UAE cheque rules: A big leap towards global best practices

DUBAI (Agencies): The UAE’s new law on decriminalisation of bounced cheques that became effective on Sunday has come as a great leap forward in updating the banking laws in the country in sync with the global best practices.
The new amendments to the Commercial Transactions Law comes with tough administrative penalties for issuing cheques without sufficient funds and a robust judicial alternative through civil courts to protect the rights of cheque beneficiaries.
The changes to the law consolidate the principles of justice by striking a balance between the interests of the cheque beneficiary (bearer) in fulfilling his rights in the shortest time span possible, and the drawer’s interest in removing any criminal case filed for non-payment of the cheque.
Through the changes in the law, the government and the Central Bank of UAE expects to protect the interests of all stakeholders in financial transactions involving cheques.
Despite the amendments to the law on bounced cheques, some cases will be retained as crimes to achieve the desired objectives of decriminalisation and its replacement by some civil measures. Under the amended provisions, fraud related to cheques and cases of intentional prevention of payments on issued cheques on the due date without a legal reason such as the cheque has been lost, or the bearer was declared bankrupt can invite criminal procedures.
Additionally, cases related to fraud and misuse of cheques involving closing the account, or withdrawing the entire balance before issuing the cheque, or before presenting it to the bank for cashing and or intentional freezing of account or any activity that aimed at preventing cashing of a cheque will become a criminal offence.
The new amendments to the Commercial Transactions Law are aimed at reducing difficulties faced in practical experience of dealing with cheques and achieving the best and most successful international practices.
A MATTER OF CONCERN
Over the years, criminal cases relating to financial transactions, with majority involving bounced cheques had been a matter of concern for government, regulators, law enforcement agencies and the judiciary in the country for a long time. While the changes to the law narrows the scope of criminal procedures, these are expected to reduce the burden on the police and judiciary in determining criminality in the event of cheque bounces and quick and efficient delivery justice to the aggrieved parties.
The provision for partial payment of the cheque in the event of insufficient funds has come as a flexible alternative for payments and reducing criminalisation of cheque bounces.
In essence, in letter and spirit, the changes to the law has come as a flexible alternative, streamlining procedures for collecting an issued cheque’s value in favour of the beneficiary while minimising criminal procedures.
While the amended law consolidates the principles of justice by striking a balance between the interests of the cheque beneficiary and the drawer, the focus is clearly on operational flexibility of cheques in financial transactions. Going forward, criminal procedures and hefty fines on non-compliance will be exceptions rather than a rule and should act as a deterrent to those likely to violate the new rules.