Don’t Run Away From Your Debts In Dubai

We are often approached by people who have, for one reason or another, fled Dubai (or anywhere in the UAE) leaving behind debts such as a loan from a bank.

It is understandable why people flee from the jurisdiction of the UAE because it is a criminal offence to owe a debt there.  This quite often leads to debtors being arrested.  UK ex pats decide that rather than going to prison, they will return to the UK to walk away from the threat of incarceration and also the debt itself.

However, the debt does not go away and increasingly, debtors are being sought out by law firms in the UK who have been instructed by the banks in the UAE.

Ex pats may believe that as they have left the jurisdiction of the UAE, then the bank cannot touch them unless they return to the UAE.  This is not correct.

Ex pats may also believe that if 6 years passes, the debt dies.  This is because in England and Wales, the Limitation Act means that any debt over 6 years old is effectively unrecoverable (there are some conditions to this such as no payment or acknowledgment of the debt being made for a period of 6 years).   Ex pats thinking that the 6 year period is in their favour are incorrect.

When a loan agreement is signed in the UAE, there will be a jurisdiction clause.  Nearly all of the time, that jurisdiction clause will state that the bank can enforce the agreement in any jurisdiction they choose to.  This means, leaving the UAE does not protect you from being sued for the debt.

The part that really catches people out is the Foreign Limitation Periods Act 1984.  This legislation is applicable to anyone in England and Wales.  Put simply, it means that a creditor (such as a bank) can issue proceedings in England and Wales using their own limitation period, not the 6 year Limitation Act that people believe they are protected by.

In the UAE, they have a Civil Code.  This is similar to our own Civil Procedure Rules.  Article 473 of the UAE Civil Code sets out the limitation periods.  It states:-

‘A right shall not expire by the passage of time but no claim shall be heard if denied after the lapse of fifteen years without lawful excuse, but having regard to any special provisions relating thereto.’

In layman’s terms this means the limitation period for civil debts in the UAE is 15 years.  Therefore, the banks rely on the jurisdiction clause in the contract to sue a debtor in the UK.  They can also sue you up to 15 years after you have left the UAE.

Surprised?  Well, this is the law.  It has been challenged many times in Court and the law is correct.  Unfair?  Maybe.  To be pursued for a debt up to 1 years later does of course seem unfair and comes as a shock – as does the interest and charges that will have been added to the debt since you left the UAE.

The banks are becoming increasingly aggressive with debtors who left the UAE.  If you are contacted by a law firm in the UK in respect of a debt in the UAE, my advice is not to ignore their correspondence as ultimately, the law firm with issue proceedings against you in the Court.  The longer the matter goes on for without negotiating a settlement figure, the higher that law firms costs will be and under the contract you entered into with the bank, the legal fees of the law firm are also recoverable from you.

Although the above seems to lead to the inevitable, we do regularly advise both individuals and banks as to the potential merits or hurdles faced and have successfully represented debtors and creditors relating to UAE debts.