Dubai Court of Cassation (General Assembly), Resolution No. 1 of 2021, 9 June 2021
Where the parties have not agreed on an interest rate, interest on an adjudged debt, whether 'legal' interest or delay (late-payment) interest, is calculated at 5 per cent a year until full payment. The Dubai courts had applied 9 per cent a year as a judicial custom. The General Assembly unanimously abandoned that custom because interest rates follow economic and social conditions, and 9 per cent no longer matched current conditions or the rates charged by banks operating in the UAE.
The Technical Office of the Court of Cassation asked the General Secretariat of the Court to consider departing from a principle the Court had applied in earlier judgments: that legal and delay interest on a judgment debt, where the parties had not agreed on a rate, was calculated at 9 per cent a year in accordance with the judicial custom prevailing in the Dubai courts. The request pointed to changes in the circumstances in which that custom had arisen. The question was referred to the General Assembly under Article 20(a)(4) of Dubai Law No. 13 of 2016 on the Judicial Authority in the Emirate of Dubai.
The Assembly reasoned that interest rates rise and fall with the economic and social conditions in the country. The custom of 9 per cent was no longer suited to present conditions or to the interest rates charged by banks in the UAE, so the rate had to be reconsidered in a way that fits those conditions, supports market activity and achieves fairness in dealings between individuals and institutions.
After studying these factors, the Assembly unanimously decided to depart from the earlier judgments and to set both legal and delay interest, where not agreed between the parties, at 5 per cent a year until full payment. The resolution addresses only the rate applied in the absence of agreement; it does not deal with contractual rates.
Interest is claimed in most debt, banking and trade claims before the Dubai courts. Since this resolution the default rate is 5 per cent a year rather than 9 per cent, which reduces the cost of late payment for debtors where the contract is silent and makes an agreed contractual rate more important for creditors.
| Article 20(a)(4) of Dubai Law No. 13 of 2016 on the Judicial Authority in the Emirate of Dubai |
“تخفيض سعر الفائدة بنوعيها القانونية والتأخيرية في حال عدم الاتفاق عليها إلى نسبة (5%) سنويا حتى تمام السداد”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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