Diana Hamade, Attorney at Law, Founder & Managing Partner at International Advocate Legal Services (IALS.ae) shares her expert insights and advice on debt with Good

1. What is debt? What constitutes a debt?

According to the Black’s Law Dictionary, debt is a sum of money due by contract. It is money due by a certain and express agreement, which fixes the amount, independent of extrinsic circumstances.

According to this general, not to say rather confusing, definition, even in the UAE the financial obligations of a debtor can take many forms through a wide range of relationships such as, but not limited to, borrowed money by the debtor from a UAE financial institution as credit products (credit card or loan), cheques, rent payments, and security cheques. Again, some of these forms of debt can be constituted by an express contract or implied financial obligation that can be established through extrinsic evidence.

As a result of the failure to settle any of the aforementioned forms of debt in the UAE, the defaulter can be subject to both criminal and civil liabilities.   

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2. What are the criminal consequences of a bounced cheque?

Article 401 of the Penal Code of the UAE states that “A punishment of confinement or a fine shall be inflicted upon any person who, in bad faith draws a cheque without no existing or withdrawal provision, or after issuing the cheque, withdraws all or part of the fund so the balance becomes insufficient to settle the amount of the cheque, any person who endorses or delivers to another cheque payable to the bearer, whilst being aware that there are no existing funds covering its value, or it cannot be drawn, shall be liable to the same punishment.”

This can be summarised as the criminal outcome of the bounced cheque in the UAE. It can be said that the criminal matter of the bounced cheque is the common outcome. The criminal liabilities initiated at the time when a cheque of the defaulter is bounced. Upon the dishonouring the drawn cheque by the defaulter, the dishonour of the cheque triggers the right of the creditor to initiate a criminal case against the defaulter. It is acceptable to state that the criminal liabilities of the bounced cheque will be automatically triggered immediately at the time when the debtor account has no sufficient funds to honour the said cheque. The criminal law has the power to criminalise all situations of the bounced cheque except in number of excluded circumstances.

3. As a creditor what can you do?

The creditor should obtain correspondence confirming the lack of funds from the bank that reflects that the bank account of the defaulter had no sufficient funds at the time of cashing the bounced cheque. Consequently, the creditor should open a police report against the defaulter and submit the bank’s correspondences before the police in order to initiate a criminal proceeding against the defaulter. Upon the completion of the investigation by the police officer pertaining to the cheque, the matter will be referred to the Public Prosecutor office. If six months has passed from the cheque date a police complaint cannot be filed. 

4. What is the role of public prosecutor in the criminal proceedings of the bounced cheque? 

A public prosecutor shall carry the responsibilities to further investigate the bounced cheque matter. The public prosecutor examines the circumstances of the case, starting from the nature and the purpose of the bounced cheque, the amount of the bounced cheque, to the reasons of issuing the bounced cheque. They usually interrogate both parties of the case; the creditor and debtor. After considering all circumstances of the case, the public prosecutor will decide if he/she will allow the defaulter to pay a bail “Kafala” either by depositing the value of the cheque or depositing the passport of the defaulter or another guarantor. In the event of that the bail is not accepted, the prosecutor may order the defaulter imprisonment until the court hears and decides on the case.

5. What is the judicial role of the criminal court?

Upon referring the case to the criminal court, the court will assign a day to hear the case and examine the public prosecutor’s report as well as each party’s allegations and defences. Upon the completion of the court assessment of the case and establishing the guilt of the defaulter, the court may order the defaulter to pay a penalty and/or serve a jail term.  

6. What punishments could the defaulter face? 

The punishment against the defaulter can vary depending on the circumstances of each case such as, but not limited to, the reason and motive of issuing the bounced cheque, and the nature of the transaction. In practice, the common confinement sentences for the vast majority of cases range between one to three months and could reach up to three years, or/and a fine that usually varies from Dhs1,000 to Dhs30,000 based on the amount of the bounced cheque.

7. What are the exceptions for the criminal consequences of a bounced cheque?

As it stated above, the bounced cheques have its criminal liabilities; however, there are enumerated exceptions that are established either under the UAE Federal Penal Code or specific decrees.


Family disputes pertaining to the monetary obligations of the divorced husband “defaulter” towards either his divorced wife or his child’s expenses. The defaulter becomes under the civil liability in the event of dishonouring the Family Court’s order. After dishonouring the Court’s order, the divorced wife can seek an execution order from the judge to order the defaulter to honour the said court entailing the monetary obligations under the said order. The Judge could order the defaulter to make all prospective payments directly to the Court’s Accounting Department or to the bank account of the divorced wife. In the event of violating the execution order, the defaulter will be confined until either satisfies the execution order by making the payment or gives a guarantee to the authorities that the payment will be made.

Real estate

After the financial crisis in 2008 and the hit of the real estate market in Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, the Ruler of Dubai, issued Decree No 56 of 2009 which established a Tribunal for the Settlement of Cheque Disputes Relating to Real Estate Transactions. The decree delegates the power to the said Tribunal to have an exclusive jurisdiction to settle complaints related to dishonoured cheques which are issued by a purchaser and made payable to a real estate developer, or those cheques issued by those with usufruct rights or with long-term leasehold rights.

Rental dispute

Additionally, HH Sheikh Mohammed Bin Rashid Al Maktoum, in his capacity as Ruler of Dubai, has established the Rental Dispute Settlement Centre through Decree No. 26 for 2013, which delegated the Centre to provide a judicial system that can deal with rental disputes and settle them in a quick, transparent and professional manner between the landlord and tenant. These aforementioned concerned authorities have the power to hear enumerated matters, cancel the written cheques, substitute the cheques or refer the cases to the court. In other words, the Defaulter under the aforementioned default categories is granted the opportunity to resolve the matter of the bounced cheque outside of the court and without being subject to the criminal liabilities or consequences.

8. What are the civil consequences of the bounced cheque?

In addition to the criminal case against the defaulter that takes form of fine or confinement term that the defaulter may serve, the creditor can commence a civil case against the defaulter by relying on Article 246 and Article 710 of the UAE Federal Law No. 5 of 1985 of the Civil Code. Article 246 states “the contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith.” Article 710 states “A loan is the granting of ownership of property or fungible things to another with the condition that the other should return it like in amount, kind and description to the lender upon the expiry of the period of the loan.” Conjunctionally, both Article 246 and Article 710 of the Civil Code established the civil liability against the defaulter to honor his/her financial obligations as per the contract terms and condition with the creditor. Upon obtaining the civil judgment from the civil court, the creditor will file for an execution order before the judge, who will order the Defaulter either to honor the Civil Court’s order or being subject to confinement time until the Civil Court’s order is satisfied. 

9. How can you extinguish the criminal case of a bounced cheque?

The UAE in its efforts to minimise the impact of the criminal liability in relation to a bounced cheque replaced Article 401 of the UAE Federal Penal Code with a new provision in 2005. It allows the courts as well as the Public Prosecution to extinguish the criminal case against the defaulter upon settling the disputed amount, provided that the settlement is reached prior to the final judgement of the Criminal Court against the defaulter.

10. Last piece of advice

A debt is a liability, so please do consult a lawyer prior to committing. If you have left the country while in debt you can come back upon settling your debts and all arrest warrants will be cancelled.


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