The Legislative Framework: Federal Decree-Law No. 6 of 2025

Federal Decree-Law No. 6 of 2025 (the “New Banking Law”), in force since 16 September 2025, is the most significant overhaul of UAE financial regulation in over a decade. It replaces the old Central Bank Law (No. 14 of 2018) and the Insurance Regulation Law (No. 48 of 2023), consolidating banking, financial services and insurance under one unified framework. Among its three core objectives — strengthening CBUAE independence, expanding the regulatory perimeter to cover fintech and virtual assets, and enhancing consumer protection — it is the third that carries the greatest consequence for banking litigation.

Article 150: Credit Facilities Guarantees — The Core Provision

Sitting within Chapter Six (Customers’ Protection) of the New Banking Law, Article 150 establishes an obligation, an admissibility sanction, and a regulatory enforcement mechanism in three concise clauses:

The effect of Article 150(2) is unambiguous: a bank that fails to obtain or maintain adequate guarantees does not merely face regulatory censure — it forfeits its right to bring any court or arbitration claim. The claim is inadmissible from the outset.

What Are ‘Adequate Guarantees’?

The law does not define “adequate” — only that guarantees must be commensurate with the customer’s income and facility size, as determined by the CBUAE from time to time. The prior law used the word “sufficient,” and the Abu Dhabi Judicial Department issued Circular No. 9 of 2022 and Explanatory Circular No. 3 of 2023 attempting to draw the line between pure personal guarantees (potentially unenforceable) and in-kind guarantees. Courts still issued conflicting decisions. The New Banking Law preserves this flexibility — making ongoing monitoring of CBUAE guidance essential for any lending institution.

The Sanctions Exposure: Article 168

A breach of Article 150(1) triggers not only inadmissibility of claims but potential regulatory action under Article 168, including formal cautions, activity restrictions, removal of authorised individuals, and fines reaching up to AED 1 billion for institutional violations. The dual exposure — judicial and regulatory — makes guarantee compliance one of the highest-stakes obligations in UAE banking law.

The Courts Speak: Abu Dhabi Court of Cassation, Case No. 169/2026

In March 2026, the Abu Dhabi Court of Cassation issued its most authoritative interpretation yet of Article 150 in Commercial Case No. 169/2026. The dispute arose from a murabaha financing agreement under which a licensed bank extended credit to an individual borrower. Upon default, the bank sought recovery of an outstanding balance exceeding AED 2.4 million. After losing at first instance and on appeal, the borrower escalated to the Court of Cassation on four grounds.

Issue 1: Were the Guarantees Adequate?

The borrower argued the bank had failed to satisfy Article 150(1), rendering the claim inadmissible. The Court drew a critical distinction:

Inadmissibility under Article 150(2) is triggered only where guarantees are entirely absent or wholly insufficient — not by every regulatory breach. Other non-compliance, such as exceeding lending ratios or breaching internal credit policies, does not bar a claim.

The Court further held that the adequacy of guarantees is a factual question for judicial determination. Salary assignment arrangements and security cheques — widely used in UAE retail lending — can satisfy the requirement. There is no rigid regulatory formula; each case turns on its own facts.

Issue 2: Did the Bank Exceed Regulatory Lending Limits?

The borrower argued that the bank had violated CBUAE income-multiple limits when originating the facility. The Court rejected this entirely: exceeding lending limits is a regulatory compliance matter that does not extinguish the borrower’s underlying contractual obligation to repay. A bank’s origination-stage breach does not invalidate a debt.

Issue 3: Was Formal Notice (Al-Ithar) Required?

The borrower contended the claim was procedurally defective for want of formal notice (اعذار) under Article 272 of the UAE Civil Transactions Law. The Court adopted a pragmatic position: the filing of proceedings itself can constitute sufficient notice, provided the pleadings clearly demand performance. The purpose of notice is to place the debtor in default — and that purpose is fulfilled by commencing suit.

Issue 4: Expert Reports

The Court confirmed that court-appointed expert reports carry significant evidentiary weight in banking disputes, particularly for calculating outstanding balances, accrued charges, and contractual entitlements.

Summary of Key Principles

• Inadmissibility under Article 150(2) requires complete absence or total insufficiency of guarantees — not merely imperfect compliance.
• Salary assignments and security cheques can constitute adequate guarantees; adequacy is determined case-by-case.
• Exceeding CBUAE lending ratios does not extinguish a borrower’s repayment obligation.
• Commencing proceedings can fulfil the formal notice requirement under the Civil Transactions Law.
• A borrower cannot rely on self-induced financial difficulty (e.g. voluntary resignation) to avoid liability.

Practical Implications

For Banks and Financial Institutions

The judgment is reassuring: not every compliance gap renders a recovery claim dead on arrival. However, the threshold that does — complete absence or total insufficiency of guarantees — remains a live and costly risk. Particular exposure arises where facilities were extended without documented security, where guarantee instruments have expired or were never registered, or where the institution holds only a blank cheque or informal assurance. With the compliance deadline of 16 September 2026 approaching, institutions that have not yet conducted a guarantee documentation audit should do so immediately.

A proactive audit of your loan portfolio’s guarantee documentation is not merely good practice — it is the difference between an enforceable claim and an inadmissible one.

For Borrowers and Defendants

For individuals or sole proprietors facing recovery proceedings, guarantee adequacy is a legitimate and potentially powerful defence. A challenge under Article 150(2) should be raised at the Court of First Instance — not left for appeal — to preserve it as a live ground. Before engaging on the merits, defendants should investigate whether guarantees were obtained, whether they were commensurate with income and facility size, and whether security documentation was properly executed and maintained.

For Corporate Borrowers

Article 150 applies only to facilities extended to natural persons and sole proprietorships. Corporate borrowers fall outside its scope, and the admissibility sanction of Article 150(2) does not apply to corporate debt recovery. The broader customer protection framework and the CBUAE’s enhanced Article 168 sanctions remain applicable to all licensed institutions in their dealings with any customer.

Conclusion

Article 150 of Federal Decree-Law No. 6 of 2025 is not a compliance formality — it is a condition precedent to judicial enforcement of debt. The Abu Dhabi Court of Cassation’s judgment in Case No. 169/2026 clarifies that the condition is triggered by the absence of guarantees, not merely their imperfection; that adequacy is assessed on the facts, not against a rigid formula; and that a bank which has met its guarantee obligations retains its full enforcement rights. But where guarantees are genuinely missing, the claim fails at the door of the court — regardless of how clear-cut the default.

In a jurisdiction where banking disputes routinely involve tens of millions of dirhams, this is not a technical point. It is a fundamental risk — for lenders and borrowers alike.

For further information, please contact

Ahmed Hadeed
a.hadeed@hadeedpartners.ae

This article is current as of January 2026 and is intended for general information purposes only. It does not constitute legal advice. For specific guidance on your transaction, please contact our team.

© Hadeed & Partners 2026