The
economic downturn has resulted into a nightmare for many individuals in the UAE. Hundreds of individuals are currently being imprisoned for bounced cheques as booming businesses went bust. For one Irishman, the nightmare of prison and a lengthy jail sentence is looming large, forcing him to resort to a hunger strike. This person was the managing partner of a building company, and was jailed after late payments from a client that resulted in cheques that he had written to contractors to be dishonoured by the banks due to insufficient funds.
Read more about this case.
What is the law on bouncing a cheque?
Article 401 of the UAE Penal Code provides that bouncing cheques shall be punishable by confinement or a fine to any individual who, in bad faith, writes a cheque without sufficient funds.
In the UAE, it is a common practice for banks to demand blank cheques from customers as security against credit cards or loans offered to them. However, before signing any cheque, it should be remembered that bouncing a cheque is illegal in the UAE. In other words, if a cheque is presented without adequate funds to cover the amount, the person who signed the cheque can face both criminal and civil charges. Furthermore even after the person has serviced the jail sentence, he may still not be able to leave the country until the funds have been paid in full. Here are a few practical tips on how to avoid such a situation.
- Avoid signing blank or undated cheques, only sign cheques after all details have been completed.
- Make sure that you have sufficient funds available in your account before writing a cheque. Do not sign cheques if you do not have sufficient funds or if the funds will not remain in your account until the cheque is deposited or cashed by the other party.
- It is important to keep accurate records of your accounts including every cheque that is written, to whom it is payable, when it is dated and how much it is for. Do not unwittingly withdraw money before the cash is taken out to pay for the cheque.
- All financial records should be consistently cross-checked against the available balance in the bank account to ensure there are always sufficient funds to cover the value of the cheques.
- If any of your cheques does bounce, speak immediately with the bearer of the cheque to reschedule the payment. If the matter becomes out of control, contact your lawyer immediately.
Tagged as:
Bounced Cheque; UAE Penal Code;
Foreign principals who wish to conduct business in the UAE or in the wider Middle East, but want to do so with a minimal investment, often turn to commercial agents to sell their goods. The main piece of legislation that governs agency arrangements in the UAE is Federal Law No. 18 of 1981, what is commonly referred to as the “Agency Law”. The Agency law is extremely wide and captures all forms of agreements for sale through third parties. The Agency Law however tends to favor agents rather than foreign principals. Therefore, in the context of foreign principals looking to expand into the UAE market, obtaining legal advice before making any commitments regarding an arrangement with a prospective agent is of paramount importance. There are important considerations that foreign principals should bear in mind before entering into or terminating agency agreements. These include:
- Nationality. Only UAE national individuals or companies wholly-owned by UAE nationals can act as commercial agents in the UAE. This is a mandatory provision of the UAE Agency Law.
- Exclusivity. A commercial agency must be granted for a specified exclusive territory within the UAE, namely one of the seven Emirates. Exclusivity can also apply to multiple Emirates or the whole of the UAE.
- Registration. A commercial agent must be registered in the Commercial Agencies Register maintained by the Ministry of Economy in the relevant Emirate. If the agency agreement is registered, the agent is provided with protections and privileges, such as the ability to block parallel imports and to claim damages on behalf of the principal.
- Termination. Once agency is granted and registered with the Ministry of Economy, the termination of an agency relationship by a principal can be extremely difficult to effect and in most cases such terminations result in significant compensation awards in favor of the local agent.
- Compensation. Agents are entitled to statutory compensation on termination of their agency agreements. Compensation can be substantial and is in addition to any existing contractual rights. However, the exact calculation of a compensation payment is not set out in the Agency Law and several factors, such as duration of the agency, efforts of the agent in promoting the goods and net profit generated by the agent are taken into consideration in establishing compensation awards.
For the right type of business, the appointment of an agent remains an attractive way of entering in the UAE. However, it is extremely important to conduct thorough due diligence on prospective commercial agents and to draft agreements carefully to ensure compliance with the provisions of the Agency Law.
Tagged as:
Agency,
Commercial Agent,
Foreign Principal,
Registration,
UAE
Governments in the Middle East are in the process of rapidly developing their physical and social infrastructures to provide necessary services to their citizens. In this regard, a public private partnership (PPP) can be a viable option to construct or develop a wide range of these infrastructure projects, including highways, power plants, bridges, pipelines, ports, airports, waste treatment facilities and hospitals. Generally speaking, a PPP is a long-term contract between a government and a private sector party in which the government leverages the private sector party’s skills and assets to perform all or significant aspects of a project. The government and the private sector party share the risks and rewards of a project and typically, the government retains some measure of control over the project either through ownership of the project or contractual provisions binding the private sector party
Advantages of PPPs
Governments often prefer PPPs to other methods of infrastructure delivery because of several advantages. Firstly, PPPs allow the government to shift some or all of the risks of the project to the private sector party while retaining some measure of control over the project. Secondly, PPPs free up the public budget so that funds may be applied to other projects. Lastly but not the least, PPPs allow governments to take advantage of the technical and professional expertise of the private sector. Some projects are highly technical and require specialized knowledge. Many governments do not have the in-house expertise and personnel to develop and manage these projects.
Considerations & Issues
However on the other hand, PPPs can be complex and can raise many issues and considerations. PPPs involve extensive work and time in terms of the structuring and planning of these projects. The costs of employing professionals and consultants to manage the PPP process can also be significant, especially if project financing is also being used. From the government’s perspective, the government has to share revenues earned from the project with the private sector party. Nonetheless, the advantages certainly outweigh any issues involved in PPPs which is making it increasing popular in the Middle East. Moreover, PPPs across the world have – when properly structured and planned – improved efficiency and saved governments enormous investments in infrastructure projects. We can confidently expect to see a significant rise in regional PPPs going forward.
Tagged as:
Abu Dhabi investments,
Dubai International FInancial Center,
Islamic Finance,
Middle East,
Public–private partnership,
UAE Investment
