“Dubai Discrimination” overturns a ruling prohibiting the insolvency of a female citizen

The Court of Cassation in Dubai, headed by Judge Zuhair Ahmed Bassiouni, overturned a ruling issued by the Court of First Instance in Dubai, and upheld by the Court of Appeal, not accepting a lawsuit filed by a female citizen employee declaring her insolvency, and its consequences, as a result of her inability to pay money owed to two parties, one of which is an Islamic bank. The second is another personal plaintiff, claiming that the debts owed by the plaintiff are the result of commercial transactions that took place between the employee and the defendants.

The Court of First Instance said in the merits of its first ruling, which was upheld by the Court of Appeal, that “the plaintiff requesting declaration of her insolvency did not clarify in the circumstances of her claim whether the debts she owed were the result of negligence, negligence, or intentionality, and that these debts were due to the purchase of 53,582 real estate shares in one of the major companies.” She was granted banking facilities from the bank under a Murabaha share sale contract, on the basis of which the bank purchased the shares for her benefit, and based on that The two courts considered it a merchant for conducting commercial business in accordance with the provisions of the Federal Commercial Transactions Law, and concluded that its insolvency is subject to the bankruptcy law, not insolvency.

The plaintiff’s defense agent, lawyer Muhammad Al-Awami Al-Mansouri, filed an appeal before the Court of Cassation asserting that the ruling of the court of first instance – which was upheld by the Court of Appeal – was marred by an error in applying the law, corruption in reasoning, and deficiency in justification, as he added to his client the status of a merchant, even though she did not have any Business or partnership licenses, or regularly engages in business professionally, but is merely an employee.

The defense asserted that the status of the commercial business based on the Murabaha contract with the Islamic Bank does not confer the status of a merchant on the bank’s client, as it is merely a procedure by Islamic banks in personal loans, and its client knows nothing about those shares, demanding proof of her insolvency in accordance with Federal Insolvency Law No. 19. of 2019, considering that the first ruling is flawed and requires it to be overturned.

The Court of Cassation ruled to overturn the contested ruling, confirming in the merits of its ruling that the defense’s appeal was valid, based on Article No. 2 of the Bankruptcy Law promulgated by Federal Decree Law No. 9 of 2016, which stipulates that bankruptcy provisions apply to companies subject to commercial companies provisions, or Any person who has the status of a merchant in accordance with the provisions of the law. Evidence that the debtor may be declared bankrupt if it is proven that he is a merchant and stops paying his commercial debt on the due date as a result of a disturbance in his financial position, or the availability of objective conditions for his bankruptcy.

The Court of Cassation explained that in order to acquire the status of a merchant, a person must engage in commercial business in his name and for his account, and take it as his profession, stressing that proving this falls on the plaintiff and not the person who confirms that he is not a merchant.

The court indicated that the appellant is an employee, receives a monthly salary, and does not have the status of a trader, adding that the court of first instance attributed the plaintiff’s subjection to the bankruptcy law in its first ruling to the fact that her debts resulted from commercial activities without the court of first instance stating what kind of commercial business she engaged in, whether in her name or For her account, and whether or not she took it as her usual profession, so it is a flawed ruling due to inadequacy in justification, and it did not examine the appellant’s claim, which is flawed. It must be annulled.

Based on the above, the Court of Cassation overturned the appealed ruling from the Court of First Instance on December 29, 2019, and the Court of Appeal upheld it on March 11, 2020, and referred the case to the Court of Appeal for a new ruling.

A person acquiring the status of a merchant depends on engaging in commercial activities and adopting them as a profession.