Financial News

Bounced cheque upsets bank borrowing for UAE expats

A row over an unpaid cheque that has gone before judges in two countries is set to change the way homes are bought in the United Arab Emirates.

The repercussions of the bounced cheque are rippling out across the way business is conducted in the UAE.

The case started when British expat Amanda Allen gave an undated cheque as security against a £400,000 mortgage when she bought a home in Abu Dhabi in May 2008.

At the time, she was working for a hospitality and leisure company and earned £6,000 a month.

She defaulted on the borrowing a year later and the bank tried to cash the cheque, but it bounced.

Under UAE law bouncing a cheque is a crime because undated or post-dated cheques are considered security for all kinds of business transactions.

Allen was found guilty in the UAE of issuing an uncovered cheque and jailed for three years in her absence.

In March 2011, the Home Secretary agreed a request from the UAE government for her extradition and she was arrested and taken to Westminster Magistrates Court.

The case was thrown out and an appeal in the High Court was dismissed.

In his High Court appeal ruling, Lord Justice Toulson criticised the use of undated cheques as security and the prosecution of clients who defaulted during the financial crisis.

“Illness, accident and unemployment are not outside the ordinary course of human events over a 20 year period. Was the respondent to be taken as saying that in such an event, resulting in a default, her circumstances at the time of the loan were nevertheless such that the cheque would be met, albeit that she was unable to fulfil her primary repayment obligations? It makes no sense,” Lord Justice Toulson was quoted as saying in court documents.

Now, the UAE banks are contemplating refusing loans to expats from countries that do not consider bouncing a cheque a criminal offence.

Leave a Comment