How To Collect A Debt In Dubai
According to the 2018 Global Ranking on Debt Collection, the UAE is one of the most difficult places in the world to collect debt. Over time it doesn't get any easier and it's time consuming, stressful and unsustainable for business owners.
Nonetheless, debt collection does not need to be too burdensome if you know what to look for, and how to respond effectively if your debtor fails to pay on time.
1. Overview
1.1. In the UAE, debt may or may not be included in a written document in the form of an express contract or inferred by extrinsic evidence. But here, debt collection is a more complicated process than in most other nations.
1.2. In the above report, the UAE ranks next to the bottom in a debt collection table in 50 countries, with a ranking of' collection difficulty' of 81 out of 100 based on local payment procedures, court proceedings and insolvency proceedings.
1.3. The UAE is definitely known for having a complex legal system – let's look at a handy guide to coping with the most important aspects of debt collection here in the UAE against this backdrop.
2. Invoices and security checks
2.1. It is always advisable for any company to receive from its clients agreed terms and conditions (T&C); and to provide detailed invoices specifying the nature of the work done, the expenses, how to pay and in what timeframe.
2.2. In the UAE, post-dated or undated cheques have traditionally been used to secure debt repayment for rendered services or supplied goods.
2.3. It helps the business owner to bring a legal case if a customer has not charged within the period stated.
3. Charging interest
3.1. It is important to be aware that interest on monies due can be paid. It is common to add interest claims when pursuing a debt. Yet, according to sharia law restrictions, the right to claim interest is often an area of uncertainty for contracting parties in the UAE.
3.2. Fortunately, Article 76 of the UAE Legal Code of Practice clarifies the ambiguity, and clarifies that borrowers have the right to claim interest on a commercial loan in compliance with the contract rate.
4. Bounced cheques
4.1. You can activate a criminal case or file a police case on a bounced cheque, against both the defaulting client and the authorised signatory on the cheque.
4.2. You should have all the documentation available to file a legal action for each cheque you collect, including a copy of the passport or electronic identity of the signatory.
4.3. If another party has signed the T&C, you should also show that the verification provider has signed an NOC (no objection certificate), a copy of their electronic ID / passport and additional contact details (residence, phone numbers and email addresses).
4.4. Any police case would prohibit the individual from leaving the country, renewing visas or opening bank accounts.
5. Follow-up on payment delays
A payment delay should be followed up first with a telephone call detailing the payment conditions and timeframes, then with an email verifying appropriate payment methods.
If no payment is made, you may contact a law firm to file a letter of law or' claim' on your behalf and/or continue with a lawsuit against the client by police.
6. Amicable negotiation
6.1. Friendly arbitration options are a serious alternative to formal legal action, except where the argument is substantial and there is a good chance of a favorable ruling.
7. Solvency condition
7.1. Try to establish whether the company is still operating, the prospects of survival and the solvency position of the company before commencing legal proceedings against a debtor in the UAE. A debt can not be imposed upon the commencement of insolvency proceedings.
8. Legal proceedings
8.1. If things go ahead, the first step is a registered demand letter requesting the debtor to pay the outstanding principal amount plus any interest in late payment. Company disputes can be resolved before a Settlement and Reconciliation Commission.
8.2. Each disagreement under AED 50,000 in Dubai has to be taken before the Center for Amicable Dispute Settlement. If this stage of negotiation fails, the Code of Civil Procedure requires a summary judgement procedure.
8.3. Each disagreement under AED 50,000 in Dubai has to be taken before the Center for Amicable Dispute Settlement.
