Commercial law: UAE case law

A murabaha financing is a sale at cost plus agreed profit and cannot be treated as an interest-bearing loan

A validly concluded contract has the force of law between the parties, and the judge must interpret it according to its clear wording without departing from the parties' intention. Interpreting a contract is a legal question the court must decide itself…

An appeal court that refuses a payment order must decide the merits itself instead of remitting the claim

Where a creditor starts by petitioning for a payment order and, on appeal against the order, the appeal court finds that the conditions for issuing it are not met, the court must not stop at refusing the order or declaring the petition inadmissible, and…

Parties cannot agree to litigate before the courts of a different judicial authority; this jurisdiction is public order

Under Article 104 of the Constitution, each emirate's local judicial authority handles all judicial matters not entrusted to the federal judiciary, within the borders of that emirate. Each local judiciary is therefore a judicial authority independent of…

A cheque returned because the account is closed is an execution title, like one returned for lack of funds

Article 667 of the Commercial Transactions Law makes a cheque on which the drawee bank has recorded that there are no funds or insufficient funds an execution title, which the holder may enforce wholly or partly by compulsory means. The Authority held that…

Entities wholly owned by the federal government are outside the Companies Law and litigate only before federal courts

Under Article 4(1)(b) of the Commercial Companies Law, companies wholly owned by the federal or a local government or their institutions, bodies or subsidiaries are excluded from the law, apart from registration, in matters for which their founding…

A dissolved company keeps its legal personality until liquidation ends, and a custodian's appearance cures a standing defect

A company dissolved by judgment is treated as continuing, with its legal personality, for the needs of liquidation until liquidation is complete, so that its claims can be collected, its debts paid and the balance divided among the partners, and to protect…

A bank recovers its agreed interest up to filing and simple interest afterwards, all interest capped at the principal

A court must award the interest that the customer and the bank agreed or applied in their dealings for the period before the claim was filed. For the period after filing, it must award interest at the average rate prevailing in banks during the proceedings…

A nominee Emirati partner's stake is sham, and courts must apply the 2021 Companies Law allowing full foreign ownership

Simulation (a sham arrangement) is established where parties conceal their real dealings and legal positions behind an outward contract made as a front to the public, while a separate writing or agreement governs between them; once proved, the hidden…

An insurance policy condition that defeats cover is void unless printed conspicuously, and courts must rule on that objection

Under Article 1028(1)(c) of the Civil Transactions Law, a printed condition in an insurance policy relating to a circumstance that leads to the avoidance of the contract or the lapse of the insured's right is void unless it is shown conspicuously, set…

A cheque bearing the executory formula can still be contested as a security cheque in a substantive execution dispute

A cheque is a means of payment that carries in itself the presumption of the cause for which it was handed to the payee, but the drawer may rebut that presumption, dispute the debt and prove that he has been discharged in whole or in part. Placing the…

Waiver of an arbitration clause is never presumed and must appear clearly from the contract read as a whole

The trial court interprets contracts free from cassation review only while it stays within what the words can bear and does not depart from their apparent meaning. A waiver of an arbitration clause is not presumed: it must be proved and drawn from the…

Courts must weigh the Covid-19 pandemic as an exceptional event when assessing a contractor's liability for delay

Where failure to perform a contractual obligation results from an exceptional or unforeseeable event beyond the parties' control, whose consequences could not be guarded against, liability for non-performance is reduced or, at the least, the event must be…

An assignment of a receivable binds the debtor once it knows of it; the debtor's consent is not required

Under Articles 1109 and 1110 of the Civil Transactions Law, as the Federal Supreme Court has consistently applied them, an assignment (hawala) is a consensual contract between the assignor, who owes the assignee, and the assignee. Where it transfers a…

Signing a company's security documents as authorised signatory does not make the signatory a guarantor of its debts

Joint liability between debtors arises only by agreement or by law, although the agreement may be implied from the circumstances (Article 450 of the Civil Transactions Law and Article 72 of the Commercial Transactions Law). A guarantee (kafala) is formed…

Judgments differing in parties, subject and cause do not conflict, as with a bank suing as endorsee of cheques

A conflict between two final judgments, for the Federal Supreme Court's conflict jurisdiction, exists only where the later judgment contradicts an earlier one that has become res judicata on an issue between the same parties, decided in its operative part…

Claims against a contractor or engineer for building defects are barred three years after the defect is discovered

Under Article 883 of the Civil Transactions Law, a claim under the guarantee owed by the contractor or the engineer for the collapse of a building or defects in it cannot be heard after three years from the collapse or the discovery of the defect.…

A customer's deposit at a bank's foreign branch cannot be set off against facility debts in the UAE without agreement

Compulsory set-off under Article 370 of the Civil Transactions Law requires each party to be both creditor and debtor of the other, with debts of the same kind, description, maturity and strength, and the set-off must not prejudice third parties; failing…

A bounced cheque makes its signatory and the account holder jointly liable without proof of why it was issued

A cheque is in principle an instrument of payment and, at the least, a debt instrument entitling the holder to collect its value from the drawee bank. If it is returned unpaid, the signatory and the person from whose account it was drawn remain jointly…

Silence about a debt is misrepresentation only if meant to mislead, and rescission also needs proven gross lesion

Under Articles 185 to 187 of the Civil Transactions Law, misrepresentation (taghrir) is deceiving the other party by fraudulent words or acts, and deliberate silence about a fact counts if the deceived party would not otherwise have contracted; a contract…

Those who act in the UAE for an unlicensed foreign company are personally and jointly liable for its dealings

Under Articles 313 to 316 of the Commercial Companies Law then applicable (Federal Law No. 8 of 1984), a company incorporated abroad could carry on business in the UAE, or open an office or branch, only after obtaining a licence from the Ministry with the…

A murabaha acceleration clause makes the whole unpaid balance due on default, and courts, not experts, interpret it

The terms of a contract govern the parties' obligations and how they are to be performed; a valid contract is the law of the parties, which neither party nor the judge may alter. Interpreting contracts is a question of law for the trial court, which may…

A sale of a business is void unless notarised and entered in the commercial register

A sale of a business (commercial store) is a consensual contract that takes effect between the parties once validly made, but under Articles 42 and 44 of the Commercial Transactions Law (Federal Law No. 18 of 1993) it must also be notarised or attested…

The first trader to register a trade name can stop a later, confusingly similar name in the same trade

Ownership of a trade name, and the legal protection attached to it, is acquired by entry in the commercial register (Articles 59 and 68 of the Commercial Transactions Law, Federal Law No. 18 of 1993, and Article 3 of Federal Law No. 6 of 1975 on the…

A bank that let unauthorised partners move a company's money is liable in contract alongside the wrongdoers

Where the injured party and the person responsible are bound by a contract, the court may not apply the rules of tort liability unless the harm amounts to a crime, fraud or gross fault. A bank's liability to its customer for allowing unauthorised persons…

A sale of a business binds the parties once agreed; registration governs only when ownership passes

A business (محل تجاري) is the set of tangible and intangible assets used for a commercial activity, physical or virtual (Article 36 of the 2022 Commercial Transactions Law). Its sale is a consensual contract formed by offer and acceptance, which obliges…

Islamic financial institutions cannot recover late-payment interest, even as compensation, on Sharia-governed transactions

Under Articles 468, 472, 473 and 474 of the Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), in force from 2 January 2023, an Islamic financial institution, meaning one whose constitution says it operates under Sharia or which operates…

An LLC cannot be annulled because its Emirati partner was nominal; it converts into a company of the real partners

Some Dubai judgments had held that proof that the real partners differed from those in the memorandum of association meant an LLC lacked its essential elements and was absolutely void, leading to dissolution and liquidation. The General Assembly held…

Between LLC partners, a sham shareholding must be proved in writing, and profits are due only once distributed

Between partners, none may prove anything contradicting or going beyond the memorandum of association except in writing, so a partner cannot prove without written evidence that another partner's recorded holding is sham; this rule is of public policy and…

The 30-day limit for annulling an award runs only from the tribunal's notification of it to that party

Article 54(2) of the Federal Arbitration Law bars an annulment action brought more than 30 days after the award is notified to the party seeking annulment, and Article 44 requires the tribunal to notify each party by delivering a signed original or copy…

A claim that the Emirati partner was nominal fails where the memorandum and audited accounts show its capital was paid

Sham (صورية) means that the parties agreed on an apparent transaction that is not real and conceals their true relationship; the sham act has no existence in their intention, and the hidden agreement is the one in force between them. Whether a transaction…

The agreed legal seat, not the institution or its rules, decides which court hears an action to annul an award

The seat (legal place) of arbitration is the jurisdiction in which the arbitration takes place, and it determines the law governing the procedure, the court supervising the arbitration and hearing annulment actions, and whether the award is domestic or…

An optional arbitration clause does not oust the courts, and the new five-year limit for traders runs from 2023

An agreement to arbitrate is not presumed: its wording must show that the parties made arbitration the only way to resolve their disputes. A clause that sits alongside the courts' jurisdiction or offers a choice between them, such as one allowing either…

A mortgage securing present and future facilities survives repayment of one facility, and a guarantor-mortgagor can be sued first

Under Dubai Law No. 14 of 2008 on mortgages, a mortgage gives the creditor a real right over the property to be paid from its price ahead of ordinary and later creditors. Applying to sell the mortgaged property is only an option: the creditor may instead…

Any LLC partner may seek the manager's removal for serious cause, but resolutions can be annulled only on three grounds

Any partner of a limited liability company, whatever the size of its holding, may ask the court to remove the manager if there are serious reasons, such as mismanagement, illness or inability to work, or disloyal acts against the company and the partners,…

An arbitration clause binds only its parties, and enforcing a cheque in Dubai courts can waive it

A party who relies on an arbitration agreement must raise it before making any request or defence on the merits (Article 8(1) of the Federal Arbitration Law). The right to arbitrate may be waived expressly or impliedly, but implied waiver requires conduct…

A party may resist enforcement of an award on annulment grounds even after the time to sue for annulment has passed

Under Articles 55 and 57 of the Federal Arbitration Law, an award may be challenged either by an action for annulment or during the application to confirm and enforce it. A party who has not sued for annulment may still object to the enforcement order by a…

A subrogated insurer's recovery claim against a negligent contractor and its insurer runs from the date it paid

Under Article 1036(1) of the Civil Transactions Law, claims arising from an insurance contract cannot be heard after three years from the event giving rise to the claim, which is not necessarily the occurrence of the insured risk; for an insurer that has…

A cheque given as security can be enforced only for the part of the secured debt actually unpaid

A cheque is presumed to be an instrument of payment with a valid underlying cause, but the drawer may prove that it was given for another purpose, such as security. If it was given as security, the obligation to pay it is subject to a suspensive condition,…

Facilities run through a current account fall due on closure, and refinancing does not end guarantees reaffirmed for it

Where credit facilities are linked to a current account, the rights and obligations they create become entries in the account that set off against each other, and the final balance on closing is a debt immediately due to the bank, whatever the original…

Directors of a bankrupt company are liable for its debts only on proof of fault under the law applicable then

Where a bankrupt company's assets do not cover at least 20 per cent of its debts, the court may order its directors and managers, jointly or not, to pay all or part of the debts, but only if their liability for the company's losses is proved under the…

A lawyer with a written fee agreement sues for fees by ordinary action before the competent court of first instance

Under Article 52 of Federal Decree-Law No. 34 of 2022 regulating the advocacy and legal consultancy professions, a lawyer is paid according to the written agreement with the client, and a claim for agreed fees is brought by ordinary action before the court…

Accepting a right-of-first-refusal offer at a different price is a counter-offer, not an acceptance

A contract is formed only when an acceptance matches the offer (Article 125 of the Civil Transactions Law). An offer is a definite expression of the will to conclude a particular contract; an acceptance that modifies, adds to or reduces it is a rejection…

Removing an LLC manager from office does not dispose of a separate claim to expel him as a partner

The Court distinguished two remedies against the managing partner of a limited liability company. Removal (عزل) only relieves the manager of management, and he remains a partner. Expulsion (فصل وإخراج) ends his membership of the company and requires…

A properly filed and served claim interrupts limitation even if it is later dismissed or declared inadmissible

Under Article 484 of the Civil Transactions Law the limitation period is interrupted by a judicial claim, or any judicial step by which the creditor asserts its right against the debtor, before the courts or an arbitral tribunal. A statement of claim filed…

Guarantors are released if the creditor does not claim within six months of maturity, unless they clearly agreed otherwise

Under Article 1092 of the Civil Transactions Law, once a guaranteed debt falls due the creditor must claim it within six months, failing which the guarantor is released; this applies to commercial guarantees. The rule is not of public policy, so a…

Courts must examine evidence that an LLC manager acted fraudulently and that two companies operated as one

A managing partner of a limited liability company is not liable in his own assets for the company's debts unless he commits a fault. If he breaches a management duty, the law or the company's constitution, he is liable for his personal faults and for acts…

A debtor may not be detained unless the creditor proves solvency or a listed exception applies

Under Article 319 of the Civil Procedure Code (outside the public-funds recovery regime), an execution judge may order the detention of a debtor able to pay who refuses to satisfy an executory instrument. Detention is not allowed unless the creditor proves…

When a developer's instalment sale is terminated, it refunds the instalments less a fair rent for the buyer's use

Where a transaction is commercial for one party and civil for the other, the Commercial Transactions Law governs both parties' obligations unless the law or the parties provide otherwise. Under its instalment-sale rule, if the buyer fails to pay an…

Bank loans earn compound interest until the account is closed, and suing to sell the mortgaged home does not close it

Loans granted by banks are commercial transactions whatever the borrower's status or purpose, and produce interest automatically during the loan, at the agreed rate or otherwise at the market rate, compounded unless agreed otherwise, even if interest…

Appeal judgments in substantive enforcement disputes, unlike those on pure enforcement steps, can be challenged in cassation

The Civil Procedure Code distinguishes temporary enforcement disputes, which seek only a stay or continuation of enforcement without touching the right and are decided by the execution judge subject to a final grievance (Articles 209 and 239), from…

A debtor company's trade licences and other intangible business assets can be attached by its creditors

All of a debtor's assets secure its debts (Article 391 of the Civil Transactions Law), and a creditor may attach the debtor's movable and immovable property except what the law exempts (Articles 242 and 247 of the Civil Procedure Code). Attachable property…

Closure of a DIAC arbitration file for unpaid costs does not extinguish the arbitration clause

The General Assembly unanimously abandoned the earlier view that closure of a Dubai International Arbitration Centre case for unpaid costs makes the arbitration clause lapse. Under Federal Law No. 6 of 2018 on Arbitration, proceedings end with an award…

A grievance against a payment order must be heard by a judge other than the one who issued it

Under Article 147(1) of the Civil Procedure Code, a party may file a grievance against a payment order whose value is within the final jurisdiction of the first-instance court before 'the competent payment-order judge'. The judge who issued the order has…

An unlicensed real estate broker cannot recover commission, compensation or expenses under a void brokerage agreement

Dubai legislation (Articles 3 and 24 of Local Order No. 32 of 1987 regulating real estate brokerage and Articles 3 and 21 of Regulation No. 85 of 2006 on the Register of Real Estate Brokers) prohibits any natural or legal person from brokering the sale,…

The payment-order procedure is mandatory for qualifying debts, but an ordinary claim is admissible once a serious dispute arises

Under Article 62 of the Civil Procedure Regulation (Cabinet Resolution No. 57 of 2018, as amended by Cabinet Resolution No. 33 of 2020), a creditor must use the payment-order procedure, not an ordinary action, where the debt is proved in writing by a…

Where no rate is agreed, Dubai courts award legal and delay interest at 5 per cent a year

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…

A contract's clear terms bind the parties; a buyer who accepted unfinished infrastructure cannot rescind because of it

The General Assembly restated that a contract is the law of the parties: neither may revoke, amend or rescind it except by agreement or on grounds the law allows, and clear terms may not be departed from by interpretation, since they express the parties'…

Appeal judgments on enforcing foreign judgments can go to cassation, and default judgments need proof of proper service

Article 173(3) of the former Civil Procedure Law made appeal judgments 'in execution proceedings' final, but that covers only disputes about pure enforcement steps. A ruling on whether a foreign judgment qualifies for enforcement under Article 85 of the…

A payment order requires a valid prior demand on each debtor, and one co-debtor's personal defect does not free the others

Under Article 63(1) of the Civil Procedure Regulation (Cabinet Resolution No. 57 of 2018), a creditor must first serve on the debtor a demand to pay within at least five days before applying for a payment order. The demand is an essential step: if its…

An LLC partner may sue for his share of profits when the manager or general assembly fails to act

The general assembly of a limited liability company normally decides what profit is distributed, and a partner's entitlement only crystallises once the manager has prepared the annual accounts and the assembly has approved them. But the manager may not…

A concrete supplier was not liable for a building collapse that experts attributed to design and site supervision failures

Under Articles 878 and 880 of the Civil Transactions Law, the contractor and supervising engineer guarantee, as an obligation of result, against total or partial collapse and defects threatening a building's safety for ten years from handover. A supply…

A cheque returned because the account is frozen or suspended is not an execution title; a closed account is

To be enforced directly, a cheque must be sufficient in itself as an execution title and the right it embodies must be certain, liquidated, due, not seriously disputed and not conditional. Under Article 667 of the Commercial Transactions Law, read with the…

A sole establishment cannot sue on a contract made by the LLC whose shares its owner bought

A sole proprietorship (مؤسسة فردية) has no legal personality separate from its owner. The conversion rules in the Commercial Companies Law apply only between forms of company and do not cover turning a company into a sole establishment or the reverse.…

A partner in a limited liability company cannot be expelled by court order at the majority's request

Commercial companies are governed by the Commercial Companies Law, not the civil-law rules on partnerships, except where that law is silent. Article 677 of the Civil Transactions Law, which lets a majority of partners ask the court to expel a partner for…

A claim filed against a deceased person can be cured by joining the heirs; rescinded partnership refunds net of sums received

A claim or appeal brought against a person who had already died is not void beyond repair: it may be corrected by joining the heirs at the same level of court, by a memorandum or new statement filed with the case management office within the time limit,…

A tenant in control of gas tanks is strictly liable for a fire that spreads to a neighbour's warehouse

Under Article 316 of the Civil Transactions Law, whoever has actual control of things requiring special care, owner or not (such as a tenant), is liable for the harm they cause unless it could not be guarded against. The liability rests on the principle…

The registered licence holder owns a sole establishment unless ownership was transferred by the statutory procedure

A sole establishment is a commercial business (محل تجاري) belonging to its owner or licence holder, with no separate legal personality; its rights and obligations are his. Ownership passes to another person only by a disposition notarised and entered in…

A principal that sells into an exclusive agent's territory through its own affiliate owes the agent commission

A registered commercial agency is concluded for the parties' common interest, so the principal cannot end or refuse to renew it alone without an acceptable reason, although the parties may agree an express termination clause, which leaves the court only to…

Bundled claims arising from separate causes are valued one by one for the AED 500,000 cassation threshold

A judgment of the Court of Appeal can be challenged in cassation only if the claim exceeds AED 500,000 or is of unassessable value (Article 175(1) of the Civil Procedure Law). Under Article 51(9), claims arising from a single legal cause are valued…

A bounced cheque is an execution title only when returned for no or insufficient funds (later overruled federally)

Article 667(1) of the Commercial Transactions Law makes a cheque that the bank has marked as unpaid for lack or insufficiency of funds an execution title that the holder may enforce directly. Because this departs from the rule that a returned cheque needs…

Banks may charge agreed simple interest on commercial loans but not compound interest, a public-order rule

In a bank loan the bank advances money and the borrower must repay it with interest on the agreed terms. A creditor may charge interest on a commercial loan at the contractual rate; if no rate is agreed, the market rate at the time applies, capped at 9% a…

An LLC manager is not personally liable for company debts without fraud, misuse of authority or gross fault

A limited liability company has legal personality and assets separate from its partners from formation; a partner is liable only up to his capital contribution (Article 71 of the 2015 Companies Law), and a manager is personally liable only for fraud,…

An arbitration clause in a subcontract cannot block a guarantee claim involving the issuing bank, which is not party to it

Under Article 8 of the Arbitration Law a court must declare a claim inadmissible if the defendant invokes an arbitration agreement before pleading on the merits, unless the agreement is void or incapable of performance. But a contract binds only its…

A buyer's agreed waiver of claims for late completion of an off-plan villa was upheld as a valid exemption from contractual liability

Parties may include terms that increase, reduce or exclude a party's contractual liability, provided they do not conflict with mandatory rules, public order or morals. Article 296 of the Civil Transactions Law voids only clauses excluding liability for a…

A subcontractor has no contractual claim against the project owner, even if the owner paid some of its invoices

The main construction contract creates no rights for a subcontractor against the employer. Following the employer's instructions does not make the subcontractor a party to the main contract or entitle it to compensation for its breach, and an employer that…

A court may raise a developer's agreed delay compensation to match the buyer's loss despite a lump-sum clause

Under Article 390 of the Civil Transactions Law parties may fix compensation in advance, but the court may, at either party's request, adjust it to equal the actual loss, and any agreement to the contrary is void. A clause in an off-plan sale stating that…

The payment-order route applies only when the whole claim is a documented debt; traders' claims were barred after ten years

Claims are ordinarily brought by a statement of claim filed with the court. The payment-order procedure is an exception, available only where everything claimed is a debt established by a document signed by the debtor or a specified movable; it cannot be…

A purchase order is a binding contract once essential terms are agreed, and its storage-charge clause is enforceable

A contract is formed when an offer is matched by acceptance, expressed in words, writing, conduct or any behaviour that leaves no doubt of consent (Articles 125, 129 to 132 of the Civil Transactions Law). Under Article 141, it is concluded once the parties…

A buyer may rescind an off-plan plot sale and recover the price when the developer has not built the infrastructure

In bilateral contracts, if one party fails to perform, the other may, after notice, seek performance or rescission, and the judge may rescind and award compensation where justified. Contracts must be performed in good faith and include what follows from…

An assignment of a debt cannot be enforced against the debtor who did not consent to it

The bar on cassation appeals against appellate rulings 'in execution procedures' (Article 173(3) of the former Civil Procedure Law) covers only rulings on the measures the execution judge takes to enforce a title. Rulings on a prior legal question on which…

Courts may not hear claims whose court fees are unpaid; an agent who signs a cheque is personally liable on it

Courts at every level may not hear a claim, appeal or request on which the fees due under Abu Dhabi Law No. 6 of 2013 on court fees (as amended in 2016) have not been paid in full, unless an exemption or deferral was granted; this is a matter of public…

Banks may raise loan interest under a contractual clause tied to Central Bank rates and charge compound interest

The relationship between a bank and its customers is governed by freedom of contract, so the parties' rights are set by the contract unless it breaches public order, and clear contract wording must be applied as written. A bank that raises the interest…

UAE courts cannot annul a foreign-seated arbitral award unless the parties chose the UAE Arbitration Law

An international commercial arbitration held abroad is not subject to the UAE Arbitration Law unless the parties agreed to apply it (Article 2 of Federal Law No. 6 of 2018). The law of the seat governs the award, including whether it can be set aside.…

A finance company's loan is commercial, so agreed delay interest and late fees are recoverable

The business of finance companies is commercial, so a loan they make is a commercial act even if it is civil for the borrower. Delay interest on the resulting debt is due at the agreed rate, subject to the statutory ceiling. Commercial loans by banks,…

A bank is not liable when a correspondent bank abroad freezes a transfer it executed correctly

A bank transfer is governed by the agreement between the ordering customer and the bank. In executing it the bank must exercise more than ordinary care, but its liability is measured by the data in the transfer order and by its own fault in choosing the…

An arbitration clause survives the termination of the main contract, and annulment is no appeal on the merits

An arbitration agreement is independent of the other terms of the contract, so the contract's nullity, rescission or termination does not affect it (Article 6 of the Federal Arbitration Law), whether it is a clause in the original contract or a later…

Rescission for breach restores the parties' positions, but whether rescission is justified is for the trial court

Contracts must be performed in good faith. If one party fails to perform, the other may seek rescission, and once the contract is rescinded or dissolved the parties are restored to their previous position, failing which compensation may be awarded…

A court may remove an LLC manager at a partner's request where serious management failures justify it

A partner in a limited liability company may ask the court to remove the manager, and the court may do so whenever it finds a legitimate reason, whether or not the manager is a partner; whether the reasons are serious is for the trial court. The manager…

A trader's computer-generated statements and invoices can prove a commercial debt between traders

Regular commercial books are evidence in commercial disputes between traders (Article 15 of the Evidence Law). A trader who runs his business with modern technology may keep electronic records in place of paper books (Article 38 of the Commercial…

A court must put a requested decisive oath unless it is abusive, even against written evidence

The Public Prosecutor may appeal in cassation, within a year, against final judgments that breach the law where the parties cannot or did not appeal (Article 174 of the Civil Procedure Law), to resolve conflicting rulings on the same point of law. The…

A transfer of LLC shares passes ownership only when entered in the company register and commercial register

A limited liability company's memorandum and every amendment must be published by entry in the commercial register; until then they cannot be relied on against third parties. A partner may assign his shares, but ownership passes, even between the parties,…

Annulling an award is limited to the statutory grounds; omissions such as arbitrators' nationality do not void it

An annulment action is not an appeal and cannot reopen the merits; the grounds in Article 53 of the Arbitration Law are exhaustive. Evidence, experts and whether to stay the arbitration pending another case are for the tribunal. What an award must state…

A transfer of a debt binds the creditor bank only with its consent; a sole proprietorship has no separate personality

An assignment of debt moves the debt from the original debtor to another person and takes effect against the creditor only if the creditor consents (Articles 1106, 1109 and 1110 of the Civil Transactions Law). A sole proprietorship has no legal personality…

An LLC manager may agree to arbitration for the company, and silence during the arbitration waives objections

A party that continues with an arbitration knowing of a breach of the arbitration agreement or of a non-mandatory rule, without objecting in time, waives its objection. Choosing an arbitral institution brings in its procedural rules, and the tribunal rules…

LLC partners who sign a company loan as its representatives are not liable beyond their capital

A loan term falls due early if the borrower becomes insolvent, can no longer pay, or the security is lost, and generally whenever the creditor risks losing its security (Article 431(3) of the Civil Transactions Law). A partner in a limited liability…

Bank loans carry the agreed interest until full payment, including compound interest within Central Bank rules

A bank loan is a commercial act for both parties, whatever the borrower's status or purpose. Banking operations are exempt from the statutory ceiling on agreed interest, with the Central Bank empowered to set the rates banks may charge, and compound…

Introducing clients for a commission is akin to brokerage and is commercial; commercial debts bear interest from the due date

Brokerage is a commercial activity, and so are acts akin to it; 'akin' requires similarity in nature and purpose, not identity. A company is a trader if it carries on commercial activity or takes one of the forms in the Companies Law, even if its activity…

An expert must invite the parties to his first meeting, and grounds of appeal must be specific

A court-appointed expert must notify the parties of the first meeting of his assignment in the manner and time the Evidence Law requires; failing to do so makes his work void. Procedures are presumed to have been followed, and whether the expert gave…

A cheque is presumed to be a means of payment; the drawer must prove a different cause or duress

A cheque is a payment instrument, and whoever claims otherwise must prove the reason it was issued, that its cause was unlawful or had lapsed, or that the payee failed to perform. Duress that vitiates consent requires a threat of serious and imminent harm…

An agreed delay penalty is payable without proof of loss unless the debtor proves none occurred or it is excessive

A penalty clause fixes in advance the loss the parties expect from a breach, so the creditor need not prove loss; the debtor must prove that no loss occurred or that the agreed amount is excessive, and the judge may then adjust it (Article 390 of the Civil…

Only the principal can rely on an agent's lack of authority to sign an arbitration agreement

A claim is inadmissible where the parties have agreed to arbitrate and the defendant raises the arbitration clause at the first hearing; interpreting the clause is for the trial court. The relationship between a party and its agents or representatives…

A loan account is a simple account, not a current account, and must be assessed on the loan terms

The bank-customer relationship is governed by freedom of contract. A current account is an agreement to settle mutual claims through entries that offset each other, so only the closing balance is payable, whereas a bank loan obliges the bank to deliver or…

Under apparent agency a land sale binds the owner, and only the owner can claim under it

A contract may be made through an agent, whose authority under the agency agreement governs his relationship with the principal; a third party must normally check the agent's authority. But where the principal's own conduct creates an outward appearance…

A mortgagee bank may, but need not, enforce against the mortgaged property before other assets

A secured creditor may enforce first against the mortgaged real estate, but this is an option, not an obligation: it may pursue the debtor's other assets to recover its debt. Whether a creditor committed a fault in conducting enforcement is a question of…

Partner arrangements that keep UAE nationals at 51% of an LLC do not breach the share-transfer restriction

The rule in the Companies Law that a transfer of shares must not reduce the UAE national partners' holding below 51% of the capital prohibits only a reduction of the nationals' share. It does not invalidate partners' dealings designed to bring their…

Agreeing to arbitrate needs special authority, but a company that relies on the contract ratifies the clause

Only someone with capacity to dispose of the disputed right may agree to arbitration; a company must act through a person with power to dispose of its assets. A general power of attorney is not enough, because an arbitration agreement is an act of disposal…

A managing partner is accountable as a trustee and is always liable for fraud in managing the business

A partner who manages a partnership acts as agent of the company and the other partners and holds the company's funds as a trustee. If paid, he is liable for loss caused to the company, the partners or third parties by his fault or breach of the…