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UAE Payment Order Developments

  • UAE
  • Litigation and dispute management

14-09-2021

On 3 September 2021, two new legal instruments came into effect in the UAE: Federal Law 15 of 2021 amending the UAE Civil Procedure Code (Federal Law 11 of 1992); and Cabinet Decision No. 75 of 2021, amending Cabinet Decision No. 57 of 2018 (which in itself amended the Civil Procedure Code). The legislation introduced a variety of changes, but those expected to attract the most immediate attention are the provisions relating to the widely debated subject of Payment Orders (“PO”).

POs have been quite the hot topic in the legal community as Cabinet Decision No. 57 of 2018, (subsequently amended by Cabinet Decision No. 33 of 2020), provided that where a creditor’s claim satisfies the relevant PO conditions, it had to be submitted as a PO application, and not a substantive claim. The claimant had no choice over how to proceed. A number of judgments were then issued in which the Court expressly stated that when litigants filed a PO claim using a different method (i.e. by issuing a substantive claim before the Court of First Instance), then it was within the Court’s discretion to refuse to accept the case for failing to comply with the prescribed procedure.

As a result, claimants were finding themselves on the receiving end of adversejudgments, having been deemed to have incorrectly issued substantive claims instead of PO applications. In such circumstances, claimants were then left with two options, either appeal the court decision and incur the costs of doing so at the risk of a second rejection; or file a PO application, on the basis of the first judgment which would then become final (if no appeal was filed) and run the risk of the PO application being rejected for failing to meet the legal criteria. Article 68 of Cabinet Decision No. 75 of 2021 appears to address this issue, establishing the substantive Court’s authority to consider PO applications as part of a substantive court claim, pursuant to the following: “As an exception to the provisions of this [Payment Order Chapter], if the case, which is being tried before the Court satisfies the conditions required for the issuance of a payment order, the court shall dispose of it pursuant to the rules and procedures of disposing of cases”.

Consequently, it appears that from now on, cases issued before the Court of First Instance as substantive claims, but deemed by the Court to satisfy the relevant PO criteria, will still be considered and disposed of as normal. The case will not be dismissed, which is a welcome development, particularly for those claimants who remain unsure as to whether or not the PO criteria will be deemed satisfied. It should also assist in circumstances where a defendant has previously been unresponsive but then subsequently changes its position upon receipt of the claim and defends the proceedings. The option to file a PO claim still remains available to litigants and the criteria remains unchanged.

These amendments will no doubt be considered a positive step forwards in the legal community, providing legal certainty and addressing the risk previously faced by litigants of having their substantive claims dismissed for failing to use the PO route when the criteria was deemed to apply.