Dubai Court of Cassation Confirms Jurisdiction and Guarantor Liability in Major Cross-Border Finance Dispute (9/10)

5 min 14 sec February 18, 2026 (Edited) الترجمة العربية

Written by

Dr. Hassan Arab

Partner, Regional Head of Dispute Resolution

h.arab@tamimi.com View LinkedIn Profile

Hend Al Mehairi

Associate

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Dina Assar

Senior Knowledge Lawyer

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Introduction:

The Dubai Court of Cassation has issued a significant judgment confirming the UAE courts’ mandatory jurisdiction over defendants domiciled in the UAE, rejecting attempts to divert proceedings to foreign courts or arbitration when the party invoking those provisions is a non‑signatory. The Court also reaffirmed the independence and enforceability of personal guarantees notwithstanding foreign insolvency proceedings, and it upheld a substantial monetary award against the guarantor. The appeal was dismissed in full, and the lower courts’ orders were affirmed.

Background:

The dispute arose from two cross‑border acquisition structures financed by the creditor and supported by personal guarantees from the appellant. The first related to a 2009 shareholders’ agreement; the second to a 2011 shareholders’ agreement. In both transactions, the appellant issued written guarantees securing the borrower’s obligations. The guarantees were drafted as continuing obligations, intended to cover the ultimate residual balance after any recoveries from the primary obligor.

Following payment defaults and a 27 September 2022 Dutch bankruptcy judgment against the borrower, partial distributions were made in the insolvency; however, a substantial balance remained outstanding. The creditor commenced proceedings in Dubai to recover the unpaid balance under the guarantees. The court of first instance appointed an expert to reconcile the accounts and quantify the shortfall, after which judgment was entered for the creditor. The Court of Appeal affirmed. The guarantor then brought a cassation appeal challenging jurisdiction, applicable law, arbitrability, the effect of foreign insolvency, and quantum. That appeal has now been dismissed.

The Court’s reasoning:

1-Mandatory jurisdiction of UAE courts despite foreign forum clauses:

The guarantor relied on forum‑selection clauses in the 2009 and 2011 agreements designating the courts of England and Alberta, Canada. He further argued that the transactions were negotiated and performed abroad, and thus should not be heard in Dubai. The Cassation Court rejected these contentions. It reiterated the foundational principle of UAE civil procedure that proceedings may be brought before UAE courts when the defendant is domiciled or resident in the UAE. Where jurisdiction is grounded on such mandatory connecting factors, a contractual clause purporting to confer jurisdiction on a foreign court cannot divest the UAE courts of their competence. The Court therefore confirmed the Dubai courts’ jurisdiction over the claim against the UAE‑domiciled guarantor and treated the foreign forum clauses as ineffective to the extent they conflicted with mandatory rules.

2-Proof of foreign Law:

The Court emphasized that a party seeking the application of foreign law bears the burden of putting the precise legal texts before the court, supported by a complete and reliable Arabic translation. Mere references to foreign concepts or excerpts from secondary sources are insufficient. If the relevant foreign provisions are not produced in full, the court may apply UAE law. Here, the guarantor’s submissions did not satisfy that standard, which undermined the defenses predicated on non‑UAE law.

3-Non-Signatory cannot invoke an Arbitration Clause:

To defeat court jurisdiction, the guarantor invoked an arbitration clause contained in a separate agreement that provided for arbitration under the Netherlands Arbitration Institute rules. The Cassation Court applied the principle of contractual relativity: arbitration is strictly consensual and binds only those who have agreed to it. A person who is not a party to the arbitration agreement cannot rely on it to compel arbitration or to oust the courts’ jurisdiction. Because the guarantor did not sign the agreement containing the arbitration clause, he could not deploy that clause to resist the creditor’s claim under the guarantees.

4- Foreign insolvency does not bar proceedings against a guarantor:

The guarantor argued that the borrower’s Dutch bankruptcy vested exclusive jurisdiction in the foreign court and precluded parallel proceedings in Dubai. The Court disagreed. It characterized bankruptcy as a status proceeding that organizes collective enforcement against the debtor’s estate; it does not absorb all disputes arising from related contracts. The personal guarantee is an independent obligation running from guarantor to creditor. Accordingly, the creditor may pursue the guarantor for any shortfall remaining after insolvency distributions. The Court referred to Article 1089 of the Civil Transactions Law to clarify that the creditor should lodge its claim in the bankruptcy to preserve recourse against the guarantor to the extent delay could cause harm; however, that procedural duty does not bar a separate action on the guarantee.

5-Other defenses rejected:

The Court disposed of the remaining defenses in clear terms. First, it rejected the time‑bar argument associated with Article 1092, holding that the guarantees were framed as continuing guarantees that capture the final outstanding balance rather than discrete periodic debts. Second, it rejected the contention that a good‑faith negotiation step was a condition precedent to litigation, reiterating that substantive rights do not lapse absent a specific legal basis. Third, it dismissed the attempt to invalidate the guarantees based on the guarantor’s alleged inability to pay, noting that capacity and solvency are assessed at the time the guarantee is granted and that monetary obligations are generally enforceable by payment of value.

6-Reliance on expert evidence:

The Court also upheld the lower courts’ reliance on the court‑appointed expert’s accounting analysis. The expert reconciled the financing streams, applied the contractual interest provisions, and deducted amounts realized in the Dutch insolvency to determine the residual debt. The Cassation Court found that evaluation of such technical evidence lies within the trial courts’ discretionary fact‑finding authority and that the expert’s conclusions were reasoned and supported by underlying documents.

The Outcome:

The Court of Cassation dismissed the appeal and affirmed the orders requiring the guarantor to pay USD 96,706,986 (or AED equivalent at the time of enforcement), plus 5% per annum interest from judicial demand until full payment, together with costs, AED 2,000 advocate’s fees, and confiscation of the security deposit. The Court’s disposition aligns with the lower courts’ findings on liability and quantum.

Why this decision matters:

This ruling provides clear guidance for cross‑border finance disputes involving UAE‑based guarantors. It strengthens jurisdictional certainty by confirming the primacy of UAE courts’ mandatory jurisdiction over locally domiciled defendants, it limits the ability of non‑signatories to leverage arbitration clauses in separate contracts, and it clarifies that foreign bankruptcy does not extinguish a guarantor’s independent liability. It also underscores the practical burdens of invoking foreign law in UAE proceedings and the continuing nature of well‑drafted guarantees.