Federal Decree No.14/2020 was circulated on 27th September 2020. The law has removed specific provisions of Federal Law No.18/1993 concerning commercial transactions. This includes amendments relating to decriminalizing of bounced cheques and partial payment of cheques coming into force from 2nd January 2022. The scope for these is narrowed and confined to cases of bad faith and other cheque crimes with the goal that residents and corporate entities are not always put in a challenging spot.
The reason for the time period between the law being introduced and the law taking force is so that the market gets to be aware and understand the aspects of how to apply the amendments to their firm. With the application of this amendment, there will be the promotion of all banking and commercial transactions, simplification of the procedures for collecting the cheque’s value and creation flexible approach towards using cheques.
In practice, legal actions in the United Arab Emirates (UAE) for a bounced cheque vary from case to case, and numerous criteria must be considered, including the amount of the cheque and the reason the cheque was bounced. In most circumstances, the appropriate courts will impose a fine rather than a jail sentence if the amount of the cheque is little; nevertheless, if the amount is large, the courts will still impose prison punishment.
The Key Amendments: –
Major amendments which will come into effect are: –
- Decriminalization of the offense
- Revised penalties regarding imprisonment
- Public Shaming
- Chequebook suspension of up to 5 years
- Partial Payment
- Decriminalization of the offense
Some believe that rules criminalizing the issue of dishonored cheques are vital, while others argue that the penalty should be eliminated. The most recent legalization changes take into account all sides of the debate and provide specific criminal offenses for various bounced cheque circumstances, as well as redefining what comprises a criminal offense.
The Decree under Article 641 specifically states that obtaining a criminal remedy for a bounced cheque crime will only be for cases:
- If the drawer ordered the bank to stop paying the value of the cheque to the beneficiary;
- If the drawer closed the account and withdrew all the available balance before the cheque due date.
- If the drawer had a dormant account (an account of yours which has had no financial or non-financial transactions and you have had no contact with the bank for a period of 3 years) at the time of issuing the cheque, and yet issued the cheque to the beneficiary; and
- If the drawer has purposely caused an error in the signed cheque to prevent the beneficiary from cashing the cheque at the bank (e.g.: signature mismatch).
- Revised penalties regarding imprisonment:
The amendments have introduced various changes to the penalties so as to narrow it.
Now the prescription is that the drawer will be –
- sentenced to a minimum of six months in prison and a maximum of two years in prison,
- a fine of not less than 10% of the value of the cheque which should have a minimum of AED 5,000 but the value should not be more than double the cheque,
- or all of these penalties.
As a result, the court will have complete authority and discretion in enforcing this provision on failed cheques. In the case that the cheque is returned, the beneficiary maintains the ability to initiate a criminal complaint.
The beneficiary can obtain a Writ of execution. Through this, they are no longer required to file a claim with the courts in order to secure a final judgment or a payment order, which allows them to begin enforcement actions immediately with the execution judge.
- Public Shaming
The court will have the ability to publish the guilty person’s judgment in two daily local newspapers [an English and an Arabic paper] or online, including the convicted person’s name, residence, and occupation, as provided for in Article 642 of the legislation. In addition, the convicted person is responsible for the expense of publication.
- Chequebook suspension up to 5 years-
Under Article 643 of the decree, if the court finds the defendant guilty of a crime under the law then the defendant must surrender their chequebook and will be barred from purchasing new chequebooks for a period of up to five years. Penalties will be imposed if the convict does not withdraw their chequebook from the bank within the prescribed 15-day period.
- Partial Payment of Cheque –
The practice of partial payment of a cheque has now become necessary as a result of the new amendments. Under Article 617, the beneficiary is now vested with the power to ask the bank for partial payment of the cheque, with respect to the bank balance of the drawer. If the amount available for payment is less than the value of a particular cheque, the drawee (bank) is now compelled to pay only a portion of the amount. In such cases where cheques are returned due to insufficient funds., the banks will issue a ‘partial payment certificate’ to the cheque presenter, which will include all of the issuer’s basic information, such as the emirates id/passport number, trade license information (if the issuer is a company), IBAN number, and contact information, such as telephone and address. Subsequently, the beneficiary can choose to pursue legal action in the Execution Department of the Civil Court to recover the remaining funds against the drawer, if the drawer refuses to pay or does not have the capacity to pay. It must be noted that the remedy to approach the Execution Department of the Civil Court can only be availed within six (6) months of the date of return of the Cheque. In the event the cheques are returned upon expiry of six (6) months, the remedy available to the beneficiary is that they can approach the Civil Court to file a civil case in order to recover the due amount.