Commercial Cassation Judgment on Islamic Finance and Interest Prohibition

Judgment summary

This case involves two appeals before the Dubai Court of Cassation concerning a dispute over Murabaha (cost-plus financing) facilities. A bank sued a client to recover an outstanding debt of over $149,000. The lower courts ordered the client to pay the principal amount plus interest. The client appealed to the Court of Cassation, arguing that imposing interest violates the principles of Islamic finance and UAE law. The bank also appealed, challenging the debt calculation. The Court of Cassation rejected the bank's appeal. It accepted the client's appeal regarding the interest, ruling that under the UAE Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), Islamic financial institutions are prohibited from charging any form of interest or late payment fees on debts arising from Sharia-compliant transactions. The court overturned the interest award, confirming the prohibition is a matter of public policy.