Judgment on Islamic Murabaha Financing and Delay Interest

Judgment summary

A customer received two Murabaha financing facilities from a bank to invest in fund shares. A dispute arose over the outstanding debt. The bank sued the customer, and lower courts awarded the bank a principal amount plus interest. The customer appealed to the Court of Cassation, arguing that charging interest on an Islamic Murabaha facility is unlawful under the UAE Commercial Transactions Law. The bank also appealed, challenging the calculated debt amount. The Court of Cassation upheld the bank's appeal regarding the debt calculation and rejected its claims about procedural errors. Crucially, it accepted the customer's appeal regarding the interest, ruling that Islamic financial institutions are prohibited from charging any form of interest, including delay interest, on Sharia-compliant transactions. The court overturned the interest award, confirming the principal debt only.