Bounced Cheques in the U.A.E.

تيم إليوت
Welcome to Lawgical, the UAE’s first—and still the only—legal podcast. My name is Tim Elliott. Lawgical comes to you from the Dubai-based legal firm HPL Yamalova & Plewka. And here is the managing partner, Ludmila Yamalova. Good to see you.

لودميلا يامالوفا
Tim, pleasure to see you as always.

تيم إليوت
This time, we’ve talked about this a number of times over the years, both on Lawgical and on the radio—bounced checks. That red flag. And really, the simple rule is you should never write a cheque that you can’t honor. In practice, there may well be reasons that checks written might end up not being honored, whether it’s misfortune, willful wrongdoing, or whatever. If you’re not paid on time, funds haven’t cleared—whatever it might be.

Here in the Emirates, not honoring a presented cheque has historically been something that the law applies to in the strictest of terms. Let’s put it that way. Things, however, have changed in recent years. Can we start with a general look at how things were and how things are now, just to put this into perspective?

لودميلا يامالوفا
There’s a lot of granularity to that. It’s how things were, how things are now, and how things will soon be. By “soon,” I mean January 2022.

تيم إليوت
Well, just perhaps a month and a half from now. Next year is very soon—just around the corner.

لودميلا يامالوفا
Exactly. How things used to be is as you rightfully said—bounced checks historically have been considered a criminal offense in the UAE. In other words, when a check would bounce, particularly for insufficient funds, that was considered to be a criminal offense on its face.

More importantly, even if you gave me a check with conditions attached to it—for example, I was supposed to perform some obligation like giving you a car, but I didn’t—and then I still cashed the check, the law treated the bounced check as a separate legal obligation.

To challenge that, you would have had to pay the check to me first, and then you would have needed to go through civil courts to dispute whether I had the right to that money. If you couldn’t pay, you could end up facing a jail sentence until the check amount was paid in full or partially settled through bail or a settlement.

تيم إليوت
So even in cases where the transaction terms were unclear or unfulfilled, the bounce itself became the primary legal issue.

لودميلا يامالوفا
Exactly. A bounced check was a standalone legal obligation. As a result, the practical reality was that any bounced check—particularly for insufficient funds—almost automatically resulted in a police complaint.

The issuer of the check could be placed on a travel ban or blacklist, even before a final judgment. If you were flying into Dubai, for example, you could be arrested at the airport because of a criminal file created simply by someone filing a complaint. This was true even though there might not yet have been a trial or judgment.

If arrested, you would sit in jail until the matter was resolved—whether by paying the amount, negotiating a bail, or waiting for a court ruling.

تيم إليوت
That sounds like an extremely harsh system that could easily be abused.

لودميلا يامالوفا
It was, and it often was abused. While it provided security to lenders and those issuing financial benefits, it wasn’t sustainable. Many countries evolved away from criminalizing bounced checks years ago, recognizing the potential for misuse.

The UAE has been evolving as well. Over the years, various stakeholders—businesses, international organizations, and even banks—called for changes to these laws.

تيم إليوت
So how did the legal framework change?

لودميلا يامالوفا
Historically, the penal code and the UAE Commercial Transactions Law both criminalized bounced checks. Articles 401, 402, and 403 of the penal code and various articles in the Commercial Transactions Law of 1993 explicitly stated that bounced checks carried criminal sanctions.

However, in September 2020, the Commercial Transactions Law was amended via Federal Decree Law No. 14 of 2020. This amendment set out a transition period, gradually reducing the criminal implications of bounced checks.

Starting January 2, 2022, bounced checks will no longer be criminally punishable.

تيم إليوت
This is a huge shift. So, under the new framework, bounced checks are not criminal by default. But there are exceptions, aren’t there?

لودميلا يامالوفا
Correct. While bounced checks are no longer criminal by default, they can still lead to criminal charges in specific circumstances. These include cases of clear criminal intent, such as forgery, falsified signatures, or deliberately closing an account before issuing a check.

In these cases, it’s not the bounce itself that is punishable—it’s the fraudulent intent or underlying crime.

تيم إليوت
That makes sense. The focus is now on intent rather than the check as an isolated issue.

لودميلا يامالوفا
Exactly. It aligns with international standards, where checks are treated as financial instruments, not criminal triggers.

تيم إليوت
You mentioned civil remedies earlier. What recourse remains for someone holding a bounced check?

لودميلا يامالوفا
The civil process has become more streamlined. The check itself can now serve as a writ of enforcement. This allows the holder of the bounced check to go directly to the enforcement courts and pursue collection of the debt.

Previously, you needed to file a civil case, wait for a judgment, and then move to enforcement. Now, with a bounced check, you can skip straight to enforcement.

Additionally, under new provisions, the bank is obligated to pay the holder any available funds in the account, even if they don’t cover the full check amount.

تيم إليوت
So there’s still a strong mechanism for recovering funds, just without the criminal penalties.

لودميلا يامالوفا
Precisely. The changes strike a balance—removing the punitive aspects while ensuring creditors still have effective legal tools to recover their money.

تيم إليوت
That’s a fascinating overview of how bounced checks are evolving in the UAE. Ludmila, thank you for walking us through this significant legal shift.

لودميلا يامالوفا
Always a pleasure, Tim.

تيم إليوت
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