Commercial debt recovery Dubai - Legal process for businesses

Recovering unpaid commercial debts in Dubai starts with a formal demand, proceeds to filing a claim before the Dubai Courts or the appropriate free-zone tribunal, and concludes with judgment enforcement under Federal Decree-Law No. 42 of 2022 (Civil Procedure Law) and Federal Decree-Law No. 18 of 1993 (Commercial Transactions Law).

Related Services: Explore our Commercial Litigation and Debt Recovery services for practical legal support in this area.

WHAT INITIAL STEPS SHOULD A CREDITOR TAKE BEFORE FILING A CLAIM?

A creditor should first issue a written demand letter that clearly states the outstanding sum, the contractual or invoicial basis for the debt, and a reasonable payment deadline-normally 15 calendar days. Attach all supporting documents: the original agreement, any amendments, delivery notes, invoices, and correspondence evidencing non-payment. Sending the letter via a traceable channel (registered email, courier with receipt, or notarised post) creates an evidentiary trail that satisfies the pre-litigation encouragement found in Article 10 of Federal Decree-Law No. 42/2022, which urges amicable settlement before resorting to court.

If the debtor ignores the demand or offers only partial settlement, the creditor may proceed to litigation. The demand letter not only demonstrates good-faith effort but also influences the court's assessment of potential costs sanctions for abusive litigation under Article 115 of the same law. While the statute does not prescribe a rigid format, specificity-such as exact invoice numbers, dates of service, and applicable interest clauses-strengthens the letter's probative value and reduces the risk of the debtor disputing the amount claimed.

HOW IS A COMMERCIAL DEBT CLAIM FILED IN THE DUBAI COURTS?

To initiate proceedings, the creditor prepares a statement of claim that includes:

• a concise factual narrative outlining the contractual relationship, performance, and breach;
• the legal grounds relied upon (typically breach of contract under Federal Decree-Law No. 18/1993, Articles 61-68);
• the precise monetary relief sought, including principal, agreed interest, and any liquidated damages;
• a list of exhibits (contract, invoices, demand letter, proof of delivery, and any correspondence).

The claim is lodged at the Court of First Instance's civil division, accompanied by the prescribed court fee. Fees are calculated as a percentage of the claimed amount, subject to minimum and maximum thresholds published annually by the Dubai Courts; creditors should verify the current schedule directly with the registry or via the Dubai Courts' online portal.

Upon filing, the court issues a summons to the debtor, usually within 7-14 days, and schedules a first hearing.The debtor may file a defence within the timeframe set by the summons, typically 15 days. If the claim falls within the scope of Federal Decree-Law 40/2023 on Mediation and Conciliation, the judge may refer the parties to the Dubai Courts' Centre for Amicable Settlement of Disputes (CASD) for mandatory mediation before trial. Mediation sessions are confidential, and any settlement reached is recorded as a binding agreement enforceable as a court judgment.

Should mediation fail or be deemed unsuitable, the case proceeds to trial. The judge examines documentary evidence, hears witness testimony (if any), and evaluates expert reports where applicable. Under Article 165 of Federal Decree-Law 42/2022, the burden of proof rests on the creditor to establish the existence and amount of the debt on the balance of probabilities. Judgment is rendered in writing, specifying the amount payable, any interest, and court costs.

WHAT ENFORCEMENT OPTIONS EXIST AFTER OBTAINING A JUDGMENT?

Once a judgment becomes final (i.e., not subject to appeal within the statutory period), the creditor moves to the execution phase.The process begins with an application to the Execution Judge for a writ of execution. The application must include:

• a certified copy of the judgment;
• a detailed request identifying the debtor's assets to be seized (bank accounts, receivables, movable equipment, or immovable property);
• proof of the creditor's identity and legal standing.

The Execution Judge evaluates the request, issues the writ, and directs the relevant authority-Dubai Police for bank account freezes, the Department of Finance for property seizure, or the Dubai Municipality for movable goods-to carry out the attachment. Execution measures include:

• Attachment of bank accounts - the judge orders the bank to freeze funds up to the judgment amount;
• Seizure of movable property - assets such as vehicles, machinery, or inventory are tagged and may be sold at public auction;
• Seizure of immovable property - a mortgage is placed on real estate, preventing transfer or refinancing until the debt is satisfied;
• Garnishment of receivables - third parties owing money to the debtor (e.g., tenants, customers) are directed to pay the creditor directly.

Costs associated with execution comprise court fees for the writ, administrative charges levied by the executing authority, and, if applicable, auctioneer fees and publication notices. The law does not fix a timeline; duration hinges on the debtor's asset liquidity and cooperation. If no identifiable assets exist within Dubai, the creditor may seek recognition of the judgment in other Emirates under Federal Decree-Law 42/2022, Articles 215-220, or pursue enforcement abroad via bilateral treaties (e.g., the Riyadh Arab Agreement for Judicial Cooperation).

HOW DO DIFC AND ADGM PROCEEDINGS DIFFER FROM ONSHORE DUBAI COURTS?

Contracts that expressly elect DIFC or ADGM law must be litigated before the respective free-zone courts, which apply their own procedural regimes rather than UAE federal legislation.

DIFC Courts operate under DIFC Law No. 1 of 2004 (DIFC Court Law) and the DIFC Court Rules. Key features include:

• Early case management conferences aimed at narrowing issues and encouraging settlement;
• Strict limits on pleading amendments-typically only one amendment permitted without judicial consent;
• Disclosure obligations modeled on the English Civil Procedure Rules, requiring proportional and relevant document production;
• Enforcement mechanisms mirroring those of the Dubai Courts, but a judgment rendered in the DIFC must be recognised by the Dubai Courts (pursuant to DIFC Law No. 9 of 2004, Article 7) before it can be executed against assets situated outside the DIFC.

ADGM Courts follow the ADGM Courts Regulations 2015 and the ADGM Civil Procedure Regulations 2020. Their process emphasises:

• A compulsory case management hearing within 21 days of filing;
• Limited scope for oral hearings-many matters are resolved on written submissions;
• Adoption of the UNCITRAL Model Law on International Commercial Arbitration for arbitration-related matters;
• Recognition of ADGM judgments by the Dubai Courts under the Judicial Cooperation Treaty between the ADGM and the UAE, facilitating cross-border enforcement.

Creditors must scrutinise the governing law and forum clause in their contracts. If the clause selects DIFC or ADGM jurisdiction, filing in the onshore Dubai Courts risks a jurisdictional objection that could lead to dismissal and refiling in the agreed free-zone forum, incurring additional time and cost.

FREQUENTLY ASKED QUESTIONS

What law governs the limitation period for commercial debt claims in Dubai?
The limitation period derives from Federal Decree-Law No. 5 of 1985 (Civil Transactions Law), Article 473, which establishes a general fifteen-year window for contractual claims unless a shorter period is stipulated by specific legislation (e.g., two-year period for claims arising from cheques under Federal Decree-Law No. 18 of 1993, Article 633). The Arabic text in the Official Gazette prevails over any translation.

Can a creditor claim interest on overdue amounts?
Interest may be awarded if the contract expressly provides for it or if the court deems it appropriate under Federal Decree-Law No. 18 of 1993 (Commercial Transactions Law), Article 68. The judiciary assesses reasonableness by reference to prevailing market rates, the parties' bargaining power, and whether the interest constitutes a penalty. Excessive interest may be reduced to a compensatory amount.

Are there alternative dispute-resolution options before court?
Yes. Federal Decree-Law 40/2023 on Mediation and Conciliation encourages parties to engage in mediation via the Dubai Courts' Centre for Amicable Settlement of Disputes (CASD) or a DIAC-administered process. Mediation is not universally mandatory but may be ordered by the judge when deemed beneficial, potentially reducing litigation costs and expediting resolution. Settlements reached in mediation are recorded as enforceable agreements akin to court judgments.

What happens if the debtor contests the jurisdiction of the Dubai Courts?
The debtor may raise a jurisdictional objection under Federal Decree-Law 42/2022, Article 101, which examines the court's authority over the subject matter and the parties. If the contract contains a valid forum clause selecting another forum (e.g., DIFC Courts), the Dubai Courts may decline jurisdiction, prompting the creditor to refile in the agreed forum. Conversely, if the clause is ambiguous or contrary to public order (as with arbitration clauses in onshore Dubai leases under Dubai Law 26/2013), the court may assert jurisdiction despite the clause.

This article provides a general overview of the legal process for commercial debt recovery in Dubai. For advice tailored to specific circumstances, consult a qualified legal practitioner.

If your matter involves commercial debt recovery in the United Arab Emirates, you are welcome to request a consultation with Nour Attorneys. Our team can assess your position under the law currently in force and outline the options available to you. Request a consultation

This article is provided for general informational purposes only and does not constitute legal advice. Reading this article or contacting Nour Attorneys through this website does not create an attorney-client relationship; such a relationship arises only after a conflicts-of-interest check and a signed engagement agreement. Do not send confidential information through this website; information submitted before engagement is not protected by legal privilege. Past results do not guarantee future outcomes. The firm's lawyers practice in the jurisdictions stated in their individual profiles; this article addresses the law of the United Arab Emirates only.