UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Credit By Acceptance in the UAE

 

 

 

Credit by acceptance is a contract where the bank fulfills the role of drawee and in this capacity accepts a commercial paper drawn on it by its customer or the other party with whom that customer is dealing and the bank is obliged to pay its value when due.

If the bank pays the value of a commercial paper accepted by it, it shall debit its value plus expenses to the customer’s account.  The bank shall be entitled to make recourse upon the customer for the sums paid pursuant to the credit opened for the customer and used as consideration for payment of the commercial paper it undertook to accept.

*Emirates Institute for Banking and Financial Studies, Legal Environment in the United Arab Emirates, Laws Relating to Banking

Article 444 of the Commercial Transactions Law, Federal Law No. 18 of 1993  (the “Law”)

Acceptance credit is a contract under which the bank assumes the role of the drawee and shall in this capacity accept a commercial paper drawn on it by its customer or by the other party who deals with such a customer and the bank shall undertake to pay its value upon maturity.

Article 445 of the Law:

If a bank pays the value of a commercial paper accepted by it, it shall enter its amount and the expenses in the debit side of the customer’s account and shall have the right to claim the amount paid in accordance with the credit opened in favor of the customer and used for settlement of the commercial paper accepted by it.

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

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