By Joanna Lamah, Associate
As it is now common knowledge, the United Arab Emirates is in the process of a legal renaissance, the first of its kind in its history and in the history of Arab countries. It has recently amended approximately 40 laws in order to keep up with the high paced development and working life of its citizens and residents. Among the laws that were amended is Federal Law No. (14) of 2020 issued on September 27, 2020, amending some provisions of Federal Law No. (18) of 1993 issuing commercial transactions, which entered into force on January 2, 2022.
The new amendments included in the new law fundamentally change the criminal policy of the UAE legislator with regard to cheque crimes in specific cases, after he abolished Articles Nos. (401, 402 and 403) of the Federal Penal Code related to the criminalization of the cheque and made it subject to the Commercial Transactions Law solely without the Penal Code.
In view of the several queries about how to implement the provisions of this new law and the confusion that occurred among individuals about the interpretation of its provisions and its scope, it is necessary to shed light on the most important amendments that have occurred and give its provisions the correct interpretation given the importance of the cheque as a tool of payment in commercial transactions, which constitutes a fundamental pillar in the UAE economy, and among those queries we mention the following:
Does the decriminalization under the new amendment affect all cases?
No, the new amendments did not decriminalize all cases. As the decriminalization was limited to two cases of crimes related to the cheque, which are represented in 1) the absence of a balance; 2) insufficient balance, on the other hand, criminalization continued in other cases.
However, Article (641) of the amendment says that anyone who endorses a check for someone else, if they know there isn't enough money to pay it or that it can't be withdrawn, will be punished. However, the law does not punish the person who wrote the check itself if the check bounces in the same way.
The aim of the new amendments is not to overburden police stations, public prosecutors, and courts with cases where the perpetrators may not have real criminal intent. Rather, it arises in most cases from the failure of the activity of individuals and companies due to the fluctuating economic conditions that may occur in the country. This may prevent them from paying the value of the cheques they have drawn up. (In this context, we emphasize that there is no legal justification for this, given that a cheque is originally a tool of payment, and it is considered similar to giving an amount of money in cash; however, the practical reality has imposed in some cases the giving of post-dated cheques or security cheques, especially in business transactions, which created these problems). Therefore, the UAE legislator was keen, in order to ensure the desired goals of decriminalization, to keep some cases in which the explicit criminal intent of the perpetrators is confirmed, subject to criminalization as a deterrent to individuals from committing such crimes.
The cases that are still criminalized under the new amendment are as follows:
1. In case of requesting from the bank, prior to the date of withdrawal, not to cash the cheque illegally, i.e. outside the two cases specified exclusively in Articles 620 and 625 of the law, in which such a request is permissible, namely in the event of a check being lost, the bankruptcy of its bearer, loss of a cheque to its bearer or perishing.
2. In case of closing the bank account or withdrawing the entire balance available in it, before the cheque is issued or before it is presented to the bank for disbursement, or the account is frozen, this prevents the cheque from being cashed in bad faith.
3. In case of intentionally writing or signing the cheque in a way that prevents it from being cashed: as in the case of using a signature different from the one approved by the bank to cash the cheque.
4. In cases of forgery and the use of counterfeit cheques
In the event of conviction, the court may order the publication of a summary of the judgment in the newspaper at the expense of the convicted, provided that it includes the name of the convicted, his place of residence, his profession, and the penalty imposed. In addition, it might order the convicted person to return the cheque book in his possession, as well as ban the convicted person from practicing a commercial or professional activity for a period not exceeding three years if the crime was committed because of this activity. The criminal case shall lapse if the value of the cheque is paid or the settlement is made before the issuance of a final judgment, and if the reconciliation takes place after the judgment becomes effective, the execution shall be suspended.
As for the crimes that were introduced under the new amendment, the most important ones are the following:
1. The bank's refusal to partially pay the cheque, or issue a certificate to that effect, or hand over the original cheque to its bearer.
2. Accepting amounts paid by a forged cheque, or using it unlawfully, or its use is linked to a fraud crime.
3. The convicted (who issued the cheque) did not deliver his cheque books to the banks within a period of fifteen (15) days from the date of his notification in implementation of the court's decision issued in this regard as a punishment for his actions.
4. Anyone who resumes his commercial or professional activity despite a court order prohibiting him from doing so.
5. Punishing the drawee bank if it does not notify the Central Bank of the cases punishable by law, especially in the case of partial payment of cheques.
What is the procedure in the event that a cheque is presented for payment that is not fully receivable?
Prior to this amendment, the drawee bank was required to pay the available part of the balance only if the cheque bearer requested it to do so. Whereas, following the amendment, it became obligatory for the bank to partially pay the cheque without waiting for the holder to request it, and it is exempted from this partial payment only in the case that the latter asks it not to do so.
Accordingly, the drawee bank approves the cheque and marks the cheque as partially paid and the remaining undisbursed amount, and accordingly, it is obliged to freeze the consideration for its payment for the benefit of the cheque bearer under its responsibility until the timeframe for presenting the cheque for payment specified for six months' elapses.
Herein lies the bank's obligation to freeze the payment for the benefit of the bearer of the cheque with an earlier due date, according to what is stated therein, which has priority in withdrawing it when there are several cheques that are drawn on a balance that is not sufficient for all of them, regardless of the date the bearer obtained the cheque or the date it was presented for disbursement.
It's worth mentioning that the bearer of the cheque may present it for partial payment as many times as he would like until the amount is fully paid. In the event that a part of the cheque remains unfulfillable within the legally specified period for disbursement, then the cheque approved by the bank shall be considered as an executive document that can be executed directly before the execution department without the need to follow the regular procedures that were previously applied to obtain an order of payment from the competent court against the drawer. As such, to complete the execution of the cheque, the bearer shall submit to the execution judge an application to obtain the executive form for such cheque and then proceed with the execution of the entire value of the cheque or the remaining part of it as the case may be. The execution means is not limited to the case of returning the cheque without cashing it due to insufficient balance or lack of balance. Rather, the beneficiary has the right to take enforcement measures according to the cheque, whether it is subject to criminalization or not, in accordance with the text of Article 644 of the law.
This amendment aims at achieving two main goals: the first is to accelerate the litigation proceedings and make the bearer obtain the value of the cheque as fast as possible, taking into account that the cheque is primarily considered by law as a payment instalment, as well as the possibility of taking all executive measures on the drawer's movable and immovable funds directly, which may help, to avoid the drawer's smuggling of his money due to his lack of time, and the second is to create a Deterrent to the cheque drawer who knows with certainty when issuing any cheque the legal and practical repercussions that may befall him in the event of non-fulfilment of his obligations towards the other party with the possibility of dropping the criminal case against him in the event of full payment.
In this context, it is necessary to draw attention to the fact that the Central Bank in the UAE has issued on 8/2/2022 a new circular instructing the bank to provide the beneficiary of the cheque with all the required details of the drawer of the cheque in order to be able to apply for the executive form without considering such disclosure as a breach of confidentiality of their customers with the aim of ease implementation of the new amendments to the commercial transactions law relating to cheques.
What is the most important banking penalty that may be imposed on the drawer of an undisbursed cheque?
To reduce the occurrence of issuing cheques without funds, which would lead to undermining confidence in transactions using the cheque which is considered the most reliable in commercial transactions, the legislator imposed some penalties on the perpetrators, including closing their bank accounts and withdrawing their cheque books in order to avoid persisting in committing them, as well as placing them on the blacklist with the central bank, which may prevent them from opening bank accounts in the country in the future; This banking penalty would affect their professional or commercial activity and confidence in dealing with them directly or indirectly in most cases.
Accordingly, for those persons to whom at least four cheques are returned due to insufficient balance during a maximum period of one year between the first cheque and the fourth one, the legislator imposed on them the penalty of closing their accounts for a period of two years. In the event of a recurrence, the account will be closed for three years as well as they will be asked to refund the remaining possessed cheques.
The scope of application of the provisions of the new amendment to the facts occurred prior to its applicability:
To deal with the crimes that took place before the new amendment came into effect, they will be dealt with as shown in the following:
1. The criminal complaints that are still under consideration by the police stations: They will be closed and all measures previously taken will be cancelled accordingly, especially the seizure and summons orders issued against the defendant. The guarantees will also be handed back to their providers, and no criminal report will be registered against the drawer.
2. Cases under investigation: These are the reports that police stations have referred to the competent Public Prosecution and were registered with a criminal case number and no measures have been taken in the case by the latter. In the event that no investigation procedure has been initiated, the case will be closed administratively. However, in the event of taking any such measures, the Public Prosecution then shall issue an order stating that "there is no reason to file a criminal case due to the lack of the existence of a crime." If the accused is detained, he must be released and all measures and orders issued against him must be cancelled accordingly.
3. Cases before the courts for which no final judgments have been issued: Considering that the new federal law constitutes the most suitable law for the accused, it must be applied to cases in which no final judgments have been issued by all courts at all levels. In this regard, those who have been initially convicted or those who are detained pending the implementation of non-conclusive sentences issued against them may apply for their release in implementation of the provisions of the new law.
4. Cases in which final judgments have been issued: Since the judgment has a Res Judicata effect once it becomes final and not subject to appeal, it would no longer be possible to amend the findings of the judgment. However, in the interest of justice, the legislator considered that the best way to achieve its purpose is to suspend the execution of the judgment and negate the criminal aspects of the judgment by not enforcing the same, i.e., fine or imprisonment. As for what has been previously executed, it would be considered legal and no action may be taken in this regard.
5. Cases of deportation and placing the convict on the blacklist to enter the country: As for the measures that were not implemented by the date of the law's entry into force, its implementation will be suspended as explained above. As for the measures that were actually implemented, the matter is still unclear. The question of whether or not the name of the convicted person will be removed from the black list will be clarified by practical applications in the future, or most likely a regulation may be issued to address this matter.