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Methods to Resolve Disputes in Debt Collection

As per the 2018 Global Ranking on Debt Collection, it is noted that debt collection in the UAE is mostly difficult. It is often seen as time-consuming and costly for any business in the UAE. In the UAE economy, overdue debt and payments are common for almost every other business. Debt collection is recovering overdue payments made to an individual or a company; it is retrieving the overdue debt from the debtor. It is common for businesses to recruit a company or a law firm that specializes in debt collection.

Debt Collection Through Alternate Dispute Resolution

When a law firm is appointed for debt collection, they suggest various legal ways to deal with debt collection. A lawyer will often suggest the creditor to consider an amicable solution to debt collection, which is through Alternate Dispute Resolution (ADR). ADR helps resolve disputes outside the Court through Meditation, Negotiation, and Arbitration. This method is most suited for creditors who want to get out of the troublesome procedure of debt collection at the immediate. As this method works outside the court, it fastens the procedure of debt collection and concludes the process on mutually agreed terms. The UAE law encourages ADR for debt collection as it provides a mutually agreed solution to both the parties.

While ADR seems like the best solution for such cases, it is often difficult to reach a mutually agreed decision, and in certain cases, the amount of debt is higher than usual, so there is a need to present the case in the lawsuit. Thus, after suggesting ADR as a solution, lawyers often go ahead with the Court procedures for debt collection.

Also Read: How Debt Collection Can Help You to Retrieve Commercial Debt

Debt Collection Through Court Proceedings

  • The UAE follows the Civil Law system, unlike other Common Law jurisdictions, where laws are developed through precedents. The UAE laws are drafted for every legal issue, and only those explicit laws are followed in the Court.
  • A claim needs to be brought forward, in this case, by the lawyers representing the creditors (claimants) to the Reconciliation and Settlement Committee which is appointed under Federal Law No 26 of 1999 by the Ministry of Justice. This Committee examines all the claims for civil and commercial disputes.
  • If the parties fail to reach a settlement in front of the Committee, the claim will then be filed to a relevant Court.
  • The claim will be filed in Arabic language and filed under the basis of a dispute resolution and remedies need to be sought.
  • All submissions are initially heard in the Court of First Instance, and a suitable judgement is given. This judgement can be appealed in the Court of Appeal.
  • The Court of Appeal rehears the submissions and further appeals, after which the Court delivers its judgement
  • The appeal can be brought to the Court of Appeal within 30 days after the judgement from the Court of First Instance.
  • The judgement of the Court of Appeal remains on both the parties after the proceedings, and after this appeals can only be made on certain points such as monetary limits. This appeal will be heard in the Court of Cassation.
  • The time limit to file for an appeal to the Court of Cassation is within 60 days.
  • Failure to follow the set time limits will result in the Court of First Instance judgement being enforced.
Also Read: UAE Bankruptcy Law for Restructuring Debts

Debt collection through court proceedings is a very long and troublesome procedure, and often judgements may not be favorable to both parties even after the appeals. It is for this reason, debt collection through ADR is more suitable in the UAE. By having access to ADR, both the parties can put their views forward, and an amicable solution can be found in the interest of both.

Hassan Humaid Al Suwaidi., LL.B. is a Senior Partner in HHS Lawyers. He has 20 years of experience dealing with high-value and complex cases. Frequently featured in local and international legal directories and commended for his ability to attain favorable outcomes for clients, Hassan has been involved in some of the largest legal settlements. A major part of his work is providing expert legal advice on UAE legislation and acting for individuals and businesses during disputes and litigation.