UAE constitutes a challenging jurisdiction in terms of debt collection. The legal processes in UAE have continuously evolved to address the challenges faced in debt collection process in the region. Debt claims are potentially settled in the UAE through the Courts, and upon obtaining successful judgment, steps for execution and enforcement mechanism is proceeded. Apart from civil remedies there are instances when a criminal action might also be plausible, especially in the case of bounced cheques.

The probability of effecting debt collection measures in the UAE, quiet often depends on various factors and the same are discussed herein:

• Court fees in civil claims:

  The litigation process in the UAE courts requires the claimant to incur the court fees and in addition the claimants also incur attorney fees for legal representation. Upon achieving a successful judgment, the court fees amount can be claimed by the judgment creditor from the judgment debtor through the execution process. Legal expenses may in itself have a deterrence effect.

• Time duration:

  The UAE court system includes a three-level system that comprises of the ‘Court of the First instance’, the ‘Court of Appeal’ and the ‘Federal Supreme Court’ (Federal level) and ‘Court of Cassation’ (at emirate level). Judgments rendered by the First instance court can potentially be appealed up to the level of the Federal Supreme Court and/or the Court of Cassation, particularly when the claim amount is substantial. Thereby, the parties can potentially be tied up in litigation for a lengthier time period.

• Limitation Period:
  

  Pursuant to Article 473 of the Federal law No. 5 of 1985 on Civil Transactions, a claim is generally time -barred if the fifteen years have lapses. However, this time period can be shorter in some cases if specifically stated accordingly in the law. Article (473) states that, ‘A right shall not be extinguished by time limitation but the hearing of the court case, against the one who denies it, shall not be admissible after the lapse of fifteen years without legal excuse, after due observance of the matter governed by special provisions’.

If the statutory limitation period has been crossed then the claim gets time-barred and will be potentially rejected by the Courts.

• Execution of judgment in other jurisdiction:
  

  In instances wherein the judgment debtor is not holding any assets and is not physically present in the UAE, can further complicate a debt recovery process. In such instances further steps can be initiated based on the reciprocity principle existing between the UAE and the foreign jurisdiction. If reciprocity is plausible execution measures can be initiated against the judgment debtor in the foreign jurisdiction. However, essentially these hurdles can cause further delays and expenses in the recovery process.

Extra judicial methods can also be employed to initiate debt recovery and much depends on the contracts between the parties and legal attorneys can guide you in the settlement processes. In order for a settlement agreement to be valid, it is essential that certain key parameters are satisfied. For instance, pursuant to article 125 of the Federal law no. 5 of 1985 on the Civil Transactions Law of the United Arab Emirates, ‘A contract is the meeting of an offer issued by one of the contracting parties with the acceptance made by the other party and their concordance in such a manner as to produce their effect on the object of the contract and results in a binding obligation on each party in consideration of the obligation of the other party’. A binding settlement agreement meeting the legal parameters can be enforced in the Courts. The possibility of entering into settlement agreements can even be sought alongside an on-going civil litigation and the courts may accept a settlement agreement in record before a final verdict is reached. If the settlement agreement is accepted by the Courts, the Courts will confirm its acceptance and issue its judgment noting that the matter has been settled between parties with reference to the settlement agreement and thus concluding the litigation.

Unlike in many other jurisdictions, the debt collections in the UAE proceeds within the parameters of the legal processes. The UAE legal system ensures that the basic limits of debt collection are not exceeded by using dubious means to terrorize the debtor and his close relatives. Legal attorneys can represent your interests and can strategize the best possible route to initiate debt collection. The possibility of entering into re-structured plans and settlements can achieved through the right legal representation.