UAE to introduce arbitration to cut prison time for debtors

New mediation law is expected to be ratified in 2016, says Essam Al Tamimi
UAE to introduce arbitration to cut prison time for debtors
By Sarah Townsend
Sun 22 Nov 2015 05:33 PM

Mediation is to be introduced in the UAE for the first time to prevent cases of bounced cheques and debt from clogging up the courts, The National has reported.

But, separately, one of the highest profile lawyers in the country told Arabian Business that a long awaited law on arbitration is likely to be delayed until next year.

The National said debtors in civil cases or those caught with bounced cheques will be granted access to a judge without having to wait for a hearing, and defendants jailed over their debts will not serve a day longer than their sentence.

Arbitration lawyers will work with debtors to resolve the case without the whole case having to go to trial. The debt must be paid between 15 days and six months from the date of the “hearing”.

Jail will be considered a last option by judges – with sentences only handed to those who purposely do not want to pay or who have failed to pay or give the judge any proof of their intention, the newspaper said.

In this instance, the debtor will be arrested and then given one month to put together a case or find a sponsor to help him. Otherwise, he will be jailed for a further month. The process will continue for six months.

After 90 days have passed and still the debtor has no means to even partially settle their debt or placate the creditors, the process is repeated and they can be jailed for another six months, the newspaper added.

It quoted one unnamed judge as saying: “[Under the new rules] all [the debtors] are required to do is to send in a request and a judge will meet them regardless of the date of their hearing.

“Any person who shows the slightest intention to pay off their debts is given several chances to do so. If they even pay some of the amount or, for example, show us an offer letter from an employer and a bank that’s willing to reschedule their loans – just any proof or any seriousness to repay the debt – then we assist them in doing so.”

He added: “We will have a separate registrar so that their cases are monitored to ensure that no one spends a day longer than his sentence in prison.

“Now we will always know the numbers in prison and where they are so we can reach them immediately.”

Essam Al Tamimi, founding partner of Dubai-based international law firm Al Tamimi & Co, told Arabian Business in an interview last week that the UAE has ambitions to “emerge as an arbitration hub” in response to a steady rise in dispute cases. He attributed this to a growing population and more complicated legal system and corporate structures.

However, he said that the country has been working to draft a law on arbitration for the past five years and it is “long overdue”. The law was intended to come into force by the end of this year, he said, but it is not likely to be ratified until the first quarter of 2016.

“We’ve been very late to arbitration here in the UAE,” he said. “It is not a popular form of dispute resolution, perhaps because it requires a certain maturity [in approaching corporate matters], and the large number of family businesses in the region in particular tend to more emotional.”

The full interview with Essam Al Tamimi will be published in Arabian Business next month.

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