The Dubai Court of Cassation issued Resolution No. 1 of 2021, which reverses the Court’s previous ruling regarding interest rates applied on adjudged amounts where no contractual agreement on the applicable interest exists.Till now, in the absence of a mutually agreed rate between parties, the Dubai Courts have generally awarded interest at the rate of 9% per annum on adjudged debts. As per the resolution, interest rate is now set at 5% per annum as opposed to the previously applied rate of 9% per annum. The change introduced by the resolution applies to all ongoing cases before the Dubai Courts and all judgment to be rendered thereafter.
The resolution cites the prevailing market circumstances in the UAE as prompting the need for the reconsideration of the previously applied interest rate. The change is effective from the date of the resolution, 9 June 2021.
While the change does not apply to the courts of the other Emirates in the UAE, based on previous practice and considering that the Commercial Code (the legal basis recognizing the entitlement to interest) is a federal law, other Courts are also expected to follow the same approach.