The UAE Central Bank, the Ministry of Economy and the Ministry of Justice have implemented amendments to the Commercial Transactions Law regarding the decriminalisation of bounced cheques.
Under the amendments, the regulator and the ministries introduced changes relating to the partial payment of cheques and toughened administrative penalties in cases when they are issued without funds, they said on Monday.
The amendments come into effect on January 2, 2022. They are in line with the Central Bank’s strategic initiatives and plans to upgrade banking laws and regulations to track developments in the financial sector, fill any legal gaps and deliver its vision to follow best practice internationally, said Central Bank governor Khaled Balama.
They will also help to promote commercial and banking transactions, streamline procedures for collecting the cheque’s value and make the use of cheques more flexible, the regulator and ministries said.
"The new amendments reduce the negative aspects revealed by practical experience of dealing with cheques, compared to the best and most successful international practices," Mr Balama said.
"The new amendments would also consolidate the principles of justice by striking 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."
In October 2020, the UAE updated the country's Federal Law on Commercial Transactions with several new provisions that aimed to discourage criminal lawsuits against people and businesses for bouncing cheques.
Those amendments, which will also be introduced in 2022, were approved by the Cabinet at the time and redefined crimes involving bounced cheques and the issuance of cheques without funds.
In December 2017, Dubai Attorney General Essam Al Humaidan issued an order under which a range of minor offences – including bouncing cheques and the failure to pay rent – will no longer be put through the emirate's court system. Instead, they will be treated as misdemeanours subject to financial penalties.
The 2017 ruling means that those responsible for cheques bounced in the emirate of up to Dh50,000 are now fined Dh2,000 while those who bounce cheques whose value is between Dh50,000 and Dh100,000 pay a Dh5,000 fine. The fine for bounced cheques with a value between Dh100,000 and Dh200,000 is Dh10,000.
However, under the latest amendments, 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, the Central Bank said.
"This would deliver the desired goals of replacing decriminalisation with preventive measures, coupled with deterrent alternative penalties to reduce the misuse of cheques," it said.
The amendments also aim to secure the rights of cheque bearers and beneficiaries, and would expedite the collection of a cheque's value in a more effective manner, which will be determined by the Central Bank.
They will also encourage the public to use modern, technological and digital means instead of traditional paper cheques.
Under the amendments, the partial payment of a cheque has also become mandatory. If the amount available for payment is less than a cheque's value, the drawee bank must pay the amount partially unless the bearer rejects partial payment.
The decriminalisation of the 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, said Abdulla bin Touq, Minister of Economy.
"It would also reinforce the principles of justice, fairness and equal opportunities in commercial transactions and the business environment in the country, and contribute to enabling sound commercial practices at both individual and institutional levels," he said.
"Amendments that lift penal protection of the cheque, scheduled to come into force at the beginning of 2022, are part of a series of efforts undertaken by the UAE over the past months to accelerate economic recovery, particularly in private sector activities, and to bring about the qualitative transformation of the current economic model, based on the principles of proactivity and sustainability."
In September, the International Monetary Fund forecast that the UAE’s economy would grow 3.1 per cent in 2021. That is higher than the Central Bank's estimate, which has the Arab world’s second-largest economy expanding 2.1 per cent this year and 4.2 per cent in 2022, according to its second-quarter review.
The UAE economy continues to recover from the coronavirus-induced slowdown, aided by Dh388 billion ($105.6bn) worth of economic support measures.
These packages include the Central Bank's Dh50bn Targeted Economic Support Scheme to boost liquidity in the financial and banking sector, parts of which were extended to June 2022.
Other government initiatives such as retiree visas, remote working visas and the expansion of the 10-year golden visa programme, to encourage foreign professionals to settle in the country, have also helped to improve investment sentiment.
"These efforts also include enhancing the flexibility of economic policies and raising the state’s ranking [on] the Global Competitiveness Index, associated with the ease of establishing and doing business and increasing the country’s attractiveness to foreign direct investment and international companies," Mr bin Touq said.
"This move keeps pace with latest global trends on digital transformation, modern digital payment systems and advanced financial technology; supports the continuity and growth of economic activity; increases confidence in the business environment and provides rapid, advanced [and] civil alternatives to commercial and financial transactions."