Bounced Cheque in UAE: What You Need To Know

Although checks are used less frequently each year, in the United Arab Emirates they remain a common method of payment. Until recently, issuing invalid checks was considered a serious criminal offense that could result in imprisonment. And although the legislation changed in 2022, issuing a check without sufficient funds can lead to serious legal consequences and civil lawsuits.

One of the main areas of activity of our legal company is resolving disputes related to bounced cheques. We help clients promptly resolve conflicts, protect their interests in court, and provide consultations on preventing such situations in the future.

In the United Arab Emirates, checks are one of the key payment instruments, especially when concluding large transactions, paying rent, and fulfilling credit obligations. However, if the bank refuses payment, a situation of Bounced Cheque arises, which can lead to serious legal consequences for the owner.

Bounced Cheque is a situation when the recipient’s bank refuses to honor it for various reasons. When attempting to cash or use the cheque for payment, the bank cannot complete the transaction due to non-compliance with certain criteria (insufficient funds in the account, incorrect details, etc.).

In the UAE, checks are often regarded as a guarantee of solvency. Therefore, the return of a check is interpreted not only as a financial miscalculation but also as a possible violation of the law. Under local laws, administrative or even criminal liability may arise, up to and including legal proceedings.

The return of a check can occur at any stage of its presentation for payment. Usually, this happens at the moment when the check holder tries to cash it at the bank or use it to fulfill their obligations.

If during verification it turns out that the check cannot be paid, the bank issues a Dishonored Cheque Notice, and the person attempting to receive the money is forced to contact the check issuer for clarification or debt repayment.

Let us consider the most common reasons for check returns:

If you are faced with the issue of an unpaid check or want to protect yourself and your business when making deals, it makes sense to consult with experienced lawyers. Our legal company is ready to help you understand the intricacies of UAE legislation, protect your rights, and minimize possible risks.

The key regulatory legal act governing issues of checks in the UAE is Federal Law No. 18 of 1993 “On Commercial Transactions.” In the context of check operations, this law stipulates:

Before the amendments in 2022, issuing an invalid check was considered a criminal offense in a number of situations:

The problem was that even in cases of unintentional violations (for example, a temporary lack of funds or a technical error in the details), a person could face the threat of criminal liability. This negatively affected the business climate, especially in Dubai, where a large volume of transactions is conducted using checks.

To simplify business transactions and reduce criminal liability in cases of bounced cheques, changes to UAE legislation came into effect in 2022.

For a series of violations related to issuing invalid checks, administrative or civil liability is now provided instead of criminal prosecution.

The emphasis was placed on compensation for damages and the enforcement of monetary recovery using civil law instruments, while minimizing the risk of prison sentences.

If it is proven that the check owner intentionally deceived the recipient (for example, knew about the lack of funds in the account or used knowingly invalid details), or if the amount of damage is very large, the judicial authorities can still pursue criminal prosecution.

Another important innovation is the mechanism for partial payment of checks. The bank is obligated to pay the available portion of funds in the payer’s account, while recording the remaining amount as debt. This reduces the total size of the debt and lowers the risk of being accused of a full bounced check. The bank must provide the recipient with written confirmation of the partial payment and the remaining debt amount.

At the same time, the recipient of the check receives more flexible tools for debt collection. For example, it becomes easier to issue a court order for enforced execution, which increases the likelihood of quickly obtaining the owed funds.

The legislator paid special attention to accelerated court orders (Order for Payment), which help the creditor receive money without a full court trial. For this, it is sufficient to present evidence of the existence of a debt obligation (i.e., the check itself).

Depending on the amount of the check and the circumstances of the return, a person may be subjected to a fine in an administrative manner. The specific amount of the fine depends on the internal regulations of the emirate and the assessment of the violation by government authorities. In most cases, it involves fixed or progressive fines, where the amount increases along with the check amount.

In addition to a fine for canceling a check in the UAE, imprisonment is possible. In the case of forgery or falsification of a check, the person faces imprisonment for a term of no less than 12 months and a fine ranging from 20,000 to 100,000 dirhams. Assigning a check to a third party by altering any details falls under the same category of punishment.

The recipient of the check has the right to file a civil lawsuit for debt recovery and possible damages. After reviewing the case materials, the court may issue an order for payment or another decision obligating the defendant to settle the debt within specified timeframes.

When returning a check, the bank issues a document confirming the inability to process the payment (through a certificate or notification). The check recipient can use this notification as a basis for further actions.

Most often, the first step is a pretrial claim to the payer: the check recipient offers to pay the debt voluntarily, compensate for the missing amount, or replace the check. If the parties reach an agreement, legal proceedings can be avoided.

If pretrial settlement does not yield results, the beneficiary of the check has the right to go to court. Considering the legislative changes of 2022, more and more cases are being reviewed in civil proceedings, and a simplified court order procedure may be applied for debt collection.

Depending on the amount and circumstances of the case, the proceedings may take place in a civil or administrative court. If signs of fraud or intent are identified, the case may fall under criminal law.

The party demanding payment must confirm the existence of the debt (primarily using the check itself and the return notice). The payer must prove the absence of intent, the invalidity of the claims, or payment already made.

The simplified Order for Payment procedure allows for the quick recovery of a debt based on a check. In a more complex dispute, the court may require the defendant to settle the debt as well as cover court costs.

With the right strategy and timely legal support, many cases of bounced cheques in the UAE can be resolved either out of court or by successfully defending your position in court. Our legal firm is ready to provide comprehensive assistance at every stage: from document analysis to representation in UAE courts.

After receiving a notification about the return of the check, it is necessary to contact the bank first:

If the issue is related to insufficient funds in the payer’s account, some banks allow the check holder to resubmit the check after replenishing the balance, which may resolve the issue without additional disputes.

If the check has not been paid, but you have the issuer’s contact information, try to resolve the issue directly. Perhaps they are willing to pay the amount in another way, issue a new check with correct details, or agree on a payment plan. In some cases, the parties may reach an agreement without involving lawyers or filing a lawsuit.

If the bank refused to process the check and the payer refuses to repay the debt, the next step may be taking the matter to court.

In the UAE, there is a procedure for expedited debt recovery based on checks. If you have a check and confirmation from the bank regarding its return, you can file an application for an Order for Payment. Prepare the application and attach a copy of the check, the bank notification, and other supporting documents. Submit it to the Civil Court. If the judge approves the request, the defendant is obligated to pay the debt within the specified timeframe.

If the check amount is large or additional disputes arise, a full civil lawsuit can be filed. The court may require the payer to settle the debt, impose additional penalty sanctions, seize the debtor’s property, or freeze bank accounts.

If the situation cannot be resolved peacefully, or the amount of debt is significant, the best step is to consult a lawyer. Experienced attorneys will help assess the situation and propose the optimal legal course, prepare a complaint for court, conduct negotiations with the payer or their representatives, as well as challenge the payer’s actions if the check was stopped unlawfully.