The courts are clogged with cases of bounced post-dated cheques, and the practice is unlikely to go away anytime soon. It is a situation that does not serve any party.
Momentum builds for debt law reform
A businessman is detained at Dubai International Airport over a former employee's unpaid Dh152 Etisalat bill. An Abu Dhabi resident is charged over a cheque he wrote three years earlier as the chief executive of a property company in Dubai. Since the global downturn, such stories have been all too frequent.
As The National has reported over the last year, there has been a noticeable shift in attitude towards existing bankruptcy laws, with government authorities calling for immediate changes. This momentum received another boost on Wednesday after senior officials criticised the current policy.
"We need to decriminalise bounced cheques," said Dr Nasser Saidi, the chief economist of the Dubai International Financial Centre. "This practice harks back to the 18th century, and this is something that we should rapidly get rid of."
Many consider these laws outdated and, in today's turbulent global economic climate, counterproductive to conducting business, whether winding up old companies or setting up new ones. According to World Bank figures, the UAE ranks 143rd out of 183 countries in the ease of closing a business; it takes five years on average to wrap up operations. Business owners often end up embroiled in financial disputes which can lead to imprisonment.
Late payments and defaults on debt spiked during the financial crisis as widespread redundancies left many residents unable to pay personal loans, mortgages and housing rent. Currently, the law deals with such offenders in the same way it does with criminals.
Rent payments in particular have accounted for a large percentage of bounced cheques in the past, with many landlords insisting on one-off yearly payment or at best two cheques. The relaxation of this practice across the Emirates, as well as the drop in rents, has thankfully led to a decrease in the cases of bounced cheques.
However, the problem persists. The courts are clogged with cases of bounced post-dated cheques, and the practice is unlikely to go away anytime soon. It is a situation that does not serve any party. The sooner bankruptcy laws are reformed, the quicker these debts will be resolved.