criminal law


November 05, 2023



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Dubai's New Debt Law: How Proving Financial Hardship Can Prevent Imprisonment

In Dubai civil cases, if someone proves they cannot pay what the court ordered, they will normally avoid facing an arrest warrant, the emirate's highest judicial body has said.

Creditors need to demonstrate that the person who owes the money has sufficient funds to pay the debt before the court can issue an arrest warrant for unpaid dues.

The Dubai Court of Cassation made the announcement on October 24 in an attempt to clarify the clauses of article 319 of the federal civil procedure law and avoid creditors making unnecessary claims.

The court said insolvency should be presumed unless proved otherwise and that creditors must provide evidence.

Dr Hassan Elhais, a legal consultant at Awatif Mohammad Shoqi Advocates and Legal Consultants in Dubai, said the law allows for the imprisonment of debtors who fail to comply with court-ordered payments, unless they can prove their insolvency.

"However, it's crucial to note that the article also outlines specific conditions under which claims of insolvency may not be accepted, potentially leaving debtors vulnerable to imprisonment," he told The National.

"These include if the debtor has smuggled or concealed their assets with the intent of harming the creditor.

"These actions make it impossible for the creditor to access these assets for repayment."

He said this includes cases where the debt contains one or more instalments that the debtor has failed to pay, or when the debtor has provided guarantees for another person's debt before the court or an execution judge.

The only exception is if the debtor can demonstrate new circumstances that have significantly affected their financial circumstances, making it impossible to meet their repayment obligations.

"But we have to be clear that this is related to cases involving real estate, commercial, family and labour disputes, and not criminal offences," Dr Elhais added.

The court said enforcement judges must conduct a brief investigation with the debtor before considering imprisonment, with a focus on proving solvency or uncovering asset concealment.

"This landmark resolution aims to provide a fairer and more balanced approach to debt-related matters in Dubai, ensuring that individuals facing financial challenges are not unduly penalised," Dr Elais said.

"It underscores the importance of proving a debtor's solvency before resorting to imprisonment, ensuring a more equitable legal process."

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