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The Egyptian Cheques

A. Definitions, General Information, Pre-dated Cheques

The regulations pertaining to cheques under Egyptian law are included in the Egyptian Commercial Code, Chapter Three, Art. 472-539 EG-CL.

Cheques are defined in Art. 473 EG-CL. Cheques that do not contain the information listed therein are deemed invalid in accordance with Art. 474 EG-CL. Only the place of payment and the place of issuance may be replaced, as an exception, by the corresponding legal regulation. Accordingly, cheques are void, if the date of issuance is missing. It was, however, confirmed by a well-reputed Egyptian bank, that it is permissible, to issue pre-dated cheques. However, from Art. 503 Para. 2 EG-CL, it may be concluded that even pre-dated cheques may be submitted at any time (at sight), which de facto, would make any pre-dating ineffective or latent to misuse. This regulation, however, was legally suspended for a period of 3 years, which meanwhile has been extended for another 3 years.

B. Renvoi, EG – International Private Law

According to Art. 481 No. 1 EG-CL, Egyptian cheque regulations apply only for those cheques that have been issued in Egypt. If a cheque was issued abroad, the law applicable at the place of issuance is to be applied for such cheque in accordance with Art. 481 EG-CL. Art. 481 No.2 EG-CL As a case of Renvoi in international legal transactions Egyptian International Private Law refers to the Law of another country, i.e. the country of issuance. If the cheque, however, is invalid according to the foreign regulations, yet valid according to the Egyptian regulations, Egyptian law establishes the validity and prevails.

C. Certified Cheque

In accordance with Article 482 No.2 EG-CL, the beneficiary may present the cheque at the bank drawn upon and request a confirmation of coverage. The bank has to annotate the cheque whether it is covered or not. The consequence thereof is that the bank blocks the equivalent sum of the cheque in the issuer’s account. Since cheques, in accordance with Art. 503 EG-CL may be presented at any time; the bank confirmation is essentially significant in the case of cheques, which have been pre-dated.

Under Art. 485 EG-CL the issuer of the cheque is simultaneously the guarantor for the cashing of a cheque.

D. Endorsed Cheques

According to Art. 486 EG-CL, cheques may be endorsed. The endorsement of the cheque may not be dependent upon a condition or be limited to a part of the sum, Art. 487 EG-CL. As is obvious in Art. 496 No. 3 EG-CL, the endorser is liable to the endorsee and the preceding endorsers, as far as the cheque itself does not state any restrictions or exemptions. A cheque may be given to a third party for the drafting of the cheque in accordance with a corresponding annotation, by which the endorsee is no longer liable to the endorser. Should the cheque beneficiary intends to claim a cheque obligor, a 6-months period from the day of the submission of the cheque to the bank is to be observed, Art. 533 EG-CL. Contrary to the date of issuance of the cheque, endorsements may not be pre-dated, Art. 496 EG-CL.

E. EG-Foreign Exchange Control

Art. 510 EG-CL regulates the cashing of the cheque issued in a foreign currency. The paying bank has to pay in the foreign currency only to the extent foreign currency is available, otherwise the sum may be converted at current rate into Egyptian Pounds and paid in Egyptian currency. Thus on the day of submitting the cheque, the exchange risks are transferred to the beneficiary.

F. “not to order”, Crossed Cheques

By law, cheques are considered to be cheques payable “to order” and may be endorsed even when they have issued in favour of a specifically person, Art. 486 No. 2 EG-CL. If the cheque, however, is marked with “not to order”, regulations relevant to cheques do no longer apply. Instead the regulations relevant to the cession of claims according to the Egyptian Civil Code apply.

A crossed cheque, according to which the amount on the cheque is payable only to a specified account, is regulated in Art. 515 EG-CL and 516 EG-CL. If the name of a bank is printed between the two parallel lines on the crossed cheque, the amount of the cheque shall be paid only into an account at the specified bank.

G. A Comparison between Cheques and Promissory Notes

Claims may be secured i.a. by promissory notes or by blank or postdated cheques. Securing by cheques increases the security for the creditor for the following reasons:

  • In both cases (cheques or promissory notes), the issuer may be different from the debtor.
  • In accordance with Art. 534 lit. a EG-CL a payment via an uncovered cheque constitutes a punishable act. For promissory notes, the general Criminal Law applies.
  • The proceedings are the same in both cases and are governed by Art. 540-549 EG-CL. Cheques and promissory notes are considered securities instruments.
October, 2014 Amir El Shamy & Rolf Meyer-Reumann
Meyer-Reumann & Partners
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