The General Authority of the Dubai Court of Cassation recently issued Decision No. (9) of 2025

This approach is consistent with the provisions of Federal Decree-Law No. 50 of 2022, which explicitly prohibits the arrangement or collection of interest on deferred or overdue debt.

The decision states that such a condition is contrary to the nature of Islamic finance and is linked to public order, which allows the court to address it on its own initiative.

Notably, the decision contradicts previous rulings that permitted legal interest as compensation for delay, provided it was spent on charitable causes. This reflects a legislative and judicial development toward greater jurisprudential discipline and Sharia compliance in Islamic finance contracts.

The decision reaffirms the Maliki school of jurisprudence and some Islamic banking industry standards, which limit the possible penalty to the debtor's obligation to donate an amount to a charitable organization—without any return to the financier.

This ruling sets an important judicial precedent and calls on all those working in the banking and legal fields to review the wording of penalty clauses and payment obligations in Sharia-compliant financing contracts.