New amendments to the UAE’s Commercial Transactions Law regarding the decriminalisation of bounced cheques and the partial payment of cheques will take effect from January 2, 2022, the UAE Central Bank has announced.
The scope for criminalisation of returned cheques due to insufficient funds has been narrowed and confined to cases of bad faith, fraud, forgery and illegal use, deliberately writing or signing cheques in a way that render them unpayable.
The law aims to replace decriminalisation with preventive measures, coupled with deterrent alternative penalties to reduce the misuse of cheques, the Central Bank said.
As part of the changes, administrative penalties for issuing cheques without funds will also be toughened, including withdrawal of chequebook from the transgressor, denying them the right to receive new chequebooks for a maximum of five years, and suspending their professional or commercial activity.
Under the amendments, partial payment of the cheque has also become mandatory. If the amount available for payment is less than the cheque value, the drawee bank must pay the amount partially, unless the bearer rejects partial payment.
Khaled Mohamed Balama, governor of the UAE Central Bank, confirmed that the amendments are part of strategic initiatives and plans to upgrade banking laws and regulations in the financial sector and fill any legal gaps and shortcomings.
Under the current law, if the victim chooses to file a criminal complaint, the criminal judgment may not automatically include a restitution order, which means that once the criminal judgment is handed over the victim will need to file a follow-on claim before the civil court in order to get their money. The criminal judgment can be used before the civil court as an enforcement order. The new law will most likely remove the alternative of bringing criminal proceedings in bounced cheques related cases, unless there is evidence of bad faith, noting however, that we do not yet know the mechanism and court interpretation of the new law.
Alternatively, as per the current law, the creditor may choose the civil route, in which the civil court’s Case Management Office will issue a payment order to the drawer of the cheque providing an opportunity to settle the debt without court proceedings within ten days, according to Article 17 (8) Federal Cabinet Resolution No. 57 of 2018. This procedure may be replaced in the new law, i.e. the banks will be obligated to issue part-payment if the full amount is not available and if the cheque is dishonoured, the cheque return report issued by the bank can be directly enforced by the Execution Judge as a writ of execution without any proceedings, civil or criminal, whatsoever. We shall leave and see how this mechanism will work.