Debt Recovery in UAE

Ezra Taft Benson, an American farmer who later assumed the role as the Secretary of Agriculture in the United States quotes, “A good name is still to be preferred over great riches. It is to be preferred to the appearance of riches, acquired with nothing down and nothing to pay for 2 months.” 

This quote implies the importance of being debt free rather than acquiring great riches.

The United Arab Emirates (UAE) has seen a rise in debt recovery cases over the past few years. UAE provides two ways of recovering the debts, the first one being the extra-judicial procedures to collect the debts keeping in mind the financial condition of the debtor and the age of the debt. In this method, the creditor can approach the debt collectors, who can help in recovering the debts without having to go to the court. The debt collectors will serve the legal notices and keep following up with the debtor through calls and visits, in order to convince the debtor to pay the money owed to the creditor. Thereby, the debt collectors strive to settle the matter amicably. 

The second means of recovering the debts is through initiating a civil or commercial case against the debtor before the courts and judicial tribunals. Before a claim for debt recovery can be initiated, a valid claim as to the recovery of the said money must be established by the creditor as per Article 113 of UAE Civil Transaction Law. Once the debt has been established by the creditor by proving the existence of a valid contract between the parties, further actions against the debtor can be initiated. After exhausting all the available extra-judicial options to recover the debts, the creditor then takes it before the court. 


Debt Recovery Process: 

The first step to initiate a civil and commercial dispute is by submitting the case before the Reconciliation Settlement Committee, as set up by the Ministry of Justice as per Federal Law number 26 of 1999 pertaining to the establishment of reconciliation committees in the Federal Courts. Thereafter, the committee hears the parties and tries to reach an amicable settlement. If the parties failed to reach any kind of settlements, then the Reconciliation Committee shall further refer the dispute to the Court of First Instance. All the relevant documents and the claims submitted to the court shall be in Arabic or where it is any other language, it shall be translated into Arabic by the official translator. A claim shall be served to the defendant by the court and also the date of hearing shall be fixed. 

A judgment can be still obtained even if the defendant has been found to ignore the claim or has absconded. The parties are required to exchange the submission of their pleadings in the time as stipulated by the court, on reviewing the court shall fix a date for the delivery of the judgment and after this stage the court will not accept any further submissions or hear either parties any further claims, except for few occasions the court may consider re-opening the case on an application by either party or on its own.

There is a scope of appealing the judgment of the First Instance Court with regards to the law or facts in the issue. Such appeal can only be filed within thirty days (30) from the date on which the judgment was issued by the first instance court. Also, there is a right to appeal further to the Court of Cassation with regards to the law but it is subjected to certain monetary limits. 


Execution of Judgments: 

There is a separate department in the court called as the execution court, consisting of specifically appointed judges who are assisted by an Execution Bailiff and administrative staff, whose role is to administer the execution and enforcement of judgements and orders. The executive judge is in full authority regarding all the matters related to execution. A judgment cannot be executed by the creditor unless it has been reviewed and certified by the execution judge to be good to proceed with such execution. The main ways to enforce the judgment are as follows:


The judgment of the Court of First Instance shall not deem to be final if it has been appealed within thirty days (30) from the delivery of such judgment. As per Federal Law number 5 of 1985 on Civil Transactions provides rules regulating the limitation period in which a debt suit can be initiated. The general rule states that a claim for the recovery of the debts cannot be commenced after fifteen years, which is also subject to certain exceptions. The most recommended way to recover debts is through the extra-judicial methods before proceeding it to the courts.