Civil Law and UAE: Unfair Banking Practices Claims

1. Meaning

Unfair banking practices are acts or omissions by a bank or financial institution that unfairly prejudice a customer, particularly where the bank:

imposes unclear or disproportionate contractual terms;

gives misleading information;

provides unsuitable financial advice;

makes improper charges;

mishandles customer instructions;

exercises contractual powers improperly;

fails to provide required information;

uses unfair collection or enforcement practices;

mishandles complaints;

breaches applicable banking or consumer-protection obligations.

In UAE litigation, an “unfair banking practice” is usually not a single independent cause of action. Depending on the facts, the claim may be framed as:

contractual breach + unfair term + misrepresentation + negligence + regulatory breach + consumer-protection violation + causally connected loss.

The UAE Central Bank's Consumer Protection Regulation is specifically intended to protect consumers using financial products, services and relationships with licensed financial institutions. (Central Bank of the UAE)

2. Current UAE Legal Framework

A. Civil Transactions Law

The current UAE Civil Transactions Law is Federal Decree-Law No. 25 of 2025, effective from 1 June 2026.

It provides the general civil-law framework concerning:

contractual obligations;

good faith;

compensation;

causation;

harmful acts;

invalidity/avoidance where applicable.

Older banking cases may refer to the 1985 Civil Transactions Law. Those cases should be treated as historical authorities where their article numbering differs from the current law.

3. Central Bank Consumer Protection Framework

The UAE Central Bank Consumer Protection Regulation applies to licensed financial institutions and establishes principles concerning consumer protection.

The regulatory framework addresses matters such as:

transparency;

disclosure;

fair treatment;

responsible conduct;

complaints;

consumer information;

financial products and services.

The current Central Bank Rulebook also contains a complaint-resolution framework. It identifies conduct that is deceptive, misleading, fraudulent or unfair as a basis on which a complaint may be treated adversely to the financial institution. (Central Bank Rulebook)

4. What May Constitute an Unfair Banking Practice?

1. Unfair contractual terms

Examples:

excessive unilateral variation rights;

unclear interest provisions;

unreasonable jurisdiction clauses;

disproportionate default charges;

hidden fees;

excessively broad set-off provisions.

2. Misrepresentation

Examples:

false statements about investment returns;

misleading statements about loan terms;

inaccurate representations about security;

false assurances concerning financial products.

3. Negligence

A bank may face a civil claim where a legally recognised duty exists and the bank's failure to exercise appropriate care causes compensable loss.

4. Improper exercise of contractual rights

Examples include disputes over:

termination;

suspension;

margin calls;

acceleration;

enforcement of security;

account restrictions.

However, the existence of a banking relationship does not automatically mean that every bank decision must satisfy a general judicial test of fairness.

5. Essential Elements of a Banking Claim

A useful examination formula is:

Bank Conduct → Legal Duty → Breach → Causation → Actual Loss → Remedy

The claimant must identify the precise legal wrong.

For example:

Unfair fee

→ contractual/regulatory restriction

→ prohibited or improperly imposed charge

→ financial loss

→ compensation/restitution or other remedy.

6. Unfair Banking Terms

In the DIFC, the Implied Terms in Contracts and Unfair Terms Law, DIFC Law No. 6 of 2005 provides a statutory reasonableness framework for applicable contractual terms.

Importantly, an unfair-term argument does not necessarily constitute a standalone claim for “breach of unfair terms.” The court may instead determine whether a particular contractual term is subject to the statutory reasonableness requirements.

This distinction was explained in Kishanchand Gangaram Bhatia v ICICI Bank Ltd [2014] DIFC CFI 018. (DIFC Courts)

7. Case Law

1. Kishanchand Gangaram Bhatia v ICICI Bank Limited [2014] DIFC CFI 018

Principle: Unfair banking terms

The claimant sought to rely on provisions concerning unfair contractual terms in a banking contract.

The DIFC Court explained that the relevant provisions did not themselves create a conventional cause of action for “breach of unfair terms.” Rather, where a party relies on a contractual term falling within the statutory framework, the opposing party may argue that the term is subject to the reasonableness test and is unreasonable. (DIFC Courts)

Importance

This is useful for distinguishing:

unfair contractual term

from

independent contractual breach.

8. Valentyna Plewka Kolesnik v Emirates NBD Bank [2024] DIFC SCT 242

Principle: Banking jurisdiction clauses and reasonableness

The claimant challenged the effect of an asymmetric jurisdiction clause in banking terms and conditions.

The case considered:

banking standard terms;

asymmetric jurisdiction clauses;

ambiguity;

DIFC jurisdiction;

the DIFC Unfair Terms legislation;

the contractual reasonableness test.

The Court ultimately rejected the particular jurisdiction argument, while discussing the statutory framework governing reasonableness of contractual terms. (DIFC Courts)

Importance

A banking customer cannot necessarily invalidate a term simply by describing it as unfair. The court examines the actual contractual wording and applicable statutory test.

9. Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin-Alpen (ME) Ltd [2018] DIFC CA 010

Principle: Mis-selling, regulatory breach and bank responsibility

This major banking dispute involved allegations concerning:

unauthorised financial services;

unsuitable investment advice;

contractual breach;

misrepresentation;

negligence;

vicarious responsibility.

The litigation concerned structured financial products and alleged failures concerning suitability and advice.

The Court dealt with the interaction between regulatory liability, contractual claims and civil claims. It also considered whether alleged representations and conduct could generate liability against the bank. (DIFC Courts)

Importance

It demonstrates that an unfair banking-practice claim may involve multiple overlapping legal causes of action, rather than merely a general allegation that the bank acted unfairly.

10. Rafed Abdel Mohsen Bader Al Khorafi v Bank Sarasin-Alpen [2009] DIFC CFI 026

Principle: Suitability, advice, negligence and causation

The original proceedings concerned allegations that financial products had been presented as suitable for the claimants' investment objectives.

The claimants alleged:

regulatory violations;

negligent advice;

misrepresentation;

breach of duty of care;

vicarious liability.

The Court examined whether the alleged breaches caused the claimed losses. It rejected the particular non-contractual claims against Bank Sarasin on the evidence before it. (DIFC Courts)

Importance

Unfair banking conduct + no proven causation/loss = unsuccessful damages claim.

11. Kirtanlal International DMCC v State Bank of India (DIFC Branch) [2022] DIFC CFI 041

Principle: Good faith cannot normally rewrite express banking rights

The claimant argued that the bank had exercised its contractual rights to suspend/terminate financing unfairly and in bad faith.

The Court rejected the argument that general principles of good faith could be used to restrict clear express contractual termination rights.

It emphasised that where sophisticated banking documentation expressly gives a bank a termination right, an implied obligation cannot ordinarily be used to contradict that contractual allocation of rights. (DIFC Courts)

Importance

This case provides an important limitation:

Unfairness cannot simply be used to rewrite an express banking contract.

12. Bank of Singapore Limited v Marj Holding Limited & Mohammed Ahmad Ramadhan Juma [2022] DIFC CFI 090

Principle: Banking facilities, security and alleged misrepresentation

The dispute concerned substantial banking facilities and securities.

The defendants alleged, among other matters, that the bank had:

re-evaluated loan-to-value ratios;

interfered with refinancing;

made representations concerning bonds;

communicated with a bond issuer;

failed to load facility limits;

made disputed margin calls.

The Court examined these allegations in the context of the express facility documentation and the pleaded contractual obligations. (DIFC Courts)

Importance

The case illustrates that disputes about margin calls, valuation, security and banking discretion must be analysed against the actual facility agreement.

13. Oheo Bank v Parker [2025] DIFC CA 006

Principle: Bank's payment obligations and Quincecare-type claims

The claimant brought claims for:

deceit;

misrepresentation;

breach of Quincecare duty;

regulatory breaches;

negligence.

The Tribunal rejected the claims.

The DIFC Court of Appeal discussed the bank's ordinary obligation to execute a valid customer payment instruction and the limited circumstances in which a bank's duty might restrict that obligation. (DIFC Courts)

Importance

This is particularly relevant to unauthorised-payment and fraud-related banking claims.

It shows that:

A customer alleging that a payment was harmful or induced by fraud does not automatically establish bank liability.

The precise mandate, bank knowledge, circumstances and applicable duty remain critical.

14. Gate MENA DMCC v Tabarak Investment Capital Ltd [2024] DIFC DEC 002

Principle: Bank/payment obligations and reasonable care

Although involving a digital-asset transaction rather than a conventional consumer banking dispute, the case discussed the relationship between:

contractual payment obligations;

reasonable care and skill;

customer instructions;

the statutory implied-term framework.

The Court referred to the reasoning of the UK Supreme Court in Philipp v Barclays Bank UK plc, including the distinction between a bank's strict obligation to follow a valid payment mandate and a more general duty of reasonable care where the contractual arrangement leaves the bank discretion. (DIFC Courts)

Importance

Useful for analysing payment disputes and alleged bank negligence.

15. Case-Law Summary

16. Common Types of Unfair Banking Claims

A. Hidden Charges

A customer may challenge charges where:

they were not adequately disclosed;

the contractual basis is unclear;

applicable regulatory requirements were breached;

the charge is inconsistent with the agreed terms.

Evidence:

account statements;

tariff sheets;

facility agreement;

customer communications;

disclosure documents.

B. Unilateral Interest Changes

Issues include:

whether the contract permits variation;

whether the calculation was correctly performed;

whether notice was required;

whether the change complied with regulatory requirements;

whether the bank exercised an express discretion consistently with the contract.

C. Improper Loan Termination

A borrower may allege:

Notice + contractual default + termination

was not properly established.

The bank may respond:

contractual termination right existed;

default occurred;

notice requirements were satisfied;

security enforcement was contractually permitted.

Kirtanlal demonstrates the importance of respecting clearly drafted contractual termination provisions. (DIFC Courts)

17. Unfair Debt Collection

Potential issues include:

excessive or misleading communications;

harassment;

disclosure of confidential debt information;

contacting persons improperly;

inaccurate statements about legal consequences;

failure to follow applicable regulatory procedures.

A claimant should establish the specific conduct, applicable legal/regulatory prohibition and resulting damage.

18. Mis-Selling of Financial Products

A bank may face allegations that it:

failed to understand the customer's investment objectives;

represented an unsuitable product as suitable;

failed to disclose material risks;

made inaccurate representations;

failed to comply with applicable regulatory requirements.

Al Khorafi is especially useful for understanding this category of dispute. (DIFC Courts)

19. Unauthorised Payments

A classic dispute is:

Customer says: "I did not authorise this transaction."

The court may examine:

the mandate;

signature;

electronic authentication;

OTP;

device information;

account records;

communications;

employee involvement;

fraud evidence;

bank knowledge;

contractual allocation of risk.

The legal position differs substantially between:

unauthorised payment

and

authorised payment induced by fraud.

The distinction is central to the reasoning discussed in Oheo Bank v Parker and Gate MENA v Tabarak. (DIFC Courts)

20. Bank's Duty of Care

The existence and scope of a bank's duty depends upon:

the contract;

nature of service;

applicable law;

regulatory obligations;

representations made by the bank;

circumstances creating an assumption of responsibility.

It should not automatically be assumed that a bank owes a broad fiduciary duty to every customer.

A claimant must identify the specific legal source of the duty.

21. Good Faith

Good faith is important in contractual relationships, but it has limits.

Incorrect approach:

"The bank acted unfairly, therefore the contract term is invalid."

Better legal analysis:

"The bank exercised an express contractual power. The claimant must establish that the exercise breached a particular contractual, statutory, regulatory or civil-law obligation."

Kirtanlal is particularly important on this point. (DIFC Courts)

22. Evidence Required

A strong unfair-banking claim normally requires documentary evidence.

Contractual evidence

account-opening documents;

loan agreement;

facility agreement;

mortgage/security documents;

guarantees;

terms and conditions;

fee schedules.

Transactional evidence

bank statements;

payment instructions;

transaction logs;

SWIFT messages;

electronic authentication;

correspondence.

Advisory evidence

suitability assessments;

investment-risk profiles;

product brochures;

recorded calls;

relationship-manager communications.

Regulatory evidence

complaints;

bank responses;

Central Bank correspondence;

Ombudsman records;

internal investigation records.

23. Causation

This is one of the most important requirements.

Suppose:

Bank gives misleading information → Customer purchases investment → Investment loses value

The claimant still needs to establish that:

the representation was actually made;

it was legally actionable;

the claimant relied on it;

the reliance caused the transaction;

the transaction caused the recoverable loss.

Al Khorafi illustrates the importance of proving the connection between alleged banking misconduct and the claimed financial loss. (DIFC Courts)

24. Remedies

Depending upon the legal basis, remedies may include:

1. Damages

Compensation for proven loss.

2. Restitution

Recovery of money improperly obtained or retained.

3. Rescission/avoidance

Potentially available where a transaction was induced by an actionable defect such as misrepresentation, subject to the applicable law and circumstances.

4. Declaration

A court may determine the parties' contractual rights.

5. Injunction

Appropriate where the legal requirements for injunctive relief are satisfied.

6. Regulatory complaint

A customer may use the applicable complaint mechanism in addition to, or before, civil proceedings.

The Central Bank's complaint framework provides for escalation to the relevant Ombudsman process where the licensed financial institution does not resolve the complaint within the applicable process. (Central Bank Rulebook)

25. Defences Available to Banks

A bank may argue:

the conduct was expressly authorised by the contract;

the customer received adequate disclosure;

the customer gave valid instructions;

the bank acted within its mandate;

the alleged representation was never made;

the statement was an opinion rather than fact;

the customer did not rely upon the statement;

there was no causation;

no recoverable loss was proved;

the claim is time-barred;

the customer accepted/affirmed the transaction;

the regulatory rule relied upon does not create a private civil cause of action.

26. Special Problem: Standard-Form Banking Contracts

Banking contracts are often standardised.

Therefore, courts may examine:

Clarity → Disclosure → Reasonableness → Applicable statutory protection → Customer circumstances

But standardisation does not automatically make a clause unfair.

Similarly, a customer signing a contract does not necessarily end the analysis where mandatory consumer-protection or unfair-term legislation applies.

27. DIFC vs Mainland UAE

This distinction is essential.

Mainland UAE

Generally consider:

Federal civil legislation;

Central Bank regulations where applicable;

UAE banking/financial regulation;

Evidence Law;

Civil Procedure Law;

relevant Emirate-specific legislation.

DIFC

Depending upon jurisdiction and transaction:

DIFC Contract Law;

DIFC Law of Obligations;

DIFC Implied Terms in Contracts and Unfair Terms Law;

DFSA regulatory framework;

DIFC Courts' case law.

A DIFC case should not automatically be treated as a statement of mainland UAE banking law.

28. Exam Answer Structure

For an exam problem involving an unfair banking practice, use:

Issue

What banking conduct is alleged to be unfair?

Rule

Identify:

contract;

Civil Transactions Law;

consumer-protection regulations;

applicable banking regulations;

unfair-term provisions;

negligence/misrepresentation principles.

Application

Analyse:

Bank conduct → Duty → Breach → Reliance → Causation → Loss

Defence

Consider:

Express contractual right → Valid mandate → Disclosure → No reliance → No causation → No proven loss

Remedy

Consider:

Damages / restitution / avoidance / declaration / injunction / regulatory complaint

29. Ultra-Short Revision Notes

Unfair Banking Practice = conduct by a bank that allegedly violates contractual, civil, consumer-protection or regulatory obligations.

Main categories

Unfair contract terms

Hidden charges

Misleading information

Mis-selling

Negligent advice

Improper termination

Unfair margin calls

Unauthorised transactions

Improper debt collection

Regulatory violations

Main formula

Bank Conduct + Legal Duty + Breach + Causation + Loss = Civil Banking Claim

Key case-law memory

Bhatia v ICICI → unfair terms/reasonableness

Kolesnik v Emirates NBD → jurisdiction clause

Al Khorafi v Bank Sarasin-Alpen → mis-selling/regulatory breach

Kirtanlal v SBI → express termination rights

Bank of Singapore v Marj → facilities/security/margin disputes

Oheo Bank v Parker → payment instructions/Quincecare

Gate MENA v Tabarak → payment obligations/reasonable care

Final memory line

In UAE banking litigation, “unfair” is not enough by itself: identify the exact contractual, civil, consumer-protection or regulatory duty, prove its breach, and establish causation and recoverable loss.