How to Recover Money from a Client After Repeated Cheque Bounces in the UAE?

The UAE updated its cheque bounce laws in January 2022, softening criminal penalties for certain cases of bounced cheques while focusing on civil recovery mechanisms. Criminalization now applies only to cases involving fraud, forgery, or insufficient funds when the issuer is intentionally avoiding payment. This shift means many cases are no longer pursued criminally, placing the burden on individuals to recover money through civil courts.With reduced criminal penalties, debtors facing financial difficulties may prioritize other debts, leading to repeated cheque bounces. Creditors now find it harder to use the threat of imprisonment as leverage, making it more challenging to recover money, particularly when cheques are repeatedly issued without sufficient funds.

But, is there a way for individuals and business owners to recover debts from clients even after repeated negotiations and defauls? Lets dive into the process of recovering money from clients after failed negotiations and repeated cheque returns.

1. Understanding the Legal Framework for Cheque Bouncing in the UAE

Federal Decree-Law No. 50 of 2022 on Commercial Transactions governs cheque-related matters in the UAE, particularly outlining the responsibilities and consequences when a cheque bounces due to insufficient funds. It is essential to understand the core laws and procedures before initiating legal actions.

2. Initial Steps to Take After a Cheque Bounces in the UAE

Before proceeding to court, it’s crucial to follow some initial steps:

• Attempt Reconciliation: Contact the client directly to seek clarification and give them a chance to resolve the issue amicably.
• Issue a Legal Notice: Serve a formal demand letter for the payment of the cheque amount. The notice should include the details of the cheque, the amount owed, and a deadline for settlement.

Issuing a legal notice sets the stage for further legal action if the payment is not made, ensuring that you have documented proof of the demand.

3. Filing a Writ of Execution

Once the cheque bounces post the agreed date, the drawee has the right to file a civil lawsuit under Federal Decree-Law No. 42 of 2022 on Civil Procedures. The civil action focuses on recovering the unpaid amount rather than imposing criminal penalties.

Under the UAE Civil Procedure Code, filing a civil case requires adherence to specific procedural steps, beginning with the initiation of the case by the Plaintiff. Below is a breakdown of the key aspects of this process:

Initiating the Case

The case shall be formally instituted by the Plaintiff through the submission of a statement of claims. This can be done either electronically or in a paper format, depending on the procedures of the court where the case is filed. The submission takes place at the Case Management Office, which oversees the administrative aspects of the court proceedings.

Contents of the Statement of Claims for Writ of Execution

The statement of claims, which serves as the foundational document for the case, must include the following details:

• Plaintiff’s Information
  The Plaintiff’s full name, surname, and identification number, or a photocopy of any government-issued document that verifies their identity, must be provided. Other required information includes their profession, occupation, domicile, place of work, phone number, fax number, and email address. If the Plaintiff does not have a domicile within the UAE, they must designate an elected domicile and provide the name, surname, ID number, profession, occupation, domicile, and contact details of their legal representative.
• Defendant’s Information
  The Defendant’s full name, surname, and identification number, or a copy of any government-issued document verifying their identity, must be included, along with their profession, occupation, domicile, place of work, phone number, fax number, and email address. Similar to the Plaintiff, if the Defendant or their representative does not have a domicile in the UAE, they must elect one and provide the legal representative’s full details.
• Jurisdiction
  The statement must specify the court before which the case is being brought.
• Date of Filing
  The exact date the statement of claims is filed with the Case Management Office must be clearly stated.
• Subject of the Case and Relief Sought
  The statement should include the subject matter of the dispute, the relief or remedy sought by the Plaintiff, and the grounds for the case.
• Signature
  The statement must be signed by the Plaintiff or their legal representative to validate the filing.

Adhering to these detailed requirements ensures that the case is properly instituted, allowing the judicial process to proceed efficiently. Failure to provide any of the required information may result in delays or potential dismissal of the case by the court.

4. Role of the Case Management Office in recovering debts Under UAE Civil Procedure

The UAE Civil Procedure Code provides for the creation of a dedicated Case Management Office at the competent court, designed to streamline and manage legal proceedings before they are referred to trial. The following outlines the key functions and responsibilities of this office:

• Establishment of the Case Management Office
  A specialized office, referred to as the “Case Management Office,” shall be set up within the premises of each competent court. This office plays a crucial role in managing the procedural aspects of cases before they reach the trial phase.
• Composition of the Office
  The Case Management Office shall consist of a head and a sufficient number of court employees, including legal professionals and administrative staff. These employees operate under the supervision of the chief justice or designated judges of the competent court, ensuring that all administrative tasks are handled efficiently.
• Duties of the Case Management Office
  The office is responsible for the preparation and management of cases before they are forwarded to the court. Its tasks include:
  • Registration and Service: Ensuring that the case is properly registered and that service of process is carried out.
  • Exchange of Documents: Facilitating the exchange of submissions, documents, and experts’ reports between the litigants.
  • Coordination: Coordinating between the parties to ensure that all procedural steps are followed before the case is referred to the competent judge for adjudication.
• Authority of the Supervising Judge
  A supervising judge oversees the activities of the Case Management Office and holds the power to make critical decisions, including:
  • Dismissal for Non-Payment: The judge may dismiss a case if the Plaintiff fails to pay the required court fees or associated costs, preventing the case from proceeding.
  • Procedural Orders: The judge has the authority to discontinue or waive proceedings, subject to standard methods of challenge as per general legal rules.
  • Appointment of Experts and Witnesses: The judge can appoint expert witnesses, refer the case for investigation, hear witnesses, or examine the litigants.
  • Mediation and Conciliation: The judge may refer the litigants to mediation or conciliation and attempt to resolve the dispute amicably. If an agreement is reached, the judge can issue a decision confirming the conciliation, which holds the legal force of a writ of execution.
• Actions Upon Legal Stay Due to Death or Incapacity
  In cases where legal proceedings are halted due to the death, incapacitation, or loss of legal capacity of either party or their representative, the Case Management Office shall refer the case to the supervising judge. The judge will then issue a decision to amend the case’s form accordingly, ensuring continuity of the legal process.
• Handling of Pleas and Appeals
  If either party files a plea that could result in the stay of proceedings or an appeal against a judgment on grounds such as inadmissibility or lack of jurisdiction, the Case Management Office will refer the matter to the supervising judge. The judge will then issue a decision regarding the next steps, which may include referring the case back to the appropriate court for adjudication.

The Case Management Office is thus a pivotal entity in the UAE judicial system, ensuring that cases are efficiently prepared and managed before entering the trial stage. This office, in coordination with the supervising judge, ensures smooth procedural handling, potentially resolving disputes through mediation or other alternative methods, and helps avoid delays in litigation.

5. Determination of Invoice Value in Legal Proceedings

In accordance with the UAE Civil Procedure Code, the value of a legal case plays a critical role in determining jurisdiction, the applicable procedures, and the rights of appeal. The following guidelines outline how case values are to be determined in various types of legal proceedings:

• Determination of Invoice Value by Court
  If the value of the case is not explicitly mentioned in cash but can be quantified in monetary terms, the court will determine the appropriate value.
• Currency Conversion for Monetary Claims
  If the claim involves a sum of money in a currency other than the UAE Dirham (AED), the case value shall be converted to its equivalent in UAE currency, ensuring a consistent standard for determining the value.
• Property Ownership Claims
  For legal proceedings related to the ownership of property, the case value will be determined based on the property’s market value. If the property has no known market value or is a vacant land with an undetermined value, the case value will be deemed to exceed the threshold for a challenge by way of cassation, indicating the case’s significance.
• Claims Involving Contracts
  • Validity, Invalidity, or Rescission of Contracts: In cases involving claims for the validity, invalidity, or rescission of a contract, the case value shall be determined based on the value of the contractual object.
  • Exchange Contracts: For contracts of exchange, the value of the case will be equivalent to the value of the higher-priced item being exchanged.
• Continuous Contracts
  In legal proceedings related to continuous contracts, such as leases or service agreements, the value of the case will be determined by the total monetary consideration for the entire contract term. If the contract has been partially performed, the value will be determined based on the remaining duration of the contract.
• Company Dissolution and Liquidation
  In cases involving the dissolution of a company or the appointment of a liquidator, the value of the case will be based on the company’s capital as stated in its Memorandum of Association.
• Eviction of Leased Property
  For legal proceedings related to the eviction of a leased property, the value of the case will be determined based on the annual rent of the property.
• Creditor-Debtor Disputes Involving Attachments
  If the legal proceeding involves a dispute between a creditor and a debtor regarding the attachment of property or an ancillary right in-rem, the value of the case will be determined based on the lesser of the following:
  • The value of the debt
  • The value of the property subject to attachment or the right in-rem
  For cases initiated by a third party concerning such property, the value of the legal proceeding will be based on the property or the attached right.

6. Adjudication of Legal Costs in Court Judgments

Under the UAE Civil Procedure Code, the court holds the responsibility to adjudicate on legal costs upon rendering a judgment or decision in a legal proceeding. The allocation and calculation of these costs are subject to the following provisions:

• Court’s Authority to Adjudicate Legal Costs
  Upon delivering a judgment or decision in a legal proceeding, the court, on its own initiative, shall adjudicate the legal costs associated with the case. This ensures that the determination of costs is an integral part of the court’s final ruling, without requiring any specific request from the parties.
• Allocation of Legal Costs to the Losing Party
  The legal costs, including but not limited to attorney fees, will be imposed on the losing party. The attorney fees are to be determined by the court in accordance with the guidelines and criteria outlined in the Legal Profession Law. Additionally, the cost of translating notices will also be included in the legal costs.
  • Multiple Losing Parties: If there are multiple losing parties, the court may decide to divide the legal costs among them either equally or in proportion to their respective interests in the case. The court has the discretion to make this decision, ensuring fairness in the allocation of costs.
  • Joint Liability: The court may hold the losing parties jointly liable for legal costs only if they have joint liability in relation to the underlying obligation that has been adjudicated against them.
  Furthermore, in cases with several losing parties, prevailing parties, or attorneys, the attorney fees shall not be multiplied. This provision prevents any unjust increase in the total legal costs for the parties involved.
• Costs of Intervention
  If an intervening party joins the proceedings and seeks independent relief, the costs of such intervention will be awarded against the intervening party if their intervention is either denied by the court or if the relief they seek is rejected. This ensures that unnecessary or unsuccessful interventions do not unfairly burden the primary litigants with additional legal costs.

7. Key Steps in Execution:

Once a writ of execution has been issued by the court, several legal actions follow to ensure enforcement of the court’s order. Below is an analysis of the key stages that take place after the writ of execution is granted under UAE Civil Procedure Law.

1. Once the writ of execution is issued, it must be formally served to the debtor. The service of the writ follows the legally defined methods under UAE law, which can include personal delivery, electronic means, or any other recognized forms of communication.
2. The debtor is notified of the court’s decision, and this service acts as the starting point for further enforcement actions.
3. The debtor is typically given a compliance period following the service of the writ to voluntarily settle the debt or comply with the court’s order (such as delivering movable property).
4. If the debtor does not comply within this period, the creditor is entitled to take further steps to enforce the court’s decision.
5. If the debtor fails to comply within the specified period, the creditor can initiate enforcement measures, including the attachment of the debtor’s assets. This may involve freezing bank accounts, seizing property, or attaching other movable and immovable assets to satisfy the debt.
6. In cases involving property, the creditor can proceed with measures such as auctioning the attached property to recover the amount owed.
7. If assets are attached and cannot be directly transferred to the creditor, the court may order a judicial sale or auction of the debtor’s property. This step is taken when movable or immovable assets are seized to satisfy the outstanding debt.
8. The proceeds from the sale are distributed in accordance with the creditor’s claim, and any excess funds may be returned to the debtor.
9. During the enforcement process, third parties (such as other creditors or parties with an interest in the attached assets) may raise claims or objections. The court will address such claims to ensure that the rights of all parties involved are protected.
10. Additionally, the debtor may file for objections or challenges, including requesting a stay of execution if there are valid grounds, such as incorrect attachment procedures or jurisdictional issues.
11. If multiple debtors are involved, the court may divide liability for the debt based on the proportion of each debtor’s interest in the case. The court has discretion in determining whether the liability is shared equally or divided proportionately.
12. Joint liability may apply if the debtors have a joint obligation, and they may be held jointly responsible for settling the debt.
13. After the enforcement process begins, the legal costs incurred, including attorney fees and translation expenses, are typically assigned to the losing party. These costs are added to the overall debt obligation.
14. If multiple parties are liable, the legal costs may be divided among them, and the court may also impose costs on intervening parties who unsuccessfully sought independent relief.
15. The court may impose additional penalties on the debtor if they continue to refuse compliance after enforcement measures are initiated. This can include further fines or other punitive measures designed to encourage settlement of the debt.
16. Once the debt is fully satisfied, either through compliance by the debtor or through enforcement measures (such as asset attachment and sale), the court will formally close the case.
17. The court may issue a final release order confirming that the debtor has fulfilled the obligations set forth in the writ of execution, and any remaining enforcement actions will be terminated.

8. Enforcement of Judgment Based on the Emirate

Execution procedures can differ depending on whether the judgment was issued in the same emirate or across emirates. For instance, if the judgment is rendered in Dubai, the Dubai Courts will handle the enforcement, while an Abu Dhabi judgment will be enforced under Abu Dhabi’s judicial system.

Key Articles of the Civil Procedure Code:

• Article 75: Summons the defendant for execution, accompanied by detailed instructions on how to proceed.
• Article 97: Stipulates that the losing party must comply within 15 days after receiving the judgment.

If the debtor fails to respond or settle within this timeframe, the court can initiate compulsory execution procedures, such as asset seizure or property detention.

9. Remedies and Methods of Execution Across Jurisdictions

The execution methods also vary depending on whether the case is handled by federal courts, emirate courts, or financial free zone courts like DIFC and ADGM.

Key Methods of Execution:

• Seizure of Assets:
  Courts can attach the debtor’s assets, including properties, shares, or other valuable items, to settle the debt.
• Interest on Unpaid Judgments:
  Under Article 76 of Federal Law No. 18 of 1993, courts may order interest payments on unpaid judgments at a rate of 12% per year, starting from the judgment date. However, compound interest is generally not permitted.

Courts within the DIFC and ADGM offer different execution methods, such as broader interim orders and asset seizures. These free zones also allow for enforcement of foreign laws and judgments, making them unique compared to the traditional UAE judicial framework.

10. Arbitration Awards: Enforcement in the UAE

Arbitration is a popular method for dispute resolution in the UAE, especially in complex financial matters. Arbitration awards are enforceable in the UAE under Federal Law No. 6 of 2018 on Arbitration.

Key Guidelines for Enforcement:

• DIFC and ADGM Courts:
  These courts administer arbitration awards under their respective legal frameworks, with DIFC governed by Articles 42 to 44 and ADGM by Part IV of the ADGM regulations.
• Foreign Seated Awards:
  Article 85 of the UAE execution regulations outlines the process for enforcing foreign arbitration awards within the UAE, provided the judgment is recognized by UAE courts.

To enforce an arbitration award, the winning party must submit a set of documents, including the writ of execution, power of attorney, and application form. This process ensures that the award can be enforced efficiently within the UAE’s jurisdiction.

11. Consequences for Non-Payment

If the drawer fails to settle the cheque amount, severe consequences may follow:

Arrest Warrant and Travel Ban (Article 319 & 324):

• The court may issue an arrest warrant after 7 days of non-payment, on request from the drawee.
• If the amount exceeds AED 10,000, the court can impose a travel ban on the drawer until the payment is made.

When a client’s cheque bounces repeatedly, the UAE law offers robust mechanisms to recover the owed amount. From filing a criminal complaint to initiating a civil case, each option should be carefully evaluated based on the circumstances. Seeking professional legal advice is essential to determine the most appropriate legal remedy and to navigate the complexities of UAE law.

Frequently Asked Questions (FAQ)

1. What is the legal framework for cheque bouncing in the UAE?
   The legal framework for cheque bouncing in the UAE is governed by Federal Decree-Law No. 50 of 2022 on Commercial Transactions, which outlines responsibilities and consequences for insufficient funds.
2. What should I do after a cheque bounces in the UAE?
   You should attempt reconciliation by contacting the client, and if unsuccessful, issue a legal notice demanding payment. This sets the stage for further legal action if necessary.
3. What is a Writ of Execution, and how can I file it?
   A Writ of Execution is a legal process to recover unpaid amounts. After a cheque bounces, you can file a civil lawsuit under Federal Decree-Law No. 42 of 2022. The lawsuit focuses on recovering the money rather than criminal penalties.
4. What role does the Case Management Office play in debt recovery?
   The Case Management Office oversees the registration and management of cases before they go to trial, coordinating between parties and ensuring procedural steps are followed.
5. How is the value of a case determined in UAE legal proceedings?
   The value is determined based on the monetary amount involved, property value, or contractual obligations. The court may also convert foreign currencies to UAE Dirhams for consistency.
6. How are legal costs adjudicated in court?
   The court imposes legal costs on the losing party, which can include attorney fees, translation costs, and other expenses. The costs are divided if there are multiple losing parties.
7. What steps follow the issuance of a writ of execution?
   Once the writ is issued, the debtor is notified and given time to comply. If not, enforcement measures like asset attachment and property seizure may follow.
8. Are there different procedures for enforcing judgments across Emirates?
   Yes, enforcement procedures can differ depending on where the judgment is issued, such as between Dubai and Abu Dhabi courts.
9. What methods of execution are available in UAE courts?
   Courts can seize assets, attach property, and impose interest on unpaid judgments. Methods may vary between federal courts, emirate courts, and free zone courts like DIFC and ADGM.
10. How can arbitration awards be enforced in the UAE?
    Arbitration awards are enforceable under Federal Law No. 6 of 2018 on Arbitration. Both DIFC and ADGM courts have specific processes for administering these awards.
11. What are the consequences of non-payment for bounced cheques?
    Non-payment can result in an arrest warrant, a travel ban, or other penalties. For amounts exceeding AED 10,000, the court can impose severe legal consequences.

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