Tim Elliott
Welcome to Lawgical, the UAE’s first and, as far as we know, still the only legal podcast here in the Emirates. I’m Tim Elliott, and as ever, Lawgical comes to you from the Jumeirah Lakes Towers-based Dubai legal firm, HPL Yamalova & Plewka. With me is the managing partner, Ludmila Yamalova. Lovely to see you, Ludmila.
Ludmila Yamalova
It’s great to see you too, Tim, as always.
Tim Elliott
This time, let’s consider a legal issue that has been a matter of consequence for years here in the Emirates—bounced checks. But this time, we have a new law. Issued on December 19th last year, it came into effect on January 2nd this year. It’s all about, and I’ll quote, “the disposal of decriminalized cases of issuing checks in bad faith and refusing to pay.” Now, it’s a welcome development because essentially, it’s a law that requires that all measures taken in criminal cases of bounced checks are to be canceled.
Ludmila Yamalova
Indeed. For the UAE, this is truly an all-around groundbreaking development. The existence of checks was so prevalent in this country, especially in the old days. And by “old days,” I mean 10 or so years ago when I first came to the UAE. Almost every transaction was supported by a check, particularly post-dated or guarantee checks. In many cases, people issued blank checks with just their signature.
This practice was especially widespread during the real estate boom. Many transactions—whether for property, car loans, or business agreements—were backed by checks. For example, banks would provide car loans but require the borrower to issue post-dated checks covering each payment as a guarantee. It became so normalized that people didn’t consider the gravity of issuing a check until financial difficulties arose.
Tim Elliott
And during the financial crisis, this reliance on checks must have caused a lot of issues.
Ludmila Yamalova
Exactly. When the financial crisis hit, many developers, suppliers, and banks holding these post-dated checks started cashing them all at once. The problem was that checks were treated as standalone legal instruments, separate from the underlying agreements. So, even if the terms of an agreement weren’t fulfilled, a bounced check was a criminal offense on its own.
This led to a surge in criminal cases and many people ended up in jail. Others fled the country to avoid imprisonment because they couldn’t honor their checks. Even today, there are people serving jail sentences or living abroad because of bounced checks.
Tim Elliott
This is where the recent changes in the law come in, right? To decriminalize bounced checks and reduce these severe consequences?
Ludmila Yamalova
Exactly. The shift began with the introduction of the Commercial Transactions Law—Federal Law No. 14 of 2020. It aimed to decriminalize bounced checks and set a timeline for implementing these changes. The final phase came into effect in January 2022, marking the complete decriminalization of bounced checks.
Tim Elliott
So, as of January 2022, issuing a bounced check is no longer a criminal offense?
Ludmila Yamalova
Correct, but with an important caveat: a check is no longer criminal unless it was issued with fraudulent or criminal intent. For example, forging someone else’s signature or knowingly issuing a check with insufficient funds to defraud someone would still be considered criminal.
For standard cases like a bounced check due to insufficient funds, the matter is now strictly a civil issue. The holder of the check can still file a civil case to recover the owed amount but cannot pursue criminal charges.
Tim Elliott
This must be a huge relief for many people, especially those with ongoing cases or travel bans due to bounced checks.
Ludmila Yamalova
Absolutely. To address these existing cases, the Dubai Public Prosecution issued Circular No. 9 of 2021 in December. This circular provides clear guidelines for implementing the new law. It states that all existing criminal cases related to bounced checks will be canceled, travel bans lifted, and prisoners serving sentences for bounced checks released.
However, this applies only to cases involving bounced checks and not to those with additional charges, such as fraud.
Tim Elliott
It’s a significant development. What about businesses or individuals who relied on checks as a form of guarantee?
Ludmila Yamalova
They still have recourse through civil courts. For example, if a bank holds a bounced check for an unpaid loan, they can file a civil case to recover the debt. But the criminal route is no longer available.
Tim Elliott
It seems like a more balanced approach. The emphasis is now on resolving disputes rather than punishing individuals.
Ludmila Yamalova
Exactly. This change not only aligns with international best practices but also reflects the UAE’s commitment to creating a more progressive and business-friendly legal environment.
Tim Elliott
Another welcome change in the law here in the Emirates. That’s another episode of Lawgical, this time focusing on the decriminalization of cases involving bounced checks.
As always, our legal expert was Ludmila Yamalova, managing partner at Yamalova & Plewka. Thank you once again, Ludmila.
Ludmila Yamalova
Thank you, Tim. Always a pleasure.
Tim Elliott
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