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Mon 29 Nov 2010 01:42 PM

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Former DFSA boss calls for urgent reforms to Dubai legal system

Lawyer Dr Habib Al Mulla calls for the decriminalisation of bouncing of cheques and concrete bankruptcy laws

Former DFSA boss calls for urgent reforms to Dubai legal system
Dr Habib Al Mulla, executive chairman of Habib Al Mulla and Company at the third Arabian Business conference. (ITP Images)

Dubai is in urgent need of legal reform and must look to decriminalise the bouncing of post-dated cheques and introduce straightforward bankruptcy laws, one of the emirate’s most prominent lawyers told the Arabian Business conference in Dubai on Monday.

“We need to upgrade our legal system so that investors have faith in doing business in the region. I say it loud and I say it clear, outdated laws have to be outlawed,” said Dr Habib Al Mulla, executive chairman of Habib Al Mulla and Company and former chairman of the Dubai Financial Services Authority (DFSA).

Speaking at the third Arabian Business Forum in the Armani Hotel in Dubai, Al Mulla added that the emirate’s laws were often “issued in reaction to events and in many cases the reaction comes too little too late.”

Two main areas he believes need urgent reform are the emirate’s bankruptcy laws and the decriminalisation of the bouncing of a cheque of post-dated cheques.

“The failure of a business should not be a criminal offence and the failure to pay a post dated cheque is, in my view, no more than a failure to perform a contract and it too should not be made criminal,” said Al Mulla.

In order to move forward out of the downturn, Al Mulla told delegates at the conference that the authorities need to focus on legal reform as a vehicle for future economic growth.

“Until that happens and until the government realises that legal reform plays a vital role in economic growth, I don’t believe we will have change,” he concluded.

His comments come just days after it was reported that a UAE developer has filed for liquidation, a move which is thought to be the first court-mandated bankruptcy of a UAE distressed property project since the financial crisis began.

Adebee 8 years ago

Al Mulla talks so much sense. Good for him!

Pradeep Naik 8 years ago

Great move if it is put into reality, many expats who are the backbone of this country fall into a trap of this PDC case, they really want to do business here which is win win situation for country & expats.
We need support from legal authorities to establish this country once again, instead of making all cases of property investors & business people the same.
This country has all the best infrstructure they need, they just need quality of people to live here & Government support to make people feel home.
No need to take risk (Quote- Al Abbar) just need some fine tuning in the various Government , Legal, Labour, immigration, RTA, National ID, Municipality departments.

Philip 8 years ago

There should also be laws implemented to punish breech of contract and non payment. SME are being decimated by large companies and semi-government companies delay or complete non payment. Yet the only ones being punished for non payment are the SME. You can not expect an economy to be funded from the bottom up.

henna 8 years ago

Philip , There are Laws that exist for Breach of Trust that would protect those who are genuinely de frauded by people or companies. Your lawyer could give good advice

Philip 8 years ago

Henna ,
Trust me I am very familiar with my lawyer and the law as unfortunately I have had to be lately. Cases Drag on for years even when they are clear cut, as large corporations or semi-government entities can afford to drag these things out. I am not the only one who has all his contracts , completion certificates and everything else in order that has not been paid according to contractual terms. This is an epidemic in Dubai and many people and companies are suffering when they have spent the last 20 to 30 years of their lives investing and helping to build up this city, which we have adopted as our home.
This situation has serious effects as it trickles down the food chain so to speak and the damages are multiplied.

El rustom 8 years ago

This is exactly what DubaiThis is exactly what Dubai and the UAE need to take off again. and the UAE need to take off again.

Hina 8 years ago

This would be a great move and is totally needed. After being involved in some alleged bounced cheque situations have been told that PDC's and bounced cheques are dangerous. I agree that a non payment of a contract should be a civil case for which the judicial system has laws and procedures. The country has an excellent infrastructure and its acheivements are impressive despite the crisis. This will be a psoitive move . There are breach of Trust Laws that exist for those who commit fraud of any type. A good credit scoring sytem like equifax in the UK will enable these cheques to stop underpinning the economy, and business transactions. Even according to the Arab Charter on Human Rights, non payment of debt should not be criminalized. A move like this will be extremely beneficial to the overall economy within Dubai, however it will require a continual programme of edducating throughout communities to ensure such moves are actually upheld in the country in terms of practice.

Insiyah 8 years ago

Of course such a reforme is needed if we want the country to overcome the recession! Bounced cheque cases should be dealt in a civil court and if the accused really owes the money to the claimant, he would be more likely be able to do so if he is free. He would be able to work out some solution, whether behind bars, how is anyone suppose to earn money to pay his debt? Lot of investors who have fled the country, scared of a jail sentence, would surely come back to try to save their business if this fear was not there!

Ghalib Sarkar 8 years ago

The simple question to be asked is "Why does the world not have the same rule as Dubai has? " Is the world gone crazy?!!!
In Business one has to use their business sense/gut feeling in dealing with people. If one is caught by a loss one does not send the other person into prison? One has to take one's own precautions and if one has to sue the other party for loss or whatever it has to be done through the courts.
How does sending one to a jail help?

Ali 8 years ago

Please note what is suggested by Mr. Al Mulla should be considered and implemented by the appropriate authorities. Really need to revise the laws and should benchmark the same with laws in other countries.