UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for March 17, 2010

Bouncing A Cheque Is A Criminal Offence in the UAE

 

 

Federal Law No. 3 of 1987 on the Penal Code for the United Arab Emirates (the “Penal Procedure”)

Article 401 of the Penal Procedure:

Detention or a fine shall be imposed upon anyone who in bad faith gives a draft (cheque) without a sufficient and drawable balance or who after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque, or if he orders a drawee not to cash a cheque or makes or signs the cheque in a manner that prevents it from being cashed.

The same penalty shall apply to anyone who endorses a cheque in favor of another or gives him a bearer draft, knowing that there is no sufficient balance to honor the cheque or that it is not drawable.

Article 402 of the Penal Procedure:

Detention or a fine shall be imposed upon anyone who in bad faith, declares falsely that the balance available to him is insufficient to cover the drawing and drawable amount.

Article 403 of the Penal Procedure:

Provisions of the preceding two Articles shall apply to postal money orders (postal cheques).

Scandalous and Disgraceful Acts under UAE Criminal Law

 

 

Federal Law No. 3 of 1987 on the Penal Code for the United Arab Emirates (the “Penal Procedure”)

Article 358 of the Penal Procedure:

Whoever openly commits an indecent and disgraceful act shall be punished by detention for a period of at least six months.

Whoever commits a disgraceful act with a girl or boy who has not completed fifteen years of age even if it is not committed openly, shall be punished by detention for at least a period of one year.

Article 359 of the Penal Procedure:

Whoever attempts to disgrace a female by words or by deeds in a public street or frequented place shall be punished by detention for a period not exceeding one year and by a fine not exceeding ten thousand dirhams or by either of these two penalties.

The same penalty shall apply to any man who disguises himself in a woman’s clothing and enters a place the entry into which is reserved for women.  If a man in such a case commits a crime, it shall be considered an aggravating circumstance.

Cheques in the UAE

 

The Commercial Transactions Law, Federal Law No. 18 of 1993 (the “Law”):

Article 596 of the Law:

The cheque shall contain the following particulars:

  1. The term cheque written in the text of the instrument, and in the language which it is drawn up.
  2. An unconditional order for payment of a specified sum of money.
  3. Name of the person who is liable to honor. (drawee)
  4. Name of the person to whom or to the order of whom payment shall be made.
  5. Place of payment.
  6. Date and place of issue of cheque.
  7. Signature of the person issuing the cheque (drawer).

 

Article 597 of the Law:

Any cheque not containing any of the particulars mentioned in the foregoing Article shall not be considered a cheque, except in the following cases:

  1. If a cheque does not specify the place of payment the place shown beside the name of the drawee shall be considered as the place of payment.  However, if several places are shown beside the name of the drawee, the cheque shall be considered due for payment at the first place shown therein, and if the cheque does not contain the said particulars, it shall be considered as due for payment at the place where the head office of the drawee is located.
  2. If the cheque does not contain the place of issue, it shall be considered as issued at the place shown beside the signature of the drawer, and if not available it shall be considered as issued at the place where it has actually been signed.

 

Article 598 of the Law:

  1. Any cheque issued in the state and due for payment therein must be drawn on one of the banks operating in the state.
  2. Any bank giving its customer a book containing blank cheques for payment against them from its treasury shall write on each cheque the name of the account holder who receives it and his account number.
  3. Drawing may be made on special written orders in the manner prepared by the bank and shall be acceptable to it in form.
  4. Signature on cheques and on special written orders shall be in conformity with the specimen signatures and the approved signatures registered with the bank and the account holders shall be responsible before the bank whether such account is in credit or debit.

 

Article 599 of the Law:

  1. No cheque may be issued unless the drawer holds with the drawee, at the time when the cheque is issued, monies that he can dispose thereof by a cheque according to an express or implied agreement.
  2. Whoever draws the cheque or orders a third party to draw it in his favor shall pay the corresponding value for honoring it.  However, the drawer in favor of a third party shall be personally responsible towards the endorsers and the bearer only for making the funds for honoring the available.
  3. The drawer rather than anyone else, shall, upon denial, prove that the person on whom the cheque is drawn has had the funds for the honoring at the time of its issue; however, if he fails to prove that, he must secure the honoring of the cheque even if the protest for non-payment is made after the time prescribed by law.

 

Article 600 of the Law:

  1. There shall be no acceptance with regard to a cheque, and if a form of acceptance is written in a cheque, it shall be treated as if to have never existed.
  2. The drawee may mark down a cheque as certified, and the certification denotes availability of the honoring funds with the drawee at the date of marking it down, and the signature by the drawee on the face of the cheque shall be considered as certification.
  3. The drawee shall not refuse to certify a cheque if the drawer or the bearer so requires from him and he has sufficient funds for honoring the cheque.
  4. The funds for payment of a certified cheque shall remain blocked with the drawee and under his responsibility in favor of the bearer, up to the expiry of time fixed for presentation of the cheque for payment.

 

Article 601 of the Law:

It may be stipulated that the cheque be paid:

  1. To a designated person, with or without expressly stating the condition that it is to order;
  2. To a designated person with the expression (not to the order) or any other expression indicating such meaning.
  3. To Bearer of the cheque.

 

Article 602 of the Law:

A cheque drawn in favor of a designated person, with the expression (or to bearer) or any other expression indicating such meaning shall be considered as cheque to bearer; however, if the name of the payee is not shown, the cheque shall be considered to bearer.

Article 603 of the Law:

A cheque due for payment in the State and includes the condition (not negotiable) shall not be paid except to whomever has received it with such condition.

Article 604 of the Law:

  1. A cheque may be drawn to the order of its drawer himself.
  2. It may be drawn in favor of another person.
  3. It may not be drawn on its drawer himself, except in the event of drawing it within the branches of the same bank or between them and the Bank’s head office, subject to that the drawn cheque is not payable to bearer.

 

Article 605 of the Law:

Stipulation of interest in the cheque shall be considered as to have never existed.

Article 606 of the Law:

The drawer shall secure payment of the cheque and any condition by which the drawer exempts himself from such warranty shall be considered as to have never existed.

Article 607 of the Law:

Debt is not renewable upon acceptance by the creditor, of a cheque for payment of his debt, and a principal debt including all of its securities shall remain until the amount of the cheque is honored.

 Article 608 of the Law:

  1. A cheque whose payment to a designated person is conditional, whether or not the ‘order’ conditions is provided for therein, shall be negotiable by endorsement, and such endorsement may be made even to a drawer, or to any other party liable thereunder, and they may endorse it all over again.
  2. A cheque the payment of which is stipulated to be made to a designated person, and in which the expression (not to the order of) or any other expression with the same meaning is written may not be negotiated except by following the provisions of the (transfer of right).
  3. A cheque whose payment to its bearer is conditional may be negotiated by delivery.

 

Article 609 of the Law:

  1. The endorser shall secure payment of the cheque unless otherwise stipulated.
  2. He may prohibit the re-endorsement thereof, and in this case, he shall not be liable under the guarantee towards those to whom the cheque devolves by subsequent endorsements.

 

Article 610 of the Law:

Endorsement to a drawee shall be treated as discharge of liability unless the bank on which it is drawn has several branches and the endorsement is made to a branch other than that on which the cheque is drawn.

Article 611 of the Law:

Endorsement made on a cheque to its bearer, makes the endorser responsible, according to the provisions of recourse; but it shall not follow as a result of such endorsement that the deed becomes a cheque to order.

Article 612 of the Law:

The holder of a cheque negotiable by endorsement shall be considered to be the lawful bearer thereof, if he proves his title thereto by uninterrupted endorsements even if the last of which is an endorsement in blank.

Crossed out endorsements shall be considered in this respect as to have never existed and where a blank endorsement is followed by another blank endorsement, the signatory of such endorsement shall be considered as the one to whom the title to the cheque has devolved by blank endorsement.

Article 613 of the Law:

Where a person loses possession of a cheque whether such cheque is to bearer or endorsable, the person to whom the cheque devolves shall not be obliged to abandon it, if he establishes his little thereto in the manner shown in the preceding Article, unless he has obtained it in bad faith or commits a serious error in obtaining it.

Article 614 of the Law:

  1. An endorsement occurring subsequent to a protest or after the expiry of the time fixed for presentment of the cheque shall have no effects except those of the Transfer of Right.
  2. Endorsement made without date shall be considered as to have been made prior to the protest or prior to the expiry of the time fixed for presentment of the cheque unless otherwise proved.
  3. Dates of endorsement may not be brought forward and if it happens, it shall be considered forgery.

 

Article 615 of the Law:

  1. Payment of the cheque in whole or in part may be guaranteed by a reserve guarantor.
  2. Such guarantee shall be given by a third party other than the drawee and may also be given by one of the signatories on the cheque.

 

Article 616 of the Law:

  1. Partial endorsement shall be null and void as well as an endorsement made by a drawee.
  2. An endorsement to the bearer shall be considered as blank endorsement.

 

Payment of Cheque

Article 617 of the Law:

  1. The cheque shall become due for payment on the day shown as the date of issue.
  2. The cheque may not be presented for payment before such date.
  3. If the funds for payment are less than the cheque amount, the bearer shall demand from the drawee to make partial settlement within the extent o the amount available with him, and shall ask him to make such payment on the back of the cheque and to give him a certificate to this effect and shall establish the right of recourse for the balance amount either by this certificate or by making a protest.

 

Article 618 of the Law:

  1. A cheque drawn inside or outside the State and due for payment therein must be presented for payment within six months.
  2. The period stated in the preceding paragraph shall commence from the date shown in the cheque as its date of issue.
  3. Presentment of a cheque to any of the banks or blocking by such bank of its amount by telephone or by cable with the drawee bank and also presentment of the said cheque to any of the clearing houses recognized by law shall be considered as presentment thereof for payment.

 

Article 619 of the Law:

If a cheque is drawn in two countries with different calendars, its initiation date shall be referred to the corresponding day on the calendar of the country of payment.

Article 620 of the Law:

  1. A drawee may honor a cheque even after expiry of the time fixed for its presentment.
  2. Objection to the honoring of a cheque is not acceptable except in case of loss or bearer’s bankruptcy.
  3. The bank shall undertake to pay the cheque despite objection by the drawer in cases other than the two provided for in the preceding paragraph, and the court shall not order suspension of payment even in the event of a lawsuit being filed for the original right.

 

Article 621 of the Law:

If a drawer dies, loses legal capacity or becomes bankrupt after giving a cheque, it shall not affect the judgments resulting there from.

Article 622 of the Law:

  1. If several cheques are presented at one time, and the funds for payment are insufficient for all of them, the order of their drawing dates shall be adhered to.
  2. Where cheques presented are slipped from one cheque book and bear one date, a cheque with the first number shall be given priority of drawing over other cheques unless otherwise proven.

 

Article 623 of the Law:

  1. If it is stipulated that a cheque should be honored in a country in a currency other than that in circulation therein, payment of its amount shall be made at the time of its presentment in the currency circulating in the UAE at the prevailing rate on the day of payment; however, if payment is not made, on the day of presentment, the bearer shall have the choice either to claim the amount of the cheque evaluated in the currency circulating in the country at its rate of exchange on the day of presentment or on the day of payment.
  2. If the cheque is presented for the first time after expiry of the period fixed for its presentment, the rate at the day on which the period for presentment has expired shall prevail.
  3. In evaluating a foreign currency, the rate prevailing in the market shall be applied; however, the drawer may specify in the cheque the rate on which basis, the payable amount should be computed.
  4. If the amount of a cheque is given in a common currency, and its value in the country of issue differs from that in the country of payment, it shall be presumed that the currency intended is the one in the country of payment.

 

Article 624 of the Law:

Liability of a guarantor who is presented in the event of loss of a cheque to order shall expire upon the lapse of six months if no demand or claim is filed during the said period.

Article 625 of the Law:

  1. If a cheque to bearer is lost or damaged its holder may lodge a protest with the drawee for payment of its value, and the protest shall contain the number and amount of the cheque, name of its drawer and any other detail that assists in identifying it, as well as the circumstances pertaining to its loss or damages; however, if the provision of some of those details becomes difficult, the reasons for that must be mentioned and if the protestor has no place of residence in the country, he shall designate a selected domicile therein.
  2. When the drawee receives the protest, it shall refrain from paying the value of the cheque to its holder, and shall set aside funds for payment of the cheque until it is decided upon.
  3. The drawee shall at the expense of the protester, publish the number and amount of the lost or damaged cheque and the drawer’s name as well as the protestor’s name and address, in a daily newspaper issued in the country in Arabic language; and any action taken in respect of the cheque after the date of publication shall be null and void.

 

Article 626 of the Law:

  1. The holder of the cheque referred to in the preceding Article, may contest the protest before the drawee and the drawee shall receive the cheque from him against a receipt and shall thereafter notify the protester of the name and address of the cheque holder.
  2. The protester shall file a claim, for entitlement of the cheque, within thirty days from the date of receiving the notification.
  3. If the protestor fails to file the entitlement claim within the period stated in the preceding paragraph, the cheque holder shall seek issuance of a judgment by the judge of summary matters to neglect the protest and in such case the holder of the cheque shall, vis-à-vis the drawee, be considered as its owner.
  4. If the protester files the cheque entitlement claim, the drawee may not honor its value except to whoever of the litigants produces a final judgment showing his title to the cheque or an amicable settlement approved by both parties confirming his entitlement.

 

Article 627 of the Law:

  1. If six months have elapsed from the date of occurrence of the protest provided for in Article 625 without a claim for payment being made by the holder of the cheque, the protestor may, during the next month, file a claim before a competent court against the drawee, seeking a judgment concerning his title to the cheque and permission to receive its amount.
  2. If the protester fails to file the claim referred to in the preceding paragraph or if it has been dismissed by the court the drawee shall re-enter the honoring funds in the assets side of the drawer’s account.

 

Crossed Cheque and Cheque Entered Into Account

Article 628 of the Law:

  1. A drawer or holder of a cheque shall have the right to cross a cheque, and such crossing shall have the effects shown in the following Article.
  2. Crossing shall be made by drawing two parallel lines across the top of the cheque.
  3. Crossing may be general or special.
  4. If nothing is written between the two lines, or if the word (bank) or any other word denoting this meaning is written between the two lines, the crossing shall be general; however, if the name of a special bank is written between the two lines, the crossing shall special.
  5. A general crossing may be changed into a special crossing; but, a special crossing cannot be changed into a general one.
  6. Obliteration of the crossing or of the name of the bank written in between the two lines shall be considered as if to have never existed.

 

Article 629 of the Law:

  1. A drawee may not honor a cheque bearing a general crossing except to one of its customers or to a bank.
  2. A drawee may not honor a cheque marked with a special crossing except to the bank whose name is written between the two lines or to a customer of such bank if the latter is the drawee; nevertheless; the said bank may assign another bank to receive the amount of the cheque.
  3. No bank shall receive a crossed cheque except from any of its customers or from another bank, nor shall it receive its amount in favor of anyone other than such persons.
  4. If the drawee fails to observe the aforesaid provisions, he shall be responsible for reimbursement of damages to an extent not exceeding the amount of the cheque.
  5. The word (customer) shall under the provisions of this Article mean every person having an account with the drawee and has obtained or is entitled to obtain a cheque book there from.

 

Article 630 of the Law:

  1. A drawer or bearer of a cheque may stipulate non- payment thereof in cash by adding the expression (to be entered into account) or any other expression denoting such meaning; in which case, the drawee shall have no alternative but to settle the value of the cheque by written entries substituting for payment.
  2. Deletion of the statement (For entry into account) shall not be regarded.
  3. If the drawee fails to observe the foregoing provisions, he shall be responsible for compensating the damage to an extent not exceeding the value of the cheque.

 

Article 631 of the Law:

Subject to the provisions of Articles 628, 629, 630, the cheque shall remain negotiable and possessing all characteristics of the other cheques.

Article 632 of the Law:

  1. The holder of a cheque shall recourse to the drawer, endorsers and other persons liable there under, if it is presented by him within the legal period and its value has not been paid and he has proved such refusal of payment by a protest; however instead of the protest, refusal of payment shall be proved through a statement issued by the drawee, showing the date of presentment of the cheque and such statement shall be dated and written on the cheque itself.
  2. It shall not be permissible to refuse adding the statement indicated in the preceding paragraph on the cheque if requested by the bearer even if the cheque contains the condition of recourse without expenses; however, such refusal may be allowed for the person under obligation through a request placed by him for a grace period not exceeding three working days for submission of the cheque even if it is presented on the last day of the period fixed for submission.

 

Article 633 of the Law:

Refusal of payment must be established in the manner provided for in the first paragraph of the preceding Article before expiry of the period fixed for submission; however, if submission occurs on the last day of such period, the refusal of payment may be established on the following working day.

Article 634 of the Law:

The bearer shall reserve his right of recourse to the drawer, even if he fails to submit the cheque to the drawee or fails to make the protest or anything in lieu thereof within the legal period, unless the drawer has provided the funds for payment and such funds remained available with the drawee, upto expiry of the period fixed for submission of the cheque, and then such funds have become unavailable by a reason not attributable to the drawer.

Article 635 of the Law:

  1. If a force majeure prevents submission of a cheque or a protest or anything in lieu thereof, within the periods prescribed therefore, such periods shall be extended.
  2. The bearer shall, without delay, notify the person who has endorsed the cheque to him of such force majeure and shall make a record of such notification duly dated and signed by him on the cheque or paper attached thereto.  Such notifications shall continue in serial manner until reaches the drawer in accordance with Article 560.
  3. When force majeure no longer exists, the bearer shall, without delay, present the cheque for payment, and then make a protest or anything in lieu thereof when necessary.
  4. If force majeure continues for more than fifteen days as of the day on which the bearer has notified the person who has endorsed the cheque to him, of the force majeure, even if such delay occurs prior to the period fixed for submission of the cheque, recourse may be made to those under obligation without need for submission of the cheque or for the making of the protest or anything in lieu thereof.
  5. Matters related to the person of the bearer of the cheque or whomever assigned by him to submit the cheque or to make the protest or anything in lieu thereof, shall not, inter alia, be considered force majeure.

Misrepresentation and Multiplicity of Copies (Cheques)

Article 636 of the Law:

  1. The drawee shall solely bear the damage, resulting from payment of a cheque, where the drawer’s signature has been forged or the statement contained therein have been misrepresented unless it is proved that a serious fault made by the drawer whose name is written on the cheque has caused such forgery or misrepresentation in the statements and any condition to the contrary shall be considered as if to have never existed.
  2. A drawer shall be considered particularly wrongful, if he fails to take the due care required in maintaining the cheque book.

 

Article 637 of the Law:

  1. Except for a cheque to bearer, the cheque may be drawn in multiple copies conforming to each other if it is drawn in UAE and is payable in a foreign country or vice versa.
  2. If multiple copies are made from a cheque, each copy must be given a number; otherwise, each copy shall be considered an independent cheque.

 

Article 638 of the Law:

Upon denial and lack of legal excuse, the following shall not be heard:

  1. A claim of recourse filed by a cheque bearer against a drawee, endorsers, and other parties liable for payment of the cheque value, after the lapse of two years from the period fixed for its submission.
  2. A claim of recourse filed by those under obligation against each other after the lapse of one year from the day on which a person under obligation has paid the amount of the cheque or from the day when he has been legally sued for payment.
  3. A claim filed against a drawee after the lapse of three years from expiration of the period fixed for submission of the cheque.
  4. The foregoing periods shall not apply in claims filed against a drawer who fails to provide the honoring funds or has provided them and then withdrew them in whole or in part; as well as in claims against all persons under obligation who have earned illegal income.

 

Article 639 of the Law:

  1. Defendants shall in spite of the lapse of the period prescribed for the hearing of the claim, confirm, under oath if so required, that they are discharged of the debt.
  2. Their heirs or other successors shall testify under oath that they are unaware that their bequeather has died without discharging his debt.

 

Article 640 of the Law:

  1. If an action has been filed, the periods provided for in Article 638 shall not apply except from the day of the last procedure taken thereon.
  2. The said periods shall not apply if the debt is adjudged or admitted by the debtor through an independent instrument in a manner resulting in renewal of the debt.
  3. Interruption of the period prescribed for the non-hearing of the claim shall have no effect except on the person against whom the procedure causing the interruption of the period has been taken.

 

PENALTIES

Article 641 of the Law:

Whoever commits any of the following actions shall be punished by imprisonment or a fine:

a.)  Intentional declaration contrary to the fact that there are no funds for honoring the cheque or that the funds available are less than the amount thereof.

b.)  Refusing in bad faith to honor a cheque drawn on a bank which has honoring funds to a bearer against whom no valid protest has been made.

c.)   Refusal to put down the statement referred to in Article 632.

Article 642 of the Law:

If a court has passed a judgment of conviction on any of the cheque related crimes provided for in the Penal Code, it shall order publishing of a summary of the judgment at the expense of the convict, in a daily newspapers issued in the State, containing the Name of the convict, his place of residence, profession and the penalty imposed upon him; and such publishing shall be obligatory in the case of recidivism.

Article 643 of the Law:

If a court has passed a judgment of conviction on any of the cheque related crimes provided for in the Penal Code, it may order withdrawal of the cheque book from the convict and prohibit him from being given new cheque books for a period determined by it.

Article 644 of the Law:

If a criminal action on any of the cheque related crimes provided for in the Penal Code has been filed against a drawer, the cheque bearer claiming a civil right may request the court to adjudge for him an amount equivalent to that of the cheque or to the unpaid amount of its value further to compensation if necessary.

Promissory Notes (Notes to the Order) in the UAE

Article 591 of the Law:

The promissory note shall contain the following particulars:

  1. Promissory condition or the expression (promissory or note to order) written in the text of the note in the language in which it is drawn up.
  2. Unconditional Undertaking for payment of a certain amount of money written in figures and words.
  3. Date of maturity.
  4. Place of honor.
  5. Name of the person to whom or to whose order payment shall be made.
  6. Date and place of issue of the note.
  7. Signature of the person issuing the note (maker).

 

Article 592 of the Law:

A note lacking any of the details stated in the preceding Article shall not be considered a promissory note, except in the following cases:

  1. If the note is made without showing the time of maturity, it shall be considered payable at sight.
  2. If the note is made without showing the place of payment or the maker’s place of residence, the place where the note is drawn up shall be considered as the place of payment and place of residence of its maker.
  3. If the note is made without showing its place of issue, it shall be considered as issued at the place shown beside the name of the maker, otherwise it shall be at the place where he has actually signed the note.

 

Article 593 of the Law:

  1. A maker of a promissory note shall be under the same obligations as those binding the acceptor of a bill of exchange.
  2. A promissory note that becomes payable after a certain period from sighting must be presented to the maker at the time provided for in Article 509 to indicate there on the sighting of the note, and such indication shall be dated and signed by the maker.
  3. The period of sighting shall commence from the date of such indication.
  4. If a maker refrains from putting the indication, a proof of his refusal shall be made by a protest of non-acceptance, and the date of such protest shall be treated as the date of commencement of the validity period of sighting.

 

Article 594 of the Law:

  1. The provisions pertaining to the bill of exchange concerning competency, multiplicity of its copies, endorsement, maturity, payment, recourse for non-payment, invalidity of granting a grace period for payment attachment, protest and computation of times and working days, recourse by making recourse bill of exchange, payment by intervention and non hearing of action for lapse of time, shall apply to the promissory note to the extent that it shall not conflict with its nature. 
  2. The rules relating to the bill of exchange payable at the domicile of a third person or at a place other than that where the drawee’s domicile is located, stipulation of interest, discrepancy in details relevant to the payable amount, results arising from signature by persons having no competence of obligation or forged signatures or signatures by fictitious persons or unbinding signatures or signature by a person who is not authorized or who has exceeded the limits of authorization, shall also apply to the promissory note.
  3. The provisions pertaining to reserve guarantee shall also apply to the promissory note, bearing in mind that if the name of the guaranteed person is not stated in the said guarantee, such warranty shall be deemed to have been made in favor of the maker of the note.

Multiplicity of Bill Copies; Misrepresentation; Statute of Limitations in the UAE

 

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

Article 581 of the Law:

  1. A bill of exchange may be drawn in numerous copies conforming to each other; and if it is drawn in several copies, each copy must be marked with the quantity and numbers of such copies; otherwise each copy shall be considered an independent bill of exchange.
  2. Every bearer of a bill in which no mention is made that it is drawn in a single copy, may request copies thereof at his own cost; and to ascertain that, he shall resort to the person who has endorsed it to him who shall be under obligation to assist him with the former endorser; and so on until he reaches the drawer.
  3. Every endorser shall write his endorsement on the new copies.

 

Article 582 of the Law:

  1. Payment of a bill of exchange in accordance with any copy thereof shall be a discharge of liability even if it is not stipulated therein that such payment nullifies the effect of the other copies.  Nevertheless, the drawee shall remain under obligation to honor in accordance with each copy signed as accepted but not recovered by him.
  2. An endorser who endorses copies of the bill in favor of different persons as well as the endorsers subsequent to him shall be liable under all the copies bearing their signatures and not recovered by them.

 

Article 583 of the Law:

Whoever sends a copy of a bill for acceptance shall indicate on the other copies the name of the person who has possession of such copy, and this latter shall deliver it to the lawful bearer of any other copy; and if he refused to deliver it, the bearer shall have not right of recourse, unless he makes a protest in which he states:

a)     that the copy sent for acceptance has not been delivered to him in spite of requesting it.

b)    that the acceptance or payment has not been made in accordance with copy.

Copies of the Bill of Exchange and Misrepresentation Thereof

Duplicates of the Bill of Exchange

Article 584 of the Law:

  1. The holder of a bill of exchange may make duplicates thereof;
  2. The duplicates of the bill shall strictly conform to the original bill and the endorsements made thereon or any other statements written therein; and the extent at which the duplicate shall cease, must be indicated on the duplicate.
  3. A duplicate may also be endorsed and secured by reserve guarantee in the same manner as the original is endorsed or secured and with the same effects.

 

Article 585 of the Law:

  1. The name of the holder of original bill of exchange shall be shown in the duplicate and such holder shall hand over the original to the legal bearer of the duplicate.
  2. If the holder of the original refuses to deliver it, the bearer of the duplicate shall have no right of recourse to its endorsers or reserve guarantors unless he makes a protest indicating therein that the original has not been delivered to him in spite of his request.
  3. If a statement is written on the original after the last endorsement made before the taking duplicate, indicating that no endorsement may be made on the bill thereafter except on the duplicate, any endorsement made subsequently on the original shall be considered as to have never existed.

 

Misrepresentation

Article 586 of the Law:

If a misrepresentation occurs in the text of a bill, the signatories subsequent thereto shall be liable under the contents of the misrepresented test; while the signatories preceding thereto, shall be liable only under the contests of the original text. 

Lapse Period Preventing Hearing of the Claim

Article 587 of the Law:

The following shall not come for hearing upon denial and lack of legal excuse:

  1. A claim arising from the bill of exchange being filed against its acceptor after the lapse of three years from the date of maturity.
  2. A claim filed by a bearer against endorsers or a drawer after the lapse of one year from the date of a protest made in due course, or from the date of maturity, if the bill contains a clause of recourse without expenses.
  3. Claims filed by endorsers against each other or against the drawer after the lapse of six months from the day on which the endorser honors the bill or from the day of lodging the claim against him.

 

 Article 588 of the Law:

If an action is filed, the periods given in the preceding Article for its non-hearing shall not apply except from the date of the last procedure performed therein.

Article 589 of the Law:

Periods shown in Article 587 shall not apply, if a judgment for debt has been awarded or if the debtor makes a declaration thereof in an independent instrument resulting in renewal of the debt.

Article 590 of the Law:

Interruption of the period prescribed for non-hearing of the case shall have no effect except on the person against whom the procedure interrupting the period has been taken.

Intervention in Bills of Exchange in the UAE

 

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

Article 572 of the Law:

  1. The drawer of a bill of exchange, its endorser or its reserve guarantor may specify who must accept or pay it when necessary.
  2. Acceptance of payment of a bill by a person intervening in favor of any person under obligation thereon who is exposed to recourse may be accepted subject to the conditions provided for in the following Articles of this Chapter.
  3. The intervener may be a third party, and the drawee may be somebody other than the acceptor or any person liable under the bill but the drawee may not be the acceptor.
  4. The intervener must notify the person in whose favor the intervention is made within the two working days following the intervention; otherwise, he shall be responsible when necessary, for indemnifying the consequential damages arising from his negligence provided that the compensation shall not exceed the amount of the bill.

 

Article 573 of the Law:

  1. Acceptance of intervention may occur in all cases where the bearer of an acceptable bill has the right of recourse before its maturity date.
  2. If whoever is to accept the bill or pay its value when necessary at the place of its honor is designated in the bill, the bearer shall not before its maturity date recourse to the person who has made such designation nor to the subsequent signatories, unless he presents the bill of exchange to the person who has been designated to accept or honor it when necessary and such person refrains from accepting it and the bearer has proved such refusal by a protest.
  3. The bearer may in the other cases refuse acceptance for intervention and if he accepts it, he shall lose his rights of recourse before the maturity date against the person in whose favor the acceptance for intervention has been made and the subsequent signatories.

 

Article 574 of the Law:

Acceptance of intervention shall be written on the bill itself and shall be signed by the intervener; and the name of the person in whose favor the intervention is made shall be stated therein, however, if the acceptance for intervention is made without this last information, it shall be considered as to have been in favor of the drawer.

Article 575 of the Law:

  1. An acceptor of intervention shall be liable towards the bearer of the bill and the endorsers subsequent to the person in whose favor the intervention is made in the manner by which the latter becomes liable.
  2. Whoever in whose and whose guarantors favor the intervention is made despite the occurrence of acceptance of intervention may against payment by them of the amount indicated in Article 563, require the bearer to surrender the bill to them together with the protest and the clearance, if any.

 

Payment By Intervention

Article 576 of the Law:

  1. A bill of exchange may in all cases be honored by intervention in events where the bearer has the right of recourse against those liable there under on or before the time limit for payment.
  2. Such honoring shall be made by payment of the full amount which ought to have been paid by the person win whose favor the intervention is made.
  3. The payment shall at the most occur on the day following the last day in which a protest for non-payment may be made.

 

Article 577 of the Law:

  1. If those who accept the bill by intervention or those who are designated to honor it, when necessary, have a place of residence at the location of payment, the bearer shall submit the bill to all such persons for payment and shall make a non-payment protest against them, if necessary, the day following the last day in which such protest may be made, at the most. 
  2. If the protest is not made at such time, those who have been designated for honoring it when necessary or whoever in whose favor an acceptance by intervention is made shall be discharged, and so shall the subsequent endorsers.

 

Article 578 of the Law:

If the bearer of a bill refuses payment by intervention, he shall lose his right of recourse to the person whose liability is discharged by such payment.

Article 579 of the Law:

  1. The proof of payment by intervention shall be made by writing a discharge on the bill stating therein the name of the person in whose favor the payment is made; and if the discharge does not contain such statement, the payment by intervention shall be considered as made in favor of the drawer.
  2. The bill and the protest, if made, shall be handed over to whoever has made the payment by intervention.

 

Article 580 of the Law:

  1. Whoever honors a bill by intervention shall acquire all the rights arising there from towards the person in whose favor the payment is made, and towards those liable to such persons under the bill.  However, whoever makes payment by intervention shall not re-endorse the bill.
  2. Endorsers subsequent to the person in whose favor the payment is made shall be discharged of the liability.
  3. If several persons offer to honor by intervention, preference shall be given to the person whose payment will discharge a greater number of persons under obligation and whoever intervenes to honor, in violation of this principle despite being aware of this, shall lose his right to recourse against the person who would have been discharged of the liability, had this principle been observed.

Claim and Recourse to Those Bound By Bill of Exchange in the UAE

 

The Commercial Transactions Law, Federal Law No. 18 of 1993  (the “Law”):

Article 550 of the Law:

Upon non-payment of a bill of exchange at the date of maturity, its bearer shall after recourse to the endorsers, drawer, and other parties liable thereunder.

Article 551 of the Law:

1. The bearer may ahve  recourse to parties liable under the bill of exchange before the date of maturity in the following cases:

  • Total or partial refusal of acceptance.
  •  Bankruptcy of the drawee, whether having accepted the bill or not, or suspension of payment by him, even if no judgment is issued declaring his bankruptcy, or his properties being placed under ineffective attachment. 
  •  Bankruptcy of the drawer of the bill of exchange, which is stipulated not to be presented for acceptance. 

2.  The guarantor may upon recoursing to him in the two cases shown in clauses (b) and (c) of the preceding paragraph, apply to the court of first instance in whose jurisdiction his place of residence is located, within three days from the date of being recoursed to, to grant him a grace period for payment.  It shall specify, in its decision, the date when payment must be made, provided that it shall not exceed the date specified for maturity, and the court’s decision in this respect shall be unchallengeable.

Article 552 of the Law:

  1. If the maturity of a commercial paper coincides with an official or bank holiday, the claiming of payment thereof may not be made except on the next working day.
  2. Likewise no procedure related to a commercial paper such as presentation of the paper for acceptance or the making of a protest may be made except on a working day.
  3. If a fixed period is determined for any procedure related to a commercial paper and the last day of such period coincides with an official or banking holiday, such period shall be extended to the next working day.
  4. Holidays that occur within such period shall be counted as part of the time limit.
  5. Thet first day of a time limit period shall not be included in the computation of the legal period or the agreement related to the commercial papers.

 

Article 553 of the Law:

A period of refusal of acceptance or payment of a bill of exchange shall be made through a protest of non-acceptance or a protest of non-payment.  The protest shall be made through a competent notary public who shall deliver a copy thereof to whomever the protest is addressed to.

Article 554 of the Law:

  1. The protest shall include a literal copy of the bill and anything contained therein related to its acceptance, endorsement, guaranteeing and payment of its value, when necessary and any other details.  The protest shall also include a notice for payment of the value of the bill of exchange, a record of the presence or absence of the person who must accept or honor the bill, the reasons for refusal of acceptance or payment, the failure or refusal to sign and the amount paid of the bill’s value in case of partial payment.
  2. A protest for non-acceptance or non-payment shall be notified to the party who is under obligation to honor the bill of exchange at his domicile or at his last known domicle.

 

Article 555 of the Law:

The concerned notary public shall enter all papers of the protest day by day taking into consideration the order of dates in a special register with numbered pages and remarks duly shown thereon.

Article 556 of the Law:

The concerned notary public shall within the first ten days of each month, send to the relevant commercial office the list of protests for non-payment written by him during the previous month and the said commercial registry office shall keep a book for their registration.  Any person may have access to them and obtain a copy therefrom against payment of the fees prescribed  and the office shall publish such protests in a bulletin. 

Article 557 of the Law:

  1. The protest for non-acceptance shall be made at the date specified for presentation of the bill of exchange for acceptance.  If the first presentation for acceptance occurs on the last day of the time fixed for presentation according to Article 522, the protest may be made on the following day.
  2. If the bill is payable at sight, the protest for non-payment  shall be made according to the conditions shown in the preceding paragraph concerning protest for non-acceptance.
  3. If a bill is payable on a certain day or within a certain period from its date of making or from the date of sighting it, the protest for non-payment shall be made on any of the two business days following the day of maturity.
  4. The protest for non-acceptance shall release from presentation of the bill for payment and from the protest for nonpayment.

 

Article 558 of the Law:

No other paper shlal replace a protest except in the cases provided by the law.

Article 559 of the Law:

  1. Where a drawee suspends payment, whether having accepted the bill of exchange or not, or where an ineffective attachment is made on his properties, the bill holder shall not be permitted to recourse to the guarantors except after presenting the bill to the drawee for payment and after making a protest for non-payment.
  2. In case of declaration of the drawee’s bankruptcy, whether having accepted the bill or not; or declaration of the bankruptcy of the drawer of the bill which is stipulated not to be presented for acceptance, the presentation of the bankruptcy judgment shall be enough for the bearer to exercise his rights in recoursing to the guarantors.

 

Article 560 of the Law:

  1. The holder of a bill of exchange shall notify its drawer and whoever has endorsed it to him of its non acceptance or its non payment within the four working days following the day on which he receives notification, inform whoever endorsed the bill to him of receiving such notification indicating to him the names and addresses of those who have served the previous notifications; and so on, from one endorser to antoher up to the drawer, and the period, for each endorser, shall commence from the date on which he receives notification from the endorser preceding him.
  2. Whenever any of the signatories of the bill receives a notification according to the previous paragraph, his reserve guarantor must also be notified at the same time.
  3. If anyone of the endorsers fails to show his address or shows it in an illegible manner, notification of the endorser prior to him shall be sufficient.
  4. Whoever is required to serve a notification shall do so in any mannter even by returning the bill itself.
  5. He shall provide evidence of serving the notification in due time, and such time is deemed to have been observed if the registered letter containing the notification is delivered to the post office within the said time.
  6. The rights of whoever is required to give the notification shall not be forfeited if he fails to give it in its specified time; however, he shall be obliged when necessary to compensate the damage resulting from his negligence provided that such compensation shall nto exceed the amount of the bill.

 

Article 561 of the Law:

  1. The drawer, as well as each endorser or reserve guarantor shall exempt the bearer from making a non-acceptance or non-payment protest upon recourse if a condition stipulating (recourse without expenses) or (without protest) or any other condition denoting this meaning is written on the bill and signed.
  2. Such condition shall not exempt the bearer from presenting the bill of exchange at the stipulated dates nor from giving the necessary notifications; and whoever insists upon the non-compliance with such dates on the part of the bearer shal have to provide evidence to that effect.
  3. If a condition of ‘recourse without expenses’ is written by a drawer, its effects shall apply to all signatories.  However, if the conditions are written by any of the endorsers or the reserve guarantors, its effects shall aply to him only.
  4. If the condition is written by the drawer, and in spite of that, the holder makes a protest, he shall bear the expenses alone, but, if the condition is issued by an endorser or a reserve guarantor, recourse may be made against all signatories for expenses of the protest, if made.

 

Article 562 of the Law:

  1. Persons liable under a bill of exchange shall be jointly responsible to its bearer.
  2. The bearer shall  have recourse to such persons severally or jointly without being required to take into account the order or their obligations.
  3. The right or recourse to each signatory on the bill of exchange shall be confirmed if he pays its value in respect of the parties liable towards him and the action filed against any one of these persons shall not prevent making recourse to the others even if they are subsequent to the person under obligation against whom the action is initially made. 

 

Article 563 of the Law:

1. The bearer of a bill of exchange shall claim the following from anyone to whom he has a right of recourse:

  • The principal amount of the unaccepted or unpaid bill together with the agreed interests, if stipulated.
  • The interests computed at the prevailing rate of exchange as of the date of maturity.
  •  Expenses of protest, notifications, and other expenses.

2. In cases or recourse before the maturity date of the bill, an amount equivalent to the official rate of discount on the date of recourse at the place where the bearer’s place of residence is located, shall be deducted. 

Article 564 of the Law:

Whoever honors a bill of exchange may raise a claim against parties under obligation to him for the amount paid by him as well as the expenses he has incurred.

Article 565 of the Law:

Courts may not grant a grace period for payment of the value of a bill of exchange or for performing any procedures related thereto except in the cases provided for by the law.

Article 566 of the Law:

  1. Every person under obligation against whom a claim is made for a bill of exchange by reason of recourse or has been aimed at for such claim may in the event of honoring it demand to be handed over the bill together with the protest and clearance of what he has paid.
  2. Every endorser who pays the bill of exchange shall be entitled to delete his endorsement and the subsequent endorsements.

 

Article 567 of the Law:

In the event of recourse after a partial acceptance, whoever has paid the unaccepted amount of the bill of exchange, may request its bearer to indicate such payment in the bill and to give him a clearance therefore.  The bearer shall, in addition to that, give him a photocopy of the bill ratified by him indicating that it is a true copy; and shall hand over to him the protest to enable him to exercise his right of recourse to either parties for what he has paid.

Article 568 of the Law:

                               I.            According to the rules of the law of exchange, the right of the bill bearer, in recourse to the drawer, endorsers and other persons under obligation save the acceptor, shall expire upon the lapse of the period fixed for the performance of the following procedures:

a)    Presentation of bills of exchange payable at sight or after a certain period from sighting.

b)    Making of a protest of non-acceptance or a protest of non-payment.

c)     Presentation of a bill for payment if it contains a clause of recourse without expenses.

                            II.            However, a drawer shall not take advantage of such forfeiture unless it is proven that he has made available the honoring equivalent at the date of maturity, and in such case, the bearer is left with no alternative but to recourse to the drawee.

                         III.            If a bill is not presented for acceptance at the time stipulated by the drawer, the bearer’s right of recourse shall expire by reasons of non-acceptance and non-payment combined, unless it appears from the wording of the clause that the drawer intended only to exempt himself from the acceptance guarantee.

                         IV.            If an endorser is the one who has stipulated in the endorsement, a time for the presentation of the bill for acceptance, he shall solely benefit from such stipulation.

Article 569 of the Law:

1)   If force majeure has prevented the presentation of the bill of exchange or the making of the protest within the prescribed periods, such periods shall be extended.

2)   The bearer shall, without delay, notify the person in whose favor he has endorsed the bill of such force majeure and shall indicate such notification dated and signed by him in the bill or in the paper attached thereto.  Notification shall continue in serial order up to the drawer in accordance with Article 560.

3)   The bearer shall, after cessation of the force majeure, present the bill for acceptance or for payment without delay and then make a protest if necessary. 

4)   If the force majeure continues for more than thirty days as of the date of maturit,  recourse may be made to the persons under obligation without the necessity to present the bill or to make a protest.

5)   If a bill is payable at sight, or after a certain period from sighting, the period of thirty days shall take effect as of the date the bearer has notified the person in whose favor he has endorsed the bill, of the force majeure, even if such date occurs before the expiry of the date of presentation of the bill; and the period for sighting shall be extended to beyond the thirty days period if the bill is payable after a certain period from sighting.

6)   Matters related to the bearer of the bill in person or to whomever he entrusts with the presentation thereof or the making of the protest, shall not be considered, inter alia, force majeure.

Article 570 of the Law:

A bearer of a bill of exchange in respect of which a protest for non-payment is made, may, without the need to furnish a guarantee, place attachment on the properties of the drawer, acceptor, endorser, reserve guarantor or other persons under obligation on the bill, subject to the provisions prescribed for such attachment in the Civil Procedures code other than the presentation of a guarantee.

Article 571 of the Law:

1)   Whoever has the right of recourse against other persons under obligation on the bill of exchange shall receive his right by drawing on a new bill on any of his guarantors and such bill shall be due for payment at sight and payable at the place of residence of such guarantor unless otherwise stipulated.

2)   The recourse bill shall include the amounts stated in Articles 563 and 564 further to any commission paid and any fees prescribed by law.

3)   If the drawer of a recourse bill is the bearer, the basis for determining its amount shall be that applicable to a bill payable at sight drawn at the place where payment of the original bill has become due at the place of residence of the guarantor.

4)   If the drawer of a recourse bill is one of the endorsers, the basis for determining its amount shall be that applicable to a bill payable at sight, drawn at the place of residence of the drawer of recourse bill on the place of residence of the guarantor.

5)   In case of several recourse bills, no claim against the drawer of the original bill of exchange or any endorser thereof may be made, except for the amount of one recourse bill.

Cabin Crew Jailed for Sexually Toned Text Messages in the UAE

 

http://www.business24-7.ae/cabin-crew-jailed-over-lewd-texts-report-2010-03-17-1.69760

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance