UAE’s amended law on the decriminalisation of bounced cheques to take effect in Jan 2022

New amendments to the UAE’s Commercial Transactions Law regarding the decriminalisation of bounced cheques and the partial payment of cheques will take effect from January 2, 2022, the UAE Central Bank has announced.

The scope for criminalisation of returned cheques due to insufficient funds has been narrowed and confined to cases of bad faith and other cheque crimes.

This will replace decriminalisation with preventive measures, coupled with deterrent alternative penalties to reduce the misuse of cheques, the bank said.

As part of the changes, administrative penalties for issuing cheques without funds will also be toughened, including withdrawal of chequebook from the transgressor, denying them the right to receive new chequebooks for a maximum of five years, and suspending their professional or commercial activity.

Under the amendments, partial payment of the cheque has also become mandatory. If the amount available for payment is less than the cheque value, the drawee bank must pay the amount partially, unless the bearer rejects partial payment.

Abdullah bin Sultan bin Awad Al Nuaimi, Minister of Justice, stated: “Amendments introduced to the Federal Commercial Transactions Law on the procedures regulating use of cheques, collection of their value and penalties, have been unified in one law. Criminalisation has been confined to cheque forging and their illegal use, deliberately writing or signing cheques in a way that render them unpayable, the criminalisation referred to in the Penal Code on issuing cheques without funds, or the phenomenon known commonly as returned or ‘bounced’ cheques, was cancelled, similar to adopted practice in a large number of jurisdictions, such as France and the United States of America.”

Khaled Mohamed Balama, governor of the UAE Central Bank, confirmed that the amendments are part of strategic initiatives and plans to upgrade banking laws and regulations in the financial sector and fill any legal gaps and shortcomings.

“These amendments will assist in facilitating commercial and banking transactions, streamlining procedures for collecting the cheque’s value, and making the use of cheques more flexible,” official news agency WAM quoted him as saying.

Balama added that the new amendments will reduce the “negative aspects revealed by practical experience of dealing with cheques”.

They are also aimed at securing the rights of cheque bearers and beneficiaries, and will also expedite collection of the cheque value in a more “effective manner” (determined by the Central Bank), while also encouraging the public to use modern technological and digital means, instead of traditional paper cheques.

They will also strike a balance between the interests of the cheque beneficiary or bearer in fulfilling their rights as soon as possible, and the drawer’s interest in removing any criminal case filed for non-payment of the cheque.

The move is also hoped to contribute in raising the country’s ranking in the Global Competitiveness Index.

Abdullah bin Touq Al Marri, the UAE’s Minister of Economy, stated that decriminalisation of issuance of cheques without funds is an essential step in developing and enhancing the flexibility of legislation regulating economic, business, trade and investment activities in the UAE.

He also stressed that the new amendments to the law are part of a series of efforts undertaken by the UAE over the past few months to accelerate economic recovery, particularly in the private sector activities. Other initiatives include enhancing the flexibility of economic policies and increasing the country’s attractiveness to FDI and international companies.

Bin Touq said that the move will “revitalise commercial dealings and protect existing companies, especially start-ups and SMEs”.

“It also avoids the negative consequences of criminalisation for returned cheques without funds, and the back-log of related cases before the courts to resolve debts that affect the financial, banking and commercial sectors in the country negatively,” he added.