In the UAE, debt collection can quickly become a complicated process. This is, in part, due to the different types of businesses from free zone, 100% foreign-owned companies to mainland companies which are 100% owned by UAE nationals or a foreign owner with 49% ownership and a UAE national with 51%.
However, with the mainland company owned by both a national and a foreign investor, the UAE national has no liability or responsibility for the management, operation, and debt of the company. This can make it extremely challenging to try to complete debt collection in Dubai if the foreign owner has left the country.
New Bankruptcy Laws
The bankruptcy laws in Dubai and the UAE are relatively new. They were brought into law in September of 2016, and they are much more restrictive than bankruptcy laws in the UK, USA or throughout most of the rest of the world.
This becomes more complicated as most business debt cases in the UAE are heard in civil law courts or in civil courts with jurisdiction in free zones. However, some free zones also have their own legal processes, which will take priority based on the governing framework for debt collection in Dubai within the specific free zone.
While in many areas of the world, debt collection starts with filing a lawsuit, in Dubai, it starts with direct negotiations between the debtor and the creditor. This includes a formal demand letter and often multiple meetings.
In some cases, there may be more formalized mediation if direct negotiations fail in talks on debt collection in Dubai. This can be a lengthy process and have legal representation may be essential in moving the matter forward. Arbitration may also be considered.
When cases cannot resolve through negotiation, mediation or arbitration, the court proceeding will be scheduled. This will be completed in Arabic and parties to the case will require experienced legal advocates throughout the process. Contact STA Law Firm for more information!