The Authority for Unification of Federal and Local Judicial Principles at the Union Supreme Court in Abu Dhabi, in its open hearing held on 21 December 2023, determined an issue on two conflicting judicial principles which were passed by Dubai Court of Cassation on the execution of cheques, and gave preference to one of them and renounced the other.

The Authority decided to renounce the judicial principle which states that a cheque bounced due to lack of balance or insufficient balance only shall be an execution instrument of which the holder has the right to request the execution of the full or part of its value forcibly, excluding the cheque which bounced due to the reason “closed account”.

The Authority, in justifying its decision, stated that the phrase “closed account” means that the cheque cannot be encashed, therefore it is equal in terms of result and consequences to the two phrases “lack of balance and insufficient balance” stipulated in Article 667 of Federal Decree Law No. 50 of 2022 on the Issuance of Commercial Transactions Law that makes a bounced cheque an execution instrument that gives its bearer the right to proceed with enforcement action against the debtor by using the bounced cheque and forcibly seeking its value in full or part.

The Authority believes that adopting this latter principle and renouncing the other one provides protection to the soundness of transactions.

The author of this Galadari Alert is Taha Ramadan.

Taha is a vital member of the dispute resolution team at Galadari and brings with him a wealth of experience advising clients on UAE legislation, human rights, equal opportunity and rental disputes, achieving favorable outcomes in both the tribunal and court.

For more information on this topic, please contact Taha directly.

Taha Ramadan Senior Counsel Taha@galadarilaw.com