• November 7, 2019

    Foreclosure and Legislative Challenges for Islamic Banks

    The way in which Islamic banks (the “Banks”) foreclose on properties they finance due to a default of the customer depends on whether the Banks either: a) register the properties in the names of their customers and mortgage them in favour of the Banks, or b) register the properties under the names of the Banks. In the first scenario, the Banks often sell the properties through an auction pursuant to Law No.14 of 2008 (Clauses 25 and 26) concerning mortgage of properties in Dubai. The process set out by the law is that if a Customer defaults on payment of their debt secured by the mortgage, the Bank will give the customer notarized notice to pay the debt within a maximum period of 30 days. Should the Customer fail to meet this obligation, the Bank may consequently file an application with an execution judge in order to sell the property directly via. an auction. Moreover, the benefit of this process is that the Bank does not need to institute proceedings before the three levels of courts, that is, the Court of First Instance, the Court of Appeal and the Court of Cassation (or Supreme Federal Court as the case may be) in order to sell the property which, at the same time, saves time and money for the Banks in terms of court costs and legal fees. When this concept first started, the Banks were successful in selling the properties by auction because the auction was conducted in the presence of buyers who always bid for best prices available. However, that being said, these auctions were also being conducted online which meant that buyers would also offer low prices for these properties which were insufficient to settle the debt owed by the Customers to the Banks. This sometimes meant that Banks were stuck with unsold properties. It should be noted that the principle for the sale of properties by auction is also recognized by Law No. 3 of 2015 (Clause 53), concerning Regulations of the Real Estate sector, in Abu Dhabi as well. From this, we can conclude that the Banks may only sell properties through an auction in Dubai and Abu Dhabi specifically. Concerning the second scenario, where the Banks register properties in their own names, the title deeds show the owners of the property are the Banks themselves, but it is subject to the terms and conditions of the lease agreement between the Banks (as lessors) and the Customers (as lessees). In this scenario, the Banks cannot apply the aforementioned laws listed above, and they are required to bring proceedings against the Customers in default and ask the court(s) to de-register the lease from the title deeds, permit the Bank to retake possession of the properties and to then claim their compensation – this value would be the difference between the outstanding amount due by the Customer and the market price of the properties. However, this process clearly takes time and causes the Banks to incur court costs and legal fees. That being said, the advantageous aspect of this scenario means that the Banks may sell the properties […]

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  • October 17, 2019

    Basics of Bounced Cheques in Dubai

    In the UAE, a country which continues to be a strategic hub with a rapidly growing economy, writing cheques is one of the common forms of payment; whether you’re buying a car, paying rent or any form of purchases and individual transactions, cheques are commonly used as a form of security. The below outlines important factors that one should familiarize themselves with prior to using a cheque as a form of payment. If a cheque is Dishonored/Bounced: When a cheque is dishonored, the drawee bank immediately issues a ‘Cheque Return Memo’ to the payee mentioning the reason for non-payment such as insufficient funds, the incorrect date mentioned on the cheque, signature mismatch, mismatch of the amount and figures, etc. Bearer of the cheque can resubmit the cheque within six months of the date on it if he believes it will be honored the second time. However, if the drawer fails to make a payment, then the beneficiary has the right to prosecute the former. Criminal Legal Action The payee may sue the defaulter/drawer for the dishonor of cheque. To file a criminal case for a dishonored cheque, the beneficiary must initiate the process by formally registering a complaint with the police of the respective emirate against the drawer. In Dubai, the beneficiary can avail the service of the Dubai Police mobile application in lodging such complaints without stepping foot in a station. Accordingly, the police shall communicate with the Drawee Bank to verify the signature of the drawer of the cheque. If the drawer settles the matter by paying the amount of the bounced cheque, no further legal proceedings will be taken. Otherwise, the Police will register a criminal complaint against the drawer. Since issuance of a bad cheque is a criminal offense in the UAE, upon registering the criminal complaint, a travel ban on the drawer will be issued automatically. This will ban the drawer/accused from leaving UAE or he will be detained on arrival if he enters the UAE. The said travel restriction can be removed only upon settlement of the amount of bounced cheque, or a sentence has been served. If the matter remains unresolved, the police will refer the complaint to the public prosecution. Upon receiving both parties’ contentions, if the public prosecutor finds the existence of a criminal basis, he shall transfer the case to the criminal court. The criminal court, based on the evidence submitted by the parties, will issue its judgment. The judgment will either entail a fine which is assessed by the court at its sole discretion (based on the conclusion reached and the value of the cheque dishonored) usually ranging between AED 1,000 to AED 30,000 or more or imprisonment between one year to three years. However, in the Emirate of Dubai, Law no. 1 of 2017 called ‘Criminal Order Law’, enables the Dubai Public Prosecution, without the need for the case to be transferred to the Criminal Courts, to issue a criminal judgment which will be in the form of fines but conclusive in the subject matter of the case. This covers dishonored cheques for a value not exceeding AED […]

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  • October 8, 2019

    Is job offer letter legally binding on the employee and the employer?

    A Job Offer Letter: It is the intention of an employer to appoint a prospective employee under the conditions and features that are outlined in a job offer. This offer is generally prepared in writing in order to prove its content easily, and it may include terms of contract and spell out specific details of the potential employee’s role such as salary, benefits, description of the position and any pertinent details concerning employment conditions. Other details would be generally discussed upon agreement and the signing of the employment contract which would be conducted by the two parties. Structure of a Job Offer Letter: The job offer may be in the form of a letter on the company or employer’s official letterhead, which is then to be signed and sealed by the company stamp. This letter may be sent to the prospective employee by regular mail, hand delivery, by e-mail, fax or by social media such as WhatsApp or Facebook. Alternatively, it may be in the form of an e-mail sent from the employer’s official e-mail and electronically signed or signed by the head of Human Resources department or by the company’s general manager or any person who has the task of selecting and appointing employees. All these modern means are legally considered as a proof. Legal Obligation of Job Offer Letter of Both Parties: The job offer issued by the employer to the prospective employee is considered an affirmative acceptance issued by the employer, which then is awaiting acceptance from the prospective employee. If the prospective employee amends the job offer letter, this shall be deemed a new affirmation by the prospective employee awaiting acceptance from the employer, in accordance with the general rules of contracts. Alternatively, if the prospective employee agrees with what has been included in the job offer letter, then the contract is concluded, and any other details shall be governed by their agreement in the employment contract. When Employment Contracts Supersede the Job Offer Letter: It is known in contracts that the subsequent contract supersedes the previous. In other words, if the parties in the employment contract agree on terms and conditions which vary or which are in conflict with the job offer letter, in this case, what prevails between the parties is the employment contract as it has been concluded after the job offer letter. This is what has been set out in the Dubai Courts judgements in terms of what is agreed upon in the employment contract is considered in determining the rights and obligations of both the employer and the employee. What has been indicated in the job offer letter is reproduced in the employment contract. The new contract regulates the relationship between the two parties, which means that they may intentionally agree to exclude what was provided or was in conflict with the terms and conditions in the previous contract. (Dubai Court of Cassation judgment No. 182 of 2016, Labor Appeal issued on 10/01/2017) .In the case that the employment contract does not mention some of what has been agreed upon in the job offer letter, the contract shall take into account […]

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