Appeal No. 812/2025 Commercial | Judgment dated 29 September 2025
The Abu Dhabi Court of Cassation has reaffirmed a key principle of banking and inheritance law: heirs are not personally liable for the banking debts of a deceased relative. Their responsibility is limited strictly to the inherited estate and any collateral or securities provided by the deceased.
Background
The case arose from a dispute over a banking facility structured as an Ijara ending with ownership valued at AED 4 million. The facility was secured by a second-degree mortgage and a cheque for AED 6.4 million, supported by personal undertakings from the borrower.
Following the borrower’s death, the bank-initiated proceedings against his heirs, seeking recovery of the outstanding debt plus variable interest. Both the Court of First Instance and the Court of Appeal ruled in favour of the bank, prompting the heirs to appeal to the Court of Cassation.
Court’s Reasoning
The Court of Cassation partially overturned the appellate judgment and amended its operative part to limit the heirs’ liability to the extent of the estate they inherited from their deceased relative and to the securities provided by the deceased in favor of the bank, without extending such liability to their personal assets. The Court based its reasoning on Article 121 bis of the Central Bank Law (as amended by Federal Decree-Law No. 23 of 2022), which requires financial institutions to secure adequate collateral and limits enforcement to those securities.
The Court also relied on the general inheritance principle that “no succession occurs except after payment of debts,” clarifying that heirs may not be held personally liable for obligations exceeding the value of the estate.
Key Legal Principle
Heirs’ liability for a deceased debtor’s banking obligations is confined to the value of the inherited estate and any securities provided by the deceased.
This interpretation ensures a balance between creditor protection and fairness to heirs, safeguarding them from inheriting financial obligations they did not assume.
Judicial Trends
Recent case law has reflected consistent application of Article 121 bis across the UAE’s higher courts:
- Abu Dhabi Court of Cassation (Appeals Nos. 102/2023 and 111/2023): Declined to apply Article 121 bis retroactively to facilities issued before its amendment.
- Dubai Court of Cassation (17 August 2023): Confirmed that Article 121 bis does not apply to facilities granted prior to 2022.
- Abu Dhabi Execution Case No. 17/2023: Enforcement suspended where only personal guarantees existed, absent secured collateral.
- Dubai Appeal No. 995/2023: Limited the scope of Article 121 bis to natural persons and sole proprietorships, excluding corporate entities.
Implications for Banks and Borrowers
This ruling reinforces the limited scope of recovery in cases involving deceased debtors. For banks, it highlights the importance of obtaining and maintaining sufficient securities when granting facilities. For individuals, it offers assurance that heirs will not face personal enforcement actions beyond the inherited estate.
The decision further aligns the UAE’s banking enforcement framework with international standards of fairness and due process, ensuring that liability remains proportionate to the assets and securities legally available for satisfaction of debts.
Alsuwaidi & Company’s Banking & Finance team continues to track significant judicial and regulatory developments shaping the UAE’s evolving financial landscape, reinforcing the nation’s position as a leading financial centre committed to transparency, stability, and investor confidence. To discuss how these changes may affect your banking and finance operations, connect with the author Feras Kalash at Feras.Kalash@alsuwaidi.ae