United Arab Emirates Collection Profile



PDF icon   Read the full Collections Profile
PDF icon   Read also the EH Economic Research Country Report
World Bank Doing Business
2014: 23/189 countries
2013: 26/189 countries

Complexity of collecting debt:

Notable High Very High Severe

Executive summary

  • Whilst the payment behavior of large domestic companies is generally good, dealing with small and medium size businesses may represent a significant risk of non-payment. Since insolvent debtors may be sentenced to a prison term,  their tendency to disappear when things turn wrong is significant.
  • The legal framework is complex and the courts tend to lack independency and reliability whilst procedural delays and costs may be prohibitive.
  • Insolvency law does not provide much support when it comes to debt recovery: a debt renegotiation mechanism has been put in place but in practice it remains largely untested and liquidation prevails, thus leaving no chances of recovery to the creditors.
General Information GENERAL INFORMATION arrow-transparent
Collection Practices COLLECTION PRACTICES arrow-transparent
Court Proceedings Court PROCEEDINGS arrow-transparent
Insolvency Proceedings INSOLVENCY PROCEEDINGS arrow-transparent
General Information 


Days Sales Outstanding (DSO)

Payment terms in the UAE have long been 30 days, but they increasingly tend to be extended up to 60 days. In 2015, the average DSO for listed companies was 62 days and vary greatly from one sector to another. Large Oil & Gas, Construction or Service entities, in particular, are likely to stretch their payment terms but would normally pay their due. Smaller businesses (e.g. General trading) are likely to default on their debt, leaving their creditors without recourse. Indeed, since there is no efficient Administration, Insolvency or Bankruptcy law in the UAE, and bearing in mind that defaulting on payment obligation is a criminal offense, most small traders will chose the “escape” route to avoid ending up in jail. In addition, most companies registered in the UAE are de facto ruled by foreigners who would tend to disappear when problems arise (sponsors are rarely involved in the business’ administration and are not liable for the debts).​


Late payment interest

"A Creditor shall be entitled to charge interest on a commercial loan according to the rate provided in the contract. If the rate of interest is not specified in the contract, it shall be reckoned according to the market rate prevailing at the time of the transaction, but in this case shall not exceed 12% until payment is made." Article 76 The UAE Code of Commercial Practice.

Collection costs are not charged to the debtor.

collection practice 


Orchestrated negotiation first

Despite obvious improvements over the past few years and a clear intention to speed-up Business related queries, the judiciary of the UAE has significant margin for improvement. Although the principle of the independence of the judiciary and the rule of law being recognized in the Constitution of 1971, domestic courts lack reliability and independence in practice, so that obtaining favorable court decisions remains an uncertain exercise. In fact, it is often not advisable to commence legal action before domestic courts, unless the claim is significant and the chances to succeed are good. As a result, amicable settlement opportunities should always be considered as a serious alternative to formal legal proceedings. Before starting legal proceedings against a debtor, in addition, assessment of assets is important as it allows verification as to whether the company is still active and whether recovery chances are at best. In addition, it is essential to be aware of the debtor’s solvency status: if insolvency proceedings have been initiated, it indeed becomes impossible to enforce a debt (see below).

Court Proceeding 


The UAE has a legal system based on Civil Law and Sharīʿah Law. It is a federation of seven Emirates sharing a common federal judicial system (to the exception of Dubai and Ras Al Kaimah). The judiciary is organized through courts of general jurisdiction, Appeal Courts and Cassation Courts. There is however no specialist courts, which means that all commercial disputes are heard by non-specialized judges. In addition, it is necessary to distinguish local courts competent for all civil matters raised by companies registered in the UAE, from Freezones' Authorities (such as the Dubai International Financial Center) which apply different (Common Law based) rules and are competent for cases filed by companies registered in these Freezones only.

Legal dunning ought to start with a registered Demand Letter recalling the debtor its obligation to pay the principal together with late payment interests. Often, business disputes may be settled before a Reconciliation and Settlement Committee (in Dubai, every dispute below AED 50,000 must for instance be brought before the Centre for Amicable Settlement of Disputes). If the amicable negotiation phase fails, the Civil Procedure Code considers a summary judgment procedure provided that the debt is for a specific or liquidated sum and that it is certain and undisputed (i.e. confirmed in writing through a commercial document). In this case, the debtor is served and must pay (or bring a defence) within fifteen days. If a defence is filed the dispute must however be solved through an ordinary lawsuit before the court of first instance. Ordinary legal action should be avoided but if undertaken proceedings would usually commence when amicable collection has failed. The creditor would file a plaint with the court, which would then serve summons to the debtor. The latter would be required to file an answer and written arguments would then be exchanged by the parties: all court proceedings in the UAE are in writing, there is virtually no oral hearing in civil cases. Of course, all proceedings are conducted in Arabic and all documents must be translated. The courts would normally issue remedies in the form of specific performances and compensatory damages but injunctive relief is not generally available in the UAE whilst attachment orders are difficult to obtain: there must be a prima facie case against the defendant and a real risk that the requesting party may not be able to enforce the judgment. In practice, it is difficult to obtain such an attachment against the assets of a UAE national or a UAE company as it is difficult to establish the risk of dissipation of such assets. Only in rare cases would a litigant be able to recover consequential losses and/or punitive damages in the UAE.

insolvency Proceeding 


Insolvency is considered under the UAE Commercial Company Law (Federal Law No.8 of 1984) and in Book Five of the Commercial Transaction Law (Federal Law No.18 of 1993), and various rules would bind individual traders and commercial companies unable to pay their debts when they fall due. However, insolvency proceedings in the UAE do not match international standards in the sense that only liquidation proceedings are effectively available. Business is inextricably linked to issues of personal honor and it is the norm that creditors, instead of relying on insolvency proceedings, in practice file criminal complaints once cheques bounce. In addition, the law makes it clear that, when the debtor company's assets cannot satisfy at least 20% of the debts, the courts may hold the Board Members liable to pay the debt. As a result, creditors have significant incentives to fetch money through a direct route and no chances are left for debtor companies to survive. Overall, although the law is sometimes characterized as being comprehensive by specialists insofar as it in theory provides for debt renegotiation mechanisms, it however remains largely untested in practice. As far as mere liquidation proceedings are concerned, and as previously mentioned, the "runaway" is the most common method when companies face financial difficulties.


Talk to one of our debt collections experts near you.

> Email us now



> For more information on local collection practices, court proceedings and insolvency read the full Collections Profile


map icon Go back to the world map