The United Arab Emirates has long positioned itself as the leading center for international trade and investment in the Middle East because of its strategic location, liberal trade practices and an influx of high-net-worth expats in the last decade. However, the country’s civil justice system often impedes the successful recovery of assets, particularly given the slow nature of civil litigation procedure before the courts of first instance in the various Emirates.
Claims can take years to progress in UAE courts and parties can leverage various interim applications and delay tactics to drag out first instance judgments, as well as exercising automatic (as opposed to merits-based) right to appeal. The expansion of the scope of payment order claims—a mechanism for immediate ex parte judgments—is a timely solution to this problem and a welcome development in the region because they lead to an expedited judgment procedure and shorten the waiting period for a judgment from years to weeks. Below, we detail the process and benefits of payment order claims and how they help claimants quickly recover assets in the UAE.
How payment order claims work
Payment order claims are an increasingly common solution for creditors in the UAE. Changes to the Executive Regulation of the Civil Procedure Law No. 11 of 1992, which details the method and procedures for litigations in civil and commercial lawsuits, have broadened the scope of expedited payment order claims in relation to admitted debts, and the court’s approach recently suggests that such claims now must be brought using the expedited procedure.
To file a payment order claim, a creditor must:
- Serve a written demand on the debtor (ideally issued by a notary public) and allow five days to elapse
- Gather evidence that the demand for payment was made to and ideally acknowledged by the debtor
- File an application that includes the evidence and details required in an ordinary statement of claim
- Notably, there are no additional costs outside of normal court fees to file a payment order claim; in Dubai, for example, fees are generally 6% of the claim value and capped at $10,980
Courts must decide on the claim within three days of submission and often do so without notifying the debtors. Once the claim is granted, a creditor must notify the debtor within three months. Most importantly, payment orders qualify for expedited execution; execution may commence immediately notwithstanding any appeal (or the time for appeal not having elapsed). This expedited execution stands in stark contrast to the general practice of the courts of first instance and is crucial for claimants seeking capital sooner.
The benefits of applying for a payment order claim
The greatest benefit of a payment order claim is speed. The procedure itself is quick and decisions are usually received within the three-day period. They are also immediately enforceable—unlike a standard civil judgment, which is only enforceable after the 30-day period for appeal has expired or following a Court of Appeal judgment. This alone saves claimants valuable time and money and reduces risk. Moreover, the ex parte nature of payment order claims mandates a shorter appeal period of 15 days and, when coupled with the immediate execution, can pressure debtors to engage.
Prior to the Executive Regulation, payment order claims could only be used in claims involving financial instruments or commercial paper claims such as promissory notes, checks and bills of exchange. The recent amendments confirm that the scope of the application can now include any instance of debt confirmed in writing, for example, a bank seeking repayment of sums due under a facility agreement. It also allows for interest on the outstanding debt to be claimed.
Furthermore, recent judgments by the Dubai cassation court have attempted to clarify the scope and validity of the payment order process. In September 2020, the court incorporated a wide interpretation of “debts confirmed in writing” to include a large number of contractual debt disputes. In June 2021, the court clarified that the payment order procedure should be used save in circumstances where there is a “serious dispute” between the parties in respect of the debt. As both judgments are recent, there is not yet a significant body of case law to assist in determining how they are being applied in practice.
Although the doctrine of precedent doesn’t apply in the UAE as it does in common law jurisdictions, the cassation court judgment should be persuasive and payment order judgments are therefore a quicker way to pursue debtors otherwise seeking to avoid payment. While enforcement in other jurisdictions is subject to confirmation by the local courts, payment order claims are likely to be a novel issue for many foreign courts. There is no reason in principle as to why they wouldn’t be effective in other courts, particularly if efforts are made to provide sufficient notice of the UAE proceedings to the debtor before substantive steps are taken abroad to enforce the payment order.
Different Emirates adopt different approaches
Whilst the Regulation applies uniformly across the UAE, in practice payment order claims are treated differently depending on which Emirate the claim is filed in. Dubai courts typically permit execution immediately, whereas courts in Abu Dhabi and Sharjah generally require that a claimant wait until the 15-day appeal period has passed or an appeal has been decided on before filing for execution. While the appeal period is minor compared to the years claimants would otherwise have to wait, it’s important that they are aware of these nuances.
As with most new processes, judges may also be cautious and deny the application, especially in cases where the claim isn’t “straightforward,” i.e. not based on a promissory note, check or bill of exchange. Moreover, not all forms of debt can be remedied by payment order claims. In the case of a denial, a creditor would have no other option but to restart proceedings using the standard procedure (in which case they would be required to pay the not insubstantial court fee again).
Partnering with an expert is the crucial first step
The fact that payment order claims are becoming more popular in the UAE is a positive development for claimants pursuing enforcement in the region as the process is usually long, expensive and often unpredictable. Claimants can use expedited claims to save time and money and add pressure to slow-to-pay debtors.
Give that payment order claims are a relatively novel and to date little-used solution in the UAE, it is imperative to work with an experienced partner. Burford’s in-house team of asset recovery and enforcement specialists in conjunction with local lawyers can navigate the unique rules and processes of UAE courts and help clients pursue recoveries in a variety of multinational investigations in the Middle East. By working with a partner with the right experience and knowledge of the region, claimants can unlock the full potential of a payment order claim.