What recourse is available in the event of an unpaid invoice?
In the current economic context and amid the global Covid-19 health crisis, cases of non-payment of debts have multiplied, and it has become very complicated to recover outstanding receivables.
Faced with these unpaid debts, many companies have found themselves in an especially difficult financial situation.
Until now, the means available to a creditor to recover a debt was to bring ordinary legal proceedings before the Dubai Court. This procedure takes place on an adversarial basis with the debtor and often proves to be very lengthy. The length of the proceedings has often discouraged companies from taking action, particularly to recover smaller debts.
An important development: the payment order, a simple and fast procedure
Since 3/09/2021, the date on which the amendments to Cabinet Decision 57/2018 on the implementation of the Civil Procedure Code came into force, creditors can now benefit from a fast and effective procedure to obtain a payment order against their debtor.
This new procedure is governed by new Articles 62 to 68 of Cabinet Decision 57/2018.
It is a simplified procedure because it does not take place on an adversarial basis with the debtor. It is therefore not necessary to serve a summons on the debtor.
The creditor simply has to submit an application to the Payment Order Judge, specifically established by the Dubai Court.
A liquid, certain and due debt
To be admissible, payment order proceedings must concern a debt that is
liquid (its amount can be assessed),
certain (its existence is undisputed), and
due (the payment deadline has passed).
The creditor must first send the debtor a formal notice to pay the debt within five days of receiving it. If payment is not made within the prescribed period, the creditor may apply to the Payment Order Judge.
The creditor must attach to the application all supporting documents establishing the merits of the claim, in paper or electronic format, such as:
- the contract giving rise to the debt, the purchase order, the invoice issued, and proof that it was sent to the debtor;
- the bill of exchange or a cheque, or any other evidence of the existence of the debt.
According to recent case law from the Court of Cassation concerning payment orders, the order may be issued only if the creditor proves that the debtor accepted or acknowledged the existence of the debt in writing (General Assembly Dubai Court of Cassation nr 2/2021 dated 9/06/2021).
It will therefore no longer be sufficient to provide a simple copy of the contract or purchase order to obtain a payment order; it will also be necessary to submit any document confirming the debtor’s acceptance or acknowledgment of the debt.
If the conditions are met, the Judge issues a payment order within three days of receiving the file.
The payment order must be served by the creditor on the debtor within three months. Otherwise, the payment order becomes void and the creditor will have to initiate new proceedings.
The debtor may file an objection to the payment order within a period ranging from 15 to 30 days, depending on the amount of the debt, starting from its service by the creditor. Thus, currently, for a debt of up to 50.000 AED, the time limit for filing an appeal is 15 days. For a debt exceeding 50.000 AED, the time limit for filing an appeal is 30 days.
The Court of Appeal must issue its decision within one week.
An enforceable payment order
The payment order is nevertheless enforceable and therefore allows the creditor to immediately take compulsory enforcement measures against the debtor. The creditor can therefore take all necessary steps to recover the amounts owed within a relatively short time.
Our partner, Merritt Legal Consultants, is available to provide you with further information on implementing this procedure.
Merritt Legal Consultants works in cooperation with a local law firm for all contentious proceedings and can assist you with your démarches.
Please do not hesitate to contact us by email at
support@merritt.ae.
