Amendments to the Commercial Transactions Law Relating to Bounced Cheques

Federal Decree Number 14 of 2020 (“Decree”) was amended and included new articles to the UAE commercial transaction law no. 18 of 1993. The amendments came into effect in January 2022. The most significant change implemented in this Decree was that limiting the applicable instances where a cheque can be a criminal offence. Under this Decree, criminality will apply where the issuer of a cheque acted in bad faith as described therein.

Narrowed Application of Criminality:  

• The issuer intentionally writing or signing the cheque in a way that prevents its cashing.
• The issuer instructs the respective bank not the pay the cheque amount.
• Providing counterfeit cheques.
• Closing the bank account or withdrawing the account balance before the date of the cheque encashment in order to prevent the cheque from being cleared.

Partial Payment of Cheque:  

Under the Decree, partial settlement of the value of the cheque is now applicable. If the amount available in the account is less than the cheque’s value, then the drawee bank is now obliged to pay the amount partially with whatever funds are available in the account. Subsequently, the beneficiary of the cheque can then proceed to file a claim before the civil courts for the remaining amount. The drawee bank in this situation will provide a certificate of partial payment to the beneficiary which will contain all information of the issuer such as Emirates ID, passport number, trade license details, IBAN number, contract details such as telephone and address.

Strong Alternatives Available for Collection of Value of the Cheque:

While the scope of what constitutes a criminal complaint for a bounced cheque has been narrowed down, alternatives to seeking recourse before the civil courts have been improved and should provide better and more efficient processes which include:

• Obligating the drawee bank to pay the cheque, at least partially, with whichever amount is available in the issuers account.
• Making a cheque from the drawee’s bank account an executable deed or document to be executed directly through the execution department of the courts, without the need to go through the lengthy legal procedures. This means that the beneficiary can almost immediately cease any assets, apply for travel bans and block licenses registered in the UAE in the issuers name.

The new amendments brought about by the Decree align the UAE with international best practices in insuring fair commercial processes are available to protect the rights of individuals and entities. These amendments have been put in place to ensure a more effected collection process is applied and thus giving more trust in the legal system and the idea that the law is there to protect the wronged.

How Can We Help? 

Hamdan Al Shamsi Lawyers and Legal Consultants are perfectly positioned to assist our clients in respect of all claims in the Dubai Courts. Our firm has three divisions including (1) the DIFC team; (2) the UAE Litigation team; and (3) the Corporate team, and currently deal with a network of other law firms around the world including the USA, UK, France, Italy, Germany, Saudi Arabi, Oman, Kuwait, Bahrain, Jordan, Lebanon, China and Australia.

Our specialized lawyers in Commercial Law will be able to further assist and answer any questions you may have. 

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