In the United Arab Emirates, checks are widely recognized as a secure form of payment. But cases of checks bouncing are not unusual. To guarantee the best results, resolving check bounce cases frequently calls for specific legal knowledge, such as Dispute Resolution Services and Commercial Litigation Expertise. This article provides a summary of several topics pertaining to returned checks, including the most recent changes to the UAE’s new check bounce law.
A bounced check: what is it?
A check is referred to as a bounced or dishonoured check when the bank returns it unpaid. To put it another way, it describes a circumstance in which the payee presents a check to the bank, but the bank declines to accept it, preventing the payee from withdrawing the specified amount.
There are numerous reasons why a check might bounce, including:
- The drawer’s account does not have enough money.
- Closing the bank account of the drawer;
- When the drawer gives the bank instructions to withhold payment, this is known as a stop payment instruction;
- Inaccurate overwriting or signature (i.e., a faulty check).
UAE’s New Check Bounce Law
The Commercial Transactions Law, issued by Federal Decree Law No. (50) of 2022, was enacted on January 2, 2022, and it has significantly altered cases involving bounced checks. Below is a discussion of some of the most significant changes.
Decriminalization
Prior to the new law, the issuer of a check that bounced or was returned for insufficient funds could face an arrest warrant and a travel ban if the payee filed a criminal complaint with the police.
However, under the new law, a criminal case can no longer be filed for a bounced cheque offense if the cheque is returned due to insufficient funds.
The Execution Deed of a Bounced Check
If the check has been returned for insufficient funds, the payee can now immediately go to the UAE Courts’ Execution Division and ask for an order for payment. According to the new law, a check returned for “insufficient balance” will be deemed an execution deed, and the payee may bring a civil execution case against the check issuer directly.
The Execution Judge may require the issuer of the returned check to pay the check amount within 15 days if the issuer does not object. The execution judge may issue an arrest warrant and travel ban for the issuer if they fail to comply.
An overview of the proceedings
If a check is returned because of an account closure, a check defect, or a stop payment instruction, the payee may choose to file summary proceedings based on the bounced check. In contrast to other civil lawsuits, a summary suit allows the creditor to demand immediate payment of the debt in cases of admitted debt (after serving the debtor with legal notice).
The summary procedure’s primary benefit is that it can be finished in a few short weeks. However, the case’s facts and circumstances will determine whether or not a summary procedure can be filed.