By Staff writer
Federal National Council approves new relaxed laws that will apply less severe punishments on vulnerable defaulters
The UAE has moved to relax its laws on debt defaulting, with the Federal National Council approving a new law that would see sick, old and pregnant people avoid jail.
Under the bill, which requires final endorsement into law by HH President His Highness Sheikh Khalifa Bin Zayed Al Nahyan, less severe punishments would apply to people aged over 70, minors below 18 years of age, terminally sick patients with an incurable or irreversible illness and pregnant women until they give birth and the baby is one year old.
The draft law says a defaulter would no longer risk a jail term if he or she has a child younger than 15 years or his or her spouse was dead or jailed for any reason.
A debtor would also no longer face jail if he or she presented a collateral agreement to answer for the debt, or named someone else who had agreed to assume legal responsibility for paying off the debt.
The draft law would also prohibit the jailing of defaulters for debts less than AED10,000 ($2,722) unless the debt was a fine or a maintenance paid by a court order.
The FNC said the changes were in response to the UAE’s low ranking in resolving insolvency and enforcing contracts as shown by the World Bank Doing Business 2014.
Globally, the UAE is ranked 101 out of 189 economies on the ease of resolving insolvency and is ranked 100 on the ease of enforcing contracts, according to the World Bank’s report.
In many countries, defaulters don’t go to prison or are held criminally liable for money owed — as long as the debt was not the result of a criminal scheme or owed as restitution for injuries or damages caused by a crime committed by the person.
Under the UAE draft law, a creditor may request the court to impose precautionary attachment on the movable property in cases where the debtor does not have permanent residency in the UAE or is a risk to abscond, smuggle or conceal his money, or where security over the debt is at risk.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
This is really laughable.
First of all this new ammendments means that bad loans will be taken out by people in the name of their elderly parents, children og sick relatives and thus evading punishment.
What should be done is a complete overhaul of the UAE debt default laws. This is the highest standard of dobbel standars. The different government owned entities default on their payments to creditors and take it really relaxed. But as soon as a resident does it he or she is jailed and robbed of the opportunity of paying back. A really catch 22 situation.
And there is the issue of whether the defaulter is an emirati or non-emirati because there is real discrimination when handling the cases.
In my opinion it is not the punishment of defaulter that should be the topic of the debate but what should be done is a complete overhaul of the UAE debt based consumption economy.
I know a father of three children 15y, 12y and 4y who got stuck in UAE because financing bank has charged him the interest of the delay of the flat mortgage over five years of hand over delays on top of his basic loan. What would be his situation now ?