Decriminalisation of bounced cheques to begin in January 2022

The Central Bank, the Ministry of Economy and the Ministry of Justice of UAE have made amendments to the Commercial Transactions Law regarding the decriminalisation of bounced cheques to commence from 2 January 2022 onwards.

The Ministries and the Regulators have supportednew changes relating to the partial payment of returned cheques and administrative penalties are strengthened when they are issued without funds.

The Central Bank’s initiative is to update banking laws and regulations to track developments in the financial sector, fill any legal gaps and deliver its vision to follow best practice internationally, said Central Bank governor Khaled Balama.

The commercial and banking transactions streamline procedures for collecting the cheque’s value and the use of cheques more flexibly.

In October 2020, the UAE updated the country's Federal Law on Commercial Transactions with several new provisions that aimed to discourage criminal lawsuits against individualsand entitiesfor bounced cheques.

The amendments will consolidate the principles of justice which will bring balance between the interests of the cheque beneficiary at the earliest and the drawer’s interest in removing any criminal case filed for non-payment of the cheque."

They aim to secure the rights of cheque bearers and beneficiaries, and would expedite the collection of a cheque's value in an effective manner.

"The new amendments reduce the negative aspects revealed by practical experience of dealing with cheques, compared to the best and most successful international practices," Mr Balama said.

Those amendments, which will also be introduced in 2022, were approved by the Cabinet.

The 2017 ruling means that those responsible for cheques bounced in the emirate of up to Dh50,000 are now fined Dh2,000 while those who bounce cheques whose value is between Dh50,000 and Dh100,000 pay a Dh5,000 fine. The fine for bounced cheques with a value between Dh100,000 and Dh200,000 is Dh10,000.

Amendments that lift penal protection of the cheque, scheduled to come into force at the beginning of 2022.

However, under the latest amendments, the scope for criminalisation of returned cheques due to insufficient funds has been narrowed and confined to cases of bad faith and other cheque crimes, the Central Bank said.

"This would deliver the desired goals of replacing decriminalisation with preventive measures, coupled with deterrent alternative penalties to reduce the misuse of cheques," it said.

They will also encourage the public to use modern, technological and digital means instead of traditional paper cheques.

If the amount available for payment is less than a cheque's value, the drawee bank must pay the amount partially.

"These efforts also include enhancing the flexibility of economic policies and raising the state’s ranking [on] the Global Competitiveness Index, associated with the ease of establishing and doing business and increasing the country’s attractiveness to foreign direct investment and international companies," Mr bin Touq said.

Eminent Corporate Lawyer Mr. Sunil Ambalavelil has welcomed the move stating that it is a proactive and progressive measure by the Government.