From Criminal Liability to Direct Enforcement
Introduction
The legal framework in the United Arab Emirates has undergone a fundamental transformation in its treatment of cheques as a payment instrument, reflected in a series of legislative amendments that have redefined the nature of the cheque and the consequences of issuing it without sufficient funds. These amendments are part of the country’s efforts to enhance its legal and financial systems and to improve the business environment by achieving a fair balance between creditor rights protection and the economic and social security of cheque issuers.
Implemented under Federal Decree-Law No. (14) of 2020 and its amendments, these reforms represent a significant step toward restoring confidence in commercial transactions and reducing the burden on courts and public prosecutions. They are also aligned with international trends in criminalizing acts of clear criminal intent while decriminalizing others.
First: From Criminal Offense to Civil Liability
For decades, issuing a cheque without sufficient funds was treated as a complete criminal offense punishable by imprisonment or fines. However, the UAE legislator has adopted a new approach by eliminating criminal penalties generally and limiting criminalization to specific acts that indicate clear bad faith on the part of the issuer. These include:
- Instructing the bank not to pay the cheque without a legitimate reason.
- Withdrawing all funds from the account before or on the cheque’s due date.
- Drafting or signing the cheque in a manner that intentionally prevents its payment (e.g., mismatched or missing signature).
Only in such cases may criminal penalties still apply, including financial fines, a ban on issuing new chequebooks, and even the suspension of professional or commercial licenses for violators.
Second: The Cheque as a Direct Enforcement Instrument (Executive Deed)
One of the most significant amendments is the classification of a returned cheque due to insufficient funds as an executive instrument (enforceable title). This entitles the bearer to approach the execution judge directly to recover the cheque amount without the need to file a substantive lawsuit.
This legal shift marks a qualitative leap that enables creditors to reclaim their rights more swiftly and effectively, eases pressure on the judicial system, and strengthens confidence in commercial dealings via cheques.
Third: Activation of the Partial Payment System
The new law obliges banks to partially honor a cheque when the available balance is less than the full value of the cheque, provided the beneficiary requests it. The amount paid must be recorded on the reverse side of the cheque.
This amendment aims to partially safeguard the beneficiary’s rights, deter the issuance of cheques with insufficient funds, and enable the beneficiary to initiate execution procedures proportionally to the paid and outstanding amounts.
Fourth: Strengthening Administrative Sanctions Against Offenders
Instead of relying on criminal penalties, the law expands the range of administrative sanctions that may be imposed on those who misuse cheques, including:
- Listing the issuer of a bounced cheque in credit reporting systems for up to three years;
- Banning the issuance of new chequebooks;
- Closing non-compliant bank accounts in cases of repeated violations.
- Prohibiting the opening of new accounts for a specified period.
Fifth: Reorganizing the Time Limits for Presenting and Protesting Cheques
The law clarifies that the cheque must be presented for payment within six months from its issuance date, unless otherwise agreed. It may still be honored beyond this period unless the drawer issues a stop-payment order.
With this, the legislator redefines the legal timelines associated with cheques, ensuring procedural clarity, flexibility for users, and stability in financial transactions.
