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Payment Orders in the UAE
The Chances for a Quick Way to Obtain Enforceable Titles?

Heinrich Köllisch

Author: Heinrich Köllisch

Guiding Principle
In recent times, UAE Lawyers and Legal Consultants have seen more and more clients trying to collect outstanding debts from business partners. A number of other jurisdictions have special “fast-track” procedures that offer a speedy way to an executable title under different circumstances. The following article would like to take a closer look at comparable instruments under the UAE Civil Procedures Law and discuss their value i.e. advantages and disadvantages.

A. Introduction

A number of foreign jurisdictions have recognized the frequent need for titles to be issued in some kind of “fast-track” procedure. Austrian Law for example, offers summary proceedings for a Payment Order, and so does German Law offering proceedings on claims arising from a deed, in which solely documentary evidence is submitted, and proceedings on claims arising from a bill of exchange.

All of these proceedings mostly require in one way or another that the underlying claim would have to meet specific conditions with regard to either kind or proof. This usually leads to a fast-track title being issued. However, defendant’s rights are being safeguarded either by a possibility to oppose or protest after the title was issued. Also in Germany, for such proceedings on claims arising from a deed where solely documentary evidence is submitted, a second round of court   proceedings will be initiated admitting all kinds of evidence.

It would thus be interesting to what extent UAE Law also provides an instrument of the same kind, and to what degree it would be an advisable option for clients seeking to collect outstanding debt.

B. The UAE Orders of Payment

The UAE Federal Law No. (11) of 1992 Concerning Issuance of the Civil Procedures Code (CPC) contains in Art. 143- 149 CPC a Title regarding Orders of Payment. This can be seen as the corresponding measure to the aforementioned European Institutions and Procedures.

In fact, the procedures outlined and established under Art. 143- 149 CPC could be seen as the “one size fits all” approach of the UAE Law to establish a “fast-track” approach to an enforceable title.

  I. General Remarks

  II. Kinds of Underlying Claims

As in all of the aforementioned jurisdictions, the underlying claim for a Payment Order has to fulfil a number of conditions as set out in accordance with Art. 143 para 1 CPC.

    This provision states that

  1. the creditor’s right has to be confirmed in writing and subrogated in the settlement, and
  2. that what he has been claiming was a debt of a fixed amount of money or a movable specified with a type and an amount, and
  3. that such rules should be followed if the claimant of the right was a creditor with a commercial paper and he has referred merely to the drawer, the clerk, receiver or a reserve guarantor of one of them.

A specific problem in the formulation of this passage of the law is if Payment Orders are limited to claims embodied in commercial papers (i.e. bills of exchange, promissory notes and cheques) or if these are only examples of the written confirmation of the underlying claim. Referring this question to Dubai courts has initially produced the answer that only claims embodied in commercial papers would be accepted, but after consulting further experts in court, it was stated that any written claim might be acceptable, as long as it can be proven in written completely. Even an email might be considered as written proof. However, these references were not yet put to a practical test and thus still need a confirmation in practice.

With regard to these requirements concerning the underlying claim itself some differences e.g. to the German system of “fast-track” ways to obtain titles become apparent. The German system in case of a Payment Order does not ask for any specific proof of the underlying claim. This is only applicable in cases of proceedings on claims arising from a deed, in which solely documentary evidence is submitted, and proceedings on claims arising from a bill of exchange. On the other hand, though the German Payment Order is strictly limited to claims for amounts of money. After an amendment of the CPC however, the UAE Payment Orders are also applicable with regard to some movables.

This last amendment of the law can also be seen as a supporting argument to the position, that the underlying claim need not be originated in a commercial paper only, as these can only contain monetary claims and the amendment would have been in vain.

In other jurisdictions, Payment Orders can be applicable to claims of limited amounts only. This is not the case of a UAE Payment Order, where the amount claimable has no expressed limit. The only practical limit will be in connection with the amount invoiced in the preliminary procedures as explained under the following heading.

  III. Preliminary Procedures

Art. 144 para. 1 CPC stipulates that the creditor shall first require the debtor to pay the amount due within a time-limit of five days at least. Again, referral of this issue to Dubai courts has clarified, that the Notary Public should attest the payment request.

Furthermore Art. 144 para 1. CPC states that the payment be required by virtue of registered letter with acknowledgement of receipt, or by any method agreed upon by the parties. Furthermore, it is worth to note that the amount of the right required to be paid may not be less than the one required in the following petition for obtaining the Payment Order.

  IV. Formal Requirements for the Application

The court will issue the Payment Order on a copy of the application. This is different to other jurisdiction e.g. Germany, where a separate document will be issued – in many cases today automatically – by the courts. Thus, the underlying procedures here do resemble more the forms of injunction orders.

Due to this, the formal requirements of the application itself do exceed the ones established e.g. by the German Civil Procedure. In accordance with Art. 144 para. 3 CPC the application shall include the information to be included in the statement of claim as stipulated in Article 42 CPC. This means the application has to meet all formal and content requirements for an initial memo of ordinary court  proceedings. This means it has to contain:

a) The claimant’s name, title, ID number (if any), profession or job, domicile, workplace, phone number, as well as his representative’s name, title, profession or job, domicile, residence, postal address, fax number or email address. If the claimant has no domicile in the UAE he shall elect one.

b) The debtor’s name, title, ID number (if any), profession or job, domicile or elected domicile, residence, workplace, phone number, as well as his representative’s name, title, profession or job, domicile and workplace if he works for others. However, in case neither the debtor nor his representative have a known domicile or workplace, the last domicile, residence or workplace and postal address, fax number or email thereof shall be mentioned.

c) The subject matter of the application, requests and grounds thereof.

d) The date of submission of the lawsuit to the application management office.

e) The court before which the application is filed.

f) Signature of the plaintiff or his representative.

Again, the character of the Payment Order as an injunctional procedure becomes apparent. It is more of  a different way of initiating an ordinary procedure than as a procedure in its own right, as would be the case for a German Payment Order.

The aforementioned underlines two core issues that an applicant must take into account at this stage. The application has to be as elaborate in form, detail, the same as an initial memo to ordinary court proceedings would have to be, and it must be in Arabic. This limits the possibility of factually initiating these orders. On the other hand, it does not undergo the requirement to have a local barrister issuing it, as only the appearance in front of a local judge requires a local barrister. Submission of documents is exempt here from, as far as local court officials have confirmed to us.

Art. 144 para. 2 CPC provides that the debenture and evidence of requirement of payment shall be attached to the petition and Art. 144 para. 3 CPC stipulates that the petition shall be made in two identical copies.

  V. Procedures

Once the application has been submitted to the claims office of the court, it will be presented to a judge. The judge now has three days’ time to approve the order (Art. 144 para. 4 CPC).

In case he does approve the order, he will issue the Payment Order. In case the judge decides not to accept all the claimant’s requests or not to issue the order for any other reason, he should abstain from issuing the order and appoint a session for examining the action before the authorized court. It will then also be the courts task to inform the defendant about the application of the order (c.f. Art. 145 para. 1 CPC).

This all suggests that the judge has a considerable discretionary authority to assess the case from the submitted memo. Other than in the German system of Payment Orders, here a control of the application takes place, thus there is no automatized proceedings.

Furthermore, it seems to be obvious, that the application can be further defendable in the court   proceedings, if rejected by the judge. Thus, applicants would at this stage need to consider the appointment of a local attorney.

  VI. Legal consequences

As already outlined by the previous remarks, there are mainly two legal consequences the application once submitted can have: either the title is issued or ordinary proceedings will start.

This stands in opposition to twofold systems like the German one, where firstly the Payment Order is issued with the possibility of the defendant to oppose against it and in case this does not take place. Then only subsequently, the claimant has to apply for a writ of execution to obtain an enforceable tittle. This second stage, which depends on a renewed application from the claimant’s side, is not foreseen by the Emirati system. This can have the advantage that a title is obtained faster (either by proceedings in the court or directly). On the downside, the Emirati system leaves less space for an amicable settlement since less steps to escalate are legislated.

  VII. Remedies of the Defendant

As already mentioned, “fast-track” procedures usually infringe some of the defendant’s rights at first glance, yet, and as a very basic expression, in a state of law these right cannot be cut off entirely. Thus, the Emirati law in Art. 147 para. 1 CPC provides that the debtor may complain against the order within fifteen days from the date of being notified. The complaint shall take place before the authorized court   and through the usual procedures of raising a law suit in the court .The complaint is to be based on good reasons, and the complainant shall practically be considered a plaintiff. Then the rules and procedures applied before the court shall be taken into consideration when examining the complaint.

As can be seen from the above mentioned, the debtor may take measures against the Payment Order. Yet the requirements therefore are more elaborate than in other jurisdictions. In particular, the requirement to be based on good reasons can only be read in its Arabic original as to the good reasons have to be submitted to the court. Thus e.g. in comparison to the German system, it is the debtor, who is will be pushed into the role of the plaintiff if he takes remedies against the Payment Order.

  VIII. Enforcement

In general, the rules related to the immediate execution shall be applied on the Payment Order and the decision delivered in the complaint there against (Art. 148 CPC).

C. Assessment for Clients trying to collect debts.

In theory, the UAE Payment Order offers an accelerated way to obtain an enforceable title immediately. It can be a useful way, when the debtor is one of the kind that would not appear in court proceedings and tries to evade them by simply disappearing, as only an active participation and presence from his side avoids an enforceable title being issued against him.

On the other hand, several issues would have to be taken into account, when trying to collect outstanding debt through a Payment Order.

The first and most obvious would be that the Payment Order procedures are likely to result in an ordinary court trial. Either due to objection by the other party or due to decision of the judge. This might lead to exactly this lengthy kind of process that was initially tried to be avoided by the Payment Order procedures.

With regard to the usual local practice of UAE judges to carefully examine their cases and allow enough time to consider their judgements, it might be highly likely that judges will try the case and decide to initiate ordinary proceedings instead of issuing a Payment Order within three days. This might even be more likely, if the underlying claim is not filed on base of a commercial paper, as these seem to be the standard cases, where a Payment Order is issued.

Moreover, also the general legal culture in the UAE might lead to many debtors attempting to object to a Payment Order. It has been our general observation during trials in local courts that many litigants will use whatever formal way of challenging a decision exists, even though in content it might be totally without any hope. Hence, it might be very likely that Payment Order proceedings, if not already converted by the judge into ordinary proceedings will be lead there by the opponent’s objection.

Thus it might be very likely, that one ends right in that ordinary lengthy court litigation procedure one tried to avoid, including all costs for local lawyers, that are usually not refunded by more than AED 1000/-n per instance.

The second main issue to consider would be that all proceedings and documents would have to be submitted in Arabic to be considered by the court. Even in the preliminary procedures – at least when involving the Notary Public – required documents would have to be in Arabic. Thus, the choice of the lawyer is key, as the respective consultant or attorney requires speaking Arabic.

Thirdly as with all other documents issued by the courts, many formalities have to be observed. Many procedures in local courts do not touch the issue of contents of the claims to be litigated (neither from a factual nor from a legal side). They rather focus on formalities like correct notices and their serving or the trustworthiness of certain witnesses or experts. Thus, any little mistake in particularly the first one would endanger the claim as a whole. Since this is a regular approach to delay at least many court proceedings, it does not seem to be out of the ordinary, if this would be taken as an argument to challenge the validity of the Payment Order or even its execution afterwards.

Fourthly, the claim from a material side needs to be completely documented from its sources (i.e. contract or legal obligation) to its amount and maturity.

D. Summary and Conclusion

To sum it up, a Payment Order can thus be most recommended in a case of a very clearly documented claim where not much active resistance from the opponent’s side can be expected. Then it offers a possible though not 100% sure way to a fast obtained and immediately enforceable title.

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