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Are you owed money by a UAE company?

19.12.2018 Commercial Disputes

Debt recovery in the UAE is of high interest both locally and abroad. Many companies have unpaid debts, some of which may not be of such a value to justify too much time, expense, or resources, but are by no means insignificant to the operation of that company.


The problem

In an ideal world, disputes over unpaid debts would be settled between parties both amicably and swiftly. But when commercial discussions fail, how do you move a matter forward without compromising unnecessarily and/or potentially harming your relationship with your counterpart and what options are there for creditors seeking to recover sums in the UAE?

In this article, we briefly explore some of the tools available to a creditor, which may help prevent the need for full legal proceedings, and explain the benefits of involving a law firm at an early stage of your debt recovery process.

Options

Below are some of tools at the disposal of creditors in the region, which may be used to incentivise a debtor to settle a claim.

Asset investigation

Before a decision is taken as to whether or not to commence legal proceedings, it is often sensible to engage an asset investigation company to produce a report on the debtor’s assets.

Attachment

It may be possible to file an application to the local court to attach the debtor’s assets and/or bank accounts. Such investigations into assets may be helpful to a creditor weighing up the potential benefits of pursuing further legal action. Whether or not it is possible to file an attachment application into the local court must be judged on a case-by-case basis. However, if the debtor has assets and the attachment is granted, said attachment should put the debtor under significant pressure to pay the debt, or to deposit security to release that attachment.

Bankruptcy Law

Federal Law by Decree No. (9) of 2016 on Bankruptcy (the “Bankruptcy Law”) allows a creditor owed a debt of AED 100,000 or more, to apply to the Court to commence bankruptcy proceedings against the debtor company, following the proper notice procedure.

Ince & Co’s Dubai office was the first law firm to be awarded a judgment against a debtor under the Bankruptcy Law and, with a number of further ongoing cases in Dubai and elsewhere in the UAE, is well positioned to advise on this, thus far relatively untested, option available to creditors.

Criminal action

It is fairly common practice in the UAE for companies to issue post-dated cheques. When a post-dated cheque bounces, we assist clients in liaising with the local authorities and the banks to file criminal complaints, that may lead to the imprisonment of the signatory.

Ship arrest

In the case of maritime debts, it may be possible to arrest that vessel as security, if a debtor has a ship located within UAE territorial waters. We can advise on whether or not a debt qualifies as a “maritime debt” under UAE law and are experienced in assisting with ship arrests in the UAE and elsewhere in the Middle East.

Why instruct us?

We understand that a balance must be struck between the prompt and economical recovery of sums owed and maintaining good commercial relationships with business counterparts, in what are challenging economic times.

We are experienced in providing prompt, concise and simple legal advice that recognises commercial realities, with a view to achieving quick recoveries for our clients, from debtors across the Middle East. Many of our clients’ claims are settled promptly and in full, with minimal time and cost investment required.

Our intervention has helped our clients:

>  Recover sums that they might not have otherwise pursued due to our fixed fee offerings that make the pursuit of a debt economically viable;

>  Obtain the focused engagement of their counterparts in serious settlement discussions; and

>  Reach bespoke commercial solutions.

We recognise that sometimes matters must be approached from a different perspective in order to find a solution. A key benefit of instructing us to recover your debt at an early stage, is that, in the event the matter is not settled promptly, we will already be familiar with the facts and the legal merits of your case and be in a position to promptly take further steps against the debtor. A recent multijurisdictional case involving a significant claim had left multiple parties, including our client, at a complete stalemate. After a period of empty promises being given to our client by the creditor, we were able to facilitate and advise on an alternative commercial solution, which saw clients recover over 80% of their claim.

Lessons for creditors

If you have a debt which remains unpaid, we would recommend consideration of the following:

1.  Time is of the essence

If direct negotiations with the debtor are unsuccessful it is worth considering outsourcing the recovery of the debt as soon as possible. Not only does this free up your team to focus on day-to-day operations, but the highest levels of recovery in the fastest timeframes are typically achieved for clients who instruct us in respect of debts that are under 3 months old.

Furthermore, certain types of claims are subject to relatively short limitation periods in the UAE, so it is important to have your claim assessed early, to ensure that your rights are protected.

2.  Document everything

If you are struggling to obtain payment of a debt and enter into negotiations with the debtor, it is important to ensure that all exchanges and agreements are documented and kept safe. Such evidence could prove crucial should the matter later progress to Court proceedings.

Award-winning debt collection service

Our Dubai office was recently awarded the Maritime Services Award at the Seatrade Maritime Awards 2018, for our debt collection offering. Our service allows our clients to avail of our first-class legal expertise, with the comfort of the same fixed fee no matter what the claim amount.

Our case handlers have a wealth of experience in this field and are well-placed to quickly digest documentation and advise, on a case-by-case basis, on the best way to approach the given scenario, whether it be a straightforward unpaid debt, assisting with the recovery of sums following a party’s failure to honour a contract, or other, often complex, situations, where previous attempts to find a commercial solution have failed.

Of course, not all claims will be capable of settlement, and should arbitration or litigation proceedings be necessary, our network of offices are able to advise on a wide range of laws and jurisdictions.