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Abu Dhabi Court of Cassation Issues New Principle on Check Enforcement Restrictions

On October 30, 2023, AD-The Court of Cassation in Abu Dhabi recently issued a principle that mandates the restriction of the enforcement of checks in cases of dishonor due to insufficient funds or nonexistence of funds

On January 2, 2023, Federal Decree No. 50 of 2022 was enacted, introducing significant amendments to commercial transactions in line with the ongoing development of the UAE economy. These amendments preserved the check's status as a means of payment. Article 667/1 of Federal Decree No. 50 of 2022 on Commercial Transactions states:

"1- A check drawn by the drawer without sufficient balance or if the balance is insufficient shall be regarded as an executable instrument, and its holder may request its full or partial enforcement through compulsory means.“

Furthermore, Article 682 of the same Decree-Law stipulates: "If the drawer is subject to criminal proceedings for any of the check-related crimes under this law, this does not affect the check's enforceability through compulsory means or the application of judicial measures in accordance with the provisions, procedures, and rules referred to in Article 667 of this law or the right of the beneficiary or the holder of the check to claim compensation in accordance with the statutory procedures."

However, the legislator has made a distinction between the check as an executable instrument in Article 667 and the check's enforceability or the application of judicial measures in Article 682. This allows the beneficiary or holder of the check to choose between its enforceability under the provisions of Article 667 or other judicial measures.

Due to conflicting judgments from commercial courts regarding the cases where a check is considered an executable instrument, some have argued that the legislator has explicitly stated in Article 667 of the Decree-Law that the exceptional enforcement procedure for checks applies strictly to cases of dishonor due to the absence of funds or insufficiency of funds, and it should not be extended to cover other reasons for refusing to honor the check.

Other rulings have held that the refusal to honor a check due to account closure implies its unavailability for payment, equivalent to the absence of funds, and thus, it can be enforced compulsorily, considering it as an executable instrument.

Since Article 667 clearly provides for an exception from following the necessary legal procedures, it should not be expanded or interpreted in a manner that includes other cases beyond the legislator's intended exception.

In light of the above, the General Authority of the Court of Cassation has approved and affirmed the judicial principle of restricting the enforcement of checks to only two cases, which are the absence of funds or insufficiency of funds as stipulated in Article 667 of Federal Decree No. 50 of 2022 on Commercial Transactions.

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