Dubai: The latest changes to the UAE’s Commercial Transactions Law will enhance the force of cheques as a payment instrument and cut time on beneficiary’s claim.
Last September, the UAE Cabinet amended certain provisions of Federal Law No 18 of 1993, the Commercial Transactions Law, including those related to bounced cheques. The new law will create a mechanism that will ensure the collection of payments through cheques, such as obliging banks to partially pay the amount after deducting the total amount available to the beneficiary.
A giant leap
Wageh Amin Abdelaziz, senior legal adviser at World Center Advocates and Legal Consultants, told Gulf News that the new changes are a giant leap into the future and will effect major and quick results when it comes into force by January 2, 2022.
“The changes will cut time and effort on the part of the beneficiary of a cheque as the decree makes bounced cheques an executive document to be executed directly by an appropriate judge in court. The changes will help overcome challenges with commercial dealings and with securing payments,” said Abdelaziz.
According to the new legal provision, banks will be obliged to make partial payment for a cheque to the beneficiary when a cheque is presented for payment at the bank as long as an account balance is available to even partly satisfy the beneficiary’s claim.
Realising the remaining amount
“The banks will be obliged to make partial payment of the cheque amount and bounce the rest of the amount. The beneficiary can then take the bounced cheque and present it to court to realise the rest of the amount.”
Abdelaziz said this change in law will help reduce the time for the beneficiary to claim his rights as the bounced cheque will be viewed as an executive document that can be enforced and executed directly by a judge in a UAE court.
The Civil Court can demand the issuer of a bounced cheque to pay a sum equal to the value of the cheque or its outstanding balance. If the person fails to pay, his assets may be subjected to enforcement to satisfy the balance and the convicted person must serve a jail term for failing to comply with the civil court’s decision.
Amended penalties for cheques
The amendments to the law have introduced several penalties to narrow the scope of writing bad cheques. One of the articles states: ‘Any person who endorses or issues a cheque in favour of another, knowing that there is no sufficient balance or it is not withdrawable, shall be fined a minimum of 10 per cent of the cheque amount and not less than Dh1,000. The penalty should be doubled if the person repeats the act.’
The same article prescribes imprisonment between six months to two years and fine for a minimum of 10 per cent of the cheque amount and not less than Dh5,000 if the person orders the drawee [the bank] before the date of encashment, not to encash the cheque or withdraws its entire balance before the cheque is presented to the bank or deliberately writes a cheque in a way that prevents it from being encashed.
“The cheques will be a strong instrument like an alternative currency as it will enhance the trust between parties in commercial transactions because both parties will believe that they can realise the amount of the cheque,” added Abdulaziz.
Punishment for the forgery of cheques will be imprisonment for a minimum of one year and fine between Dh20,000 and Dh100,000.
“Article 642 of the law provides for a strong and new punishment as the court will have the power to publish the judgement of the convicted person in two daily local newspapers [an English and an Arabic paper] or online, including the name of the convicted person, his residence and occupation. Additionally, the convicted person should pay the cost of publishing,” Abdelaziz said.
Supreme Legislation Committee in Dubai
The General Secretariat of the Supreme Legislation Committee in Dubai held recently an awareness workshop titled ‘Update on cheque-related provisions in light of the latest amendments to the Federal Commercial Transactions Law’ to strengthen the legislative culture and increase the knowledge of legal professionals in the Government of Dubai.
Improving legislative and legal environment
A total of 61 government entities in Dubai participated in the workshop led by Dr Sherif Mohammad Ghannam, Legal Adviser to the committee. During the workshop, attendees discussed the new amendments to the law following the national efforts to improve the legislative and legal environment regulating commercial and economic sectors.
They discussed the protection of cheque holders under criminal and legal rules and the legal implications, criminal charges and penalties that await the drawer and bank employees for issuing bounced cheques or making a forged endorsement on cheques; and compared these with the new additions and amendments under the federal law by decree.
Ahmad Saeed bin Meshar Al Muhairi, Secretary General of the committee, said that the workshop aimed to spread legal and legislative knowledge amongst the participating local government entities. He pointed out that through these efforts, the committee sought to ensure the proper implementation of sustainable and balanced government legislation in support of the UAE’s ongoing preparations for the next 50 years.
“The workshop discussed the recent amendments to the Federal Commercial Transactions Law, which aim to strengthen the value of a cheque as a reliable tool in commercial transactions that will positively reflect on the local economy, society and legislative system. The event was also aligned with the national goal to create a fair judiciary and build a safe society,” Al Muhairi said in a statement.
Raising economic competitiveness and attractiveness
He added that the new amendments are expected to produce innovative and effective solutions to prevailing and emerging challenges in line with the best global practices.
“By introducing the amendments, our national economy’s competitiveness and attractiveness will further gain strength, supported by the freedom of exchange and credit effectiveness amid the present and rapid global changes. We will continue our awareness and educational efforts to provide local government entities with modern legislative knowledge, one of the key fundamentals towards realising our wise leadership’s vision to establish a transparent, reliable, proactive and distinguished government,” said Al Muhairi.