By Dr. Abdultaiyab Bahrainwala, Partner, Head of Corporate, and Jouslin Khairallah, Founder & Managing Director, Head of Litigation.
A practical analysis of Abu Dhabi Court of Cassation Judgment No 720 of 2026 Commercial
A borrower’s retirement does not give a bank an unrestricted right to continue deducting the original instalments from a substantially lower pension. In a judgment issued on 3 September 2026, the Abu Dhabi Court of Cassation held that a bank was required to restructure three financing facilities so that monthly deductions did not exceed 30% of the customer’s retirement income. The ruling is important because it treats the relevant Central Bank framework as an enforceable legal obligation and explains how courts should respond when contractual repayment arrangements collide with mandatory protections for retirement income.
The ruling in one sentence
Where a financing term extends into retirement and the pension remains the agreed source of repayment, the bank must restructure the facilities so that deductions do not exceed 30% of the pension, subject to the facts and governing legal framework of the case.
The dispute began with a dramatic fall in income
The customer had entered into three credit facilities with the bank: a sukuk sale by murabaha, residential finance structured as a specified ijara, and vehicle murabaha finance. Before retirement, his monthly salary was AED 71,265.67, and the combined monthly instalments for the three facilities were AED 36,825. The repayment arrangements were therefore made against the background of an employment salary paid into an account with the bank.
The position changed on 1 April 2025, when the customer retired and his monthly income fell to a pension of AED 41,132.23. The bank nevertheless continued deducting the original instalments without a corresponding reduction. According to the court-appointed banking expert, the monthly deductions represented approximately 89.6% of the pension. In practical terms, almost the entire retirement income was being absorbed by debt service.
The customer brought Commercial Case No. 120 of 2026 before the Al Ain Court of First Instance. He sought repayment of sums allegedly deducted above the permitted level, compensation, and an order limiting future deductions to 30% of his pension. The dispute therefore concerned both past deductions and the continuing structure of repayments until the outstanding finance was fully discharged.
The case moved through three judicial stages
On 7 May 2026, the Court of First Instance ordered the bank to reduce the monthly instalment to 30% of the pension, calculated at approximately AED 12,339.66 per month. It also ordered repayment of AED 270,528.95 as the excess deducted from June 2025 through May 2026 and awarded AED 10,000 in compensation.
The bank appealed. On 10 June 2026, the Court of Appeal set aside the first-instance judgment and dismissed the customer’s claim. The customer then filed Cassation No. 720 of 2026. The Court of Cassation overturned the appellate judgment, rejected the bank’s appeal on the merits, and reinstated the first-instance decision. It also ordered the bank to bear the relevant fees, expenses, and specified legal costs.
This procedural history matters. The Court of Cassation did not merely send the dispute back for reconsideration. It found the matter ready for determination, addressed the merits, and confirmed the operative relief granted at first instance.
Why the 30% pension limit was legally binding
The central legal question was whether the 30% limit was only an administrative or supervisory recommendation, or whether it imposed an obligation capable of enforcement by the courts. The Court of Cassation adopted the latter view.
The judgment referred to Article 150 of Federal Decree-Law No. 6 of 2025 concerning the Central Bank, the regulation of financial institutions and activities, and insurance business. The court identified that provision as corresponding to former Article 121 bis under the earlier legislative framework. It also relied on the Central Bank’s regulatory framework for bank loans and services offered to individual customers, including Article 7 of Regulation No. 29 of 2011 and the relevant explanatory circulars.
Under the framework described in the judgment, total deductions from a borrower’s salary or regular income for loans and facilities generally must not exceed 50%. A more specific rule applies where the term of a loan or banking facility extends to retirement: banks and finance companies must arrange a reduction so that deductions are limited to 30% of the retirement salary or pension.
The Court of Cassation rejected the suggestion that these rules were merely internal guidance with no binding effect on the judiciary. Its reasoning was that the obligation did not rest on a circular in isolation. It arose from the combined effect of applicable legislation, regulation, Central Bank directions, and established cassation principles. A court could therefore examine compliance and grant civil relief where a bank failed to restructure qualifying facilities.
Why this point matters
The judgment connects regulatory compliance with private-law remedies. A breach may affect the enforceability and administration of repayment arrangements between the bank and customer, rather than remaining solely a matter between the bank and its regulator.
Retirement triggered a duty to restructure
The ruling does not suggest that retirement cancels a borrower’s debt. The outstanding balance remained payable. What changed was the lawful rate at which repayment could be taken from the pension. The court distinguished between the existence of the debt and the method of collecting it from a protected source of income.
Several facts supported the duty to restructure. The facilities extended into the customer’s retirement. Salary transfer had been the agreed source of repayment, and no alternative repayment source was shown. After retirement, the pension continued to be deposited into the same bank account. The bank was therefore aware of the change in the character and amount of the customer’s income and continued taking the original instalments from that income.
On those facts, maintaining deductions that consumed approximately 89.6% of the pension was incompatible with the governing limit. The bank was required to reprogramme or restructure the facilities so that the aggregate monthly deduction did not exceed 30% of the pension. The debt was not written off; its repayment profile had to be adjusted.
A future payment obligation can determine cassation jurisdiction
The judgment also resolved a procedural objection concerning the monetary threshold for cassation. The bank argued that the appeal was inadmissible because the customer’s monetary claim was below the applicable threshold. The Court of Cassation rejected that objection.
The customer’s final claims were not confined to a fixed refund for historic deductions. He also sought an order limiting monthly deductions to 30% until the finance was fully repaid. That continuing relief had an ascertainable financial value. With an outstanding balance stated at AED 2,894,732.52 and future payments continuing over time, the value of the dispute exceeded the jurisdictional threshold.
The lesson is procedural but commercially significant: the value of a claim may include the measurable effect of prospective relief, not only sums already due on the filing date. Parties assessing appeal rights should identify every final claim and calculate the value of continuing obligations where the law permits them to be valued.
What the judgment means for banks and finance companies
Banks should treat a customer’s retirement as a credit-administration event requiring prompt review where any facility continues beyond the retirement date. Existing instructions to collect a fixed instalment may no longer be lawful when the repayment source changes from salary to pension. The relevant inquiry is not limited to one loan in isolation; the judgment examined the combined deductions across three facilities.
Operationally, a bank should verify the retirement date, pension amount, outstanding balances, maturity dates, and all deductions taken from the same regular income. It should then document any restructuring calculation and communicate the revised instalment schedule clearly. Delayed action can create exposure to refund claims, expert proceedings, compensation, litigation costs, and regulatory scrutiny.
Banks should also avoid assuming that contractual wording automatically prevails over mandatory regulation. UAE contracts operate within the governing statutory and regulatory framework. A fixed instalment agreed during employment may need to be adjusted when a rule expressly protects retirement income and the facility was structured to continue beyond retirement.
What retired borrowers should examine
A retired borrower who believes excessive deductions are being made should begin with evidence. The most useful documents will usually include the finance agreements and schedules, salary-transfer documentation, retirement certificate, pension statements, bank statements from before and after retirement, notices sent to the bank, and any restructuring proposal or refusal. Where several facilities exist, the aggregate deduction should be calculated rather than examining each debit separately.
The borrower should also distinguish between a request to reduce future deductions and a claim to recover past excess deductions. The first concerns the ongoing repayment structure. The second requires a reliable month-by-month calculation of the amount actually deducted, the permissible amount, and the difference. In the reported case, a banking expert’s analysis was central to establishing the deduction ratio and quantifying the excess.
A borrower should not assume that the judgment produces an automatic refund in every case. Liability and relief will depend on the contracts, the source of repayment, the retirement date, the applicable version of the law and regulatory instruments, the evidence of deductions, limitation issues, and the procedural route used. Early legal assessment can help identify whether a complaint, negotiated restructuring, regulatory escalation, or court claim is appropriate.
The continuing role of banking experts
The dispute shows why banking experts often play a decisive role in UAE finance cases. Legal rules may define the permitted percentage, but the court still requires an accurate account of what happened. An expert can reconcile facility statements, identify monthly debits, separate principal and profit components, confirm outstanding balances, and calculate excess deductions over the relevant period.
Expert evidence does not replace legal analysis. The court must still determine whether the regulatory limit applies, whether the facilities should have been restructured, and what relief follows. The strongest cases therefore combine a clear legal theory with a complete financial record that another professional can reproduce.
A significant consumer protection ruling with defined limits
The judgment gives practical force to the protection of retirement income. Its importance lies in the court’s refusal to treat the 30% rule as optional and in its recognition that a bank’s collection practices must change when a customer moves from salary to pension under a facility that extends beyond retirement.
At the same time, the ruling should be read carefully. It does not extinguish valid financing liabilities, impose a universal 30% ceiling on every form of income, or decide every dispute concerning enforcement against other assets or security. Its reasoning is tied to pension deductions, the continuing facilities, the agreed repayment source, and the particular legislative and regulatory provisions considered by the court.
For banks, the practical message is to build retirement-triggered restructuring into servicing systems and dispute protocols. For borrowers, the message is to preserve financial records and challenge excessive pension deductions with precise calculations. For practitioners, the decision provides a strong authority for the proposition that applicable Central Bank rules can shape civil rights and remedies in the underlying banking relationship.
Conclusion
Abu Dhabi Court of Cassation Judgment No. 720 of 2026 confirms that repayment obligations survive retirement, but the manner of repayment may have to change. Where qualifying finance extends into retirement and the pension is the repayment source, deductions must be restructured within the applicable 30% ceiling. A bank that continues taking the original instalments risks being ordered to reduce future deductions, refund excess sums, pay compensation, and bear litigation costs.
The decision is a useful reminder that responsible lending does not end when credit is approved. It continues throughout the life of the facility, particularly when a foreseeable event such as retirement materially reduces the customer’s regular income.