Designated Zones and the Burden of Proof: An Analysis of Federal Supreme Court Case 1570/2024 on Excise Tax

September 26, 2025

In a definitive judgment that clarifies the boundaries of criminal liability for tax evasion, the Federal Supreme Court, in its session on 5 August 2025, has affirmed the acquittal of individuals accused of evading excise tax amounting to over fifteen million dirhams. The ruling, in Case No. 1570 of 2024, provides a robust analysis of the distinction between the mere possession of untaxed goods within a designated zone and the substantive offence of tax evasion. It reinforces the paramount importance of judicial conviction and the high threshold of proof required by the prosecution in criminal matters.

The case was brought by the Public Prosecution following the discovery on 9 February 2022 of a substantial quantity of excise goods—specifically 1,787,120 units of one product and 32,820 kilograms of another—which did not bear the requisite digital tax stamps. The goods were found in the warehouse of a shipping company. The Prosecution’s case was straightforward: the possession of such goods within the territory of the State, without the tax having been paid, constituted a deliberate evasion of a tax that was legally due. After the defendants were acquitted by the Court of First Instance, a decision upheld by the Court of Appeal, the Public Prosecution elevated the matter to the nation’s highest court, arguing that the lower courts had erred in law and fact.

At the heart of the final judgment lies a powerful restatement of a core tenet of criminal jurisprudence. The court began its reasoning by affirming the principle that, “The essence of criminal trials lies in the conviction of the trial judge, based on the evidence presented, regarding the guilt or innocence of the accused.” The judgment makes clear that a court cannot be compelled to adopt a particular piece of evidence. The law vests in the judge the full authority to weigh the probative value of the evidence and to found his judgment upon any proof or presumption with which he is satisfied. Most critically, the court reiterated that “it is sufficient in criminal trials for the judge to harbour doubt as to the soundness of the accusation in order to acquit.” This principle establishes not a mere technicality, but a formidable barrier that the prosecution’s evidence must overcome.

Applying this principle to the facts, the Federal Supreme Court found the prosecution’s case to be fundamentally deficient. The judgment adopted the reasoning of the lower court, which had concluded that the evidence “was inadequate to reach the threshold of conviction, having been beset by frailty and weakness and enveloped in such doubt and suspicion that the court could not be satisfied by it.” The prosecution’s case rested almost entirely on the findings of a tax enforcement officer. This, in the court’s view, was insufficient to establish guilt beyond a reasonable doubt.

The court’s decision turned on a crucial finding of fact regarding the location and purpose of the seized goods. It drew a sharp and legally significant distinction regarding the warehouse’s location in a “designated zone,” defined as a fenced area with security controls specifically intended to monitor the movement of excise goods.

The judgment determined that the goods had not been released for consumption into the local market. Instead, they were being stored “for the purpose of transit, the clearance of their transactions, and their subsequent export out of the country.” This was consistent with the defendant’s unwavering denial and his explanation that his company was merely a shipping and logistics agent. The court noted that “it is legally established that excise goods which are to be exported are exempt from tax, provided they are not released for consumption.” As the goods were seized within a designated zone and destined for an overseas market, they were not yet subject to the excise tax.

In dismissing the Public Prosecution’s appeal, the Federal Supreme Court delivered a judgment of significant clarity for businesses engaged in logistics and trade. It confirms that the physical location of goods is paramount. The presence of untaxed excise goods within the secure confines of a designated zone for the purpose of re-export does not, in itself, constitute the crime of tax evasion. The ruling stands as an authoritative statement that the heavy burden of proof in a criminal case remains squarely on the prosecution, and that mere suspicion, however strong, cannot substitute for evidence that removes all reasonable doubt.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

UAE Tax Disputes: Silence Is No Longer Refusal at the Committee Stage (Supreme Court 388/2024)

September 26, 2025

For almost seven years UAE taxpayers and their advisers treated the lapse of the statutory time-frame given to a Tax Disputes Resolution Committee (TDRC) as a de-facto “no” and went straight to court. The Federal Supreme Court has now changed that position in Judgment No. 388/2024 issued on 14 May 2025.

Judgment No. 388/2024 (14 May 2025) holds that:

  • The TDRC is a quasi-judicial body whose work is governed by the Civil Procedures Law, not by the ordinary rules of administrative silence.
  • The 20 + 60-working-day deadline in Decree-Law 28/2022 is purely regulatory; exceeding it does not amount to an implied rejection.
  • A court may only review a written TDRC decision. Filing a case before that moment is “premature and without subject-matter”.

In effect, the “implied-rejection” doctrine survives only at the administrative level (the Federal Tax Authority’s reconsideration stage). At the quasi-judicial committee level, silence no longer speaks.

The legal architecture in brief

Instrument Relevant articles Key deadlines
Cabinet Decision 23/2018 (creating the TDRCs) Art. 6(1)-(2) Committee decides objections within 20 WD.
Decree-Law 7/2017 (old Tax Procedures Law) Arts. 27-29 FTA must decide a reconsideration request in 20 WD. Silence ⇒ taxpayer may object to TDRC.
Decree-Law 28/2022 (current Tax Procedures Law) Art. 31 TDRC decides objections in 20 WD, extendable 60 WD by the Exec. Regs.
Cabinet Decision 74/2023 (Exec. Regs.) Art. 45 Confirms the additional 60 WD extension.

The “old” approach: silence = refusal

Courts had routinely applied classic principles of administrative law:

  • Primary Ct 507/2019 – declared the FTA’s failure to rule on a reconsideration within 20 days an implicit refusal, giving the taxpayer standing before a TDRC.
  • Primary Ct 180/2021 – extended the same logic upward: if a TDRC exceeded its own statutory period, silence equaled rejection.
  • Supreme Ct 1245/2022 – characterized any unjustified administrative omission as a “negative administrative decision” subject to annulment.

Because TDRCs were often viewed as administrative adjuncts to the FTA, litigants treated them the same way: once 20 (or 20 + 60) working days expired, they filed suit.

Courts reinforced that view, a recent example was in Federal Supreme Court Judgment No. 1020/2023 (issued January 2024) where the taxpayer lodged an objection with the TDRC; when no ruling emerged, the taxpayer petitioned the Federal Primary Court directly. The case travelled through three tiers—Primary Court ➔ Appeals Court ➔ Federal Supreme Court—without a single court questioning the admissibility of the claim in the absence of a TDRC decision. All three courts examined the substantive merits, confirming that — at that time — judicial practice accepted TDRC silence as a de-facto rejection.

Judgment 388/2024: the turn of the tide

Quasi-judicial status reaffirmed

The Supreme Court emphasized that a TDRC “exercises a form of judicial jurisdiction” and applies the Civil Procedures Law. Therefore procedural silence does not generate a decision—positive or negative. Only an express written decision can be challenged.

Regulatory vs. mandatory deadlines

Because the 20 + 60-day limit is “organizational”, the committee may validly extend its deliberations without sanction. The Court explicitly stated that the legislator attached no penalty to non-compliance.

Premature actions dismissed

The claimant in the case filed in court five weeks before the extended deadline expired; the suit was struck out as “filed before its proper time”.

Judgment extract

The reasoning of the Federal Supreme Court in Judgment 388/2024 was as follows:

“It is established that an administrative committee vested with quasi-judicial authority exercises a form of judicial jurisdiction and applies the provisions of the Civil Procedure Law. Accordingly, one must await its decision on the merits of the dispute, since that decision is the subject and basis of any subsequent challenge.

When a statutory text is clear, explicit, and definitive as to its intent, no departure from it or interpretation contrary to its wording is permissible under the pretext of pursuing the purpose that inspired it; there is no room for interpretation where the text is unequivocal.

Because the legislator has conferred jurisdiction on the court only upon the issuance of a decision by the Tax Disputes Resolution Committee, judicial review pertains to that decision alone, and the court may not go beyond it by examining grounds not contained in the committee’s ruling.

Where the claimant’s submissions before the committee are identical to those later brought before the court of first instance, the claimant must wait, then promptly challenge the committee’s decision once issued.

In the present case, the claimant challenged the respondent’s reassessment decision and filed an objection with the Tax Disputes Resolution Committee on 25 June 2024. The committee was entitled—after the initial 20-day period—to extend the objection’s review by 60 working days, ending on 22 October 2024, as stated by the claimant in his pleading. Yet he brought his action before the court of first instance on 20 September 2024, without awaiting the committee’s decision, which would have been subject to annulment proceedings. Consequently, his action was filed prematurely and was inadmissible.

Nor is the matter altered by the committee’s statement of 15 November 2024 that the objection was still under consideration, for the committee may extend the period even after 80 working days have elapsed; that time limit is regulatory, and the legislator has prescribed no sanction for its breach.

Moreover, the court’s review is confined to the committee’s decision; it is not competent to revisit the respondent’s underlying reassessment, as doing so would contravene the express statutory provisions cited above.

The requirement that a decision be issued by the Tax Disputes Resolution Committee—a body with quasi-judicial competence—is a formal prerequisite that must be satisfied.”

Practical consequences

Issue Before 388/2024 After 388/2024
When can a taxpayer go to court? On day 21 (or day 81) if the TDRC had not ruled. Only after receiving a written TDRC decision.
Risk of limitation periods Taxpayer controlled timing by filing early. Taxpayer must monitor issuance of the TDRC decision and file within 40 WD of notification (Art. 46, Exec. Regs.).
Case-management strategy Encourage early escalation to avoid delay. Emphasise proactive engagement with the TDRC; consider follow-up letters but do not file in court prematurely.

 

The boundary that remains

FTA reconsideration stage
The FTA is a traditional administrative authority. Its silence for 20 WD (or where extended) still triggers an implied rejection, enabling the taxpayer to proceed to a TDRC (Cabinet 23/2018 Art. 6(2); Decree-Law 28/2022 Art. 31(2)). Nothing in 388/2024 disturbs this.

TDRC stage
From 14 May 2025 onward, an objection remains alive—no matter how long it takes—until the committee signs and notifies its decision.

What taxpayers and advisors should do now

  1. Calendar both statutory windows – the committee’s 20 + 60 days and the court appeal window of 40 working days once a decision issues.
  2. Maintain correspondence – ask the committee to confirm hearing dates or expected issuance, creating an evidentiary trail of diligence.
  3. Update timelines – factor in the possibility that disputes may stay at the committee level for significantly longer than 80 working days.
  4. Educate finance teams – delayed resolution affects provisioning and cash-flow planning (especially under the “pay now, argue later” rule).
  5. Screen legacy cases – if a court claim was filed solely on the basis of a lapsed TDRC deadline, assess the vulnerability of a court strike-out and consider retrial, withdrawal or settlement.

 

Looking ahead

Whether the legislator will codify an explicit consequence for TDRC delay—mirroring the rule that already exists for the FTA—is now a policy question. Until that happens, procedural patience replaces “silence is refusal” at the committee stage.

For taxpayers, the takeaway is clear:

Wait for the TDRC gavel, not the clock.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

ADGM Courts and Arbitrations Administered by the ICC ADGM Office: A Revisited Look at the Onshore/Offshore Divide in Light of Recent UAE Decisions

September 26, 2025

Introduction

Throughout 2022 onwards, multiple judgments of the Abu Dhabi Cassation and Appeals Courts took the view that an ICC arbitration “seated” in Abu Dhabi but administered by the ICC office in the Abu Dhabi Global Market (ADGM) came under the exclusive jurisdiction of the ADGM Courts rather than the onshore Abu Dhabi Courts. The outcome generated significant debate over whether the mere presence of an ICC office in the ADGM could, by itself, shift supervisory jurisdiction away from the courts of onshore Abu Dhabi.

In August 2024, the ADGM Court itself addressed whether an ICC arbitration might fall under its supervisory jurisdiction simply because it was administered by the ICC ADGM branch and some of the hearings took place in the ADGM, despite the parties having originally designated “Dubai” as the seat. The ADGM Court ultimately emphasized that party autonomy in specifying the seat prevailed over the physical location of the ICC office or any hearings.

At the same time, two recent judgments of the Dubai Cassation Court—Case 460 of 2023 and Case 805 of 2022—clarified that, while courts should consider whether the agreement explicitly identifies the seat, the factual place of arbitration and the actual operations of the arbitral institution are equally important. Even though these Dubai cases involved the Emirates Sports Arbitration Center rather than the ICC, they reflect the principle that determining which local court has jurisdiction depends on where the institution in question functioned and conducted its proceedings, rather than on a nominal reference alone.

The ADGM Court’s August 2024 Decision

In A15 v B15, the claimant sought to have its ICC award recognized and enforced under section 61 of the ADGM Arbitration Regulations 2015, arguing either that the ADGM was the seat or, alternatively, that the court could exercise enforcement jurisdiction by treating the award as foreign. The underlying subcontract had referred to the UAE as the place of arbitration, with the ICC Rules governing. Procedurally, the Terms of Reference specified “Dubai” as the legal seat, but the arbitration hearings had been held in the ADGM. The ADGM Court concluded that the parties’ explicit choice of “Dubai” as the seat should not be overridden simply because the ICC branch in the ADGM administered the arbitration. It considered the seat of arbitration a legal concept, determined above all by party autonomy and the relevant contractual documentation, rather than by the physical location where hearings happened or where the ICC had its local office. Accordingly, the court decided that, under section 60(1)(a), it did not have supervisory jurisdiction but still had authority to recognize and enforce the award under section 60(1)(c).

The Abu Dhabi Courts’ Position

In contrast, several onshore Abu Dhabi judgments—among them decisions numbered 101/2022, 87/2022, 81/2022, 57/2023, 53/2021, and 635/2022—adopted a starkly different stance when dealing with the ICC ADGM branch. These courts generally held that, where an arbitration agreement referred to Abu Dhabi and the ICC administered the proceedings through its ADGM office, the seat was effectively deemed the ADGM, with exclusive supervisory power vested in the ADGM Courts. Their reasoning often drew on Article 18 of Federal Law No. 6/2018 (the UAE Federal Arbitration Law), together with the principle that the ICC ADGM office was regarded as an “ADGM establishment.” The result was that if parties specified Abu Dhabi as the place of arbitration but employed the ICC’s local presence in the ADGM, the onshore Abu Dhabi courts would refuse jurisdiction and direct all challenges or annulment actions to the ADGM.

Dubai Cassation Court Judgments

In Dubai Cassation Court Cases 460 of 2023 and 805 of 2022, the court examined the extent to which it had jurisdiction over annulment applications involving the Emirates Sports Arbitration Center, whose headquarters are in Abu Dhabi but which has branches in other Emirates. The facts concerned whether the arbitration had been conducted in a recognized branch within Dubai, or whether it remained centralized in Abu Dhabi. In Case 460 of 2023, the court found that the arbitration had taken place at the Dubai branch and consequently assumed jurisdiction. In Case 805 of 2022, it concluded there was insufficient evidence that the place of arbitration was in Dubai; the arbitral proceedings were in Abu Dhabi, so the Dubai courts had no valid basis to intervene. These two cases illustrate that factual determination of where the center held its sessions or from which branch it operated can be decisive. The courts would not simply rely on a notional reference to “Dubai” or “Abu Dhabi” if that reference did not match the practical and administrative reality.

Synthesis of Approaches

The ADGM Court, in its August 2024 judgment, prioritized the written choice of seat in the parties’ agreement. It would not accept that simple administrative involvement by a branch office or the convenience of holding hearings in the ADGM could nullify a clear contractual arrangement specifying “Dubai.” In so doing, it adhered to the principle that party autonomy is paramount in defining the seat. Meanwhile, the onshore Abu Dhabi courts appear to consider that, wherever the ICC’s ADGM office administers an Abu Dhabi-related dispute, the matter is necessarily seated in the ADGM, thus excluding onshore Abu Dhabi jurisdiction. By contrast, the Dubai courts highlight the actual conduct of arbitration would bear weight: if the evidence shows the arbitration happened in Dubai, they assume jurisdiction; if it took place elsewhere, they decline jurisdiction. Although the various rulings do not center on the exact same arbitration centers or identical contractual wording, they underscore that practical facts and precise drafting can be as significant as textual references in determining the seat.

Practical Implications

These developments underscore the essential need for clarity. When drafting dispute-resolution clauses, parties should unambiguously specify the seat and the intended supervisory court, taking care to distinguish between references to Abu Dhabi onshore courts, the ADGM, the Dubai onshore courts, or the DIFC. Equally important is the reality of where the arbitration will be administered. If parties choose “Dubai” but rely on a center headquartered outside the Emirate, they risk an onshore court ruling that it lacks jurisdiction because the proceedings were not genuinely held within its boundaries. Conversely, the ADGM Court may decline to exercise supervisory authority if the seat is expressed as “Dubai,” even if the actual hearing occurred in the ADGM. Such potential misalignments can lead to contested proceedings over set-aside or enforcement applications, creating uncertainty, delay, and additional legal costs.

The potential for contradictory rulings exists. Onshore courts may direct parties to the ADGM if an ICC branch there is used in practice, while the ADGM Court might defer to another Emirate if the contract says the seat is elsewhere. These outcomes reinforce the message that contracting parties ought to identify precise seat provisions, ensuring they do not inadvertently empower or disempower an intended court.

Conclusion

The question of which court exercises jurisdiction over ICC arbitrations with a connection to the ADGM, or indeed any arbitration center across different Emirates, now turns heavily on two factors: the parties’ express designation of the seat and the factual location or branch where the arbitration was administered. The ADGM Court’s August 2024 ruling shows that it will respect contractual seat clauses without automatically accepting jurisdiction simply because the ICC office or hearings took place within ADGM territory. Yet the onshore Abu Dhabi courts and the Dubai courts have demonstrated a willingness to interpret seat designations with reference to practical realities of administration. For parties and counsel involved in UAE-seated arbitrations—whether through the ICC’s ADGM branch or other arbitration centers—careful drafting and deliberate planning about where the tribunal will function remain the best safeguards to avoid the complexities arising from this evolving and sometimes divergent jurisprudence.

Wasel & Wasel was counsel on record in this matter A15 v B15 before the ADGM Courts.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

Dubai Cassation Court Exempts Pre-2018 Supplies from VAT in Construction of Property That Extended Past 2018 into VAT Implementation

September 26, 2025

In a matter concerning the application of Value Added Tax (VAT) to a long-running construction project that began before 1 January 2018 but concluded years later, the Dubai Court of Cassation issued a notable ruling (Judgment No. 685 of 2024) regarding how VAT should be calculated. The dispute centered on whether the contractor could collect VAT on portions of the work that were either completed or invoiced prior to the official effective date of the UAE’s VAT regime.

Before reaching the Court of Cassation, the lawsuit originated in the Dubai Court of First Instance under Case No. 2154 of 2022 Commercial (Partial). In that lower court judgment dated 28 March 2023, the factual background shows that the claimant (contractor) entered into a three-party construction agreement in mid-2017 with (1) the landowner and (2) the consulting engineer, who was in charge of supervision. The primary court found that the contract covered the construction of a villa consisting of a ground floor, upper floor, and a service block. Originally, the project term was set at 13 months. However, work on the villa extended well beyond that schedule. According to the primary court’s findings, the final completion certificate was eventually issued on 12 June 2022:

“…after five years and 12 days from the date of signing the contract between the parties, which was originally intended to last 13 months.”

The contractor had alleged that it completed 76.34% of the works by the time the project stalled in 2018. It further claimed that it stopped construction because of the owner’s refusal to provide the required finishing materials, which the owner was contractually obliged to supply. By the time the dispute reached the courts, one key question involved the sum of AED 363,389 that the contractor demanded as payment, plus a requested declaration that a check held as security should be canceled.

While the primary court eventually awarded the contractor AED 171,996.50 plus legal interest, the issue of VAT became pivotal upon reaching appellate review and, ultimately, the Court of Cassation. The contractor argued that VAT should apply broadly to the amounts claimed. However, the Court of Cassation partially disagreed, confining VAT only to portions of the supply that took place after VAT’s effective date (1 January 2018).

In its judgment, the Court of Cassation directly addressed whether sums paid for work done before January 2018 could be subject to VAT. It explained:

“…if a service is provided on a phased basis or in installments such that part of the supply occurred before the law’s effective date, then VAT at the rate of 5% applies only to the portion of the supply executed after 1 January 2018. The work completed and paid for beforehand remains outside the scope of the new law.”

Referring to the contractor’s specific situation, the Court of Cassation noted that the contractor received certain payments in 2017, well in advance of the 1 January 2018 VAT start date. and that the owner had disbursed AED 807,000 to the contractor during that period. Thus, the Court reasoned:

“It was established through the expert’s supplemental report that the respondent [the owner] paid an amount of 807,000 dirhams to the contractor in 2017, prior to the effective date of the VAT law. Therefore, no VAT is due in connection with this amount because the supply of those services was completed before 1 January 2018.”

Consequently, the Court “partially quashed” the lower judgment regarding the contractor’s VAT entitlement. It revised the amount due to the contractor down to AED 128,801.49, specifically excluding any VAT on sums invoiced and paid before 2018. In the final dispositive clause, the Court stated:

“We rule to amend the appealed judgment so that the sum due to the contractor shall be 128,801.49 dirhams, and the contractor is not entitled to VAT on the works paid for in 2017.”

It is relevant to note that the case reached the Court of Cassation through a petition by the Dubai Public Prosecutor’s Office “in the interest of the law.” Once the highest court in Dubai rendered its decision, it clarified the treatment of VAT for a construction project that began prior to the introduction of the tax but was completed—and indeed extended—well after the tax took effect. The Court, however, only addressed the parties to the dispute, and its ruling does not establish direct obligations on the Federal Tax Authority (FTA) itself, as the FTA was not a party to the proceedings and the Cassation Court does not exercise jurisdiction over the FTA.

From a factual standpoint, the primary court’s judgment documented how the villa construction started around mid-2017, that the contractor and the owner disagreed about responsibility for supplying finishing materials, and that work effectively concluded in June 2022 under the contractor’s name, even though the original timeframe was set at 13 months. The Court of First Instance awarded the contractor the principal sum but did not separate out pre-2018 VAT liabilities in its calculation. Only at the Court of Cassation stage was the VAT element clarified, leading to a partial reduction of the final amount payable.

Outside the specifics of this ruling, there is a broader historical position concerning development projects that transition from the pre-VAT to the post-VAT period, especially regarding property transfers. The general authoritative position has been that if the legal ownership of a property is transferred to the buyer—or if the buyer takes possession of it—before 1 January 2018, then that supply is considered outside the scope of VAT. However, if ownership or possession transfers on or after 1 January 2018, the entire supply may be considered subject to VAT under Article 80(1) of the Decree-Law, regardless of whether payments were received before or after the law’s implementation. In such situations, Article 70(4) of the Executive Regulations, which deals with partially supplied goods or services before VAT took effect, would not apply to commercial units fully handed over after the effective date. Thus, a developer generally charges VAT on the entire value if the property is finished, transferred, or taken possession of post-implementation of the VAT laws on 1 January 2018.

In the villa construction case at issue, the contractor succeeded in demonstrating that certain works and payments fell firmly into the pre-2018 bracket, despite the project as a whole extending well into 2022. Under these facts, the court ultimately excluded pre-2018 amounts from being subject to VAT. In complex development scenarios, parties often need to document each phase carefully and confirm when a supply of services (or a transfer of ownership in real estate transactions) is deemed to have taken place.

In the end, the judgment underlines the legal principle that VAT does not attach to works and payments definitively made prior to 1 January 2018, even if the overall project continued well beyond that date. The fact that this project took over five years to complete did not alter the Court’s view that the pre-2018 payments were outside the scope of the newly enacted tax. The ruling thus offers guidance on how courts may approach transitional VAT scenarios for long-duration construction contracts signed before the law’s inception.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

A New Gateway to Challenge UAE FTA Decisions Through Enforcement: Analysis of Judgment No. 1322 of 2024 (Supreme Court – Administrative)

September 26, 2025

Introduction

In a significant development for taxpayers disputing Federal Tax Authority (FTA) decisions, the Federal Supreme Court issued Judgment No. 1322 of 2024 (Administrative) on January 8, 2025. While the law provides a structured procedure to challenge FTA rulings—such as filing for reconsideration, objecting to the Tax Disputes Resolution Committee (TDRC), and appealing before the competent federal courts—this judgment clarifies that taxpayers may also initiate a challenge in the context of enforcement proceedings. As a result, the door is open for taxpayers to dispute the subject matter of FTA decisions through a substantive enforcement dispute.

Below, we discuss the background and key points of the judgment, citing verbatim translations of critical excerpts from the original ruling where relevant.

1. Background of the Case

The dispute arose when a taxpayer (the Appellant) was subjected to an FTA enforcement action to collect allegedly unpaid Value Added Tax (VAT) and administrative penalties. The taxpayer claimed that the underlying debts did not, in fact, belong to its account. Faced with a decision from the FTA Director General—which, by operation of law, had the status of an “executory instrument” or “enforceable title”—the taxpayer contested its validity within the enforcement stage before the enforcement judge.

Quote from the Judgment (translated): “If the person subject to tax fails to settle the tax due within the statutory time limits, the Federal Tax Authority notifies the person to pay; then the Director General issues a decision obligating the person to pay the tax due, and such Director General’s decision shall be regarded as an executory instrument for the purposes of enforcement by the enforcement judge.”
(Judgment, ¶2 citing Article 40 of Federal Decree-Law No. 28 of 2022 on Tax Procedures)

2. Established Path for Challenging FTA Decisions

Ordinarily, taxpayers disputing FTA assessments or decisions must follow a prescribed sequence:

  1. Reconsideration with the FTA;
  2. Objection before the Tax Disputes Resolution Committee (TDRC);
  3. Appeals to the competent federal courts (the Federal Court of First Instance, then the Court of Appeal, and ultimately the Supreme Court).

The statutory regime aims to ensure that all administrative avenues are exhausted before judicial review on the merits. However, the new judgment acknowledges a parallel route when the dispute is raised during enforcement.

3. Substantive Versus Provisional Enforcement Disputes

A central issue in this judgment was whether the taxpayer’s challenge during enforcement was merely a “provisional enforcement dispute” (seeking a temporary measure without touching the underlying obligation) or a “substantive enforcement dispute” (contesting the validity of the debt itself).

Quote from the Judgment (translated): “The intended temporary disputes in enforcement—over which the enforcement judge has exclusive urgent jurisdiction—are those in which a party seeks a provisional remedy that does not touch the substance of the right. However, a substantive dispute is one in which the objective is to resolve the underlying right and the nullity of the enforcement.”
(Judgment, ¶4)

The Court firmly held that if the taxpayer is disputing “the essence of the alleged tax debt,” the matter is a substantive enforcement dispute, which cannot be dismissed merely as a provisional request.

4. Court’s Reasoning: Re-Characterizing the Dispute

The Supreme Court reproached the lower courts for classifying the taxpayer’s objection as a mere provisional enforcement dispute. Instead, the Court stressed that judges must look beyond the labels used by the parties and consider the real nature of the claim.

Quote from the Judgment (translated): “It is established that the court of the merits is obliged to bestow the correct designation upon the action and to apply the correct legal characterization to it, unrestricted by the terms used by the litigants.”
(Judgment, ¶3)

Because the taxpayer was directly challenging the existence and correctness of the underlying tax debt (alleging clerical errors, unrelated import transactions, and mismatched amounts), the claim was undeniably substantive in nature.

5. Enforcement Orders as “Executory Instruments” but Not Final Judgments

The key legal nuance is that a decision from the FTA Director General—which the law treats as an enforceable title—remains an administrative decision, not a final judicial determination. This distinction allows the taxpayer to contest the debt’s validity in an enforcement proceeding.

Quote from the Judgment (translated): “Since the executory instrument in question is not a judgment but an administrative decision endowed by the legislator with the force of an enforceable title, it remains open for the debtor to raise a substantive enforcement dispute regarding the genuineness of the debt. An administrative decision does not enjoy the same conclusive presumption as a judicial ruling, and thus it may be rebutted.”
(Judgment, ¶6)

Thus, the taxpayer may demonstrate the inaccuracy or invalidity of the sums claimed, even after enforcement begins, so long as the challenge truly concerns the heart of the debt.

6. Court’s Criticism of the Lower Judgments

The Supreme Court found that the lower courts erred in refusing to entertain the taxpayer’s objections about wrongfully attributed import transactions and contradictory figures. Simply stating that Article 40 of the Tax Procedures Law designates the Director General’s decision as an enforceable title did not absolve the lower courts from examining the substance of the taxpayer’s defense.

Quote from the Judgment (translated): “The contested judgment ignored what the appellant insisted upon—namely that its dispute is a substantive enforcement dispute aimed at demonstrating the non-liability for the claimed amounts—and ruled in favor of dismissing the enforcement objection under the pretext that the Director General’s decision has the status of an executory instrument. Such reasoning violates the law and deprives the appellant of the right to defend itself.”
(Judgment, ¶7)

The Supreme Court thus overturned (or “quashed”) the prior ruling and remanded the case for further examination.

7. Practical Implications: A New Gateway for Taxpayers

This judgment underscores that taxpayers are not strictly confined to the official reconsideration or TDRC route when challenging disputed tax liabilities. Even if the FTA has already issued an enforceable decision, the taxpayer can still raise a substantive dispute at the enforcement stage, provided the taxpayer can present factual or legal grounds indicating the debt is incorrect.

  1. Substantive Enforcement Dispute: Taxpayers may argue they owe nothing or a reduced amount, attacking the very basis of the FTA’s claim.
  2. Continued Enforcement: Per Article 239 of Federal Decree-Law No. 42 of 2022, the court may permit ongoing enforcement unless it orders suspension, but the taxpayer still has the chance to register a substantive challenge.
  3. Procedural Safeguards: Enforcement judges must assess whether the objection is provisional or substantive, directing the taxpayer to file the appropriate claim before the competent court if it is truly a matter of the underlying right.

8. Conclusion

The Federal Supreme Court’s decision in Judgment No. 1322 of 2024 (Administrative) serves as a landmark precedent, confirming that although a set procedure exists for disputing FTA decisions (reconsideration, TDRC objection, and judicial appeals), taxpayers may also raise substantive challenges at the enforcement stage. This development broadens the channels available to taxpayers and compels enforcement judges to scrutinize the legitimacy of the underlying tax claim when genuine disputes arise.

Ultimately, this ruling reinforces judicial oversight of administrative tax decisions and ensures that the so-called “executory instrument” conferred upon FTA determinations does not become an irreversible fait accompli. Taxpayers, therefore, should be aware of this new gateway to protect their rights when confronted with FTA enforcement actions.

As of this writing, Wasel & Wasel has successfully halted enforcement actions against taxpayers exceeding approximately AED 250,000,000 maintaining a near-perfect track record. We warmly invite you to speak with us if you wish to explore your legal options in challenging or staying FTA enforcement.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

UAE Supreme Court 212/2023: Empowering Taxpayers when Evidence is with the FTA

September 26, 2025

In a recent ruling (UAE Federal Supreme Court 212/2023, Administrative Division), the court addressed a critical issue for taxpayers who find themselves in disputes with the Federal Tax Authority (FTA) but lack access to essential documents. In essence, the court recognized that, while the standard rule is that the burden of proof lies with the claimant, there are instances where this burden can shift onto the administrative body if that body alone holds the evidence needed to decide the case.

In English, the respective part of the judgment translates to:

“It is established that the burden of proof lies upon the claimant, and that the administrative judiciary’s departure from this principle in certain situations and placing the burden of proof upon the administration occurs only when the documents necessary for ruling on the case are exclusively in the administration’s possession… Therefore, if a taxpayer challenges the legality of the contested decision on the grounds that it was based on an unsound premise, and the administrative authority fails to respond or produce evidence refuting this claim, the court may rule on the basis of a presumption that the taxpayer’s claim is correct in light of the administration’s negative stance.”

This ruling carries important implications for taxpayers engaged in disputes with the FTA, especially when the documents or evidence that might prove their position are under the sole control of the authority. Ordinarily, an individual or a company that brings a challenge before the court bears the responsibility to prove their case. This general principle ensures that those seeking to overturn or modify an existing administrative decision must present compelling evidence demonstrating why the decision is flawed. However, as the court acknowledges, the rigid application of this principle can be unfair to the taxpayer in situations where the evidence they need is not publicly available or is kept exclusively by the FTA.

By recognizing that the burden of proof can shift to the FTA, the Supreme Court judgment introduces an equitable balance. If a taxpayer alleges that a tax assessment or penalty was improperly calculated or imposed on an incorrect legal basis, they would typically need to present proof of those errors. Yet if the FTA alone holds the relevant records—perhaps internal calculations, documents exchanged with other agencies, or internal correspondence that could shed light on the assessment—the taxpayer is at a disadvantage. The court has effectively stated that in such circumstances, the FTA must either supply the evidence or accept the risk that the court will presume the taxpayer’s position to be correct.

This mechanism prevents the authority from withholding documents that could clarify factual or legal questions. It also incentivizes administrative bodies to participate actively in litigation, rather than remaining silent and relying on the presumption that the taxpayer has the sole duty to prove every aspect of their case. When the FTA fails to submit the necessary documents or offers no substantive rebuttal to the taxpayer’s claims, the court may interpret that silence as an indication that the taxpayer’s assertions are true.

For taxpayers, this ruling underscores the importance of highlighting to the court precisely what documents they believe the FTA possesses and why those documents matter. It is not enough merely to state that the taxpayer disagrees with the FTA’s calculations. The taxpayer must show that the vital pieces of evidence lie in the authority’s domain, making it impossible to provide them on their own. Once that hurdle is cleared, if the FTA does not meet its obligation to disclose or rebut, the taxpayer can benefit from the presumption that their allegations are correct.

In conclusion, Federal Supreme Court decision 212/2023 provides a fairer framework for disputes involving tax assessments and penalties. It ensures that if the FTA alone holds decisive evidence, it cannot deprive taxpayers of the opportunity to prove their case by refusing to produce the necessary records. This development helps maintain a balance in tax litigation and affirms the judiciary’s commitment to equitable treatment when critical evidence is solely in the hands of the administration.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

UAE Supreme Court on Constitutionality of “Pay Now, Argue Later” System in Tax Disputes

September 26, 2025

Navigating the landscape of tax disputes in the United Arab Emirates presents unique challenges for taxpayers and legal practitioners alike. Central to this environment is the “pay now, argue later” system, a framework that mandates taxpayers to settle disputed taxes before contesting decisions through legal channels. This approach has sparked considerable debate regarding its fairness and constitutional validity. Drawing on our extensive experience at Wasel & Wasel in over 300 tax dispute procedures, we delve into the intricacies of this system and explore the recent judgment by the UAE Federal Supreme Court that upholds its constitutionality.

The “pay now, argue later” system operates on a straightforward principle: when a taxpayer challenges a decision by the Federal Tax Authority (FTA), they must first pay the full amount of the disputed taxes during the second step of the dispute process before the competent tax dispute resolution committee.

If the taxpayer fails at the committee stage, they may escalate to the federal primary court. At this stage, the requirement shifts slightly; taxpayers must pay half the value of the penalties in dispute to grant the primary court jurisdiction. This system ensures that tax revenues are collected promptly while providing a structured pathway for dispute resolution.

We have observed firsthand the impact of this system on taxpayers. Clients frequently express reservations about the necessity of paying disputed taxes upfront. Concerns center around the financial burden imposed on individuals and businesses, particularly when the outcome of the dispute is uncertain. Taxpayers often question the equity of this requirement, fearing that it may disproportionately affect those with limited financial resources or those facing substantial penalties.

The crux of the debate lies in whether this system aligns with the principles enshrined in the UAE Constitution, particularly regarding equality before the law and the right to access the judiciary without undue hindrances. These concerns were addressed in a landmark judgment by the UAE Federal Supreme Court in case number 928/2023 AD, which examined the constitutionality of the “pay now, argue later” approach.

In its ruling, the Supreme Court emphasized the principle of equality before the law as a cornerstone of the UAE Constitution. The court stated:

“The Constitution of the United Arab Emirates ensures the principle of equality before the law and guarantees its application to all citizens as the foundation of justice and freedom. It recognizes that the aim pursued is primarily the rights and freedoms of citizens in the face of discriminatory phenomena that undermine or restrict their practice. The emergence of discrimination is based on origin, gender, language, religion, or creed and is not limited exclusively. The Constitution also guarantees the right to litigation for all people.”

This declaration underscores that the “pay now, argue later” system does not infringe upon the constitutional mandate of equality. Instead, it operates within the framework designed to balance the social function of taxation with the protection of property rights. The court recognized that while taxation is a legitimate exercise of state authority, it must be regulated in a manner that considers the social utility of taxes and the necessity of maintaining public services and infrastructure.

Furthermore, the judgment addressed the right to access the judiciary, a fundamental right enshrined in the Constitution. The court affirmed:

“It also guaranteed the empowerment of every litigant to access the judiciary easily without being burdened by financial obligations or procedural obstacles. This access means that every individual has the right to resort to the judiciary, whose doors are not closed to anyone seeking to benefit from them. The path to it is paved by law.”

While acknowledging the importance of this right, the court also recognized the state’s legitimate interest in ensuring the efficient collection of taxes. By requiring taxpayers to pay disputed amounts before challenging decisions, the system aims to prevent the undue accumulation of tax liabilities and ensure the steady flow of revenue necessary for public services.

The Supreme Court further elaborated on the legislative authority over taxation, highlighting that the legislative branch holds the primary responsibility for determining tax laws, including their application and assessment. The court stated:

“The legislative authority is the one that holds the reins of public taxation, as it undertakes to regulate its conditions through laws issued by it, designed to determine its scope and assessment principles, specify its amount, and oblige its performance. It also establishes the rules for its calculation, analysis, and collection, as well as the procedures for its payment, the statute of limitations, and what appeals can be made against it, encompassing everything related to the tax and its collection framework.”

This clarification asserts that the legislature is empowered to set the framework within which tax disputes are resolved, provided that these regulations do not infringe upon constitutional rights. In this context, the “pay now, argue later” system was deemed a lawful exercise of legislative authority, designed to uphold the Constitution’s mandates while facilitating effective tax administration.

Moreover, the court underscored the importance of procedural fairness within the system. The judgment noted:

“Cases of non-acceptance of submissions or appeals as stated above are merely legislative regulations. They fall within the discretionary authority of the body regarding methods of tax collection, submitting them to the established authority for collection, and appealing them before the judiciary. They do not infringe upon the principle of equality and equal opportunities granted by Articles (14) and (25) of the Constitution.”

This indicates that while the system requires upfront payment, it also provides structured avenues for taxpayers to contest decisions, thereby ensuring that their legal rights are preserved. The requirement to pay half the penalties before escalating to the federal primary court serves as a compromise, balancing the need for revenue collection with the taxpayer’s ability to challenge assessments without bearing the full financial burden initially.

Given that the requirement to pay taxes arises at the tax dispute resolution committee stage, it is imperative for taxpayers to engage expert tax dispute counsel early on during audits, voluntary disclosures, or reconsideration requests to address liabilities before they may be required to be paid at the tax dispute resolution committee and reduce penalties at the federal primary court levels, respectively.  The “pay now, argue later” system represents a balanced approach to tax administration in the UAE, aligning with constitutional principles of equality and access to justice. The recent judgment by the UAE Federal Supreme Court reaffirms the system’s constitutionality, providing a legal foundation that supports both effective tax collection and the protection of taxpayer rights.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

Landmark Arbitration Victory: Dubai Court Affirms Recoverability of Legal Costs Under ICC Rules

September 26, 2025

In a monumental decision, the Dubai Court of Cassation has issued a groundbreaking judgment in Case No. 756/2024, reshaping the arbitration landscape in the country. This judgment confirms that arbitral tribunals operating under the ICC Rules have the authority to award legal fees to parties, even if not explicitly stated in the arbitration agreement. This marks a significant departure from previous rulings that limited such recoverability.

At Wasel & Wasel, we had the honor of representing the successful party in this landmark case. We presented arguments emphasizing that Article 38(1) of the ICC Rules inherently empowers arbitral tribunals to award legal fees, as they form an integral part of the costs incurred by parties during arbitration. We referenced authoritative sources and interpretations by the ICC, which clarify that arbitration costs include not only the fees and expenses of the arbitrators and administrative expenses but also the legal fees and expenses of the parties.

Reversing Previous Limitations

Historically, the courts in Dubai held a narrow view on the recoverability of legal fees in arbitration. In prior cases over the years, the Dubai courts had determined that unless the arbitration agreement or the arbitration rules explicitly granted the tribunal the power to award legal fees, such costs could not be recovered. This interpretation posed challenges for parties seeking to fully recover their arbitration expenses.

The Court’s Reasoning

In this recent judgment, the court examined Article 38(1) of the ICC Rules, which states:

“The costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses fixed by the Court, in accordance with the scale in force at the time of the commencement of the arbitration, as well as the fees and expenses of any experts appointed by the arbitral tribunal and the reasonable legal and other costs incurred by the parties for the arbitration.”

The court emphasized that when the wording of a legal provision is clear and unambiguous, it should be applied as written without resorting to interpretation that alters its meaning. The use of the word “include” indicates that the list of costs is not exhaustive, thereby encompassing legal fees incurred by the parties.

The court further noted that the phrase “and other reasonable costs incurred by the parties for the arbitration” is broad and unrestricted, covering various costs without limitation. This interpretation aligns with common practices in international arbitration, recognizing that legal fees are a significant component of the costs parties incur.

The court reasoned as follows [translated]:

“And the legal costs, which include lawyers’ fees paid by the parties to the legal representatives who represent them in arbitration proceedings, are considered reasonable costs incurred by the parties in arbitration. Therefore, they are deemed arbitration expenses that are estimated and awarded by the arbitral tribunal according to the text of the first paragraph of Article 38 of the aforementioned rules. This is not altered by the argument that the absence of an explicit mention of legal representatives’ fees—as is explicitly stated in the first paragraph of Article 36 of the 2022 Rules of Arbitration of the Dubai International Arbitration Centre—would mean they are not considered arbitration expenses. This is because such an absence does not imply that the drafter of the ICC Rules intended to exclude the arbitral tribunal’s jurisdiction to award lawyers’ fees after including the phrase ‘and other reasonable expenses incurred by the parties in arbitration,’ which encompasses all reasonable costs incurred by the parties, including legal costs like lawyers’ fees.

Furthermore, asserting otherwise contradicts the consistent practice of the ICC Rules, where Article 37(1) of its rules effective since 2012 includes the phrase ‘reasonable legal costs and other expenses incurred by the parties in arbitration.’ According to the ICC Guide, which provides commentary on these rules, the arbitral tribunal considers the following categories of recoverable costs: (a) fees and expenses of the parties’ lawyers. This same text appears in Article 38(1) of its rules effective since 2017. Moreover, international arbitration practices applying these rules have established that lawyers’ fees are included among the reasonable costs incurred by the parties in arbitration, which are estimated and awarded by the arbitral tribunal.”

Implications for Arbitration in Dubai

This judgment has practical implications for arbitration proceedings in Dubai. The court’s decision brings Dubai’s arbitration practices closer to international standards, which commonly allow for the recovery of legal fees as part of arbitration costs. This alignment enhances the jurisdiction’s appeal to parties seeking arbitration consistent with global practices.

Parties can now approach arbitration in Dubai with increased confidence that they can recover reasonable legal fees, which may influence their decision to arbitrate disputes in this jurisdiction. This greater certainty reduces the financial risk associated with arbitration and ensures that parties are more likely to be fully compensated for their legal expenses if successful.

Moreover, arbitral tribunals operating under the ICC Rules now have clear authority to award legal costs. This clarification contributes to more predictable and fair outcomes in arbitration proceedings, as tribunals can ensure that successful parties are not unduly burdened by their legal expenses.

Our involvement in this case reflects our commitment to contributing to the development of arbitration law in the region. By advocating for a practical interpretation of the ICC Rules that recognizes the full scope of recoverable costs, we aim to support efficient and equitable dispute resolution processes.

We believe that this decision will positively impact parties considering arbitration in Dubai, offering a clearer understanding of the potential costs and recoveries involved.

Conclusion

The Dubai Court of Cassation’s judgment in Case No. 756/2024 provides important clarification on the recoverability of legal fees under the ICC Rules. By affirming that legal fees are included in the costs of arbitration, the court has enhanced the predictability and fairness of arbitration proceedings in Dubai.

At Wasel & Wasel, we are pleased to have led litigation to this outcome. Our focus on practical solutions and thorough legal analysis was instrumental in achieving a result that benefits not only our client but also the broader arbitration community in Dubai.

This decision offers greater clarity for parties engaging in arbitration and supports the use of arbitration as an effective method for resolving disputes.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

UAE Supreme Court on Taxability of Employee Housing

September 26, 2025

The recent judgment by the UAE Federal Supreme Court in Case No. 629 of 2024 marks a significant advancement in the interpretation of value-added tax (VAT) laws concerning employee benefits. This ruling provides critical guidance on how companies should handle VAT related to housing expenses provided to employees.

In this case, a company sought to recover input VAT incurred on expenses for providing housing to its employees, accommodating job candidates, and offering hotel stays during marketing campaigns. The company argued that these expenses should be exempt from VAT and that it was entitled to reclaim the input VAT paid.

The Federal Supreme Court delved into whether expenses such as water, gas, and electricity fall within the concept of a housing allowance. According to the court, these utilities “are outside the concept of housing allowance that is considered a component of the salary as an in-kind benefit granted to the employee by the employment contract and fall within services that must be reclaimed in respect of VAT.” The court emphasized that unless these expenses are explicitly included in the employment contract, they cannot be deducted from the tax base.

Furthermore, the court highlighted the necessity of precise documentation in employment contracts. Article 10 of Cabinet Decision No. 1 of 2022 stipulates that “the employment contract must contain… the agreed wage, including benefits and allowances.” This means that any in-kind benefits, such as housing allowances or utility payments, must be clearly defined in the contract to be considered for VAT exemption.

The court found that the lower court had failed to verify whether these expenses were included in the employment contracts. “The judgment under appeal did not properly examine whether these expenses were included in the employment contract… It has violated the law and must be reversed,” the court stated. This oversight led to the reversal of the lower court’s decision and a remand for further examination.

This ruling underscores the importance for companies operating in the UAE to structure their employment contracts. By clearly outlining all benefits and allowances, companies can ensure compliance with VAT regulations and avoid unexpected tax liabilities.

For businesses, this judgment serves as a crucial reminder of the intricate relationship between employment law and tax obligations. Companies must be vigilant in documenting all aspects of employee compensation to optimize their tax positions and comply with the law.

At Wasel & Wasel, we understand the challenges that companies face in this area. With our experience in over 300 tax procedures collectively valued at over USD 1 billion, we are well-equipped to assist businesses in navigating these complexities. Our team is dedicated to providing clear, practical advice to ensure that our clients remain compliant while maximizing their operational efficiency.

The Federal Supreme Court’s decision represents a pivotal moment in the interpretation of VAT laws related to employee benefits. It highlights the need for businesses to be proactive in reviewing and updating their employment contracts and tax strategies.

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com

Dubai Courts on Criminality of Unlicensed Virtual Asset Operations

September 26, 2025

 

In a recent decision by the Dubai Court of Appeal, Judgment No. 829 of 2023, the court identified the criminal conviction of a former employee who was found guilty of both embezzling funds and engaging in virtual asset service activities without obtaining the necessary license from the relevant regulatory authorities. This case serves as a critical reminder of the legal obligations that come with handling virtual assets and the severe consequences of failing to adhere to them.

The court’s findings were rooted in the criminal judgment from an earlier case, Criminal Case No. 16363 of 2021, where it was established that:

“the defendant was convicted of embezzling funds belonging to one of the plaintiff’s clients, [redacted], in addition to being convicted of engaging in virtual asset service provider activities without obtaining the necessary license from the relevant regulatory authorities.”

The connection between the defendant’s embezzlement and his unlicensed activities in the virtual asset space cannot be understated. The court recognized that by operating without a license, the defendant not only breached regulatory requirements but also facilitated his illicit activities. Deductively, engaging in unregulated virtual asset services provided the defendant with opportunities to handle and misappropriate client funds, which ultimately led to his conviction.

In Dubai, the regulation of virtual asset service providers is overseen by the Virtual Assets Regulatory Authority (VARA) for mainland activities and the Dubai International Financial Centre regulates operations in its respective jurisdiction which mandates that any entity offering services in Dubai related to virtual assets must obtain the appropriate licenses. These regulations are designed to protect investors, maintain the integrity of the financial system, and ensure that all transactions involving virtual assets are conducted transparently and lawfully.

The defendant’s failure to obtain the necessary license from VARA or otherwise was not a minor oversight; it was a fundamental breach of the regulatory framework that governs virtual assets in Dubai. Operating without a license meant that the defendant’s activities were outside the purview of regulatory oversight, allowing him to engage in transactions that were both unmonitored and unregulated. This lack of oversight was seemingly connected to the crime of embezzlement of funds, as there were no regulatory checks in place to detect or prevent the misuse of client assets.

The court’s decision underscores the serious consequences of engaging in virtual asset service activities without proper licensing. It highlights that unlicensed activity in this sector is not just a regulatory breach—it can also be a gateway to criminal behavior, such as the embezzlement of funds. The connection between unregulated virtual asset services and the illicit obtainment of funds in this case serves as a clear warning to others in the industry.

In summary, the Dubai Court of Appeal’s ruling in Judgment No. 829 of 2023 / Criminal Case No. 16363 of 2021 strongly affirms the importance of regulatory compliance in the virtual asset sector. The case demonstrates that operating without a license is not only illegal but also potentially criminal, especially when it leads to misappropriation of client funds. As the virtual asset market continues to grow, the need for stringent regulatory oversight and compliance becomes ever more critical. This judgment serves as a reminder that the consequences of ignoring these regulations can be severe, leading to criminal convictions and significant legal repercussions

Author: Mahmoud Abuwasel
Title: Partner – Disputes
Email: mabuwasel@waselandwasel.com
Profile: https://waselandwasel.com/about/mahmoud-abuwasel/ 		Lawyers and consultants.
Tier-1 services since 1799.
www.waselandwasel.com
business@waselandwasel.com