Civil Law and UAE — Unfair Banking Practices Litigation

1. Meaning of Unfair Banking Practices

Unfair banking practices litigation concerns disputes in which a bank or other financial institution is alleged to have acted unfairly, deceptively, negligently, abusively, or contrary to applicable banking, consumer-protection, contractual, or regulatory duties.

Typical allegations include:

undisclosed or excessive charges;

misleading loan or investment information;

unsuitable financial products;

unauthorized transactions;

improper account restrictions;

unfair debt-collection practices;

excessive or incorrectly calculated interest;

misrepresentation;

failure to disclose material information;

improper set-off;

wrongful enforcement of security;

unfair treatment of consumers;

regulatory breaches;

negligent investment advice;

improper handling of complaints.

The UAE regulatory framework expressly requires licensed financial institutions to treat consumers equitably, honestly and fairly and to provide clear and understandable information about financial products and services. It also prohibits undue and coercive pressure in debt collection. (Central Bank Rulebook)

2. UAE Legal Framework

Unfair banking disputes can involve several overlapping legal regimes.

A. Banking and financial regulation

The Central Bank of the UAE regulates licensed financial institutions and has consumer-protection requirements concerning fair treatment, transparency and complaint handling.

B. Contract law

The bank-customer relationship is generally contractual. The court may therefore examine:

loan agreements;

account-opening documents;

terms and conditions;

facility agreements;

security documents;

investment agreements;

guarantees;

fee schedules.

C. Civil liability

Depending on the facts, a claim may involve:

breach of contract;

negligence;

misrepresentation;

fraud;

unjust enrichment;

restitution;

damages.

D. Consumer protection

Consumer-protection principles become particularly important in retail banking.

E. DIFC/ADGM regimes

Where the transaction falls within a financial free-zone jurisdiction, DIFC or ADGM legislation and regulatory rules may apply.

3. Current UAE Consumer-Protection Position

The Central Bank's Consumer Protection Regulation states that consumers must be treated equitably, honestly and fairly at all stages of their relationship with licensed financial institutions. Financial institutions must provide clear and understandable information concerning consumers' rights and responsibilities. (Central Bank Rulebook)

The framework also addresses:

tied selling and bundling;

errors by financial institutions;

debt collection;

complaint procedures;

authorized agents;

transparency.

For example, licensed financial institutions must not benefit from their own errors and must rectify identified errors without undue delay. They must also establish procedures preventing undue or coercive pressure in collecting debts. (Central Bank Rulebook)

4. What Makes a Banking Practice "Unfair"?

The term should not be treated as meaning simply:

“The customer received an unfavorable result.”

A banking practice becomes legally problematic depending on the relevant legal duty.

For example:

Potentially unfair

A bank knowingly gives a consumer misleading information about the cost of a financial product.

Not necessarily unfair

A customer enters a clearly disclosed variable-rate loan and later finds that the interest rate has increased according to the agreed contractual mechanism.

Therefore:

Commercial disadvantage ≠ automatically unlawful unfairness.

The court must identify the actual contractual, statutory, regulatory or tortious duty involved.

5. Common Forms of Unfair Banking Practices

5.1 Hidden Charges

A dispute may arise when a bank charges:

account fees;

early repayment charges;

processing fees;

penalties;

administration charges;

foreign-exchange charges;

investment fees.

The key questions are:

Was the charge contractually authorized?

Was it adequately disclosed?

Was the customer informed?

Was the amount calculated correctly?

Did regulatory requirements apply?

6. Misleading Financial Information

Banks frequently provide customers with information concerning:

interest rates;

expected returns;

investment risks;

loan costs;

repayment obligations;

margin requirements;

collateral;

liquidity.

If the information is materially misleading, the customer may potentially have a claim based on:

misrepresentation;

negligence;

breach of contract;

regulatory breach;

statutory liability.

7. Unsuitable Investment Advice

This is particularly important in private banking.

A customer may allege:

“The bank recommended an investment that was unsuitable for my financial circumstances and objectives.”

The court may examine:

whether advice was actually given;

whether the relationship was advisory or execution-only;

customer's experience;

risk tolerance;

investment objectives;

financial position;

information supplied to the bank;

whether the customer independently decided to invest.

8. Execution-Only vs Advisory Relationship

This distinction is critical.

Execution-only

The bank executes the customer's instructions.

Advisory

The bank provides recommendations or advice.

A customer cannot necessarily transform an execution-only relationship into an advisory relationship merely because the bank employee discussed investments.

The DIFC Court considered precisely this issue in Lara Basem Musa Khoury v Mashreq Bank PSC [2022] DIFC CA 007. The customer alleged that the bank negligently advised her to invest in loss-making investments, while the bank maintained that the account was execution-only. (DIFC Courts)

Principle:

The contractual nature of the bank-customer relationship is fundamental to determining the scope of the bank's duties.

9. Unauthorized Transactions

Another major category involves transactions allegedly made without proper authorization.

Examples:

unauthorized bank transfers;

unauthorized withdrawals;

forged signatures;

compromised online banking;

unauthorized investment instructions;

improper use of powers of attorney.

The court may consider:

authentication records;

signatures;

electronic instructions;

account mandates;

customer conduct;

bank security procedures;

fraud;

negligence;

allocation of risk under the account contract.

Modern cases may also raise questions concerning a bank's duties when it receives a suspicious payment instruction.

10. Quincecare-Type Banking Duties

A specialized issue is the Quincecare duty, traditionally associated with circumstances where a bank receives an instruction from an agent of a customer and has reasonable grounds to believe that executing the instruction would facilitate fraud against the customer.

A recent DIFC authority is Oheo Bank v Parker [2025] DIFC CA 006.

The case involved claims for:

deceit;

misrepresentation;

breach of Quincecare duty;

regulatory breaches;

negligence.

The DIFC Court of Appeal discussed the scope of the Quincecare duty and referred to the modern UK Supreme Court decision in Philipp v Barclays Bank UK plc. The tribunal had rejected the customer's Quincecare claim on the facts. (DIFC Courts)

Principle:

A bank's duty to execute valid customer payment instructions must be analysed carefully against the circumstances giving rise to any alleged fraud-related duty.

11. Debt Collection Practices

Banks have legitimate rights to recover debts.

However, debt collection must comply with applicable law and regulatory standards.

The UAE Consumer Protection Regulation expressly requires licensed financial institutions to establish standards and procedures prohibiting undue and coercive pressure on consumers when collecting repayments or debts. (Central Bank Rulebook)

Potential disputes include:

harassment;

excessive communications;

misleading threats;

improper disclosure of debt information;

pressure against third parties;

inaccurate debt calculations.

12. Interest Disputes

Interest disputes can concern:

contractual interest;

default interest;

variable rates;

compound interest;

calculation errors;

undisclosed changes;

unauthorized interest;

interest exceeding legally enforceable limits.

The court must distinguish between:

A contractually agreed and legally enforceable rate

and

A charge that lacks contractual or legal foundation.

In NS Investment Limited v Ajay Sethi [2020] DIFC CFI 055, the DIFC Court considered an unlicensed lender and held that the interest charged under the loan agreement was unenforceable against the defendant because of the claimant's regulatory breaches. (DIFC Courts)

13. Unlicensed Banking Activity

A particularly serious issue arises where an entity performs banking or financial activities without the required authorization.

In NS Investment v Ajay Sethi, the court found that the claimant was operating as a financial lender and charging interest without the required Central Bank authorization or exemption. The court held that the contractual interest was unenforceable. (DIFC Courts)

Principle:

A party cannot necessarily enforce contractual financial charges where the underlying financial activity itself violates mandatory regulatory requirements.

This is highly relevant to unfair banking litigation.

14. Misrepresentation by a Bank

A bank may potentially incur liability where it makes a false statement that:

induces a customer to enter a contract;

causes an investment;

causes financial loss;

affects the customer's decision.

But not every statement by a bank employee constitutes actionable misrepresentation.

The claimant must establish the applicable elements, including:

what was said;

who said it;

whether it was a representation;

whether it was false;

whether the customer relied upon it;

whether loss resulted.

This reasoning appears in Emirates NBD Bank PJSC & Others v Advanced Facilities Management LLC & Others [2020] DIFC CFI 065, where alleged representations concerning future financing were examined and the court emphasized the importance of specificity and reliance. (DIFC Courts)

15. Unfair Investment Product Sales

Structured products can produce significant litigation.

A customer may allege:

product was misrepresented;

risks were not disclosed;

product was unsuitable;

bank failed to explain leverage;

margin-call risks were not understood;

bank acted negligently.

In Actina FZCO v Standard Chartered Bank [2018] DIFC CFI 045, the customer alleged that a structured financial product had been missold through misrepresentation and fraud. The investment had been financed partly through a USD 2 million loan and ultimately generated substantial losses. (DIFC Courts)

Principle:

Complex financial-product litigation requires analysis of the product, representations, contractual documents, customer's knowledge and the precise duties undertaken by the bank.

16. Suitability and Customer Knowledge

A sophisticated investor may have greater understanding of financial products than an inexperienced retail customer.

This can affect:

reliance;

causation;

suitability;

contributory negligence;

damages.

The older Bank Sarasin litigation is instructive. Customers claimed losses from structured notes and alleged that the products were unsuitable and that the bank breached regulatory duties. The court considered the customers' investment knowledge, financial circumstances, objectives and independent decision-making. (DIFC Courts)

Principle:

Suitability must be assessed in light of the customer's circumstances and the actual nature of the bank's advisory relationship.

17. Forced Set-Off

A bank may have contractual or statutory rights of set-off.

However, disputes may arise concerning:

whether the contractual conditions existed;

whether proper notice was given;

whether the account was subject to a valid right of set-off;

whether the bank improperly appropriated funds;

whether the set-off complied with regulatory requirements.

In Actina v Standard Chartered, the bank ultimately set off a fixed deposit against an outstanding loan after the investment product was unwound. The litigation included allegations concerning the original sale of the product. (DIFC Courts)

18. Bank Errors

A bank can make:

accounting errors;

duplicate charges;

incorrect interest calculations;

mistaken transfers;

incorrect balance calculations;

incorrect fee assessments.

The UAE Consumer Protection Regulation specifically provides that financial institutions must not benefit from their errors and must rectify errors without undue delay, while informing affected consumers about the cause, impact and rectification. (Central Bank Rulebook)

This creates an important regulatory foundation for banking-error disputes.

19. Complaint Handling

The current UAE framework provides a formal complaint-resolution structure.

As of 13 September 2026, the CBUAE's complaint rules require financial institutions to have an accessible and transparent complaint process that is free of charge. Complaints must be acknowledged in writing within two business days, and a final response with detailed reasons is generally required within 30 business days. (Central Bank Rulebook)

The external financial complaints mechanism, Sanadak, can consider alleged financial loss or harm resulting from deceptive, misleading, fraudulent or unfair conduct by a licensed financial institution. (Central Bank Rulebook)

20. Banking Litigation vs Regulatory Complaint

These should not be confused.

Court litigation

May seek:

damages;

declaration;

restitution;

injunction;

enforcement/non-enforcement of contract.

Regulatory/ombudsman process

May address:

unfair conduct;

regulatory breaches;

customer redress;

complaint resolution.

A regulatory finding can be important evidence, but the precise effect depends on the applicable legislation and forum.

21. Burden of Proof

A customer alleging unfair banking conduct should identify:

the bank's legal duty;

the conduct allegedly breaching that duty;

causation;

actual loss;

applicable remedy.

For example:

Bank gave misleading investment advice → customer relied on advice → investment was unsuitable → loss resulted → bank breached applicable duty.

The bank may respond:

The account was execution-only → customer independently instructed the transaction → risks were disclosed → no actionable duty was breached.

The court then evaluates the evidence.

22. Documentary Evidence

Banking disputes are heavily document-driven.

Important evidence includes:

account statements;

facility agreements;

loan applications;

investment mandates;

terms and conditions;

emails;

SMS/WhatsApp communications;

call recordings;

transaction logs;

risk disclosures;

suitability assessments;

KYC documents;

internal bank records;

complaint correspondence;

interest calculations.

Electronic evidence is increasingly important in modern banking litigation.

23. Case Law 1 — Lara Basem Musa Khoury v Mashreq Bank PSC [2022] DIFC CA 007

The customer claimed approximately USD 6 million in damages, alleging that Mashreq Bank negligently advised her to subscribe for loss-making investments.

The bank argued that the account was execution-only and that it did not provide investment advice.

The Court of Appeal dealt with the procedural/jurisdictional issues rather than finally determining the merits of the underlying negligence claim. (DIFC Courts)

Principle:

The precise contractual characterization of the banking relationship is fundamental to determining the scope of the bank's duties.

24. Case Law 2 — Al Khorafi v Bank Sarasin-Alpen [2009] DIFC CFI 026 / [2015] DIFC CA 008

The claimants invested approximately USD 200 million in structured financial products.

They alleged, among other things:

unsuitable investment advice;

negligence;

misrepresentation;

regulatory breaches.

The litigation considered the customer's investment knowledge, objectives, financial circumstances and the nature of the bank's advisory relationship. The appellate proceedings also considered the recoverability and causation of losses. (DIFC Courts)

Principle:

A bank's responsibility for investment losses depends upon the precise advisory relationship, applicable regulatory duties, reliance and causation.

25. Case Law 3 — Actina FZCO v Standard Chartered Bank [2018] DIFC CFI 045

The claimant alleged that it had been missold a structured financial product and brought claims involving misrepresentation and fraud.

The investment was leveraged through a bank loan and ultimately generated a substantial loss. (DIFC Courts)

Principle:

Complex banking-product disputes require examination of both the product's risks and the representations made during the sales process.

26. Case Law 4 — NS Investment Limited v Ajay Sethi [2020] DIFC CFI 055

The claimant acted as a financial lender without the required Central Bank authorization.

The court held that the interest provision was unenforceable against the defendant because the claimant could not benefit from its breach of applicable regulatory requirements. (DIFC Courts)

Principle:

Regulatory illegality can affect the enforceability of contractual banking charges.

27. Case Law 5 — Oheo Bank v Parker [2025] DIFC CA 006

The claimant advanced claims including:

deceit;

misrepresentation;

Quincecare duty;

regulatory breach;

negligence.

The tribunal rejected the claims, including the Quincecare claim, and the DIFC Court of Appeal considered the relevant issues in the subsequent proceedings. (DIFC Courts)

Principle:

A bank's duty concerning suspicious payment instructions must be established within the precise factual and legal framework; a general allegation of unfair banking conduct is insufficient.

28. Case Law 6 — Bank of Singapore Ltd v Marj Holding Ltd [2022] DIFC CFI 090

The defendants alleged that the bank had breached regulatory rules and had acted without due regard to their interests, causing losses including forced liquidation of portfolio assets.

The case illustrates how allegations of regulatory breach can be linked to claims for compensation and loss. (DIFC Courts)

Principle:

Regulatory duties may become relevant to civil compensation claims where the applicable legislation creates a private remedy and causation/loss are established.

29. Case Law 7 — Emirates NBD Bank PJSC & Others v Advanced Facilities Management LLC [2020] DIFC CFI 065 / [2022] DIFC CA 012

The dispute involved alleged representations concerning financing.

The court examined whether statements concerning future lending could amount to actionable representations or a collateral contract. It emphasized the importance of specificity, reliance and the continuing negotiation of formal financing terms. (DIFC Courts)

Principle:

A bank's preliminary financing statement does not automatically create a binding commitment or actionable misrepresentation; the precise content, context and reliance must be established.

30. Case Law 8 — Corinth Pipeworks SA v Barclays Bank Plc [2010] DIFC CFI 024

This case concerned trade finance and fraudulent conduct involving representations associated with banking transactions.

The court ultimately found fraudulent conduct and considered contribution and recovery issues involving the bank. (DIFC Courts)

Principle:

Fraudulent representations connected with banking and trade-finance transactions can give rise to substantial civil liability and contribution claims.

31. Case-Law Comparison

32. Unfair Banking Practices and Contract Law

A banking contract should be analysed through the following questions:

A. Formation

Was the agreement validly formed?

B. Terms

What exactly did the customer agree to?

C. Disclosure

Were material terms adequately communicated?

D. Performance

Did the bank perform according to the contract?

E. Regulatory compliance

Did the bank comply with mandatory banking regulations?

F. Conduct

Was there fraud, negligence, misrepresentation or other wrongful conduct?

G. Loss

What actual financial harm resulted?

33. Unfair Banking Practices and Consumer Protection

Consumer protection becomes particularly important where the customer is a retail consumer.

The CBUAE framework requires fair treatment at all stages and clear information about products and services. It also restricts tied selling and bundling and requires financial institutions to correct their own errors. (Central Bank Rulebook)

Thus, a retail-banking dispute may involve both:

Contract law + regulatory consumer protection.

34. Unfair Banking Practices and Vulnerable Customers

Banks must pay particular attention to consumers who may have difficulty understanding complex financial products.

The consumer-protection framework is expressly concerned with the gap between consumers' financial literacy and the complexity and risks of financial products. (Central Bank Rulebook)

Relevant issues may include:

language;

financial literacy;

complexity of the product;

disclosure;

risk warnings;

suitability;

accessibility.

35. Unfair Debt Collection

A bank's legitimate right to recover debt does not mean every collection method is permissible.

A useful legal test is:

Debt exists + lawful collection method + accurate amount + proper communication + no prohibited coercion.

The CBUAE framework expressly requires procedures prohibiting undue and coercive pressure during collection. (Central Bank Rulebook)

36. Remedies

Depending upon the cause of action, possible remedies may include:

1. Damages

For proven financial loss.

2. Restitution

Recovery of improperly obtained amounts.

3. Declaration

Determination concerning contractual rights or liabilities.

4. Injunction

To restrain unlawful conduct where the legal requirements are satisfied.

5. Correction of account

Appropriate where the bank has made an accounting error.

6. Cancellation/non-enforcement

Where a contractual term is invalid or unenforceable.

7. Regulatory redress

Where an applicable regulatory complaint mechanism provides it.

37. Sanadak and Banking Complaints

The CBUAE's Ombudsman Unit, Sanadak, provides an independent complaint-resolution mechanism for consumers of licensed financial institutions and insurance companies. (Central Bank Rulebook)

Eligible complaints can include alleged financial loss or harm caused by:

deceptive conduct;

misleading conduct;

fraudulent conduct;

unfair conduct.

The framework also permits review through the relevant appeals mechanism. (Central Bank Rulebook)

This creates an important alternative or complementary route to ordinary court litigation, subject to the applicable rules concerning jurisdiction and pending court proceedings.

38. Practical Litigation Test

For an unfair-banking problem, use this sequence:

Step 1 — Identify the banking relationship

Is it:

retail banking;

private banking;

corporate banking;

investment banking;

lending;

trade finance;

payment services?

Step 2 — Identify the alleged unfair practice

Was there:

misrepresentation;

negligence;

hidden fee;

unauthorized transaction;

unsuitable product;

improper collection;

regulatory breach?

Step 3 — Identify the applicable contract

Find:

account terms;

loan agreement;

investment agreement;

facility agreement;

guarantee;

security documents.

Step 4 — Identify regulatory duties

Check applicable CBUAE, DFSA, ADGM or other rules.

Step 5 — Establish breach

What precisely did the bank do wrong?

Step 6 — Establish reliance/causation

Did the customer's loss result from that conduct?

Step 7 — Quantify loss

Calculate:

principal;

interest;

fees;

investment loss;

consequential loss where recoverable.

Step 8 — Examine contributory conduct

Did the customer:

ignore warnings;

independently instruct the transaction;

fail to read material terms;

contribute to the loss?

Step 9 — Determine forum

Consider:

UAE courts;

DIFC Courts;

ADGM Courts;

arbitration;

Sanadak.

Step 10 — Select remedy

Consider:

Damages + restitution + declaration + injunction + account correction + regulatory redress.

39. Key Distinctions for Exams

40. Ultra-Short Revision Table

41. Exam Formula

Unfair Banking Practices Litigation = Bank-Customer Relationship + Contractual Terms + Regulatory Duty + Fair Treatment + Disclosure + Conduct + Breach + Causation + Financial Loss + Remedy

One-line conclusion

UAE unfair banking-practices litigation is not based on a general rule that every unfavorable banking outcome is unlawful; the claimant must identify the specific contractual, regulatory, consumer-protection or civil-liability duty breached, establish the bank's wrongful conduct and resulting loss, and then determine the appropriate judicial or regulatory remedy. The CBUAE framework strengthens this analysis by expressly requiring fair and transparent treatment, clear information, controls against coercive debt collection, correction of bank errors, and accessible complaint resolution. (Central Bank Rulebook)