A cheque is regarded as an instrument of payment that serves as a substitute for cash, and must be issued in accordance with specific legal requirements. Recent amendments to the UAE Commercial Transactions Law have brought about notable changes to the legal character of cheques, particularly in instances of non-payment (i.e., bounced cheques).
Under the recent amendments to the Commercial Transactions Law, a cheque may now carry executive status under certain conditions. In such cases, it is treated as an executive instrument, enforceable without the need for a prior court judgment, provided that the relevant criteria are satisfied.
Nonetheless, a legal debate has emerged regarding whether it remains permissible to file an ordinary civil claim for the value of a cheque, even when it meets the conditions required to be considered an executive instrument.
Recent judicial decisions from courts in both Dubai and Abu Dhabi have given rise to several legal discussions concerning the appropriate legal procedure for recovering the value of a bounced cheque, particularly when such cheque qualifies as an executive instrument.
The divergent judicial approaches adopted by the Dubai and Abu Dhabi Courts are outlined below:
Dubai Courts:
The Dubai Courts have established a judicial precedent permitting the holder of a cheque with executive status to choose between the following legal options:
1. Initiate execution proceedings directly by opening an execution file in accordance with applicable procedures; or 2. File an ordinary civil claim to recover the value of the cheque.
- The Dubai Courts' approach provides procedural flexibility, enabling the cheque holder to elect either to file a civil claim or proceed with execution.
- This position was affirmed by the Dubai Court of Cassation in its judgment dated 30 January 2025, in Commercial Cassation No. 127 of 2024.
Abu Dhabi Courts:
Conversely, the Abu Dhabi Courts have taken a more stringent position, stressing that a cheque holder must adhere strictly to the legal execution process for bounced cheques that meet the requirements for executive status.
The court held that it is impermissible to pursue a civil claim for the value of such cheques and that the only legally valid course of action is to initiate execution proceedings by opening an execution file.
This position was confirmed in the judgment of the Abu Dhabi Court of Cassation dated 22 February 2024, in Commercial Appeal No. 143 of 2024.
Conclusion:
There is consensus between the Dubai and Abu Dhabi Courts concerning the executive nature of cheques and the conditions under which they qualify as executive instruments. Both courts agree that it is permissible to directly commence execution proceedings for bounced cheques that satisfy these conditions.
The Dubai Courts permit the holder of a cheque with executive status to either initiate execution proceedings or file a civil claim.
In contrast, the Abu Dhabi Courts limit the legal pathway exclusively to execution proceedings, thereby excluding the filing of a civil claim in such circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
