July 14, 2024 6:13 pm in Dubai

Habib Al Mulla and Partners obtains decisive court precedent addressing the extent of a corporate branch’s liability in enforcement proceedings

Contacts

  1. Habib Al Mulla and Partners is proud to announce a major win in a case rehearsed before the Dubai Court of Cassation, wherein a long-awaited precedent was set.
  2. In a landmark decision issued on the 14th of May 2024, the Dubai Court of Cassation addressed an area of ambiguity surrounding a creditor’s ability to enforce a judgment against a company for a debt incurred by its branch.   
  3. This issue, although widely addressed in comparative laws and jurisprudence, had not previously been expressly addressed by the Dubai judiciary, thereby leaving creditors uncertain of whether a company and its branch had separate legal personalities.
  4. Our legal team, comprised of Ahmed Al Zaabi (Senior Associate) and Mohamed El Khatib (Principal Partner and Head of Dispute Resolution) illustrated to the Cassation Court how there are other aspects of law where a branch is considered inseparable from its ‘parent’ entity such as in liquidation proceedings, wherein its branch is statutorily required to immediately proceed with its own liquidation and closure.  This argument implied without a doubt that the branch, while operationally distinct is merely an extension of the parent company and enforcement should therefore extend both of them considering they are one and the same debtor (as opposed to the parent-subsidiary scenario). 
  5. The Cassation Court accepted this argument and declared that enforcement should be permitted against the ‘parent’ company as if it was the principal debtor (i.e. the branch).  
  6. This decision addresses a critical issue in the realm of UAE commercial and corporate law and litigation, thereby offering clearer guidance on the enforceability of judgments and representing a progressive step towards a more cohesive practical framework.

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