Dubai Court Dismisses Dh10.8m Embezzlement Claim in Restaurant Dispute

The Dubai Criminal Court has dismissed an embezzlement case involving more than Dh10.8 million in a restaurant investment dispute, ruling that the matter falls under civil rather than criminal jurisdiction. The decision provides important legal clarity for investors and businesses operating in the UAE, particularly on the distinction between contractual disputes and criminal breach of trust.

 

Prosecutors accused two men of embezzling Dh10,809,231, which an investor claimed was entrusted to them to secure a 50 per cent stake in a Dubai-based restaurant. According to the prosecution, the funds were transferred over a two-year period following a Memorandum of Understanding (MoU) signed in May 2019.

 

The investor alleged that the defendants failed to fulfil their obligations under the agreement, effectively misappropriating the funds.

 

The Court, however, found that the money had been transferred as part of a commercial arrangement for acquiring restaurant shares and covering operational expenses. It ruled that this did not amount to a legally recognised “contract of trust” -- such as a deposit, lease, or agency agreement -- which is required under UAE law for a criminal embezzlement charge to stand.

 

In its judgment, the Court emphasised that contractual breaches involving financial transactions are civil matters unless they arise from a fiduciary relationship specifically defined under the law.

 

Legal specialists explain that the ruling underscores a fundamental principle in UAE criminal law: failure to honour contractual obligations, even in high-value deals, does not automatically constitute a criminal offence. For a breach of trust to be prosecuted as a crime, there must be evidence that funds were transferred under a fiduciary arrangement, coupled with clear intent to misappropriate them. This interpretation draws a firm line between civil and criminal liability, particularly in investment and partnership disputes.

 

The case also serves as a reminder for investors to safeguard their interests when entering into high-value commercial transactions. Agreements should clearly outline fiduciary duties, responsibilities, and protective clauses. Without such provisions, disputes are more likely to be treated as civil matters, limiting the scope for pursuing criminal action in cases of alleged misappropriation.

 

By reaffirming the distinction between contractual disagreements and criminal breach of trust, the ruling provides a valuable precedent for businesses and investors navigating Dubai’s commercial landscape. It highlights the importance of precise contractual drafting and legal due diligence in structuring partnerships and investment deals.

 

 

For any enquiries please fill out this form, or contact info@thelawreporters.com and  Follow  The Law Reporters on WhatsApp Channels