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Important Change to Interest Rate by Dubai Court


The General Assembly of the Dubai Court of Cassation issued the Resolution No. 1/2021 (the “Resolution”) very recently.

The Resolution which was passed unanimously has now changed the previous judicial practice regarding interest rate calculations for the awarded amount of debt in the absence of a mutually agreed rate of interest in a loan agreement.

Article 76 of Federal Law No. 18/1993, as amended (the “Commercial Code”) states as follows:

A creditor is entitled to receive interest on a commercial loan as per the rate of interest stipulated in the contract. If such rate is not stated in the contract, it shall be calculated according to the rate of interest current in the market at the time of dealing, provided that it shall not exceed 12% until full settlement.


Until recently the Dubai Courts generally awarded interest at the rate of 9% per annum in cases where the parties were not bound by a mutually agreed rate in a loan agreement.

With the issuance of the Resolution, the interest rate is now reduced to 5% per annum for all those loan agreements where the parties have not agreed to a mutually agreed rate.

Interestingly, the Resolution also recognises that:
  • the previous interest rate of 9% per annum is no longer appropriate considering the existing market conditions and the prevailing interest rates for banks operating in such market; and
  • it was felt necessary to reconsider the interest rate in a manner that suits the existing conditions and achieves justice for both borrowers and lenders.
The change of interest rate to 5% per annum is now applicable to all existing cases being adjudicated before Dubai Courts and will apply to all judgments issued in future by the Dubai Courts.

Possible impact on the judicial decisions of other Emirates’ courts

The Resolution does not apply to the courts of other Emirates. However, until now, the courts of other Emirates also applied an interest rate of 9% per annum on the same basis as Dubai Courts. Based on the past practice and considering the federal nature of Commercial Code, we may expect the courts of other Emirates to adopt the same approach as Dubai Courts going forward by reducing the interest rates from 9% to 5% per annum.

Authored by Musab Iftikhar

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