A Payment Order is a judicial mechanism designed to expedite the process for creditors to recover debts. This process is commonly used for debts arising from financial transactions, unpaid invoices, or defaulted contractual obligations, ensuring a fast-track resolution for clear-cut claims. It allows creditors to secure ex-parte judgments, meaning the judgment is issued without the need for prior notice to the debtor, because there is clear and compelling evidence of the debt.
Payment Order: A Tool for Debt Recovery in the UAE
One of the significant challenges faced by businesses in the UAE is recovering money owed by their counterparts. As a civil law jurisdiction, the UAE’s legal system places significant importance on procedural compliance, making it challenging for companies to recover outstanding payments when documentation is incomplete or lacks clarity.
Through the mechanism of the Payment Order, initially introduced through the Civil Procedure Law (Federal Law No. 11 of 1992) and later amended, companies now have a relatively effective way to recover outstanding debts. Subsequent amendments, including Cabinet Decision No. 57 of 2018, Cabinet Decision No. 33/2020, and Cabinet Decision No. 75/2021, have streamlined the process, making it more efficient for creditors to obtain a judgment for payment. These updates ensure that creditors can more easily pursue debt recovery, provided the necessary documentation is in order and the debt is clear and specified.
This blog is a part of Debt Recovery FAQ: UAE Laws, Procedures, and Best Practices
What is a Payment Order?
A Payment Order is a judicial mechanism that enables creditors to obtain ex-parte judgments issued without prior notice to the debtor when there is clear and compelling evidence of debt. It is especially effective for uncontested claims, including those stemming from financial instruments or commercial agreements.
Article 62, as amended by Cabinet Decisions No. 33/2020 and No. 75/2021, provides a streamlined framework for creditors to leverage Payment Orders effectively. This judicial mechanism is designed to facilitate expedited recovery of uncontested debts under specific conditions:
- The creditor’s right must be established in writing or electronically. The clear evidence of debt is necessary.
- The claim must relate to a specified debt amount or a movable asset with a clearly defined type and value.
- Applicable to cases involving commercial papers or enforcement of commercial contracts.
- Creditors can include interest claims and seek precautionary measures without affecting the Payment Order process.
Key features
- The Payment Order mechanism applies to debts arising from financial instruments or commercial contracts acknowledged by the debtor.
- Creditors must first issue a formal demand notice, providing the debtor five days to settle the debt.
- The creditor submits an application to the Court of First Instance, supported by evidence of debt acknowledgment and a statement of claim.
- Judges are required to issue a decision within three days of receiving the application.
- If approved, the Payment Order must be served on the debtor within three months to remain valid.
- Debtors have 15 days to file an appeal.
- If the appeal is dismissed, creditors can enforce the Payment Order through execution courts.
The Payment Order mechanism offers several benefits to creditors, including the ability to acknowledge debts through electronic means, such as email, making the process more efficient. It also extends to debts arising from commercial contracts, not just financial instruments, broadening its applicability. Furthermore, creditors can claim interest and pursue provisional measures, such as asset attachments, simultaneously, providing a more comprehensive approach to debt recovery.
Despite its efficiency, the Payment Order mechanism faces challenges such as high court fees for large claims, delays in serving notices to untraceable or insolvent debtors, and time-consuming execution processes. While Payment Orders offer a faster alternative to traditional litigation, their success relies on meeting eligibility criteria and procedural compliance.
Streamlined and efficient solution for businesses
The Payment Order mechanism offers a streamlined and efficient solution for businesses seeking to recover uncontested debts in the UAE. With its clear procedural framework and significant benefits, including faster resolution and the ability to claim interest and provisional measures, it presents a valuable tool for creditors. However, to ensure success and avoid common pitfalls, it is essential to meet eligibility requirements and adhere to procedural guidelines.
