encoding Unicode characters. Apparently it was proposed but never really used. As such, there's hardly any standard function that can decode it into an actual UTF-8 sequence.
It's not too difficult to do it yourself though:
$string = '%u05E1%u05E2';
$string = preg_replace('/%u([0-9A-F]+)/', '&#x$1;', $string);
echo html_entity_decode($string, ENT_COMPAT, 'UTF-8');
This converts the %uXXXX notation to HTML entity notation &#xXXXX;, which can be decoded to actual UTF-8 by html_entity_decode. The above outputs the characters "סע" in UTF-8 encoding.