Dubai Court of Appeal, judgment dated 30 June 2026

A recent Dubai Court of Appeal judgment provides useful guidance on the allocation of responsibility between a bank and a third-party custodian where investment assets are frozen following a customer’s designation under foreign sanctions.

The Court upheld the dismissal of a customer’s claim seeking the release of an investment portfolio after the assets had been frozen by a custodian in the United Kingdom following the customer’s inclusion on a UK financial sanctions list.

The decision illustrates the importance of identifying who holds the relevant assets, which legal and regulatory regime applies to them, and the precise contractual role undertaken by the customer’s bank.

Background

The customer maintained investment accounts with a bank in Dubai and used the bank’s investment platform to place instructions concerning securities held within an investment portfolio.

Under the relevant arrangements, the customer issued investment instructions through the bank, which transmitted those instructions to a UK-based broker and custodian for execution and safekeeping of the assets.

Following the customer’s designation under UK financial sanctions, the custodian stopped accepting instructions to sell or transfer the investments and the portfolio was frozen.

The customer subsequently sought an order requiring the bank to release the investment assets and associated returns, alleging that the continued restriction amounted to a breach of the bank’s contractual obligations.

The Court of First Instance dismissed the claim. The customer appealed.

The bank’s contractual role was central

A key issue was the distinction between the bank’s role and that of the UK custodian.

The court-appointed expert concluded that the bank acted as an intermediary and order executor. The customer issued instructions through the bank’s platform, while the UK custodian executed the relevant transactions and provided custody services for the investment assets.

The first-instance court, whose reasoning was subsequently adopted by the Court of Appeal, found no evidence that the bank had failed to perform the obligations falling within its contractual role.

That distinction was significant. The assets subject to the freeze were not treated as amounts independently due from the bank to the customer. They formed part of an investment portfolio held through the UK custody arrangement.

The sanctions connection was direct

The evidence showed that the customer had been included on a UK financial sanctions list and that the investment assets were held by a custodian subject to the relevant UK regulatory requirements.

The custodian therefore stopped accepting instructions concerning the sale or transfer of the portfolio.

The Court did not approach the matter as one in which a UAE bank had independently chosen to apply a foreign sanctions regime to assets under its unrestricted control. Rather, the restriction arose in relation to investments held with a UK custodian operating within the relevant UK legal and regulatory framework.

That factual distinction was central to the outcome.

No contractual breach by the bank

Banking liability towards a customer is determined principally by the contractual obligations governing the banking service and whether the bank has failed to perform those obligations.

The Court found no such breach.

The bank had transmitted the customer’s investment instructions in accordance with the agreed arrangements and had communicated the custodian’s position concerning the frozen portfolio.

The expert evidence did not establish that the bank itself held an amount that had become due and payable to the customer or that it had independently caused the sanctions restriction.

In the absence of a proven contractual breach by the bank, the claim for release of the investment value was dismissed.

The linked investment-financing account

The proceedings also concerned a linked investment-financing account maintained with the bank.

The Court accepted that this account was functionally connected with the investment portfolio and was intended to fund investment transactions and receive proceeds arising from them.

As the underlying investment portfolio remained frozen at the UK custodian, the customer’s ability to use the linked account was correspondingly restricted pending removal of the sanctions impediment or different instructions from the competent authority.

This did not, on the evidence, establish an independent breach by the bank.

The Court of Appeal affirmed the first-instance reasoning

On appeal, the customer challenged the first-instance findings and also sought further expert examination.

The Court of Appeal concluded that the arguments raised did not materially depart from those already considered below.

It adopted the first-instance court’s reasoning, found it sufficient to support the judgment and held that the existing evidence and expert report provided an adequate basis for determining the dispute.

The appeal was therefore dismissed and the judgment rejecting the claim was affirmed.

Practical Significance

The judgment is relevant to banks, investment firms, custodians and customers involved in cross-border investment arrangements.

For financial institutions, it highlights the importance of clearly defining whether the institution is acting as principal, investment manager, intermediary, executing broker or custodian. Those distinctions may be decisive when determining responsibility for assets affected by sanctions or other regulatory restrictions.

For investors, the decision demonstrates that the legal position may depend not simply on the bank through which an investment account is accessed, but also on where the underlying assets are held and which entity has legal or operational control over them.

The judgment should not be read as establishing that foreign sanctions automatically determine the rights and obligations of parties before UAE courts. The outcome was fact-specific and reflected the direct connection between the sanctioned customer, the UK-held investment portfolio, the UK custodian and the applicable regulatory restrictions.

Sanctions-related disputes therefore require careful analysis of the entire custody and execution chain, including the contractual documentation, location of the assets, status of the relevant parties and regulatory obligations applicable to each institution.

Conclusion

The Dubai Court of Appeal judgment reinforces the importance of contractual allocation of responsibilities in cross-border investment structures.

Where a bank acts principally as an intermediary and order executor, while the underlying investments are held by a third-party custodian subject to a foreign regulatory regime, liability will depend on whether the bank itself breached an obligation owed to the customer.

The decision also illustrates a broader point in sanctions-related banking disputes: the identity of the sanctioned party, the location and custody of the assets, and the regulatory position of the institution controlling those assets may be as important as the sanctions designation itself.

DISCLAIMER

This publication is provided for general information only. It does not constitute legal, sanctions or regulatory advice and should not be relied upon as such. Sanctions regimes and regulatory requirements may change rapidly, and the outcome of any matter will depend on its particular facts, contractual arrangements and applicable law. Specific legal advice should be obtained before taking or refraining from taking any action.