Civil Law And UAE: Equity-Based Reasoning Within Codified Systems

1. Introduction

Equity-based reasoning within a codified civil-law system refers to the use of fairness-oriented principles when applying written legal rules to particular facts.

The UAE is fundamentally a codified civil-law jurisdiction. Courts ordinarily begin with legislation, contractual provisions and established legal principles rather than an independently developed body of judge-made equity comparable to the historical English equitable jurisdiction.

However, codification does not mean that every civil dispute can be resolved through mechanical application of statutory language.

The UAE legal system contains numerous concepts that allow courts to account for fairness and the circumstances of the particular case, including:

good faith;

abuse of rights;

unjust enrichment;

compensation for unlawful harm;

contractual fairness;

proportionality;

prevention of opportunistic conduct;

restoration of equilibrium in appropriate circumstances;

judicial discretion concerning remedies; and

equitable considerations expressly or implicitly incorporated into statutory rules.

The important point is therefore:

Equity in the UAE generally operates through the Code and recognized legal principles, rather than outside the Code as an independent source of judicial power.

2. Meaning of Equity-Based Reasoning

Equity-based reasoning attempts to prevent a rigid application of a legal rule from producing a result inconsistent with the legal system's underlying principles.

For example, assume:

Party A has a contractual right;

Party A technically satisfies the wording of the contract;

but Party A exercises that right solely to cause unjustified harm to Party B.

The court may have to consider whether the exercise of the right constitutes abuse of rights.

Thus, equity-based reasoning does not necessarily mean:

“The judge may disregard the law whenever the result seems unfair.”

Instead, it means:

“The judge applies legally recognized standards of fairness, good faith and proportionality when the Code itself makes those standards relevant.”

3. Equity and the UAE Civil-Law Tradition

There is an important distinction between:

Common-law equity

Historically developed through courts of equity and equitable doctrines such as:

injunction;

specific performance;

equitable estoppel;

fiduciary principles;

equitable remedies.

Civil-law equity

Generally operates through:

general clauses;

good faith;

abuse of rights;

unjust enrichment;

reasonableness;

proportionality;

judicial discretion;

corrective remedies.

The UAE follows the second model more closely.

Consequently, a UAE judge ordinarily cannot simply state:

“I consider this outcome inequitable, so I will ignore the statute.”

The judge instead has to identify the legal provision or recognized doctrine through which the fairness consideration operates.

4. Equity Within Codification

The UAE Civil Transactions legislation contains several mechanisms through which fairness enters civil adjudication.

Among the most important are:

good faith in contractual performance;

abuse of rights;

unjust enrichment;

liability for unlawful harm;

restitution;

compensation;

judicial assessment of damages;

interpretation according to the circumstances and contractual purpose;

protection against fraudulent or simulated transactions;

protection of creditors; and

proportionality in the exercise of certain rights and remedies.

These doctrines allow the Code to respond to circumstances that cannot be exhaustively anticipated by legislation.

5. Good Faith as an Equity-Oriented Principle

Good faith is one of the most important mechanisms.

Contractual rights are not generally viewed in complete isolation from the manner in which they are exercised.

A party may possess a contractual right but still be required to exercise it consistently with the applicable good-faith requirements.

Good faith may therefore operate as a control against:

opportunistic conduct;

deliberate obstruction;

deceptive performance;

manipulation of contractual mechanisms;

exploitation of another party's legitimate reliance.

However, good faith does not normally permit a court simply to rewrite a contract because it considers another bargain more reasonable.

The court must remain within the statutory and contractual framework.

6. Abuse of Rights

The doctrine of abuse of rights is one of the clearest examples of equity-based reasoning within UAE codification.

The traditional UAE Civil Transactions framework contains an express abuse-of-rights principle, historically associated with Article 106 of the 1985 Civil Transactions Law.

The new Civil Transactions Law that entered into force on 1 June 2026 must now be consulted for the applicable provision and wording in contemporary disputes.

The underlying concept remains important:

A formally recognized right cannot necessarily be exercised in every possible manner without legal control.

Examples include:

exercising a right solely to cause serious harm;

causing disproportionate damage compared with the benefit obtained;

using a right for an unlawful purpose;

exceeding accepted limits of the right;

using a right in a manner contrary to established legal principles.

This doctrine is highly equity-oriented because it prevents formal legal entitlement from becoming an instrument of injustice.

7. Case Law 1: Trafigura Pte Ltd & Trafigura India Pvt Ltd v Prateek Gupta & Ginni Gupta [2025] DIFC CFI 040

This DIFC case is important for understanding creditor-protection doctrines under UAE civil law.

The proceedings involved allegations concerning asset transfers and mechanisms by which creditors sought protection against transactions said to frustrate enforcement.

The judgment discussed concepts including:

indirect action;

simulation;

creditor protection;

Paulian-type remedies;

UAE Civil Transactions principles.

Equity significance

The case demonstrates that civil law does not protect formal transactions merely because they appear legally structured.

Where a transaction is used to defeat legitimate creditor rights, the legal system may provide corrective mechanisms.

The equitable idea is:

A debtor should not be able to use legal form as a mechanism for defeating substantive creditor rights.

This is not free-standing equity; it operates through codified legal remedies.

8. Case Law 2: Emirates NBD Bank PJSC v Rashed Abulaziz Almakhawi & Others [2026] DIFC CFI 039

This case involved substantial banking claims and allegations concerning transfers of assets that allegedly frustrated enforcement.

The proceedings considered UAE-law mechanisms concerning:

damages;

transactions affecting creditors;

sham or simulated arrangements;

avoidance of transactions;

protection of creditor interests.

Equity significance

The case illustrates the corrective function of civil law.

A purely formal approach might say:

“The property was transferred, therefore the transfer must be respected.”

A creditor-protection approach asks:

“Was the transfer used to defeat an existing legal obligation or creditor enforcement rights?”

The legal system can therefore look beyond formal appearance where the Code permits it.

This represents substantive fairness operating through codified doctrine.

9. Case Law 3: Oheo Bank v Parker [2025] DIFC CA 006

This DIFC Court of Appeal authority concerned an arbitral award and procedural fairness.

The Court examined issues involving:

reasonable opportunity to present a case;

due process;

adequacy of reasons;

practical injustice;

appellate review.

The Court found circumstances sufficient to justify intervention in parts of the award.

Equity significance

Although this is principally an arbitration and due-process case rather than an “equity” case, it demonstrates a broader fairness principle:

Legal adjudication must not be reduced to formal compliance when the procedure has produced real practical injustice.

This is analogous to equity-based reasoning because the court examines the substantive fairness of the decision-making process while remaining within the applicable procedural legislation.

10. Case Law 4: Khaled Salem Musabeh Humad Al Mheiri v John Cameron [2025] DIFC CA 008

The DIFC Court of Appeal examined factual findings, evidence and legal reasoning in a dispute involving an indemnity arrangement and allegations of deceit and mistake.

The Court focused on whether the first-instance decision adequately explained:

relevant factual findings;

evidence;

legal principles;

the reasoning connecting those elements.

Equity significance

The case demonstrates that fairness in civil adjudication is not limited to the final remedy.

It also concerns the quality of the decision-making process.

A reasoned decision enables:

the parties to understand the result;

errors to be identified;

appellate review to occur;

the legitimacy of the adjudication to be assessed.

Thus, procedural fairness becomes an important component of justice within codification.

11. Case Law 5: Aegis Resources DMCC v Union Bank of India (DIFC Branch) [2020] DIFC CFI 004

This DIFC banking dispute involved electronic payment instructions and alleged payment fraud.

The case required examination of:

payment instructions;

banking obligations;

electronic communications;

contractual responsibilities;

allocation of risk.

Equity significance

Modern commercial disputes frequently involve situations in which strict formal analysis is insufficient.

The court must consider:

what contractual duties existed;

what conduct was authorized;

whether instructions were genuine;

whether parties complied with their obligations;

how contractual risk was allocated.

The case demonstrates how fairness and commercial reasonableness can inform the application of contractual and banking rules without creating an independent equitable jurisdiction.

12. Case Law 6: Gate Mena DMCC / Huobi v Tabarak Investment Capital Ltd [2020] DIFC TCD 001

This case involved cryptocurrency, digital assets and disputes concerning custody/control and contractual obligations.

It is significant because digital assets challenge traditional assumptions about:

possession;

control;

ownership;

transfer;

intermediary responsibility.

Equity significance

Civil-law principles must operate even where the underlying technology is new.

The court cannot simply abandon established legal principles because the asset is technologically unusual.

Instead, the court must determine:

what rights the parties created;

what obligations arose;

who exercised control;

whether contractual duties were performed;

what remedy is legally available.

This illustrates the adaptability of codified principles.

13. Case Law 7: Gate Mena DMCC / Huobi v Tabarak Investment Capital Ltd [2023] DIFC CA 002

The appellate proceedings further addressed contractual and digital-asset issues.

The significance of the appellate authority is that technologically novel disputes can still be analyzed through conventional legal concepts such as:

contractual obligations;

control;

custody;

performance;

breach;

remedies.

Equity significance

The case demonstrates an important characteristic of codification:

General legal concepts can be applied to new factual environments without creating an entirely new legal system for every technological development.

Equity-oriented reasoning therefore works through existing principles rather than necessarily requiring a separate doctrine.

14. Case Law 8: International Electro-Mechanical Services Co. LLC v Emirates Speciality Hospital FZ-LLC [2020] DIFC CFI 114

This construction dispute involved payment certification and expert evidence concerning UAE law.

The case illustrates the significance of:

contractual allocation of responsibilities;

engineer certification;

technical evidence;

contractual rights;

evidentiary evaluation.

Equity significance

Construction relationships frequently involve competing interests between:

employer;

contractor;

engineer;

subcontractors.

The court may need to prevent a technically correct but legally incomplete interpretation from distorting the contractual relationship.

The principle is not that the court can freely rewrite the contract.

Rather:

The contractual arrangement must be interpreted and applied according to the applicable legal framework and the actual allocation of rights and responsibilities.

15. Case Law 9: Dubai Court of Cassation Commercial Judgment No. 767 of 2021

UAE jurisprudence concerning court-appointed experts distinguishes technical questions from ultimate questions of law.

An expert may assist the court with:

accounting;

engineering;

valuation;

technical calculations;

factual reconstruction.

But the expert does not normally determine the final legal issue.

Equity significance

This protects the judicial function from excessive formalism or excessive delegation.

The court must independently evaluate whether the technical evidence satisfies the legal requirements.

This becomes particularly important where an expert's conclusion appears persuasive but may produce a result inconsistent with the governing legal rule.

16. Case Law 10: GFH Capital Ltd v Haigh [2014] DIFC CFI 020

This commercial dispute illustrates the importance of evaluating evidence and contractual relationships in their wider commercial context.

Equity significance

Civil adjudication cannot always be reduced to reading individual contractual provisions in isolation.

The court may need to consider:

surrounding circumstances;

contractual structure;

documentary evidence;

commercial conduct;

obligations undertaken by the parties.

This contextual method is consistent with the broader principle that codified law should be applied to the real relationship between the parties rather than through artificial fragmentation.

17. Case-Law Summary

18. Equity and Abuse of Rights

The abuse-of-rights doctrine is particularly important because it prevents a party from arguing:

“I had a right, therefore anything I did in exercising it was lawful.”

That reasoning is incomplete.

The court may need to examine:

What right existed?

What was the purpose of the right?

How was it exercised?

What harm resulted?

Was the conduct within the legally accepted limits of the right?

Did the exercise conflict with another mandatory legal principle?

This is one of the clearest ways that fairness enters UAE codified civil law.

19. Equity and Unjust Enrichment

Unjust enrichment is another major equitable-looking principle.

The basic idea is that a person should not retain an unjustified benefit at another person's expense where the legal requirements for restitution are satisfied.

Typical situations may involve:

payment made without legal basis;

mistaken payment;

benefit obtained through invalidity;

expenditure benefiting another party without adequate legal justification.

The remedy is generally structured through civil-law restitution principles rather than a free-standing equitable jurisdiction.

The fundamental concept is:

Benefit + corresponding impoverishment + absence of sufficient legal basis → potential restitutionary liability

The precise requirements depend upon the applicable statutory framework and circumstances.

20. Equity and Compensation

Compensation is also capable of producing equity-oriented outcomes.

Civil liability may require consideration of:

actual loss;

lost profits where legally recoverable;

causation;

foreseeability where applicable;

mitigation;

degree of harm;

contractual limitations.

The court's task is not to punish the defendant simply because the defendant's conduct was undesirable.

The objective is generally to provide the legally appropriate civil remedy.

21. Equity and Proportionality

Proportionality is particularly useful where a legal right can be exercised in several ways.

For example:

a creditor may have enforcement rights;

a contracting party may have termination rights;

a party may seek security;

a party may seek an injunction or interim measure.

The court may need to determine whether the particular remedy sought is authorized and appropriately connected to the legal interest being protected.

This does not mean that proportionality universally overrides express contractual or statutory provisions.

Instead, proportionality operates where the relevant legal framework gives the court discretion to consider it.

22. Equity and Contractual Good Faith

Contracts create legally binding obligations.

However, contractual performance is not necessarily evaluated only by asking:

“Did the party technically perform the words of the clause?”

The court may also have to examine:

good faith;

cooperation;

prevention of performance;

misleading conduct;

contractual purpose;

abuse of contractual rights.

This is especially important in long-term contracts such as:

construction agreements;

distribution agreements;

agency contracts;

finance arrangements;

technology contracts;

infrastructure projects.

23. Equity and Specific Performance

Specific performance illustrates another area where fairness and codification interact.

A claimant may have a substantive contractual right, but the precise remedy can depend on the legal requirements governing enforcement.

The court may need to examine:

whether performance remains possible;

whether damages are an adequate remedy;

whether third-party rights are affected;

whether the requested order is legally available;

whether enforcement would create disproportionate consequences.

Again, this is not unrestricted judicial equity.

The court's discretion operates within the governing legal framework.

24. Equity and Creditor Protection

Equity-oriented reasoning is particularly visible in creditor cases.

A debtor should generally not be able to:

conceal assets;

simulate transactions;

transfer assets to defeat creditors;

structure transactions solely to frustrate legitimate enforcement.

Codified creditor-protection mechanisms can address such conduct through:

avoidance;

simulation claims;

indirect actions;

attachment;

execution;

insolvency proceedings.

The Trafigura and Emirates NBD authorities demonstrate the continuing importance of these principles.

25. Equity and Simulation

A transaction may appear valid on its face while not reflecting the parties' actual intentions.

Civil-law systems therefore recognize doctrines addressing:

sham transactions;

simulation;

concealed transactions;

transactions designed to mislead creditors.

The principle is:

Legal form should not necessarily defeat legal substance where the applicable law provides a mechanism for examining the true transaction.

This is an important equity-oriented characteristic of codification.

26. Equity Versus Judicial Discretion

These concepts should not be confused.

Judicial discretion

A statute gives the court a range of lawful choices.

Equity-based reasoning

The court uses fairness-related legal principles within that statutory authority.

Judicial legislation

The court creates a new rule not grounded in recognized law.

The third is substantially different.

UAE courts generally operate within a codified legal structure and therefore cannot treat personal conceptions of fairness as an unrestricted source of law.

27. Limits of Equity in UAE Civil Law

Equity-based reasoning has important limits.

27.1 Mandatory statutory rules

A court cannot ordinarily disregard mandatory legislation merely because another outcome appears fairer.

27.2 Contractual autonomy

Where a contract is valid and lawful, courts generally respect the parties' agreed allocation of rights and obligations subject to applicable mandatory rules.

27.3 Burden of proof

Fairness does not automatically eliminate evidentiary requirements.

27.4 Procedural rules

Parties must comply with applicable procedural requirements.

27.5 Public policy

Private arrangements cannot override applicable public-policy limitations.

27.6 Judicial competence

A court cannot simply assume powers that legislation does not confer.

28. Codification and Flexibility

A major strength of a codified system is that general clauses can create flexibility.

A Code cannot anticipate every possible dispute involving:

artificial intelligence;

cryptocurrency;

autonomous systems;

digital identity;

smart contracts;

cloud services;

algorithmic transactions.

But broad doctrines such as:

good faith;

unlawful harm;

unjust enrichment;

abuse of rights;

contractual responsibility;

causation;

can be applied to new factual environments.

Thus:

Codification provides stability, while general principles provide adaptability.

29. Equity and Artificial Intelligence

The issue becomes especially interesting with AI.

Suppose an automated contractual system technically exercises a termination clause.

The question is not merely:

“Did the software execute the clause?”

The court may need to ask:

Was the termination contractually authorized?

Were the triggering conditions satisfied?

Was the system supplied with correct information?

Did a party manipulate the input?

Did the party use automation to circumvent contractual duties?

Does the relevant law impose good-faith or anti-abuse constraints?

Technology therefore does not eliminate equity-oriented principles.

Instead, it creates new environments in which those principles may operate.

30. Equity and Digital Assets

Cryptocurrency and blockchain systems create similar questions.

Suppose a person technically controls a wallet but obtained the asset through:

fraud;

unauthorized access;

breach of custody obligations;

mistaken transfer.

The court must distinguish:

technical control

from

legal entitlement.

The Gate Mena/Huobi litigation demonstrates how conventional legal principles can be applied to digital assets.

31. Equity and Civil Adjudication

Equity-oriented adjudication can be understood as a balancing process between three elements:

Legal certainty

The law must be predictable.

Substantive justice

The law must respond appropriately to harmful or abusive conduct.

Judicial restraint

Courts must remain within their lawful authority.

The ideal structure is therefore:

Code

↓

General legal principles

↓

Facts

↓

Judicial interpretation

↓

Fair and legally authorized remedy

Not:

Judge's personal idea of fairness

↓

New legal rule

32. Practical Example

Assume a debtor owes AED 10 million.

Shortly before enforcement, the debtor transfers a major asset to a related entity for a nominal consideration.

The related entity argues:

“The transfer is formally valid.”

A UAE civil court may need to investigate:

whether the transaction was genuine;

whether it was simulated;

whether it prejudiced creditors;

whether an avoidance mechanism applies;

whether the transfer was designed to frustrate enforcement.

The court does not need an abstract equitable power to produce a fair result.

It uses codified creditor-protection doctrines.

This is the central characteristic of equity within a civil code.

33. Practical Example: Contract Termination

Suppose a party terminates a long-term contract immediately after the counterparty commits a minor technical default.

The terminating party argues:

“The contract gives me a termination right.”

The court must examine:

the exact contractual clause;

whether its conditions were satisfied;

applicable mandatory law;

good-faith requirements;

the nature and consequences of the breach;

the remedies legally available.

The court's conclusion must arise from the governing legal framework rather than an unrestricted personal assessment of fairness.

34. Practical Example: Unjust Enrichment

Suppose Company A accidentally pays Company B AED 1 million.

Company B knows that:

it was not contractually entitled to the payment;

the payment was made by mistake;

Company A seeks recovery.

The relevant legal question is not merely:

“Would it be fair for B to return the money?”

The court instead asks whether the statutory requirements for restitution or unjust enrichment are satisfied.

Thus:

Fairness intuition → legal doctrine → legally enforceable remedy.

35. Equity as a Corrective Function

Equity-oriented principles perform several corrective functions.

Corrective function

They prevent abuse of formally valid rights.

Restitutive function

They restore unjustified benefits.

Compensatory function

They repair legally recognized losses.

Interpretive function

They help courts apply general statutory and contractual concepts.

Procedural function

They help ensure fair adjudication.

Adaptive function

They allow traditional civil principles to operate in technologically new circumstances.

36. Equity and Legal Certainty

There is a potential tension.

Too little flexibility may create:

rigid but unjust outcomes.

Too much flexibility may create:

unpredictable judicial decision-making.

Codified systems therefore attempt to control this tension through statutory general clauses.

This is why UAE equity-oriented reasoning should ordinarily be principle-based rather than purely intuition-based.

The court should be able to identify:

the legal provision;

the recognized doctrine;

the relevant facts;

the reason the doctrine applies.

37. Equity-Based Reasoning Formula

A useful formula is:

Codified Rule

General Principle

Relevant Facts

Proportional Legal Interpretation

=

Legally Justified Outcome

This is different from:

Personal Sense of Fairness

=

Judgment

The latter would undermine legal certainty.

38. Relationship with the New UAE Civil Transactions Law

The new Civil Transactions Law, effective from 1 June 2026, continues the UAE's civil-law approach while modernizing and reorganizing substantive private-law rules.

For contemporary litigation, practitioners should therefore identify:

the date of the underlying transaction;

the date of the alleged breach;

applicable transitional rules;

the relevant provisions of the new Civil Transactions Law;

whether cited judgments interpret the former 1985 law;

whether the relevant principle has been retained, modified or renumbered.

This is particularly important when citing historical case law concerning provisions such as the former abuse-of-rights and unjust-enrichment articles.

39. Overall Doctrinal Framework

The UAE approach can be summarized as follows:

First layer — Codification

The court begins with written law.

Second layer — Contract

The court examines the parties' valid agreement.

Third layer — General principles

The court considers principles such as good faith, abuse of rights and unjust enrichment where legally applicable.

Fourth layer — Facts

The court determines what actually occurred from admissible evidence.

Fifth layer — Judicial interpretation

The court applies the legal rule to those facts.

Sixth layer — Remedy

The court grants the remedy authorized by law.

This structure combines certainty with controlled flexibility.

40. Conclusion

Equity-based reasoning within UAE codified civil law should not be understood as an unrestricted power of judges to decide cases according to personal notions of fairness.

Instead, equity operates primarily through the general principles embedded in the civil-law system.

The most important mechanisms include:

good faith;

abuse of rights;

unjust enrichment;

restitution;

compensation;

creditor protection;

simulation doctrines;

proportionality where legally relevant;

contextual contractual interpretation; and

procedural fairness.

The cases discussed demonstrate this from different perspectives.

Trafigura v Gupta and Emirates NBD v Almakhawi illustrate corrective mechanisms protecting creditors against transactions that allegedly frustrate legitimate rights.

Oheo Bank v Parker demonstrates the importance of procedural fairness.

Al Mheiri v Cameron demonstrates the importance of reasoned adjudication.

Aegis Resources illustrates contextual contractual and banking responsibility.

Gate Mena/Huobi v Tabarak demonstrates the adaptability of conventional civil principles to digital assets.

International Electro-Mechanical Services and Dubai Cassation Commercial 767/2021 illustrate the distinction between technical evidence and judicial legal determination.

The central proposition is therefore:

UAE civil law does not generally place equity outside the Code; it incorporates fairness-oriented principles into the Code and permits courts to use those principles to prevent abuse, correct unjustified enrichment, protect legitimate rights and apply general legal rules to particular circumstances.

The resulting model is:

Codified rule → general principle → factual assessment → judicial interpretation → proportionate legal remedy.

This approach allows the UAE civil-law system to maintain legal certainty without sacrificing controlled flexibility, enabling codified rules to respond to complex commercial, technological and social disputes while preserving the principle that judicial fairness must remain grounded in law.