DRAFT LAW TO RELAX PENALTIES FOR DEBT DEFAULTERS

The Federal National Council has discussed a draft law that would remove the penalty  of a prison sentence for debt defaulters who are pregnant, terminally ill, senior citizens or minors (under the age of 18). No jail sentence would be passed to those listed above unless the default was related to maintenance or an allowance payable under court order. Also exempt from the risk of a jail term will be any person who has children under the age of 15, is widowed or already has a spouse who is imprisoned.

Current regulations do allow for imprisonment of individuals for the failure to pay debts, and many creditors (most of whom are banks) are rarely seen to be sympathetic to the plight of a defaulter.

The draft law also provides that a creditor may request the court to impose a precautionary attachment on the movable property of the defaulting party in the event that the creditor fears that it may lose its rights due to the debtor not having a permanent residence in the UAE, or where the creditor fears that the debtor may abscond, smuggle or conceal his money, or where security over the debt is at risk.

The change, which will form part of amendments that are being discussed to update the UAE Civil Procedure Code, is largely seen as a response to the 2014 World Bank Doing Business report that gave the UAE a very low ranking in terms of its ability resolve insolvency matters and for its ability to enforce contracts.