Arrest Warrants – Could you avoid imprisonment for inability to repay a debt?
Last month, the Dubai Court of Cassation under the Decision no. 4 of 2023 (the “Decision”), provided a new interpretation principle of the article 319 of the Federal Decree-Law No. 42/2022 (the “Civil Procedure Law”).
Prior to this Decision, if a debtor was required to settle his debt by a writ of execution (e.g. a judgment), the Execution Judge would issue an arrest warrant against the debtor to compel him to settle such debt. In the event of non-payment, the debtor was placed in provisionary detention. Pursuant to article 319 (1) of the Civil Procedure Law, the debtor needed to prove his insolvency in order to avoid such sanction.
The Decision is essential, the Dubai Court of Cassation now sets the principle that in order to issue an arrest warrant against the debtor, the creditors need to prove that the debtor has sufficient funds to pay the debt. Indeed, the creditors shall demonstrate that the debtor possesses the means to settle the debt but is deliberately evading repayment by concealing or illicitly moving their assets (i); or that the debtor ceases repaying scheduled debt installments without any valid justification (ii).
The Dubai Court of Cassation has therefore imposed a condition on the issuance of arrest warrants, making them more difficult to obtain for creditors.
In practice, creditors are likely to find it challenging to demonstrate that the debtor is solvent, thus limiting the risk of the debtor being imprisoned. However, the rights of the creditors, still being able to request an arrest warrant against the debtor remain protected. Therefore, the new principle offers a good balance between the rights of the creditors to get paid and the protection of the debtors’ individual rights.
This decision is part of a global trend to continue to encourage foreign investments in the United Arab Emirates. This principle is in line with recent measures in this direction such as the decriminalization of bounced cheques in some situations.
This flash is providing a general guidance regarding arrest warrants, for specific advice and/or further information, please contact Dumon Partners at: info@dumon-partners.com.
DUMON PARTNERS is an international law firm registered with Abu Dhabi Global Market under license no 000008480 and the Dubai International Financial Center Courts (Part I Part II), one stop shop in the MENA region, France and Switzerland, combining a market-leading transactional, commercial law & tax practice. We advise SMEs, family businesses and large enterprises through most key industries at all stages of their corporate development whether locally or globally.
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