Podcast: What you need to know about the revised UAE bankruptcy law
A recent amendment to the Civil Procedure Code clarifies that creditors now have the option to either commence a fast-track procedure to obtain a payment order or standard claim, without having to begin a payment order claim when the conditions of such claim are satisfied. This puts an end to the uncertainty for creditors as to whether they should commence the fast-track procedure to obtain a payment order, or whether they should commence a standard claim (substantive merits proceedings).
In a boost for creditors with the recovery of debts, back in February 2019, the UAE Civil Procedure Code (“CPC”) was amended by expanding the scope for debt claims to be enforced through a fast-track court process to obtain monetary judgment, known as the ‘payment order’ process. Our update about that development at the time can be read here: Payment order claims: a setback to creditors’ position before the Dubai summary judge : Clyde & Co (clydeco.com).
Recent UAE Court cases have created some confusion for creditors on the procedure they should follow to recover their debts. The question arises in any case whether a creditor can or should pursue a debt claim through the payment order route, or if they should follow the standard claim procedures under the law? And is a creditor free to choose between these alternatives, or is one of them mandatory depending on the circumstances?
On one hand the General Assembly of the Dubai Court of Cassation¹ significantly narrowed the scope of recourse to payment order requests. This was done by requiring that such claims be supported by written evidence that the debt is accepted or acknowledged by the debtor.
On the other hand, in a number of recent cases where a creditor has opted to pursue a claim in the courts through the standard claim procedures (i.e. not using the payment order procedures) the courts have considered that they lacked jurisdiction (thus dismissing the claim) when the case satisfies the conditions of issuing a payment order. This has included cases that were already far advanced at the time of the dismissal. It is perhaps a surprising result for a claim brought under a standard process to be dismissed in favour of an exceptional process. Such decisions suggest a judicial view that it is mandatory for a claim to be brought under the payment order procedure if it meets the criteria for such claims under the law rather than it being an option for the creditor to choose as they see fit; that is so notwithstanding the wording of the payment order provision that a creditor “may” claim under such procedure.
This has created uncertainty for creditors in any given case as to whether they should commence the fast-track procedure to obtain a payment order, This iswith the risk that it may be determined by the court that the claim does not satisfy the payment order criteria and therefore dismissed, or whether they should commence a standard claim (substantive merits proceedings). This would avoid that risk, but in doing so face the converse risk of having the claim dismissed for not being brought as a payment order claim.
To resolve this uncertainty (among other things) on 30 August 2021 the CPC was amended to relevantly provide that:
Accordingly, it seems that the courts considering the merits of the case in a debt claim brought under the standard procedure will now still have jurisdiction to consider the case even if the conditions for issuing a payment order claim are satisfied.
Therefore, it now seems that creditors with a claim that satisfies the payment order criteria do have a choice as to which court claim process to follow, putting an end to the uncertainty. It remains to be seen how the courts will apply the CPC amendment in practice.
¹ Decision No. 2 of 2021, dated 9 June 2021