The new UAE cheque law was was advanced on September 27, 2020. President His Highness Sheikh Khalifa bin Zayed Al Nahyan issued a federal decree law, The law – Federal Decree Law No. (14) of 2020 Amending Certain Provisions of the Federal Law No. (18) of 1993 Concerning the Commercial Transaction Law, that deals with the issuance of cheques and their potential bouncing.
The aim is to deter criminal lawsuits against individuals and organizations for cheques that can’t be honored and to redefine crimes involving insufficiency of funds. The amendments in the Federal Decree Law No. (14) of 2020 are applicable from January 2, 2022.
The impact of the new UAE cheque law is significant:
The possibility to opt out for fractional installment cheques under the new UAE cheque law
Perhaps one of the greatest alterations reported has been related to the option for partial payments of cheques as an elective instrument to guarantee that the cheque value is collected in the quickest and easiest way, compelling the financial institution to partially fulfill the cheque by deduction from the funds available in the account.
This new order is regulated in article 617 of the law, which states: “Where the fund for payment is less than the value of the cheque, the drawee shall partially pay the value of the cheque up to the available fund unless the bearer rejects partial payment. In the case of partial payment, upon each partial payment, the drawee shall initial the back of the cheque confirming the partial payment and give back the original of the cheque to the bearer along with a certificate to that effect.”
Before the new cheque law, a cheque would bounce if the complete cheque amount was not available in the cheque writer’s account. From 2 January 2022 banks are required to satisfy partial amounts of the cheque.
As an illustrative guide to clarify the previously mentioned regulation, one might say that assuming a cheque has been issued for Dh100,000 and the cheque writer’s account only has Dh80,000 available for installment against the cheque, the bank is required to deduct Dh80,000 from the account, unless the cheque holder rejects the option for partial payment. Before 2 January 2022 the bank would return the cheque in full for lack of insufficient funds.
The prosecution of bounced cheques under the new UAE cheque law
One of the key focus points that appeals to individuals (that often issue cheques) is the fact that the bouncing of cheques has been decriminalized.
The law limits the criminalization route to cheque bouncings involve fraud in issuing the cheque, such as when a individual purposely decides to deceive the recipient, or in cases where there were sufficient funds but were withdrawn by the issuer before the cheque could be cashed.
Consequences to cases registered with the police or pending investigation or adjudication by the criminal court before January 2, 2022
Attorney General’s Office, Government of Dubai issued Circular No. 9 of 2021 on December 19, 2021, with new useful guidelines on cheque cases for the General Department of Criminal Investigation and the Public Prosecution authorities.The aim is to concede the advantage of the new law to those cases which were filed prior to January 2, 2022. Nonetheless, this circular would be applicable only to cases registered in the Emirate of Dubai. In Duba hence the new cheque law will be applied retroactively.
The practical guide procedure would rely upon the status of the proceeding:
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Criminal complaints pending with the police
The Dubai Attorney General’s office has advised the General Department of Criminal Investigation in the Circular to further communicate to all police headquarters to dismiss all criminal complaints which relate to decriminalized cases and to hold onto all warrants issued against the accused. The person involved will need to visit the police station or public prosecution office (depending on the status of the case) and formally remove the case registered.
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Criminal cases being investigated
With respect to the cases that are currently being scrutinized, the Public Prosecution office has been advised to administratively close the cases where investigations have not been initiated or to freeze (a) the examination in case it has commenced and (b) the search warrants against the accused as well as to release the accused who are in detention. Public Prosecution can continue with their investigation for acts which are still deemed as a crime under the amendment.
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Criminal cases with Court of First Instance
Dubai Public Prosecution office shall demand for quittance of the individuals accused of violations connected to the decriminalized bouncing of cheques.
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Criminal decisions that are under execution
The court office will guarantee to issue executive orders to release the accused, stop the travel ban and seize (stop) the arrest warrant.
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Criminal judgements that are not yet executed (for example when the arrest has not been affected)
The court department will ensure to issue orders to stop the travel ban and lift all warrants.
The impact that this order will produce is that the police and court officers will begin to dismiss complaints that are pending in police or prosecution and release the accused that have been subject to penalty under the old criminal law for cheques dishonored.
Punishment. How will the issuing of a bounced cheque be penalized?
Any individual convicted with issuing cheques without sufficient balance will be prevented from obtaining cheque books from the banks for a period of five years.
Likewise, they will be obliged to pay a fine of at very least 10 per cent of the cheque amount, with a minimum of AED 5,000 and a maximum of twice the amount of the cheque, or imprisonment of six months to two years.
Furthermore, the activities of convicted individuals may also be suspended for as long as half a year. In the event of repetition of offences, the professional or commercial activities may also be revoked, or the offender may be compelled to declare bankruptcy, if the cheque was issued on behalf of a corporation.
This is very different from the old regulation, which encompassed a monetary punishment ranging from AED 2,000 to AED10,000, based on the amount that was reflected on the bounced cheque.
Execution under the new UAE cheque law. A bounced cheque is considered an ‘executive deed’
Perhaps, the main modification in this law has been the treating of bounced cheques.
As stated in article 635 of the amendment:
“A cheque, which bears the drawee’s stamp as non-paid for unavailable or insufficient fund, shall constitute an executive instrument as per the Executive Regulation of the Federal Law No. (11) of 1992 and its bearer shall have the right to demand the coercive enforcement, wholly or partially,” according to the Article.
Considering a bounced cheque as an ‘executive instrument’ means that the cheque holder does not have to issue a claim and go through proceedings in order to obtain the amount of the bounced cheque. The individual in question no longer needs to present the case through court proceedings, since it may basically enforce the cheque by the executive judge requesting the execution of the assets or bank accounts of the individual who gave the cheque.
Lastly, we would recommend to the readers to take legal guidance if their cases or judgements fall within the decriminalized acts pursuant to the amendments.
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For those interested in reading the full text of the new UAE cheque law you may access it here.
**This information does not intend to be legal advice and the content is merely indicative and is subject to change as relates to governmental decisions.