UAE amendments to cheque bounce law might make way for a competitive economy and a fairer justice delivery mechanism

The UAE Cabinet Amended the Federal Law No. 18 of 1993 or the Commercial Transaction Law, including the provisions on cheque bounces. This would come into effect by the end of 2022 and includes modification of rules dealing with dishonoured cheques and the issuance of cheques without value. The reconciliatory measures introduced with the amendment is viewed as a boost to business transactions happening via cheques, infuses confidence and is expected to ease the burden on the judiciary.

The new law is focused on better and faster ways on collecting the cheque amount. The amendments have been notified under Federal Decree-Law No. 14/2020 amending some provisions of the Commercial Transactions Law promulgated by Federal Law No. 18/1993.

Adding More Penalties

Apart from the existing criminal provisions, additional penal provisions have been added to Article 641 of the Law to expand the scope of recognised offenses. Criminalisation of cheque related cases has been redefined to include:

• Offences of endorsing or delivering a bearer check to a third-party while being aware that such check is unfunded or non-withdrawable.
• Ordering or requesting the bank (or the drawee) not to pay the cheque amount, withdrawing all the balance before the date of the cheque being presented, and deliberately drawing or signing the cheque so as to prevent the payment from happening.
• Forging or Faking a cheque and assisting the same. This includes forging or faking of a cheque, knowingly using a forged cheque or accepting amounts paid via a forged cheque, and includes wrongful use or benefitting from a cheque drawn in the name of a third party, where the use of cheque is associated with fraud. The law is even wide enough to include providing access data, technology, information, equipment and much more, which assists forgery.
• Furthermore, this UAE Law seeks to address the threat of terrorism by making offences listed herein being used for terrorism as a ground for greater punishment.

Resolution Mechanisms Included

This law provides the issuers and beneficiaries of dishonoured cheques additional opportunities at more efficient resolution mechanism, whereby criminal charges could be replaced by reconciliation. Payment of the cheque amount prior to the date of final judgement would result in the dropping of the criminal lawsuit.

Introduction of secondary sanctions: Some of the secondary penalties introduced are; Withdrawal of cheque book from the convicted person, Prevention of delivery of new cheque books to him/her for a maximum period of 5 years, Suspension of professional or commercial activity. Some of the other penalties that were introduced for legal persons include; fines, suspension of commercial license for 6 months, cancellation of license or liquidation of the legal person in case of repeated offences.

The law also discusses regarding the case of death or legal incapacity of one or more joint bank account holders. The remaining joint account holders shall notify the bank within no later than 10 days from the date of death or legal incapacity. The bank shall immediately suspend withdrawals from the joint account up to the limits the share of the demised or the legally incapacitated, which means no withdrawal can be made from his share until a successor is designated. If the unavailability or insufficiency of funds is affixed by the drawee, the bearer can choose to request full or partial compulsory execution.

Bottom Line

The law regarding criminalisation with respect to cheques without balances is now cancelled apart from the points just mentioned here. However, here it is pertinent to note that banks would be obliged to partially pay the beneficiary as long as balance is available with the bank. A key takeaway from the amendment is that it may enhance the economic competitiveness, since a mode of making complicated transactions easier might become way less risky than it used to be.