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In an important ruling delivered on 28 January 2026, the Dubai Court of Cassation affirmed the validity and enforceability of a lease assignment agreement executed as security for banking facilities. The judgment in commercial appeals no. 1555 2024 and 1574 of 2024 consolidates critical principles concerning the enforcement of collateral arrangements in banking transactions under UAE law. The judgment carries great significance for banking and commercial practice in the UAE. The case, which involved a creditor bank and defendant companies, offers definitive guidance on how courts should interpret and enforce lease assignment agreements when borrowers default on their repayment obligations. This article discusses the key principles set out in the judgment. Case background. The dispute arose from banking facilities granted by the bank to the first defendant company. The facilities were secured by various collateral arrangements, including a lease assignment agreement dated 8 October 2007. Under this arrangement, the defendant company agreed to assign to the bank as security its rights under a land lease agreement dated 24 May 2005 pertaining to a plot of land. The assignment was to take effect upon the borrower's default in repaying the banking facilities, which ultimately occurred in month-year. The bank subsequently initiated proceedings before the Dubai Court of First Instance, seeking a declaration of the validity and enforceability of the lease assignment agreement, the transfer of the lease to its name, the eviction and delivery of the property. The recovery of rent payments made on behalf of the defendant company in the sum of 342,739 UAE DRAMs 86 fills, plus interest at 5% per annum. The bank's claim was predicated on the fact that the defendant company had accumulated outstanding debts amounting to 11,746,839 UAE DRAMS 63 fills, as confirmed by the bank's debt confirmation letter and account statements, and had failed to satisfy its repayment obligations despite demand. Lower court judgments, Court of First Instance, the Court of First Instance, having appointed an expert to examine the matter, ruled on 15 August 2024 in favor of the bank, declaring the validity and enforceability of the lease assignment agreement and recognizing the bank's entitlement to transfer the lease to its name. However, the court rejected the remaining claims. Both parties appealed this decision. The defendant company filed appeal number 1555 of 2024, whilst the bank filed appeal number 1574 of 2024. Court of Appeal. On appeal, the Court of Appeal consolidated both appeals and appointed additional experts, including a committee of experts. On the 29th of September 2025, the appellate court dismissed the defendant's appeal and partially allowed the bank's appeal by reversing the Court of First Instances' rejection of the eviction claim, ordering the defendant company to vacate the disputed land and deliver it, together with any buildings constructed thereon, to the bank. The defendant company subsequently filed Cassation Appeal No. 1403 of 2025, whilst the bank filed cassation appeal number 1511 of 2025. The Court of Cassation's key legal findings. 1. The sanctity of contract and binding effect of lease assignment agreements. The Court of Cassation reaffirmed the fundamental principle that a contract constitutes the law governing the parties to it, and each party is bound by the obligations stipulated therein. The court emphasized that contracts must be performed in accordance with their terms and in a manner consistent with the requirements of good faith, stating The contract is the law governing the contracting parties, and each party is bound by the obligations owed to the other. The contract must be performed in accordance with its terms and in a manner consistent with good faith. Furthermore, the court held that where the terms of a contract are clear and unambiguous, they must be applied as written without deviation. Neither party may unilaterally modify the contract except by mutual consent, judicial process, or express provision of law. 2. The nature and enforceability of banking facilities. The court elaborated on the nature of banking facility agreements, defining them as contracts whereby a bank undertakes to place a specified sum of money at the disposal of its customer for a temporary period, in exchange for the customer's obligation to pay agreed interest and commission. The court referenced articles 409 and 410 of the UAE Commercial Transactions Law, noting that a banking loan is a contract under which the bank delivers a sum of money to the customer by way of loan, or credits the same to the customer's account, subject to agreed terms and time frames. The customer is obliged to repay the loan together with interest, in accordance with the agreed schedule and conditions. The court further held that when banking facilities are coupled with a current account, the rights and obligations arising therefrom are converted into entries in the account that offset one another, such that the final balance upon closure of the account constitutes a debt due from the customer to the bank. 3. Actions for declaration of validity and enforceability. In addressing the procedural aspects of the claim, the court clarified that an action for declaration of validity and enforceability is essentially an action for specific performance, aimed at compelling the fulfillment of contractual obligations that would affect the transfer of property rights to the other contracting party. The court described such an action as substantive in nature, extending the court's jurisdiction to examine the subject matter of the contract, its scope, and its enforceability. The court must determine whether the contract satisfies all requirements for formation and validity. 4. Extension of security to subsequent facility agreements. A critical issue raised by the defendant company was whether the lease assignment agreement, originally executed in connection with the 2007 facility agreement, extended to subsequent facility agreements entered into in 2012 and 2015. The defendant argued that the assignment agreement could not bind parties to later agreements without express consent. The Court of Cassation rejected this argument, holding that the expert committee had established that the subsequent amendments to the original 2007 facility agreement contained express acknowledgments by the defendant company affirming the continuation of the lease assignment as security for the bank in the event of default. The court found that these subsequent agreements, duly signed by the defendant company of its own volition, constituted new supplementary agreements that expanded and confirmed the scope of the original assignment to encompass the amended facility agreements. 5. Eviction and delivery as consequential relief. The Court of Cassation upheld the appellate court's decision to grant the bank's claim for eviction and delivery of the property. The court reasoned that, pursuant to a clause in the assignment agreement, the defendant company was obliged, upon demand by the bank following a default, to vacate and deliver the vacant land and any buildings constructed thereon to the bank. The court characterized eviction and delivery as consequential relief flowing from the primary claim for declaration of validity and enforceability of the assignment agreement, stating The claims for eviction and delivery are ancillary to the principal claim for declaration of validity and enforceability of the assignment agreement and constitute an effect of the agreement's enforceability. Conclusion. The Dubai Court of Cassation's judgment in commercial appeals number 1403 and 1511 of 2025 represents an affirmation of the enforceability of lease assignment agreements given as security for banking facilities. By dismissing both appeals and confirming the judgments of the lower courts, the Court of Cassation has reinforced the sanctity of contractual obligations and the efficacy of collateral arrangements in the UAE banking sector. The decision highlights the principle that parties who voluntarily enter into security arrangements must honor their commitments, and that courts will enforce such arrangements in accordance with their clear and unambiguous terms. For lenders, the judgment provides comfort that properly documented security over leasehold interests will be recognized and enforced by UAE courts. For borrowers, it serves as a reminder that default on banking facilities may result in the loss of valuable property rights pledged as collateral. As commercial lending continues to evolve in the region, this is an important judgment on the relationship between creditors and debtors and the mechanisms available to enforce security interests in the event of default.