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Clyde & Co | Recovering What You Are Owed: A Strategic Guide for Creditors in the UAE

By Sherif Maher: Clyde & Co and Hesham El Samra: Clyde & Co

Outstanding payments can quickly become a serious financial risk for creditors. In the UAE, to successfully recover a debt, a creditor has to not only prove the debt owed to him, but also take the right steps, at the right time, to maximise the chances of actual payment of the debt. Creditors who act early, assess risk properly, and structure their contracts carefully, are far more likely to recover their debt. 

In this article, we outline a practical and commercially focused roadmap for debt recovery, highlighting the particular risks of insolvent debtors, and how creditors can protect themselves before a payment default occurs. 

Step 1: Assessing The Financial Position of the Debtor and Negotiating 

When payment is delayed or missed, creditors often tend to move straight to legal action. However, the most effective debt recovery strategies begin with a realistic assessment of the debtor’s financial position to assess if: 

• The debtor is still actively trading;
• The debtor continues to win contracts or generate revenue;
• There are visible signs of financial distress or restructuring. 

This assessment is critical. A strong legal claim against a debtor with no assets, no liquidity, or impending insolvency, may offer limited chances of recovery. Early engagement, including open settlement discussions, often provides valuable insight into whether recovery is commercially achievable. 

More importantly, settlement discussions can also be used strategically. A properly documented acknowledgment of debt can significantly strengthen a creditor’s legal position, including opening the door to expedited court proceedings. However, settlement agreements must be carefully drafted. Poorly structured concessions, vague payment schedules, or informal wording, can unintentionally weaken enforcement prospects rather than improve them. 

Step 2: Escalating Pressure Prior to Commencing Legal Proceedings 

If settlement efforts do not result in payment, issuing a formal legal notice is often the next step. In the UAE, this commonly takes the form of a notarised legal notice served through the notary public. 

A well drafted notice should: 

• Set out the precise amount claimed;
• Identify the legal and factual basis of the debt;
• Refer clearly to supporting documentation; and
• Impose a defined deadline for payment or response. 

This stage is not merely procedural. It signals seriousness, strengthens the creditor’s litigation position, and creates a clear written record that the debtor was given the opportunity to cure the default. In many cases, this step alone is sufficient to trigger payment, particularly where the debtor wishes to avoid escalation or reputational impact. 

Step 3: Further Escalating to Litigation: Speed versus Complexity 

Where payment is still not forthcoming, court proceedings may become unavoidable. At this stage, creditors will have the option to choose before expedited proceedings, if certain conditions are met, and regular substantive proceedings, if the conditions for expedited proceedings are not met.  

Expedited procedures 

For straightforward, acknowledged, well-documented debts, an expedited route through payment orders may be available. This route is designed for clear-cut claims and can result in judicial determination within a very short timeframe. Speed matters in debt recovery. The faster a creditor moves from default to enforcement, the lower the risk that assets will disappear. 

Regular Substantive claims 

More complex or disputed matters require ordinary civil proceedings. These often involve multiple stages, expert appointments, and the possibility of appeals. While slower, this route is sometimes unavoidable, particularly where contractual interpretation, counterclaims, or disputed performance are involved. Procedural management is essential to prevent unnecessary delay and cost. 

Step 4: Enforcement 

A court judgment or payment order is only as valuable as the debtor’s ability to satisfy it. Effective enforcement requires strategic preparation and intelligence on the debtor’s assets and operations. 

One of the biggest risks in debt recovery arises when the debtor is insolvent, or is approaching insolvency. Once insolvency proceedings are commenced, creditors may face significant limitations, including restrictions on individual enforcement actions, lengthy insolvency or liquidation processes, and the risk of only partial recovery, or no recovery at all. 

In circumstances where the debtor is solvable, enforcement measures may include attachment of bank accounts, restrictions on commercial licenses, engagement with relevant authorities, and other execution steps permitted under UAE law. 

Protecting Yourself Before Things go Wrong 

The most successful creditors do not wait for default to think about recovery. Well-drafted contracts can significantly improve payment security, including through: 

• Clear payment milestones and strict due dates;
• Interest and penalty provisions for late payment;
• Personal or corporate guarantees;
• Advance payments or retainers;
• Security arrangements, where appropriate;
• Carefully drafted jurisdiction and dispute resolution clauses. 

These protections can materially strengthen a creditor’s position if a dispute arises, and may provide additional recovery options even if the debtor later becomes insolvent. 

For additional information or to discuss the best strategy to recover your debt, please contact Sherif Maher: Clyde & Co or Hesham El Samra: Clyde & Co