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Tue 27 Nov 2007 04:55 PM

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Bounced cheques, unpaid bills plague Riyadh business

Business community filed legal claims worth $124mn during first 10 months of year.

The Riyadh business community filed legal claims worth almost 500 million Saudi riyals for bounced cheques and unpaid bills and drafts during the first 10 months of the year, Riyadh Chamber of Commerce and Industry (RCCI) revealed on Monday.

Between January and October, the legal department of RCCI has processed over 560 legal claims from banks, companies, and individuals claiming for 466 million riyals ($124 million) worth of bounced cheques and unpaid bills and drafts.

Around 70% of the claims were for unpaid bills and drafts worth 328 million riyals, with the remainder for bounced cheques amounting to 138 million riyals.

The RCCI, although not a legal or executive body, said that it was able to legally settle 79 claims or 14% of the total claims so far this year.

The RCCI transferred 43% of the claims to the Ministry of Trade and Industry for further actions.

The rest of the claims are still under process at RCCI, which is trying to solve them peacefully before sending it to executive bodies.

“We are trying to solve these matters peacefully before they reach the ministry,” said Majed Al-Hedayan, head of the legal department at RCCI.

“The ministry offloaded handling bounced cheques and other similar claims at initial stages to Saudi chambers of commerce because many people are not aware of the consequences of writing a bad cheque.”

Al-Hedayan said he is trying to increase the awareness of the contending parties about the long legal process they will go through if they are not able to solve the matters peacefully.

Solving payment disputes in Saudi Arabia is difficult, with the kingdom ranked 135 out of 178 economies in enforcing contracts on the International Finance Corporation (IFC) Ease of Doing Business 2007 index.

The IFC data shows that the number of procedures contending parties have to go through for payment dispute settlement is 44. Moreover, it may take the parties up to 635 days and cost them up to 27% of the claim value before a payment dispute settlement is reached.

Almost 50% of the processed claims were from companies, individuals followed with 239 claims, or 43%, and banks were least affected with only 45 claims.

Bounced cheques have become a serious issue in Saudi Arabia in the last two years.

Official figures issued by Saudi chambers of commerce showed that there were up to 1.4 billion riyals worth of bounced cheques reported in the country in last year.

The Jeddah Chamber of Commerce and Industry (JCCI) reported in September that it receives more than 20,000 bounced cheques claims annually.

Al-Hedayan said that it is time for the Saudi government to consider writing bounced cheques, intentionally or not, a criminal offense just like in neighbouring countries.

According to the law, a person who writes a bad cheques intentionally may face up three years in prison or pay up to 100,000 riyals in fines.

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