Dubai court orders investor to repay $2.4m for defaulting on a loan repayment

The Dubai Civil Court has ordered an Asian investor to pay $2.4 million, or its equivalent in UAE dirhams, plus a legal interest of 5% annually from the date of the judicial claim until full payment.

The ruling was issued after it was proved that the defendant defaulted on a loan repayment to another investor by the agreed deadline.

The case dates back to the time when an Asian investor filed a civil lawsuit, stating that he had an agreement loan with the defendant in December 2024, under which the latter received $2 million, to be repaid by April 2025 at the latest, as per a promissory note signed by the defendant in the presence of two witnesses, which included a penalty clause for delayed payment.

The plaintiff indicated that the defendant failed to make the payment by the specified date, causing him financial damages and prompting him to resort to legal action to demand the return of the principal loan amount, along with the value of the penalty clause and legal interest, based on the documents submitted with the case file.

During the trial, the defendant argued that Dubai courts lacked jurisdiction to hear the dispute, insisting on the jurisdiction of courts outside the country.

He also requested a reduction of the value of the penalty clause, but the court rejected this argument, affirming the jurisdiction of Dubai courts to hear the case as he was residing in the country.

The court was satisfied with the validity of the document and the proved receipt of the loan amount by the defendant.

It also relied on the official translation which showed that the agreed penalty clause was 1 per thousand daily of the total debt for each day of delay.

Therefore, the court obliged him to repay the loan amount in addition to $400,000 as the value of the penalty clause for the delay period, bringing the total amount due to $2.4 million.

The court stated that as the defendant did not provide any evidence to prove that the penalty clause exceeded the actual harms that the plaintiff had befallen, his request for the penalty amount to be reduced should be rejected.

The court also ordered the defendant to pay the legal interest along with the incurred charges, expenses and lawyer’s fees.