<p>In litigation, one reoccurring topic litigators face before the UAE courts is  how interest is claimed and calculated on outstanding payments in commercial  debts. A recent Dubai Court of Cassation ruling (Judgment 66 of 2011) gives us  insight to such method as outlined  hereunder.<br /><br /><strong>BACKGROUND</strong><br /><br />This case involved two  parties, where the Claimant filed a claim against the Defendant before the Court  of First Instance for AED 730,000 as a result of the Defendant&rsquo;s breach of  contract.&nbsp; In addition to the claim amount, the Claimant also claimed legal  interest on the debt due.<br /><br />Under the terms of said contract and in  consideration of the Defendant&rsquo;s obligations, the Claimant paid the Defendant an  amount of AED 730,000 as an advance payment. The Defendant however, failed to  provide the Claimant with the agreed services and thus was in breach of its  obligations as per the terms of the contract.<br /><br />The Defendant filed a  counterclaim to obligate the Claimant to pay the Defendant an amount of AED  245,100 in addition to legal interest as they had already began providing its  services and they suffered a loss of AED 975,000 as a result of the Claimant&rsquo;s  termination of the contract.<br /><br />The Claimant challenged the judgment issued  by the Court of First Instance which rejected its claim and accepted the  counterclaim against the Claimant (effectively ordering it to pay an amount of  AED 238,605.75 in addition to the legal interest of 9%).&nbsp; The Court of Appeal  upheld the decision of the Court of First Instance. The Claimant further  challenged said judgment before the Court of Cassation which overturned the  appealed Judgment and referred the case to the Court of Appeal once again. This  time, the Court of appeal issued a judgment to:<br /><br />1.&nbsp;Cancel the challenged  Judgment.<br /><br />2.&nbsp;Terminate the disputed contract dated 06/02/2008 subject of  the main claim and to obligate the Defendant to pay to the plaintiff an amount  of AED 730,000 in addition to the 9% legal interest from the date of the  judgment until full payment.<br /><br />3.&nbsp;Reject the counterclaim filed by the  Defendant.<br /><br /><strong>THE COURT&rsquo;S APPROACH AND FEDERAL LAW ON  INTEREST<br /><br /></strong>The last judgment was challenged again by the Claimant  before the Court of Cassation in respect of the legal interest which was  calculated from the date of the judgment.<br /><br />The Claimant requested that the  legal interest was to be calculated as of the date of the contract, which was on  06/02/2008 or from the date of filing the claim as per article 90 of the  Commercial Transactions Law [Fed. Law 18 of 1993].<br /><br />The aforementioned  article states that:<br /><br />&ldquo;Interests for delay of payment of commercial debts  shall accrue from the maturity date of such debts, unless it is otherwise  provided for by Law or agreement&rdquo;.<br /><br />In this regard, legal interest  calculated for delay on outstanding amounts will be calculated as of the date of  the claim (i.e. the debt must be known at the date it falls due), even if the  debtor is disputing the claimed amount or the due date. Same also applies in the  event that a contract has specified the amount due and the court decided to  terminate the contract, the legal interest will accrue as of the date of the  claim.<br /><br />However, if it is related to legal interest in connection with  compensation for damages which was suffered by the creditor and the value of the  damages needs to be calculated by the court, the legal interest will accrue as  of the date of the final judgment.<br /><br />For the above reasons, the Court of  Cassation ruled the following:<br /><br />The Court decided to accept the partial  challenge relating to the commencement date of calculating the legal interest.  It further decided to amend the judgment so that the interest commences as of  the date of the claim on 16/02/2009 until full payment.<br /><br />This ruling  provides a useful guide for any concerned party when calculating the  aforementioned legal interests in similar situations.</p>