Recent Dubai Court of Cassation Judgment: Licensing Restrictions and the Legal Threshold for Public Policy Nullity

7 min 9 sec January 16, 2026 (Edited) الترجمة العربية

The Dubai Court of Cassation recently issued a judgment  that addresses a recurring and commercially consequential question in the UAE: does a party’s conduct of activities beyond the scope of its commercial licence render its contracts void for violation of public policy, or does it merely attract administrative consequences while leaving private bargains intact? At all three levels, the Dubai courts rejected attempts to treat licensing irregularities as per se grounds of nullity, drawing a clear boundary between matters that implicate public policy and those that do not.

The result is an approach that preserves contractual certainty while reserving nullity for genuine public policy infringements. The Court of Cassation affirmed dismissal of the claim to void and rescind the parties’ “services” agreement, endorsing the lower courts’ reasoning. The court also confirmed, in this case, that a misalignment between licensed activities and performance commitments is an administrative or regulatory infraction rather than a defect that voids the contract itself.

Background

The dispute arose from a services agreement under which the defendant undertook to provide integrated petroleum-related services to the claimant group. The claimants contended that the agreement embedded activities that the defendant was not licensed to perform — such as “fund-investment services, and crude oil trading” — and so contravened UAE licensing rules and public policy. They sought a declaration of invalidity and rescission on the basis that the agreement’s object and performance were illegal and contrary to public policy.

At first instance, the Dubai Court of First Instance rejected the claim, holding that the record did not establish a breach of such character as to trigger nullity. The court distinguished between public policy nullity and regulatory or administrative contraventions, and found the evidentiary record inadequate to show that the contract’s object itself was unlawful in a manner that would void the agreement.

On appeal, the Court of Appeal affirmed the lower court’s decision, reiterating that asserted misalignments between licensed scope and contractual activities, even if proven, do not amount to a public policy defect that would nullify the contract; at most, they suggest administrative non-compliance. The Court of Cassation dismissed the further challenge, endorsing both lower courts’ analysis and outcome.

Key findings

1. Substantive test for contract nullity under the Civil Transactions Law

The courts addressed the substantive test for contract nullity under the Civil Transactions Law and grounded their analysis in the Civil Transactions Law’s taxonomy of contract validity and nullity. The courts, at all levels, distinguished between a valid contract, a voidable contract, and a void contract for public policy reasons. The judgments restated that a contract is void if its subject matter, purpose, or required form mandated by law is contrary to public policy or morals; such nullity arises ex officio and produces no legal effect. The Court of First Instance explained:

“The contract is valid … when it is lawful in origin and description … issued by a person with capacity, with a permissible subject and lawful purpose …” (Article 209 of the Civil Transactions Law); whereas

“A void contract … where its pillar, subject, purpose or the form required by law for its conclusion is defective — this is not lawful in origin or description — has no effect and does not admit ratification”; and

“If the subject of a contract is contrary to public order or morals, the contract is void” (Article 205).

The Court of Cassation reiterated the same principles and confirmed that the public policy nullity is exceptional and must be grounded in a clear conflict with public policy or morals or a mandatory legal form, not in mere administrative non-compliance.

“If the subject of the contract is contrary to public order or morals, then the contract is void according to Article 205 of the same law … with the result that a contract … contrary to public order or morals, or the form imposed by law for its conclusion, entails no effect and does not admit ratification.”

The Dubai Court of Cassation also insisted that nullity demands clear proof of an actual public policy contravention embedded in the contract’s object or legally required form, not merely allegations that performance might exceed licensed activities.

The court found “the claim devoid of proof” of a contractual breach by the defendant rising to a public policy violation, observing that alleged misalignments with licensed activities — even if they led to administrative breaches — were not shown to void the agreement itself. The court refused to equate the alleged licensing overreach with per se nullity, and the appellate court endorsed that approach as legally sound and adequately reasoned.

2. Alleged overreach of licensed activities does not make the contract void for public policy reasons 

The claimants argued that the defendant’s license covered only the “trade of petroleum derivatives outside the State”, while the services agreement called for wider activities (trading operations and investment-related services).

The courts rejected the conclusion that any licensing activity mismatch automatically makes a contract void as a matter of public policy. The Court of First Instance held that any such conflicts are not, per se, violations of public policy ensuring nullity, and the record did not prove contractual non-performance by the defendants. The court emphasised the absence of a statutory text mandating nullity in these circumstances and the lack of evidence of breach. The Court of First Instance held:

“The claim is devoid of proof of breach of contractual obligations … the alleged contraventions to licensed activities do not establish nullity for public policy reasons; there is no legal text supporting that; at most, they suggest administrative infractions.”

The Court of Appeal adopted the Court of First Instance’s reasoning and affirmed it, noting that the first instance judgment was “correct in law” and sufficiently reasoned, with no error in applying the governing principles to the evidence.

The Court of Cassation was explicit that exceeding one’s licensed activity is, on these facts, an administrative matter that does not itself ground public policy nullity of the contract. The appellate judgment “ruled to dismiss the claim on the basis that practice of activities listed in the agreement, though contrary to those licensed, would amount to administrative violations; it does not justify nullity of the agreement; the papers are devoid of proof of contractual breach”.

The Court of Cassation summarised the principle: “This contention is unsound … as this Court’s jurisprudence holds that violation of licensed activity restrictions is an administrative breach that does not entail nullity.”

The above establish a clear rule: without a specific statutory provision rendering the contract void, or a concrete clash with public policy/morals or mandatory form, licensing overreach is not a per se ground for nullity.

3. Characterisation of the agreement as petroleum services within licensed scope

The Court of Cassation examined the text of the agreement and its annexes. It found the contract was for petroleum supply and related services — not the provision of “fund investment” services or “managing others’ funds” in the public policy sense alleged. The court identified the bundle of services as integrated petroleum supply and operational support (including procurement management, retail fuel support, etc), consistent with the defendant’s licensed petroleum trading activities. In short, the agreement “concerned petroleum services and related activities”, aligned with the company’s commercial license. The Court of Cassation detailed examples from Annex 1 confirming the agreement’s nature as an integrated petroleum-supply services package. This supported the lower courts’ view that the contract was not inherently contrary to public policy or the licensing regime.

In consolidating these holdings, the Court of Cassation confirmed that breaches of licensing limitations would, at most, invite administrative measures and not invalidate the bargain. “Even if [the] licenses…do not allow [activities] outside [the free zone], and they nonetheless carried out such activities in breach of such legal restrictions, this alleged violation would merely trigger administrative penalties… the transactions would remain valid and enforceable.”

The courts’ approach aligns with the UAE’s broader treatment of companies and licensing law. The Ministry of Justice’s opinions on the Companies Law emphasise that failure to comply with establishment or registration requirements engages public policy concerns for local companies, while other operational or procedural non-compliances are not invariably mandatory in nature and do not necessarily void transactions.

In particular, the Ministry has long distinguished between establishment and licensing provisions of the Companies Law — matters of public policy for local entities — and other regulatory norms that do not, without explicit legislative direction, affect the validity of contracts inter se. The public policy nullity remedy is reserved for contracts whose object or legally required form contravenes mandatory rules, not for every licensing deviation that may arise in the course of performance.