Key Amendments to the New UAE Cheque Law
On January 2, 2022, amendments to the new UAE cheque law came into effect. One of the most notable changes is the decriminalization of cheque bounce due to account closure, insufficient funds, or lack of balance.
The legislator also introduced the partial payment mechanism, allowing the beneficiary to request the drawee bank to fulfill the available amount in the account if the balance is insufficient. This is considered partial payment according to Federal Decree-Law No. 14 of 2020, amending some provisions of the Federal Commercial Transactions Law No. 18 of 1993.
The Central Bank of the United Arab Emirates issued a circular containing several questions and answers regarding these new amendments to facilitate public understanding.
We will discuss the key amendments to the new cheque law and the cheque transaction system, guided by the Central Bank’s circular questions and answers on these legal changes.
Objectives of the New Cheque Law in the UAE
The amendments made by the UAE to the cheque provisions, contained in Federal Decree-Law No. 14 of 2020, aim to achieve several objectives, including:
- Establishing principles of fairness and justice: Achieving balance between the beneficiary’s interest in obtaining their right as quickly as possible and the drawer’s interest in terminating the criminal case upon payment.
- Reducing drawbacks: Addressing the practical issues revealed in cheque transactions by adopting the best international practices.
- Enhancing the national economy: Achieving a strong economy and a judiciary characterized by quality and efficiency, and raising indicators of the rule of law and international competitiveness, in line with the UAE’s general strategy and vision.
Key Features and Provisions of the New Cheque Law
- Decriminalization: The new amendments decriminalize certain actions previously considered offenses under the UAE Penal Code, particularly issuing cheques without sufficient funds, except for certain cases specified in the new law.
- Continuation of criminalization in specific cases: Criminalization is now limited to certain cases such as fraud in issuing cheques, cheque forgery and misuse, and deliberate writing or signing of cheques in a way that prevents their payment.
Summary on Cheques without Sufficient Funds
The cheque holder (beneficiary) can directly approach the execution judge to claim their right through enforcement, considering the cheque as an executive document, following the procedures and rules specified in the Executive Regulations of the Civil Procedures Law.
Methods of Cheque Collection in the New Cheque Law
- Partial payment: Banks are obliged to make partial payment of the cheque if the account balance is insufficient.
- Executive document power: The law grants cheques that are not fully paid the power of an executive document, which does not require a court ruling, thereby speeding up the legal process to obtain the right.
Criminalization Cases in Cheque Transactions
The new law defines four cases of criminalization:
- Cheque forgery crimes.
- Fraud by using cheques through unjustified orders to the bank not to pay the cheque.
- Closing the account or withdrawing the entire balance before the cheque date.
- Deliberate writing or signing of the cheque in a manner that prevents its payment.
Amendment of Some Provisions of the Commercial Transactions Law Regarding Joint Accounts
- Notification upon partner’s death or loss of legal capacity: In case of opening a joint account and one of the partners dies or loses legal capacity, the remaining partners must notify the bank within 10 days.
- Stopping withdrawals from the joint account: The bank must stop withdrawals from the joint account up to the deceased or incapacitated partner’s share until a successor is appointed.
