Debt Collection in the UAE

23 October 2019

A debt is a financial obligation upon a person or an organization against a received service, product, or any other liability that has a value to money. Missing a committed payment, a bounced cheque, not returning loans and unpaid medical or other service bills are will all trigger defaulter status for the debtor.

In the UAE, there has been an increase in debt recovery cases in the past few years as there is a high-risk of non-payment especially when dealing with small and mediums sized businesses. It is not uncommon for debtors to flee the country in fear of prosecution. While the UAE has many debt collection services and agencies to whom the creditor can relay the debtor’s information, there are no official judicial dunning procedures and there is a clear lack of information on financial status of debtors.

In order to apply for debt collection, it must be first determined whether one has a claim. The legal basis of a claim is in general a valid contract between the parties (exceptions being tortious claims). A contract consists of clear offer of one party and clear acceptance by the other party. The creditor must have sufficient evidence to establish a claim. Creditor must prove his claim under Article 113 UAE Civil Transactions Law. Proof by virtue of writing, testimony, indices, examination and experience, declaration and oath (as per Article 112 of the Civil Procedure Law). Once a claim has been established, the debtor and the company’s legal structure must be assessed.

For instance, if the debtor is a limited liability company, the claim would have to be directly asserted against said company. However, if the debtor is a sole proprietorship, the owner is liable for all debts of the business. In case the debtor is a Branch, recourse can be extended to the assets of the parent company. Under UAE law it is well established that a clear acknowledgement by a debtor of its obligations, will in effect be considered appropriate proof of the debt.


Once all communication with the debtor has been exhausted, a Legal Notice can be sent to the debtor. The Legal Notice sets out a deadline for the debt, and sometimes, an invitation to meet and reach an amicable settlement. A Legal Notice may also be served through the notary public. Serving a Legal Notice through the notary public makes an impact and indicates that the matter is being taken seriously.


The best and most straightforward way to avoid such issues to ensure that the contracts are well drafted. There are also other ancillary measures that can be used, such as:

  • Set up payment terms such that either the full invoiced amount should be paid in advance or payment can be made via irrevocable, transferable, unconditional and confirmed Letter of Credit.
  • To guarantee security, ensure that the parties may agree on the Retention of Title of the seller, until he receives full payment for the goods (Article 415 Civil Transaction Law). The Right of Retention in general extinguishes if the goods pass out of the hands of the person in possession (Article 419 Civil Transaction Law). Enforcement can be complicated and time consuming. Especially if the goods have been passed to a bona fide third party
  • Additionally, the debtor may assign its future contractual receivables. Assignment requires consent of the obligor of the receivables.
  • Most frequently used ‘‘security” in the UAE is post dating cheques. Dishonoring a cheque may create a personal criminal liability of the signatory and therefore the debtor is more likely to honor the terms of the contracts.
  • Make a commercial pledge. Commercial pledge over company’s assets and movable property is permitted in the UAE. Possession of the pledged goods is required for the pledge to be effective. So, in case the debtor fails to pay, the creditor may submit a petition to court to sell the pledged goods.


It is imperative that well drafted dispute resolution clauses are in place to ensure little to no trouble. Enforcing foreign judgments tends to be difficult in the UAE, unless there is a treaty in place such as treaties with France, India and the Riyadh Convention.

Enforcing foreign arbitral awards is possible as the UAE is a member of the New York Convention. However, in particular lower courts, arbitral awards can be unrecognized and has been, in the past.


Legal procedures begin with establishing a claim and legal notice, as discussed above. Prepare evidentiary documents to support the claim. Supporting documents should be originals. It is possible for counter parties to object to copies of documents. Contract can be in the form of a Purchase Order, email confirming an offer & acceptance or a contract/agreement. All documents submitted to court must be in Arabic or legally translated in Arabic.

Then determine the correct jurisdiction. Register the case and pay court fees. Then file the SOC and supporting documents. First hearing date is usually adjourned for a reply by the respondent or for filing of a counter claim. If case preparation is thorough, the respondents defense can usually be anticipated.

It is best to appoint an Expert. Parties can request an expert, or the court will appoint an expert where it believes technical knowledge is required. The trial can take anywhere from 6 months to 2 years. There are two possible outcomes; either the judge accepts the claim and awards partial or full payment by the respondent, court fees, and expenses including interest, or the claim is rejected.

If the claim is rejected, it can be appealed at the Appeal Court. The collector has 30 days to appeal first instance judgment to Appeal Court. The court investigates the facts and subject matter to re-determine the case. Alternatively, one can go to the Court of Cassation. They do not investigate the facts and subject of the case but only determines appeal based on question and issues of law.


Register the execution case in the court. The court then notifies the respondent to make payment within 15 days. If there is no response from respondent, the court can order to freeze and attach the assets of the respondent including bank accounts, vehicles, property, shares etc. Then a warrant can be summoned against the manager of the company which can lead to further penalties and punishment, including imprisonment.