Bounced cheques for no sufficient funds are not a crime any longer in the UAE

On 27 September 2020, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of United Arab Emirates, issued a new Federal Decree No. 14/2020 (the “Decree”) amending and adding many articles to the Commercial Transaction Law No. 18 of 1993 (“CTL”). Most of the amendments deal primarily with commercial cheque rules. The Decree also cancelled articles No. 401, 402, and 403 of the UAE Penal Code (“Penal Code”), which used to penalize the issuance of cheques with bad faith/insufficient funds.

All the new amendments of the Decree will come into force only by January 2022. The reason behind this delay in coming into force is to allow the market to absorb these dramatic changes, which have an effect not only on individuals (cheques issuer) but on corporates’ commercial transactions and deals too.

Now let us approach these new amendments from a closer perspective. Below are the Decree’s key amendments.

Before The Issuance of The New Law:

The phrase (issuance of a cheque in bad faith) in Article 401 of the Penal Code has always been subject to a wide interpretation by the Criminal Court, allowing it to consider any bounced cheque for any reason a criminal offence by the Drawer of the cheque (the “Drawer”). Therefore, the criminal liability of the Drawer is usually subject to the discretionary power of the Criminal Court, as a result of the law not specifying certain exclusive acts clarifying what is considered to be bad faith.

After The Issuance of The Decree:

The Decree also added articles No. 641(1) (2) and (3), which have specifically referred to exclusive acts that, if committed by the Drawer, will be considered a crime of a bounced cheque punishable by a criminal sanction. The exclusive acts, inter alia, are the following:

  1. If the Drawer, before the due date of the cheque, ordered the bank not to cash the cheque amount to the beneficiary;
  2. If the Drawer closed the account or withdrew all the available balance before the cheque due date. Also, if the Drawer had a dormant account at the time of issuing the cheque, and yet issued the cheque to the beneficiary;
  3. If the Drawer has deliberately signed the cheque in a way that preclude the beneficiary of cashing it at the bank (ex; deliberate wrong signature).

It is our view that the above specific acts highlight the clear intention of the legislator to cancel the famous crime of a bounced cheque for no sufficient funds in the UAE.

The Decree has made it very clear that, only, the above acts (and others under articles 641 (1) and (3)) are considered criminal acts, which trigger the Drawer criminal liability. These acts are fraudulent in nature; therefore, it is justifiable more to be punishable. However, the burden of proof here is still questionable and untested.

The Decree further introduced a new article no. 635 and amend article 617 of the CTL, which aim primarily to avoid criminal lawsuits and facilitate alternative procedures for the beneficiary of the cheque to claim its value. These new amendments reflect the following:

  • The beneficiary of a cheque has the right to ask the bank, subject to the Drawer account balance, for partial payment of the cheque’s value (further explanation as to the procedures is detailed under the wording of article 617).
  • Financial institutions have no call anymore regarding the cheque beneficiary partial payment request; they must make the payment as requested; otherwise, they will be subject to criminal liability.
  • The beneficiary of a bounced cheque, after obtaining a certificate from the bank of no sufficient funds, has the right to use the dishonored cheque as a civil executive deed in accordance with the Federal Civil Procedures Code no.11 of 1992. In practice, this means that a civil execution case can be directly opened against the issuer of the cheque, including the right to seize assets and movables in the name of the Drawer as a sort of execution up to the cheque’s value


By January 2022, the long-waited reform to the bounced cheque crime will come into force in the UAE market. By waiving the criminal liability of a bounced cheque for no sufficient funds, this will:
– Play a big role in boosting business confidence between individuals and corporates. It will also promote further investments and corporates’ trust to deal with cheques in UAE;
– Reduce the number of travel bans imposed by the Police against individuals in the UAE;
– Have a substantial effect on the financial institutions which greatly depend on cheques as a mean of guarantee against their facilities and personal/car loans.

Nevertheless, the new amendments preserve the cheque beneficiary’s rights by considering the cheque as an executive deed, which fast track the collection process through the civil court. However, it as well protects the Drawer’s legal position from the Criminal Court’s wide discretionary power that used to consider any bounced cheque a crime regardless of the reason behind issuing the cheque.

Please note that the above is only a summary and our overview of the new Decree, and not legal advice in any way. We expect further practical obstacles that arise once the Decree comes into force in 2020

Written by:

Mr. Mohammad Salah

CEO / Dubai – UAE



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