Tim Elliot: Welcome to another Lawgical Lite. Lawgical is still the U.A.E.’s first legal podcast. Lawgical Lite is a speeded-up version, I guess. Lawgical comes to you from the Dubai-based law firm, HPL Yamalova & Plewka. My name’s Tim Elliot, socially distanced. We’re on the 19th floor of the Jumeirah Lakes Towers District at the firm’s offices. The Managing Partner is Ludmila Yamalova. Good to see you.
Ludmila Yamalova: Good to see you too, Tim. Thanks for being back.
Tim Elliot: Good to be here. Now this time, we are going to be talking about performance orders. That is how the translation appears in Arabic. Lots of people refer to them as payment orders, but Ludmila, this is really good news for, I guess, smaller firms who are having trouble being paid by bigger businesses, for example, but it is just really good news generally, isn’t it?
Ludmila Yamalova: Indeed. What this refers to, and I can go through the legality shortly, but in practical terms, it is fairly recently available avenue for smaller businesses, or anybody else, any other type of creditors out there who are owed money. Obviously, every penny is money, but there is a lot of debt out there. While it may be a lot of money for the particular creditor, it’s not enough to pursue a formal, or a full blown, lawsuit. So there have been a lot of claims like that around. The business community in Dubai, for example, and in the U.A.E. in general, where lots of trade, lots of businesses, service providers are owed money by their customers, clients, and perhaps medical professionals by patients, and such, but they are not choosing to collect on them because to do so through the formal court process, which was the only option in the past, was just too expensive, cumbersome, lengthy, and ultimately prohibitively inconvenient for them to actually pursue those claims.
Now with this new provision in the law, in the U.A.E. civil procedure law, in relevant terms, there is now an expedited way, or an expedited form of pursuing such claims. That is what the exciting part about this particular topic is all about. What this is called, as you said, in Arabic actually the term is a performance order. But most refer to it as a payment order. It’s a mechanism allowing a creditor to bring a claim for a payment of debt through an expedited court forum in an ex parte process. Ex parte means without serving the other side.
In other words, let’s say you gave me a check and that check bounced, and I wanted to pursue you in court because I wanted to get paid, in the past I would have had to file a case and you would have to be served. That in itself takes weeks, sometimes months, depending on where you might be located, and then you would have to make your own submissions. You would have to have your own lawyer. I would have my own lawyer. Then a hearing would be scheduled, and the hearings will then be delayed, submissions made, responses, and so on and so forth.
But this particular format of pursuing a claim is ex parte, which means you are not required to serve the other side, and therefore the judge will only look at the claim request. Obviously, you have to support your claim and then the back of the claim alone without having given you the opportunity to respond, they will issue an order, a payment order.
Tim Elliot: So, traditionally in business, this is a perennial problem in business anywhere in the world. If you’ve offered a credit period of 90 days and then you have to go to court and you go backwards and forwards. Somebody’s already late. They’ve taken 120. You add on the court time. You’re six months, eight months in, and you’re still not being paid. That’s an issue for businesses. It’s particularly an issue at a time like now, COVID-19, revenues are down, companies are not spending as much, perhaps not as forthcoming with payments as they would have been through very often no fault of their own. But what this does is it changes it, and the procedure could, or should, take less than a month. That is a huge change in the U.A.E.
Ludmila Yamalova: Absolutely. In terms of timing, the process is as follows. Let’s say if you are the creditor, you need to notify the debtor that they owe you money and give them five days to respond.
Tim Elliot: Right.
Ludmila Yamalova: After those five days, then you are free to go and file your claim with the court. Then the court has three days to issue the order. After the debtor has 15 days to challenge the order and the court then has one week to respond to the challenge. If the court decides that the order is confirmed, then at that point the order becomes final and you can move to enforcement. All in all, if you do five days, plus let’s say three days for the court, another 15 days, really you are almost under a month. All in all, within a month, you may have a final court order that allows you to move to enforcement proceedings and as part of the enforcement you will be able to, for example, freeze the debtor’s accounts and other assets, which is huge because it happens so fast and through very formal means.
Tim Elliot: If somebody listening to this is thinking, well, okay, enforcement is one thing, but collection is another. But the point is that this is under a month, you get a judgment, and companies that are just not paying because they’re not paying are going to have to change attitudes. That’s the key thing to me about this change in the law. The fact is that something can now be done, something can now be done quickly, and people are going to have to, to put not too fine a point on it, put their ideas out.
Ludmila Yamalova: For sure. This, as you rightfully pointed out, is all too common unfortunately, in the business community here where, for example, traders of various goods or providers of services, they have provided the services or they’ve already provided the goods, delivered the goods, and there are invoices proving that to be the case, and yet, they are not being paid. There could be dozens of such invoices, if not more. It could be 5,000 dirhams here, 15,000 dirhams there, 50,000 dirhams somewhere else, 100,000 dirhams, so in all in all, it may come up to half a million dirhams or a million dirhams, but they are all individual invoices, often individual invoices against different suppliers or different customers or different debtors, for that matter, and so therefore for you to file a case for each one of them in the court is just an impossibility really in practical terms because you cannot lump them all into one because they are after different parties and because they are perhaps small enough for even no particular lawyer wanting to accept them to litigate them. Which lawyer, I mean, there are not that many lawyers that would litigate too many cases, for example, of 5,000 dirhams or even 15,000 dirhams because it’s a process, the same process whether you are arguing 15,000 dirhams or a million dirhams. For a lawyer, more or less, in many cases the work is the same, so obviously the amount at stake is instrumental in deciding whether you want to pursue such cases. This is why historically there have been so many business providers out there and so many traders who have chosen not to pursue a case only because it was too expensive and lengthy and also, resource wise, just too demanding.
Now with this, all of a sudden all of that changes. But I do want to highlight which types of cases are actually qualified.
- It has to be a commercial instrument or a commercial case. Employment, for example, will not work. Let’s say, I used to work for you and you told me, “Yes, I owe you 50,000 dirhams” and you have signed onto it that you owe me that money, but you do not pay it to me. That particular claim would not qualify because it’s not considered to be a commercial claim. It has to be commercial in nature.
- It has to be a fixed amount, or some kind of a known type of good that has a quantifiable value to it.
- There has to be some document that shows the creditors right has been confirmed. In other words, let’s say I provided you services, there is a confirmation that you received those services or if I’ve delivered you goods, there is a confirmation that you received those goods.
Basically, those are the elements that are required to exist for this payment order to apply. (1) A commercial instrument, (2) a fixed amount, and (3) a confirmation of the creditor’s right.
That means in practical terms, an invoice, for example, or a check. Lots and lots of checks are now being filed under this payment order format. It could even be a WhatsApp communication or an email communication that shows some kind of confirmed debt.
With any of those documentations, then you go and file a case with the courts and within three days the court will issue a judgment, and then you have 15 days to respond. After that, if the amount is below 50,000 and the court ultimately rejects the challenge, then the amount becomes final. In other words, if you file a case and the court issues a decision three days later, then you have 15 days to respond. Let’s say you respond within 10 days and then the court has one week after that to respond to the challenge, so you could really have a final judgment within two weeks, if you think about it.
Tim Elliot: Hum.
Ludmila Yamalova: It is possible within two weeks, but certainly within a month is a realistic timeframe. Anything above 50,000 dirhams, you could appeal a second time around. Let’s say if there is a request, a payment order for 300,000 dirhams, and then it’s being challenged, and the court confirms the payment order, then the debtor can once again challenge it through the court of appeal. But anything below 50,000 dirhams, which for a lot of traders here will be a significant welcome step, basically it is final within a month.
Tim Elliot: Ludmila, this is a change in the law obviously, but if I have a check from – I don’t know – a year ago, and I filed that with the Dubai courts, is that still valid or should I have filed in this new way?
Ludmila Yamalova: You actually have to file it in this new way, the new way being, it’s still part of the court, but it’s filed through the expedited judge or the expedited proceedings. It has to be filed as a claim or a request for payment order, and not your typical civil claim which would have been the case in the past. In the past, you would have filed your claim for the bounced check, for example, as a normal civil claim. But here, if you file that, then that case will be dismissed on the grounds that it was filed in the wrong forum. In fact, it’s quite interesting because the law has actually been in existence now since 2019, so therefore still fairly recent, and as a result of this, there have been a lot of cases that have been filed as just regular civil cases, and they have been dismissed. So, you can see the courts have been quite dismissive of any kind of confirmed commercial instrument cases which were filed as civil cases on the grounds that they were filed in the wrong forum, and they should have been filed as a payment order. So, it is very important to understand that if you have one of these confirmed commercial instruments, you must file as a payment order because if you file it as such that will be cancelled or will be closed. And by the way, it will not be just transferred to the payment order jurisdiction. It will actually be cancelled which means you will have to pay feels all over again, and you will have to make all your submissions all over again. This is important to highlight because you lose time plus money if you file it in the wrong jurisdiction.
Tim Elliot: Understanding the law, once again, is paramount. Now let me move onto enforcement. In terms of enforcement, what should we understand with this new law?
Ludmila Yamalova: We can understand that enforcement, the typical enforcement that would apply in any other civil or commercial claim, which is quite interesting because to get to the enforcement or to the stage where you can actually file enforcement under the payment order, it is a much, much more expedited process. As I mentioned, it can be literally within a month you might have a payment order which can become final at that point in time, and you can then file enforcement. As part of enforcement, you have all the regular avenues that are available in any other enforcement case, which is you can try to freeze the debtor’s bank accounts, for example, properties, businesses, and any other assets. Enforcement can kick in very, very quickly, so as a result, this particular instrument or mechanism of filing or seeking the payment of debt through the payment order is extremely beneficial to traders because it is so efficient and expeditious, and because the costs and the timing involved, and the process involved, is truly perhaps what it should have always been because if you have a confirmed debt, where it says I owe you this much money, why do you need to file a full-on court case and then argue and try to prove that you don’t owe me that money if it’s already been confirmed that you owe it to me?
Tim Elliot: So, this is an expedited process. That much is clear. In those terms, you have to keep up your side of the bargain. If you have a judgment, a final judgment, as it were, and you don’t act on it within three months, that voids the decision, does it not?
Ludmila Yamalova: Yes. That’s very important to highlight. When the payment order is issued and obviously the court issues it, but remember this is an ex parte application which means that the debtor is not being served the application itself, and therefore when the court order is issued the debtor does not know that because he or she is not a party to that particular proceeding. Therefore, you as a creditor, now in your hands you have a payment order, or a court order in your hands, so now you are required to serve that on the debtor. The service has to be done through the courts, and it has to be done within three months from the time that the order was issued. If you do not serve the order on the debtor, then the order becomes null and void. So, don’t just sit in it. Make sure that it is actually served timely.
Tim Elliot: Let’s just recap very quickly what performance or payment orders mean just for the record.
Ludmila Yamalova: Yes. So, payment order, it’s a confirmed commercial instrument that can be filed through the expedited channels in the court in a form of an ex parte application, meaning the other side, or the debtor, is not being notified. The court has to issue a judgment within three days from the application. After that, you can challenge the payment order within 15 days, and after that the court has one more week to decide on the challenge of the application.
The court may dismiss the challenge, and at that particular time the order becomes final, or it can dismiss it for whatever reason, but must state the reason for the dismissal of the payment order. Also, if the payment order is for an amount that is below 50,000 dirhams, once the court has dismissed the challenge, then it becomes final and non appealable. Therefore, you cannot even appeal it to the next level.
However, if it is above 50,000 dirhams, you can still appeal it to the court of appeals, but if the reasons for the first court to have issued the order remain the same, chances are that even the appeal courts will rule the same way.
Tim Elliot: It’s like a brave new world for credit control in the U.A.E. That’s performance or payment orders. That’s another Lawgical Lite. As always, our legal expert here was Ludmila Yamalova, the Managing Partner at Yamalova & Plewka. Thank you once again.
Ludmila Yamalova: Always. Thank you to you, Tim.
Tim Elliot: If you have a legal question you need answered in a future episode of Lawgical, or a quickie answer in a Lawgical Lite form, or if you’d like a consultation with a qualified U.A.E. experienced legal professional, you can WhatsApp us, 00971 52 525 1611, or click Contact at LYLawyers.com.
