Debt Recovery, Enforcement and Termination of Suretyships Under the UAE's New Civil Code

Introduction

Federal Decree-Law No.25 of 2025 (the New Civil Code), which came into force on 1 June 2026, introduces important refinements to the rules governing the enforcement and termination of suretyship obligations. While many of the underlying principles remain preserved, the revised provisions provide greater clarity on the procedural steps creditors must take before pursuing guarantors, the protections available to guarantors during enforcement proceedings, and the circumstances in which suretyship obligations may be discharged.

These amendments aim to balance the interests of creditors seeking efficient recovery mechanisms with the need to ensure that guarantors are not exposed to liability beyond what was originally intended. In doing so, the New Civil Code codifies several important principles, expands protections in certain areas, and introduces new obligations that parties must make sure to consider when structuring guarantee arrangements.

This article examines the key changes affecting debt recovery, enforcement rights, subrogation, and termination of suretyships, together with the practical implications for lenders, creditors, guarantors, and businesses operating in the UAE.

Parties should also consider whether the relevant guarantee or suretyship arrangement was entered into before or after 1 June 2026. As the New Civil Code is not generally retrospective in effect, transitional issues may arise when assessing the applicability of the new provisions to existing contractual arrangements. Specific legal advice should therefore be obtained when reviewing guarantees executed before the New Civil Code came into force.

Debt Recovery

Judicial Enforcement Rule

The Old Civil Code stipulated that the creditor must "claim" the debt within six months of maturity; otherwise the surety is released from the suretyship obligation, leaving open whether an informal demand would be considered a sufficient “claim” (Article 1092 Old Civil Code). The New Civil Code tightens this six month judicial enforcement rule.

The new law specifically stipulates that the creditor must make a judicial claim, meaning an informal demand of any sort will not suffice. It states that suretyship will be discharged if the creditor does not take judicial claim procedures against the debtor and guarantor within six months from the day following the date the debt was due (Article 1006). As such, creditors should ensure payment timelines are accurately tracked and formal judicial complaints are made at the correct time in order to avoid losing out on repayment.

It remains to be seen how the courts will apply this provision in the context of commercial financing arrangements and banking facilities. Under the previous legislative framework, judicial decisions had recognised certain exceptions and distinctions in relation to guarantees supporting banking and commercial obligations. Parties involved in financing transactions should therefore monitor future judicial interpretation of Article 1006 and obtain specific advice where substantial guarantee exposure exists.

Rule of Exhaustion

The Old Civil Code afforded guarantors certain protections by allowing them, in prescribed circumstances, to require creditors to proceed first against the principal debtor and available security before seeking recovery from the guarantor. Article 1009 of the New Civil Code strengthens and clarifies this position by providing that a creditor generally may not pursue the guarantor unless recourse has first been taken against the debtor. Accordingly, the guarantor is intended to operate as a secondary source of recovery rather than the creditor's first port of call.

This makes a well-drafted agreement critical, as a contract that allows creditors to claim from the guarantor before exhausting the debtor’s property will have significantly different commercial and legal consequences. Creditors seeking maximum enforcement flexibility should therefore ensure that joint and several liability is expressly agreed in the contract.

Prompt Action Rule - Guarantors

Article 1010 does caveat the rule of exhaustion - whilst a guarantor may invoke the right to have the debtor's assets exhausted first, the burden of identifying and directing the creditor to those assets falls on the guarantor at their own expense. As such, this right is not a passive protection, and guarantors must ensure they actively facilitate enforcement against the debtor in order to benefit from the safeguard.

Critically, the provision limits the assets that can be relied on for this purpose; property located outside the UAE or subject to dispute cannot be taken into account, ensuring that guarantors cannot delay creditors by pointing to assets that are inaccessible or legally uncertain.

Prompt Action Rule - Creditors

The law does establish a counterbalance to the procedural obligations imposed on guarantors. Where a guarantor has fulfilled their duty by directing the creditor to the debtor's property, the creditor will also have a corresponding obligation to act promptly. A creditor who does not take

the necessary enforcement steps at the appropriate time, and subsequently finds the debtor insolvent or bankrupt, cannot fall back on the guarantee and is liable for the loss (Article 1014).

This provision ensures that guarantors that have fulfilled their obligations are not penalised for adverse effects arising from the inaction of creditors. Creditors should take care to keep track of such agreements and act promptly and accordingly in order to avoid losing out on these inbuilt legal protections. These additions taken together serve to distribute risk and responsibility between all three parties in a balanced and commercially reasonable manner.

Order of Precedence

The new law retains a core principle of the Old Civil Code: where a real security exists, a guarantor who is not jointly and severally liable with the debtor cannot have execution levied against their assets until the secured property has been pursued. However it refines and expands the protection granted to guarantors so that it now applies where the real security is created at the same time as or after the suretyship, and is not restricted to immovable property (Article 1015). This change reflects the wider range of real securities recognised under modern UAE law.

The old provision was narrowly framed and applied only where the real security predated the suretyship and was limited to immovable property (Article 1082 Old Civil Code). The expanded scope of the law ensures greater and more consistent protection for guarantors across a wider range of financing structures. For creditors, this reinforces the strategic importance of enforcing against secured assets promptly.

Guarantor Rights and Obligations

Discharge by Loss of Security Interests

Article 1005 introduces further guarantor protections. The law stipulates that where a creditor's own conduct causes the loss of a security interest, the guarantor's obligation is discharged to a corresponding extent, thus penalising creditor negligence, action or inaction. Importantly, security interests are defined expansively and include not only those existing at the time the guarantee was given, but also securities created after the suretyship and those arising by operation of law.

This means a guarantor's protection is not frozen at the time of contracting, instead it adapts in accordance with the security landscape throughout the duration of the transaction. As such, creditors are under a continuing duty of care with respect to the security, and any action which causes loss of the security interest carries the risk of a proportionate reduction in guarantee enforceability. Creditors should ensure rigorous checks and ensure they are in compliance with the laws and regulations at all times.

Multiple Guarantors - The Successive Contract Rule

The Old Civil Code addressed the position of multiple guarantors under the same contract: where joint and several liability is not stipulated, each guarantor would be liable for their proportionate share only (Article 1085 Old Civil Code). The New Civil Code preserves this rule but adds a critical new regulation addressing successive contracts: where guarantors undertake the debt through successive contracts, they are each liable for the whole debt unless they have reserved the right of division (Article 1016).

This distinction has considerable commercial implications, allowing creditors the benefit of full recovery from any guarantor unless the guarantor is protected by the terms of the contract. For guarantors, the new law makes detailed due diligence, clear wording and meticulous contract drafting essential in order to avoid having to take responsibility for an entire debt.

Suretyship of a Guarantor

The new law specifies that suretyship of a guarantor is permissible, so that a counter-guarantee with regards to the guarantor’s obligation may be given. The same legal standard applies: a creditor may not have recourse against the guarantor's guarantor before claiming against the guarantor, unless the guarantor's guarantor is jointly and severally liable with the guarantor (Article 1019).

As such, where there is a guarantee and a counter-guarantee, a creditor’s path to recovery is extended through tiers of liability. In complex financing transactions, this could materially affect a creditor's ability to recover debts quickly, particularly where the primary guarantor is solvent but delays performance, though a counter-guarantee has the benefit of increasing the likelihood of recovering at all.

All parties involved should ensure they have well drafted agreements and are aware of the terms; counter-guarantees are a recognised and legitimate instrument, but their effectiveness as an enforcement tool is directly contingent on how carefully the underlying liability structure is drafted.

Subrogation Rule

The New Civil Code now explicitly codifies the subrogation rule, stipulating that a guarantor paying the full debt is subrogated to the creditor (steps fully into the shoes of the creditor) in all their legal rights against the debtor. However a guarantor that only pays part of the debt cannot exercise their recourse against the debtor until the creditor has been fully repaid (Article 1022). This partial-payment limitation protects creditors from being diluted by a guarantor who only makes a partial payment.

This express codification provides guarantors with a statutory basis to pursue the debtor directly whilst ensuring that a guarantor cannot compete with the creditor for recovery against the debtor's limited assets. For guarantors, this creates a strong commercial incentive to repay the full debt where possible, as partial payment may put the guarantor in the least beneficial position: partial payment means liability has been partially assumed, yet the right of recourse remains suspended until the creditor is fully repaid.

Discharge of Obligations - Termination of Suretyship

The New Civil Code consolidates the Old Civil Code's more expansive framework on the termination of suretyship agreements. The core termination events - debt repayment, destruction or loss of property by force majeure (before demanding repayment), contract termination (from which the obligation arose), and release (of the debtor or guarantor) - are preserved in Article 1030 of the new law.

However, the New Civil Code makes a significant change to the old position. The Old Civil Code stipulated that suretyship was extinguished upon the death of the secured debtor and provided several delivery-related termination events tied to bringing the debtor to the place of delivery before or after expiration of the term (Article 1099 Old Civil Code). The New Civil Code not only removes these stipulations, but goes further, expressly providing that suretyship survives the death of either the guarantor or the debtor, with obligations passing to the respective estates (Article 1029).

This represents a significant policy shift and materially strengthens creditor protection. A creditor will no longer automatically lose recourse merely because the debtor or guarantor has died. For individuals providing personal guarantees, potential liability may now survive death and become enforceable against the relevant estate, making estate planning, succession considerations and careful negotiation of guarantee terms increasingly important.

Conclusion

The New Civil Code significantly modernises the framework governing debt recovery and the termination of suretyship obligations. While creditors continue to benefit from solid enforcement mechanisms, the revised provisions place greater emphasis on procedural discipline, requiring timely judicial action, proper utilisation of available security, and active participation in recovery efforts.

At the same time, guarantors gain enhanced protections through clearer exhaustion requirements, expanded safeguards relating to security interests, and a more detailed statutory framework governing recourse rights and enforcement priorities. However, these protections are accompanied by corresponding obligations, making diligence and active participation essential for guarantors seeking to rely on them.

These changes underscore the importance of carefully drafted guarantee documentation, effective enforcement strategies, and ongoing risk management. Businesses, lenders and guarantors should therefore review existing arrangements to ensure they remain aligned with the new legal framework and its evolving practical application.

The reforms introduced by the New Civil Code will have particular significance for lenders, financial institutions, businesses issuing personal guarantees, and individuals acting as guarantors. Whether dealing with debt recovery in the UAE, enforcement of guarantees, or the termination of suretyship obligations, parties should review their existing contractual arrangements to ensure compliance with the updated legal framework.