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Banking and Finance

What legal actions can the bank take if the customer defaults on a loan in the UAE?

Introduction: Defaulting on a bank loan in the UAE is regulated by the Commercial Code (federal decree-law No. (50) of 2022) and the Civil Procedure Law (federal decree-law No. (42) of 2022). Further, the Central Bank of UAE issued Loan Agreement Notice No. 3692/2012 of the personal loan agreement. This notice stipulates the terms and conditions for loan agreements for both lenders and borrowers.  In accordance with Article 2(1) of the Loan Agreement issued by the CBUAE, the principal loan shall be paid to the customer's account upon completion of all necessary securities and documentation. Additionally, the customer agrees to transfer the monthly income and end-of-service benefits to the bank for the duration of the loan, as well as to provide the bank with a letter from their employer. According to Article 4, the loan and related amounts become immediately due and payable in the event of default, which includes the customer's employment termination, an unauthorized transfer of their monthly salary, a violation of their obligations, and the failure to make consecutive or non-consecutive monthly instalment payments. Accordingly, the agreement may allow the bank to take appropriate actions such as the possible use of end-of-service benefits to settle outstanding amounts. In addition to this, Article 5 may permit the bank to deduct any amounts owed by the customer from funds in the accounts they hold with the bank or its branches. The Commercial Code regulates defaulting on a bank loan in the UAE. Article 409 stipulates that a bank loan is a contractual arrangement between a debtor and the bank, where the bank gives money to a borrower or adds the money to the borrower's bank account based on agreed conditions and time limits specified in the loan agreement as specified in Article 415 of the Commercial Code. The law states that the bank should obtain sufficient securities or guarantees for the loans it grants. The borrower is obligated to repay the loan and its interest to the bank within the specified time limits and according to the agreed-upon conditions. In accordance with the new Commercial code, criminal actions are limited and will only apply to certain cases of bounced cheques. Criminal actions will apply only to specific cases of bounced cheques such as intentional falsification, fraud, providing counterfeit cheques, and withdrawing account balances to prevent payment. According to the Commercial Code, in the event of a default payment, a bank may have the right to deposit a debtor's security cheque. If security cheques are dishonoured due to insufficient amounts, a bank can file an execution case against the debtor. Additionally, under the Civil Procedure Law, the bank can approach the court to seek a travel ban against the debtor as per Article 324. A bank may request a travel ban if there is a fear of the debtor escaping the state, provided the debt is not less than AED 10,000. Conditions for issuing a travel ban include providing written evidence of the debt and a guarantee by the creditor for potential harm to the debtor. Furthermore, Article 327 states that if a debtor with a travel ban does not surrender their passport or is suspected of disposing of money, the court may summon them and impose payment or attendance guarantees. Conclusion: Defaulting on a bank loan in the UAE leads to legal actions as per the law. It is important for both borrowers and creditors to know and understand these legal consequences when dealing with financial transactions in accordance with UAE law. In case of default by the debtor, the bank   is entitled to demand default interest, as stipulated in the loan agreement.  
Awatif Mohammad Shoqi Advocates & Legal Consultancy - July 10 2025
Dispute Resolution

Understanding the New Civil Defence Authority and Its Regulations

Introduction The UAE has issued a new civil defence law which is governed by federal decree-law No. (35) of 2024 on the reorganization of the civil defence authority. This new civil defence law aimed at strengthening emergency response and disaster management. Establishment of Civil Defence Authority. In accordance with Article 2, which establishes the Civil Defence Authority (CDA) under the National Emergency, Crisis, and Disaster Management Authority (NCEMA). It replaces the previous civil defence authority under the Ministry of Interior and transfers all its assets, rights, and personnel from the former authority to NCEMA. Responsibilities of CDA The new civil defence law stipulates the responsibilities of CDA under Article 3. Developing and implementing new civil defence policies, protecting fire safety, and responding to emergencies. CDA will also be responsible for managing evacuation plans, implementing early warning systems, and establishing public shelters. The authority will coordinate with government agencies, the armed forces, and private entities to enhance national safety measures. The director general of the military may authorize the management and regulation of the activities of the authority. In addition to this, the director general shall be responsible for handling budgets, issuing new policies, and managing emergency preparations. The new civil defence law allows CDA to use private and public property during emergencies, with fair compensation provided for any damages. Additionally, Companies must comply with CDA’s fire safety and emergency planning requirements before obtaining licenses. According to Article (11) some of the CDA officers may have judicial authority to enforce civil defence laws. They can investigate and report violations. In accordance with Article (8) the affected parties may have the right to get fair compensation for harm caused by civil defence operations and apply for compensation within 60 days. A committee may review the application of claims and decide within 60 days. If a claimant disagrees with the decision, they may have the option to appeal to the NCEMA within 30 days. Penalties under the New Civil Defence Regulation Additionally, the new law stipulates the penalties for violations. In accordance with Article 13 offenders may face jail imprisonment or fines. During disasters, penalties may increase to at least a minimum of two months’ imprisonment and fines between AED 20,000 and AED 250,000. Regarding the fees for the civil defence services, the cabinet may decide. It will also set fines for violations of civil defence laws as per Article 12. Conclusion The newly established civil defence regulation aims to promote public safety, increase emergency response efficiency, and maintain national planning for any crisis or disaster.
Awatif Mohammad Shoqi Advocates & Legal Consultancy - July 10 2025
Press Releases

MB advises Spark Education Platform on Strategic Partnership with First School Management

We are pleased to announce that Matouk Bassiouny (“MB”) acted as legal counsel to Spark Education Platform (“SEP”) in connection with securing a landmark strategic partnership with First School Management (“FSM”), the global advisory arm of GEMS Education (“GEMS”). This strategic collaboration will introduce GEMS-branded schools to Saudi Arabia and Bahrain, expanding access to high-quality education through a range of international curricula across the GCC. The deal marks a significant milestone in SEP’s wider plan to raise educational standards throughout the region. The MB team advising on the deal was led by Mohamed Esam (Partner, Head of Corporate and M&A UAE and FinTech ECVC) and included Moustafa Rizk (Senior Associate). For more about Matouk Bassiouny, check out our website at https://matoukbassiouny.com/.
Matouk Bassiouny & Hennawy - June 27 2025
Press Releases

Matouk Bassiouny welcomes Stefano Beghi as Of Counsel to its UAE Offices

We are pleased to announce that Stefano Beghi has joined Matouk Bassiouny as Of Counsel in the Corporate and M&A practice group in our Dubai office. Stefano brings over three decades of experience advising clients across the EMEA region on corporate, commercial, and M&A matters. Having worked extensively in Asia and the UAE for almost fifteen years, he offers a strong command of the local legal environment, complemented by a global outlook and cross-border execution capabilities. Stefano previously served as a partner in the international M&A practice at Seyfarth Shaw, held senior partner roles at Gianni & Origoni, where he helped lead operations in Italy, India, Hong Kong, and Shanghai, and also spent a decade with Ernst & Young and Andersen Legal in Europe. His cross-border capabilities and cultural fluency make him a trusted advisor to multinationals navigating high-value transactions and strategic investments. We are confident that Stefano’s joining will further strengthen our regional offering and enhance the value we deliver to clients across industries and borders. For more on Stefano’s background and expertise, visit: https://matoukbassiouny.com/counsel-profile/stefano-beghi/.
Matouk Bassiouny & Hennawy - June 17 2025