UAE Clarifies Previous Uncertainty Over Payment Orders | K&L Gates LLP
The payment order process is intended to provide an expedited means of obtaining a payment judgment in straightforward debt cases and helps creditors seek redress in a quick and cost effective manner. Recent changes to Cabinet Resolution No. 57 of 2018 on the Regulation of Federal Law No. 11 of 1992 (Cabinet Resolution No. 57 of 2018), which entered into force on September 3, 2021, clarified the previous uncertainties regarding payment orders and confirmed the jurisdiction of the court of first instance to rule on claims that would otherwise meet the requirements of a payment order.
What is a payment order?
Pursuant to Articles 62-68, Chapter 2 (Payment Orders) of Cabinet Resolution No. 57 of 2018 (subsequently amended by Cabinet Resolution No. 33 of 2020), the United Arab Emirates (UAE) introduced an expedited procedure for seeking judgment on an ex parte basis for payment of an amount owed to a creditor whose entitlement to payment has been confirmed electronically or in writing. Articles 62, 64 and 66 were recently amended by Cabinet Resolution No.75 of 2021.
Article 62 (1) of Cabinet Resolution No. 75 of 2021 amending certain provisions of Cabinet Resolution No. 57 of 2018 (Cabinet Resolution No. 75 of 2021) provides that, as an exception to the general filing rules of cases before the Court of First Instance, Chapter 2 (Payment Orders) applies if the creditor’s right is proved, electronically or in writing, is immediately payable and the entire claim consists of a debt of a specified amount, or movable property of a specified type and quantity. In accordance with Article 62 (2), Article 62 (1) applies if the right holder is a creditor holding a commercial paper (such as a promissory note or a check) or if the financial claim relates to the performance of a commercial contract.
Originally, a payment order was only available when the creditor requested payment of a fixed debt, plus interest. However, Article 62 (3) confirms that the payment order procedure does not prevent a creditor from claiming compensation or interest, or from requesting a precautionary measure.
The procedure for obtaining a payment order
Article 63 of Cabinet Decision No. 57 of 2018 (which has not been amended) sets out the procedure to be followed by creditors wishing to request a payment order. First, the creditor must serve the debtor with a formal notice to pay the amount due within a prescribed period of at least five days (Request for payment). The demand for payment can be served by any means specified in Cabinet Resolution No. 57 of 2018. However, the more prudent option is to issue the demand for payment through the court or notary, as it is then difficult for a debtor to refuse service.
After the deadline without payment, a request for a Payment Order can be filed with the Payment Order Judge. The request must include the details of the ordinary course claim, but must also include the debt obligation and proof of the payment request.
The fee for filing a payment order is the same as the normal court fee, which in Dubai is currently 6% of the claim value up to a maximum of AED 40,000.
Article 63 (4) of Cabinet Decision No. 57 of 2018 provides that the payment order must be granted within three days of the filing of the request and must indicate the amount to be paid by the debtor. In accordance with Article 64, as amended by Cabinet Resolution No. 75 of 2021, if the request is rejected, the Court is required to render a reasoned decision. If the decision relates to the execution of a commercial contract, a reasoned decision must be rendered in all cases (even if the request for a Payment Order is accepted).
If the payment order is granted, in accordance with Article 65 of Cabinet Decision No.57 of 2018, the debtor must be informed within three months from the date of issue, failing which, the payment order is considered null. ab initio.
Is the Payment Order a compulsory procedure?
Article 17 (8) of Cabinet Decision No. 57 of 2018 stated: âIf the Case Management Office receives a complaint which meets the conditions for issuing the payment order provided for in Article (62) hereof, the Case Management Office immediately refers it to the Judge-Commissioner for referral to competent judge having jurisdiction over the payment order, in order to rule on the complaint within the time limit provided for in article (63.4) hereof. “1
The General Assembly of the Dubai Court of Cassation also determined, in Decision No.2 of 2019, that the payment order process is a mandatory procedure and that creditors are not allowed to pursue a claim on the merits. in the usual way if the criteria of a payment order are fulfilled, unless there is a serious dispute over the proof or the amount of the claim, in which case the case is admissible in the court of first instance.
In accordance with the decision of the General Assembly, the Court of First Instance has rendered a number of judgments dismissing claims on the merits when the criteria for an order for payment are met. These creditors had either to bear the costs of appealing this decision to the court of appeal, with the risk that the judgment would be upheld, or to accept the judgment (that is to say that it would become final) and then file a request for a payment order, without any certainty that it would be accepted.
Article 68 (bis) of Cabinet Decision No.75 of 2021 seems to have resolved this issue by expressly confirming that the Court of First Instance will be competent to hear claims brought before it, even if the conditions for obtaining a payment order have been fulfilled. Article 68 (bis) states: “Notwithstanding the provisions of this chapter, if the case brought before the court meets the conditions for obtaining an order for payment, it is decided according to the rules and procedures provided for the resolution of the [regular] case. “
This is a welcome development, as it should reduce the risks and procedural uncertainty previously faced by creditors, especially in cases where it was not necessarily clear whether the claim met the criteria for a claim. payment order. These creditors can now seize the Court of First Instance without risk of rejection of the request because the Court considers that it meets the conditions for a payment order but that the procedure for obtaining a payment order has not been completed. been followed.
The rights of the Parties to appeal or contest a Payment Order
Article 66 of Cabinet Resolution No. 75 of 2021 provides for two mechanisms for contesting a payment order. First, in accordance with Article 66 (1), if the value of the payment order is below the threshold for appealing decisions of the court of first instance to the court of appeal (currently AED 50,000), the parties may lodge a complaint with the Judgment of the payment order against the payment order within 15 days from the date of notification to the debtor of the order, or, in the case of the creditor, within 15 days from from the date of issue of the decision. The decision on the grievance is final and cannot be appealed against. Second, if the value of the Payment Order is equal to or greater than the minimum threshold, in accordance with Article 66 (2), the parties may appeal the Payment Order within 30 days.
The procedure for appealing a payment order is slightly different from an ordinary appeal. In accordance with Article 66, paragraph 3, of Cabinet Resolution No. 75 of 2021, the grounds for appeal must be submitted at the time the appeal is lodged; otherwise, the appeal is dismissed. This contrasts with an ordinary appeal, where an applicant has the right to submit his full grounds for appeal until the date of the first hearing set for the exchange of notes and memoranda in response to the case manager (article 162, paragraph 3, of Federal Law No. 11 of 1992 on the Code of Civil Procedure).
The court of appeal examines the appeal in chamber within one week of the notification of the appeal. The Court of Appeal must assess the merits of the request and render a final decision and cannot refer the case back to the Court of First Instance. If the Payment Order is rejected for failure to comply with procedural requirements, the creditor’s only other recourse is to introduce a new claim.
However, as an exception to this rule, Article 66 (4) of Cabinet Resolution No.75 of 2021 expressly provides that, if the request has been submitted to the court of first instance in the usual manner (rather than as a request Order) but has been transferred to the Payment Order Judge, in the event that the Court of Appeal finds that the conditions of a Payment Order are not actually met or rejects the Payment Order for of the grounds on the merits, it refers the case to the Court of First Instance to rule in the ordinary manner.
The judgments of the Court of Appeal relating to payment orders may be appealed to the Court of Cassation.
Notwithstanding the right of a debtor to file a claim or appeal, payment orders are subject to the rules of expedited execution, which means that the obligee can begin execution immediately.
1 When a new case is brought before the courts of the United Arab Emirates, the case management office first handles the case (this includes accepting memorandums and response briefs from the parties and preparing the case) before assigning it to an appropriate judge.