Debt collection in the UAE: tips and strategies

Doing business involves many risks, and one of the most common is the occurrence of overdue debts. Creditors in different parts of the world often face the need to recover it. The legislation of the United Arab Emirates (UAE) in this area meets international requirements, but has its own unique nuances.

Negotiation process and restructuring

The debt collection procedure requires significant financial and time costs. Therefore, it is recommended to first consider the possibility of negotiating with the debtor and finding solutions for debt restructuring. This can help to avoid large expenses and maintain business relationships. The recovery process should begin only after all other methods have been exhausted.

Jurisdiction and legal aspects

Before filing a lawsuit, it is important to find out in which jurisdiction the case will be considered. If the contract specifies a specific jurisdiction for dispute resolution, this may limit your options in choosing a court.

If the agreement does not specify the terms of the applicable law, it is worth evaluating which jurisdiction will be the most favorable for the claim. In the UAE, the rule is as follows: if the debtor is registered or has assets in the country, the local court will be competent, unless otherwise specified in the contract.

Guarantees and risks

By requesting guarantees from the debtor, such as checks, creditors can reduce their risks. However, it is worth remembering that an uncovered check may entail criminal liability for the debtor. This option may not be effective if there is a possibility that the debtor will leave the country.

Execution of court decisions

Before starting legal proceedings, it is necessary to make sure that the decision received can be enforced. If the case is being considered outside the UAE, it is necessary to find out whether there is an agreement on mutual enforcement of court decisions.

In the UAE, the execution of decisions of foreign courts is possible only if there is an agreement. However, the Court of the International Financial Center in Dubai can provide more flexible conditions for this.

Pre-trial procedures

It is important to carefully study the terms of the agreement and follow the established pre-trial procedures. This usually involves submitting a formal written claim to the debtor demanding that the debt be repaid within a certain period of time. If this procedure is not followed, the court may refuse to accept the claim.

Protection of claims

If there is a risk that the debtor will try to hide his assets, the creditor may request preliminary interim measures from the court, including a ban on the alienation of certain assets such as real estate and cash. The court may request information about such assets from banks and government agencies.

It is also possible to apply an exit ban for the debtor, although this is becoming an increasingly complex process. The judicial authorities of common law in the UAE offer a wider range of interim measures.

Quick dispute resolution

In common law jurisdictions such as DIFC and ADGM, creditors can obtain a decision on a case even in the absence of the debtor. It is possible to apply for an “immediate judicial decision” if the debtor does not have a reasonable defense. This allows you to get a binding decision in a few weeks, which is not provided for in the civil courts of the UAE.

Bankruptcy opportunities

The Federal Bankruptcy Law, which applies to both individuals and legal entities in the UAE, provides an opportunity to reach compromises with creditors. However, this law has not yet had time to prove itself in practice, and its application remains uncertain.

Alternative methods of collection

Creditors are increasingly considering alternative debt collection methods, especially in international trade. This may include working with professional collectors who can take on some of the costs, or selling bad debts on the secondary market.

Each case is unique, and proper planning of the collection process can significantly reduce costs and provide more effective results.

If you are faced with debt collection problems, the international business law firm YANG CONSULT is ready to offer its assistance. We have the experience and professionalism necessary to successfully resolve your debt issues and protect your interests.

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