Landmark Legal Update: Commercial Licences Now Recognised as Attachable Assets in Debt Recovery

We are pleased to share the General Assembly of the Dubai Court of Cassation judgment establishing a new legal principle confirming that commercial licenses can fall within the scope of an attachment order. This marks a shift in the legal framework regarding the enforcement of creditors’ rights in the UAE.

On 31 January 2024, the General Assembly issued its judgment in Cassation No. 1 of 2024 (the “General Assembly Judgment”). This judgment introduced a new legal principle affirming that commercial licenses can be seized and included in debt recovery. The General Assembly Judgment provided a broader interpretation of assets that could be subject to an attachment order for debt recovery.

The General Assembly noted that, under Article 391 of the Civil Transactions Law, all of the property of the debtor stands as security for the performance of his obligations, and, according to Article 247 of Federal Decree-Law No. 42 of 2022 promulgating the Civil Procedures Law, a creditor, as a general rule,  may seek to obtain an attachment on the real property and the movable assets of the debtor if the creditor fears the loss of the security to its right, save for the assets specifically excluded under Article 242 of said law or any other special law.

Furthermore, the General Assembly Judgment also noted that assets subject to a lien must be evaluated to be saleable; otherwise, they are non-transactional assets by nature or under the mandate of Article 98 of the Civil Transactions Law. It was recognized that the debtor’s commercial licenses, as intangible assets, enhance the company’s material value, thus they can be seized.

Moreover, the General Assembly Judgment acknowledged that commercial licenses plus being an intangible asset that contributes to a company’s material value, can also be materially assessed. The court clarified that both federal and local legislation in the UAE permits the sale of commercial licenses, subject to official approvals, prescribed fees, and compliance with laws regulating commercial activities.

This new legal principle allows for the attachment of commercial licenses and all intangible assets of a company, except those specifically excluded under Article 242 of said law or any other special law.

Additionally, this overturned a previous principle from Cassation No. 122 of 2018 (Real Estate), which asserted that a commercial license, being a personal authorization from a government entity to an individual for engaging in a specific activity, could not be seized or transferred as it had no value beyond the licensee. This prior view was based on the understanding that a commercial license, being non-transferable and personal to the licensee, did not serve the purpose of a seizure aimed at satisfying the creditor’s rights.

Based on the above, the General Assembly Judgment revokes the old principle and upholds the new legal principle that a company’s commercial license and all of its intangible assets can be the object of a lien unless they are non-transactional by nature or by operation of law.

Based on the Judgment which is a current Dubai Court of Cassation precedent it signifies an advancement in debt recovery cases. By allowing the attachment of commercial licenses, the court has broadened the scope of assets available for debt recovery. The consequences of this judgment will likely influence future legal interpretations and creditors strategies within the UAE and potentially in other jurisdictions observing these developments for debt recovery.

How can we help?

Al Tamimi & Company can provide valuable insights into the implications of the General Assembly Judgment and its impact on creditors. Our team of expert lawyers can provide comprehensive legal advice on debt recovery strategies, including the attachment of commercial licenses and intangible assets. Please reach out to our key contacts below to learn more.