November 29, 2023 - 1:37 am in the UAE

    +971 4 4230000   |

Banks: do it yourself – serving notice of assignment

October 3, 2023

Cassation verdict affirms that banks can notify paymasters of the assignment of receivables in any way, shape or form (including via the lawsuit) in case the Assignor had failed to do so

Among the most tangible pieces of security that banks can take in exchange for financings are assignments of receivables.  This can be a general assignment or can be project or paymaster specific.

To perfect this security, an assignment of receivables agreement is entered into with the customer whom is usually provided with a standard template named ‘Notice of Assignment’ that the customer is expected to issue and serve on the relevant paymaster.

The Notice of Assignment will set out that the receivables from the paymaster have been assigned to for example, the bank and will designate a bank account that the paymaster must pay all the receivables into (usually held with the Assignee bank). 

However, there are instances wherein the customer does not follow up on the promise to serve the paymaster with the Notice of Assignment.  There are also instances wherein there is a failure to provide adequate evidence of such service being made.  Such events allow the paymaster to argue that the assignment is not binding towards them as it was never perfected.  This was the scenario in a recent Dubai litigation that we were handling for a UAE financial institution.  

The Courts of First Instance and Appeal ruled that the paymaster (an insurance company) was not liable for not paying the receivables to the bank as it was never served with the Notice of Assignment prior to the lawsuit being filed.

In August 2023, the Court of Cassation reversed the findings of both the Court of First Instance and Court of Appeal when it stated (contrary to what was previously decided) that:

  1. Service can be done by the bank on the paymaster.
  2. This service can be done in any way, shape or form as there are no statutory guidelines behind the method of service.
  3. The mere fact of the defendant/paymaster being served with notice of the lawsuit that aims to enforce on assigned receivables against is considered sufficient for the assignment to take effect towards them, as it satisfactorily makes the paymaster aware of the assignment.

The bank was therefore deemed entitled to compel collection of the receivables starting from the date of service of the lawsuit on the defendant/paymaster and the Cassation Court considered that the bank’s request to quantify those receivables for collection should be accepted.


  1. Better late than never: Service can be made before or long after a default occurs by the customer and should be at the forefront of any remedial/recovery strategy that the bank employs.
  2. Do it yourself: The bank can serve the paymaster with the Notice of Assignment where the customer fails to do so.
  3. More than one method of service: There is no specific method of service (albeit the Federal Factoring and Assignment of Receivables Law No. 16 of 2021 has something to say about what the notice should look like).

For any queries about this judgment or about enforcing on assigned receivables more generally, please do not hesitate to reach out.


Ali Dakhlallah

Head of Banking and Finance Litigation

Yamen Deeb

Senior Associate

Ahmed Alzaabi


Abdulrahman Alqassem


Youssef Elgazairly


Thank you! Your subscription has been confirmed. You'll hear from us soon.
Subscribe to our Newsletter
Receive regular updates on laws, reforms and firm news.