General Assembly Decision No. 9 of 2024: A Paradigm shift in debt enforcement
Dispute Resolution / UAE
Nasser YahiaSenior Counsel,Litigation
The recent decision by the General Assembly of the Dubai Court of Cassation, encapsulated in Decision No. 9 of 2024, marks a pivotal shift in the legal landscape concerning the enforcement of debt-related judgments. This decision allows for the imprisonment of debtors without requiring creditors to prove the debtor's solvency, a significant departure from previous legal principles. The decision aligns with the broader legal framework established by Article 319 of the Civil Procedure Code, which allows for the detention of a solvent debtor who fails to comply with the execution writ. However, Decision No. 9 of 2024 goes a step further by allowing for the detention of debtors without the need for creditors to prove solvency in specific cases, such as when the debtor fails to make installment payments or provide required documents. This article explores the implications and significance of this development, its impact on creditors and debtors, and the broader legal context.
Historically, the enforcement of debt judgments in Dubai required creditors to prove the solvency of debtors before any arrest or detention orders could be issued. This new principle, established less than a year ago, created numerous complications and delays in the enforcement process. Creditors faced significant challenges in collecting debts, leading to a backlog of enforcement cases and enabling debtors to evade payment. This situation had adverse economic implications, particularly for banks and large companies, which struggled to recover dues from clients exploiting this judicial principle.
The recent Decision No. 9 of 2024 marks a significant shift in the approach to debt enforcement. The General Assembly of the Dubai Court of Cassation has now allowed for the imprisonment of debtors or their legal representatives (usually the company director) in specific cases if they refuse to pay the installments they committed to or fail to provide the required documents as mandated by the execution court. This decision effectively shifts the burden of proving solvency from creditors to debtors in specific cases.
The new principle is expected to facilitate the debt collection process by granting the execution court the discretion to issue arrest warrants or imprison debtors for their failure to pay. This change is seen as a positive development, as it simplifies the collection process and reduces the opportunities for debtors to evade their obligations. By transferring the burden of proving the reasons for non-payment to the debtor, the decision aims to improve the enforcement of judgments and ensure that creditors can collect their dues more efficiently.
It is essential for lawyers and legal practitioners to understand the legislator's intent and the powers established by the legislator in founding the General Assembly of the Court of Cassation. It is argued that these principles cannot be amended or reversed; however, the principles of the General Assembly of the Dubai Court of Cassation are adaptable to reflect the changing circumstances of the legal landscape and market requirements.
As lawyers, it is not only our duty but also a right of the community to advocate for the submission of requests to the General Assembly of the Dubai Court of Cassation, either directly or indirectly, to amend or reverse a principle issued by the General Assembly or even to establish a new principle that aligns with the realities of work and the general conditions surrounding society. This is a fundamental role for lawyers, as we are deeply involved in legal disputes and are well-positioned to identify the problems and difficulties within the legal system or the applicable laws.
The decision grants execution courts the discretion to issue arrest warrants or imprison debtors for their failure to pay. This discretion is crucial in ensuring that the enforcement process is fair and just, taking into account the specific circumstances of each case. Execution courts can now act more decisively in favour of creditors, further facilitating the debt collection process.
The issuance of Decision No. 9 of 2024 by the Dubai Court of Cassation marks a significant shift in debt enforcement. It allows debtor imprisonment without creditors needing to prove solvency, aiming to streamline collections and reduce the impact of unpaid debts on banks and businesses. Legal practitioners must adapt to this new approach while advocating for reforms aligned with current economic and legal dynamics.
For further information,please contact Nasser Yahia.
Published in December 2024
