Dubai Court of Cassation Reinforces Corporate Personality and Rejects Brokerage Claims Built on Preliminary Agreements and Unlicensed Brokerage Activities as a Matter of Public Order

5 min 13 sec August 19, 2026 (Edited)

Written by

Ammar Haykal

Partner, Head of Office – Sharjah and Ras Al Khaimah

a.haykal@tamimi.com View LinkedIn Profile

Majd Baroudi

Of Counsel

m.baroudi@tamimi.com

In a significant ruling issued on 1 July 2026, the Dubai Court of Cassation (Appeal No. 533 of 2026 – Commercial) delivered a judgment that reaffirms several foundational principles of UAE commercial law. The case involved a multi-million-euro claim for brokerage commission arising from an alleged role in facilitating an industrial manufacturing project in Egypt. The Court of Cassation overturned the Court of Appeal’s award of approximately EUR 59,933,939 in commission and interest, finding fundamental errors in both the characterisation of the underlying agreement and the attribution of liability to parties who were not bound by it.

In this case, the Court firmly rejected attempts to hold a company liable for obligations under an agreement it never signed and which predated its incorporation, reinforcing that the corporate veil in the UAE will not be pierced absent proof of fraud, abuse of authority, or gross negligence. The Court also exercised its supervisory jurisdiction to recharacterise the contractual relationship, emphasising that courts are not bound by the labels parties attach to their agreements but must ascertain the true legal nature based on the contract’s terms and the parties’ intentions.

This article will examine the judgment’s key holdings on corporate separateness, the proper characterisation of preliminary memoranda of understanding, and the legal requirements for brokerage commission claims under UAE law.

Background

The dispute involved three appellants — a limited liability industrial group (the First Appellant), its director and owner (the Second Appellant), and an offshore holding company (the Third Appellant) — against a respondent who claimed to have acted as an exclusive broker in facilitating a major technology transfer and industrial complex project with the Egyptian government.

The foundation of the respondent’s claim was a Memorandum of Understanding (MOU) dated 17 April 2016, entered into between the Third Appellant and the respondent. Under this MOU, the respondent was designated as the exclusive commercial representative of the Third Appellant in Egypt, tasked with providing legal support, following up on procedures, and preparing draft joint venture agreements in the field of secure printing and document manufacturing.

The MOU was expressly titled as a “preliminary agreement in the event a final agreement is concluded” and its first clause stated that it represented a mere “pooling of efforts to establish a joint activity” rather than creating binding current financial obligations.

The respondent filed suit before the Dubai Court of First Instance in 2023, claiming a 15% commission on what he alleged to be the total project value, amounting to EUR 393,595,554, on the basis that his brokerage efforts over five years led to the conclusion of contracts between the appellants and the Egyptian government relating to a “turnkey” integrated industrial complex and the exploitation of 397 patents and know-how.

The Court of First Instance dismissed the claim on 30 October 2025 after the appointed expert committee concluded that the respondent had failed to demonstrate entitlement to any amounts. However, the Court of Appeal reversed this decision on 16 March 2026, ordering the appellants jointly to pay EUR 59,933,939 (representing 15% of EUR 393,595,554) plus 5% interest from the date of the judicial demand on 31 July 2023 until full payment.

The Court of Cassation’s Findings

Corporate Separateness and Lifting the Veil

The Court of Cassation upheld the appellants’ first ground of appeal, finding that the lower court erred in holding the First and Second Appellants liable.

The Court reaffirmed the established principle under Articles 83, 84, and 162 of the UAE Commercial Companies Law (Federal Decree-Law No. 2 of 2015) that a limited liability company acquires its legal personality from the date of its registration in the Commercial Register and possesses a personality independent of its shareholders. The Court held that:

• The First Appellant was not a party to the MOU, having not yet been incorporated at the time of its execution (it was only established on 24 December 2017, approximately a year and a half after the MOU was signed on 17 April 2016). The Second Appellant, as director and owner of the Third Appellant, signed the MOU in his capacity as legal representative of the Third Appellant, not in his personal capacity. Under Article 252 of the UAE Civil Transactions Law, a contract does not create obligations on a third party’s patrimony when signed by a representative.
• A manager of a limited liability company is not personally liable for obligations arising from the company’s activities unless fraud, abuse of authority, gross negligence, or violation of law is proven — and such fraud is never presumed but must be positively established.

Mischaracterisation of the MOU

The Court found that the Court of Appeal fundamentally erred in characterising the MOU as a “continuing brokerage contract.” Applying the principles under Articles 254, 255, 256, 261, and 263 of the UAE Commercial Transactions Law (Federal Law No. 18 of 1993), the Court held that:

• The MOU was properly characterised as a preliminary agreement for an exclusive commercial agency in Egypt, not a brokerage contract.
• The legal nature of brokerage (requiring mediation for a specific contract in return for a fee) was fundamentally different from the tasks outlined in the MOU, which involved providing legal support, company registration, and project development activities.
• Even assuming the MOU could give rise to financial entitlements, such entitlements were expressly conditional on the conclusion of a final agreement and the establishment of a joint commercial activity — conditions that were never fulfilled.

Failure to Establish Entitlement to Commission

The Court emphasised the settled legal principle that a broker is entitled to commission only where the transaction is concluded as a result of the broker’s efforts, and that no commission is payable if the contract is not concluded. The Court found that:

• Both the original and supplementary expert reports concluded that the respondent failed to perform his essential obligations under the MOU, which itself led to the failure to conclude the final contract.
• There was no evidence of any communication or contact between the parties after 9 August 2016.
• The bank transfers relied upon by the Appeal Court had no proven connection to the subject matter of the dispute.
• Even if commission were owed, it should have been calculated from the project’s profits or revenues — not from the total value of amounts transferred to the Third Appellant, which represented capital for equipment and project construction, not returns.

Licensing Requirements for Brokerage

The Court noted that brokerage activities in the UAE require a licence and registration with the Chamber of Commerce and Industry, which the respondent did not possess — a matter of public order.