Legal Actions You Can Take When a Customer Doesn’t Pay in the UAE

26 June
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It's not something you enjoy doing: you do the work, deliver the products or services, send the invoice, and then: nothing. Days, then weeks, go by. You follow up, first in a polite manner, then somewhat more assertively, but still no payment. No matter if you are a freelancer, small business, or even larger business; one of the most irritating parts of running a business is dealing with customers who do not pay.

In the UAE, where contracts are respected, and business etiquette is paramount, paying for a product or service is not simply bad business; it may be a legal issue. So, what do you do for your debt recovery in Dubai when a client doesn’t pay?

Let's break down - step by step - the legal options available to you so you can recover what is owed in the proper channels.

First Step: Communication

Before we launch into legal processes, the first and simplest thing to do is communicate. After all; not every case of failure to pay is malicious, or even intentional. There may be an internal account in error, financial problems, or the client may just forget. It is a good idea to reach out.

Here's what you can do first:

Send a polite reminder email or make a quick call.
Attach the invoice again, just in case it was misplaced.
Give them a reasonable deadline for payment.

If this doesn’t do the trick, don’t worry. At least you’ve tried the soft approach first.

If Communication Fails: Send a Formal Demand Letter

If informal communication does not yield results, the next procedure will be to send a formal demand letter. The demand letter will outline the debt, refer to the original terms of the contract or agreement to pay, provide a final deadline to pay and is a more formal demand that demonstrates you are able to continue the discussion in a legally enforceable manner if needed.

Many times, when a client receives a formal demand letter from a Dubai debt collection agency or from you, this will prompt the client to pay the overdue amount. This can be especially effective if the debtor understands that a legal process is imminent. You might also want to remind the customer about the terms of the agreement, including any penalty or interest that was agreed in the event of a late payment. As an example, you may have agreed to an interest rate of 5% monthly on outstanding amounts. If you remind the client about these terms, they may be more likely to resolve their debt quickly.

Legal Action: Filing a Civil Claim

If all else fails, you may need to consider a more formal legal process by bringing a civil claim. In the UAE, the courts can deal with commercial disputes, and if the debtor fails to pay an invoice on time, this is a matter of breach of contract. A civil claim is relatively easy to file, especially if you have all the paperwork you need to support your claim.

Below is an outline of a civil claim:

Collect Your Evidence - All paperwork, including contracts, invoices and communication showing you have approached the customer's contact has to be gathered.
Getting a Court to Consider Your Claim - You will have to file your claim with the relevant court of the emirate where the debtor is located. In Dubai, this would be Dubai Courts.
Court Appearance - If your debtor does not enter into a settlement prior to the hearing, the court will arrange a hearing and both parties will present their claims and evidence to the court.
Decision - If the court orders in your favor for the money owing, your debtor will have a legally binding court order to pay.

The process should be undertaken by a UAE debt collection agency or any professional law firm in Dubai focused on commercial disputes. The process does help to eliminate some of the headaches of dealing with a debtor.

The DIFC Small Claims Tribunal

If you’re dealing with a smaller debt (less than AED 500,000), the DIFC Small Claims Tribunal (SCT) might be an ideal route. Located within the Dubai International Financial Centre (DIFC), this tribunal operates under English common law, which is often simpler and faster for businesses and individuals from abroad.

Here are a few reasons why businesses love the SCT:

No need for a lawyer
Faster process
Remote hearings
Clear, transparent judgment

What Happens When There are Bounced Cheques?

Bounced cheque is a serious issue in the UAE and can lead to a criminal charge. Fortunately, civil reform has shifted the majority of bounced cheque cases from the criminal courts to the civil courts, although there can be a small number of fraudulent cases that will result in criminal charges.

So, what happens when your clients cheque has bounced?

You can file a case with the appropriate court: You may file a civil or criminal case, in regard to the particulars of the bounce.
You can contact a debt collector: Debt collectors in Dubai team can help expedite the process and help follow the right processes regarding bounced cheques.

Regardless of whether you choose the civil or criminal alternatives, it is best to act as soon as possible. Delay can reduce the chances of getting your money back.

Consider Working with a Debt Collection Agency

Sometimes, dealing with defaults isn’t just about following the legal steps yourself. Many businesses and individuals find that outsourcing the task to professionals helps them recover payments more effectively. This is where a debt collection Dubai service comes in.

A good debt collection agency can help you in:

Issue demand letters: A professional debt collection agency will have experience in writing demand letters and legal notices that yield results.
Take you to court: A good agency will be there every step of the way. Don’t waste time and money if you can have a professional debt collector handle it for you!
Enforce orders: Even if a debtor has the judgment against them, if they refuse to pay, the agency can help enforce the judgment by making sure the court order is followed.

In Conclusion

If a client is default on the payment terms that were established when they purchased product or service from you, don’t panic! The basic legal framework of the UAE has several ways for debt recovery. You can escalate recovery from simply communication or demand letters, to civil claims or even getting help from the DIFC Small Claims Tribunal.

Although, sometimes it’s better to let the experts do the work for you. Whether you choose through the route of a legal claim, or a specialized Dubai debt collection agency, make sure to act fast and efficiently to protect your business.

Recovering a debt - do you need help?

If you have a defaulting client that you need help collecting from, Alqada Claim Recovery Services can help you reclaim. We have developed a specialized expertise in debt collections Dubai, and can see you through the whole process from start to finish.

Choose the right debt recovery agency is very crucial process. Alqada believes in supporting clients on each step during the Debt recovery process. There are following list of steps involved in the Debt recovery process. Follow the given below articels you can know more about recovery process visiting these links.