MARKET INSIGHT
The UAE’s reliance on cheques has been the subject of much controversy over the years. As an international business centre with an ever-expanding economy, the dependence on cheques by banks and businesses in the UAE as a means of guarantee has allowed unbalanced application of laws, designed to penalise fraud, to subject persons to lengthy criminal proceedings, often facing serious punishment for their unfortunate issuance of a cheque against which they have been unable to furnish payment.
Cheques have become an antiquated method of transaction in the West owing largely to the potential for forgery and fraud as well as technological advances negating use thereof. In the UAE, cheques have been, until recently, the default method for provision of security against a loan, rental payment as well as day-to-day business transactions.
Treatment of dishonoured cheques in the UAE, and penalty imposed on the drawer, has historically been viewed as somewhat draconian with prison sentences often applied under the UAE Federal Penal Code (Federal Law No. (3) of 1987).
The wording of the Federal Penal Code provides presumption of bad faith on the part of ‘anyone who draws a draft without a sufficient and drawable balance’. However, in practice, it is far more common for a cheque to be deposited by the payee as a tool to threaten and blackmail rather than male fides on the part of the drawer.
It is, therefore, enlightened that new rules applicable to the emirate of Dubai include a criminal order relating to prosecution of bounced cheques which provides mechanism for certain offences to be penalised per fine and settled outside of the Criminal Court.
The new Penal Order System established pursuant to Law No. (1) of 2017 authorises the public prosecutor in Dubai to expedite certain minor offences and misdemeanors’ judicial procedures which, as from December 2017, includes a stay of criminal proceedings relating to bounced cheques for an amount not exceeding Dh200,000 and provides instead for fine determined according to the value of the bounced cheque.
Cheques for a value in excess of Dh200,000 will still be subject to the Federal Penal Code, as will a cheque of any amount where the court is satisfied that fraud is present.
Under the new Penal Order System, where a cheque has bounced, the payee may now present the cheque to the prosecutor for provision of a criminal order reflecting the penalty prescribed. Debtors will be accountable to prosecution for the value of the fine limited per the The writer is in-house legal counsel at GCP Group. Views expressed are her own and do not reflect the newspaper’s policies.