Cross-border commercial operations are exposed to foreign counterparty risks, non-payment and serious delays in payments. Late payments interrupt liquidity and can critically affect the working capital and continuity of the enterprise in international trade. In order to reduce these risks, the UAE has modernized its commercial and procedural legislation, introducing structured mechanisms for debt recovery, statutory interest accrual, emergency judicial orders and cross-border enforcement.
The main legislative instruments governing these remedies are Federal Decree-Law No. 50 of 2022 on Commercial Transactions, Federal Decree-Law No. 42 of 2022 on the Civil Procedure Law and Federal Decree-Law No. 40 of 2023 on Mediation and Conciliation in Civil and Commercial Disputes.
Contractual Rights and Delay Interest Under Federal Decree-Law No. 50 of 2022
Commercial activities, obligations of merchants and monetary defaults shall be governed by Federal Decree-Law No. 50 of 2022 issuing the Law of Commercial Transactions. Parties may have a statutory right to claim delay interest in cases where payment obligations are not fulfilled upon maturity under this framework. If a commercial contract provides for a specific rate of interest for late payment, then that rate may be charged until the account is paid in full.
Where the contract does not expressly provide for interest, the statutory provisions as to interest may apply. The rate of interest on any commercial loan, where not fixed in the contract, is calculated on the basis of the prevailing market rate at the time of the transaction but may not exceed 9% per annum until the full payment of the principal sum, pursuant to Article 72 of Federal Decree-Law No. 50 of 2022. Onshore courts in local jurisdictions may apply localised judicial standards.
The provisions on interest are also dealt with in Articles 74, 85 and 86. Under Article 74, when the term of the loan is one year or more, interest shall be payable at the end of the year; when the term of the loan is less than one year, interest shall be payable on the due date, unless otherwise provided by commercial custom or banking practice. The creditor is under no obligation to prove actual financial loss caused to him by the delay in payment where he is seeking interest for delay as per Article 85. Further, Article 86 provides that, unless otherwise provided by law or agreement, delay interest on commercial debts becomes due when the commercial debt matures. Article 84 also stipulates that where a commercial obligation involves a specified sum of money, and the debtor delays payment, compensation for the delay shall be calculated by reference to the interest provisions in Articles 72 and 73 unless otherwise agreed.
Statutory restrictions on compounding also apply to creditors. Article 88 of Federal Decree-Law No. 50 of 2022 provides that the creditor shall not be entitled to claim the interest on accrued interest or claim such interest as supplementary compensation.
Summary Remedies: Payment Orders and Interim Measures Under Federal Decree-Law No. 42 of 2022
In the event of informal demands not resulting in payment by the foreign counterparties, UAE companies may resort to expedited judicial procedures under Federal Decree-Law No. 42 of 2022 on the Civil Procedure Law, provided the jurisdiction of the UAE courts. A Payment Order procedure is a fast-track procedure which can be used to recover debts and is governed mainly by Articles 143 and 144.
To qualify for a Payment Order, the creditor’s right must be established electronically or in writing, be due for payment, and the claim must concern a debt for a specified amount of money or qualifying movable property. Article 143 also applies where the financial claim concerns the enforcement of a commercial contract or where the creditor holds a commercial paper, except for a cheque that constitutes a writ of execution under Article 212.
Article 144 provides that before the creditor may file an electronic or written petition to the court, the creditor shall serve a formal demand on the debtor, which shall give the debtor a period of at least five days in which to pay. If the debtor does not pay, the creditor can apply for a Payment Order showing proof of the debt and of the demand for payment. The order shall be delivered within three business days of the filing of the petition. This speeds up the process of getting an enforceable order without having to go through the usual process of ordinary proceedings.
The enforceability of the Payment Order or judgment shall be subject to the conditions laid down in Article 232, and the execution of the Payment Order or judgment shall be in accordance with Article 233, including the service of the writ and the seven-day period for payment. Article 234 also provides for the provisional seizure of the debtor’s assets prior to notification in cases where there is evidence of asset loss or risk to the creditor’s general guarantee.
Under Article 324, a creditor may apply for a travel ban where there are reasonable grounds to believe that the debtor may leave the UAE and the debt is at least AED 10,000, subject to the statutory conditions. Article 327 also allows the judge to order a payment guarantee, attendance guarantee, or a deposit of the claimed amount where a debtor who is travel-banned fails to surrender a passport, has disposed of or moved assets abroad or appears to be preparing to flee.
Article 319 provides for the detention of a debtor who ignores a writ of execution unless the debtor can demonstrate an inability to pay, within the conditions and limits laid down by law, including a general cumulative maximum of 36 months.
Statutory Commercial Mediation Under Federal Decree-Law No. 40 of 2023
The Federal Decree-Law No. 40 of 2023 on mediation and conciliation in civil and commercial disputes has established a legal framework for the settlement of civil and commercial disputes through mediation and conciliation.
Under Articles 8 and 9, parties may agree to mediation in writing either before a dispute arises or after it has arisen, including after court proceedings have commenced. Article 27 provides the Center with compulsory jurisdiction for certain disputes, including commercial and civil disputes up to a value of AED 5 million, subject to the statutory exclusions. Article 30 also provides that in courts where a Centre has been set up, qualifying disputes within the mandatory competence of the Centre may not be registered without first being referred to the Centre.
Where mediation results in settlement, the agreement may be formally approved in accordance with the Decree-Law and become enforceable against the parties.
Offshore Forum Selection and Cross-Border Judgments Enforcement
Choice of forum matters in curbing payment delays in cross-border contracts. Onshore UAE companies can agree by contract to the jurisdiction of English language common law courts located within the state, namely the Dubai International Financial Center Courts.
The jurisdiction of the DIFC Courts is governed by DIFC Courts Law No. 2 of 2025. Under Article 14(A), the DIFC Courts have exclusive jurisdiction over specified civil, commercial and employment claims connected with the DIFC. Article 14(B) further provides that parties may expressly agree in writing to submit civil and commercial disputes to the DIFC Courts, whether before or after a dispute arises, provided that the jurisdiction agreement is specific, clear and express. This allows contracting parties to opt into DIFC Courts jurisdiction even where the dispute does not otherwise have a direct connection with the DIFC.
If there is enforcement of judgments against counterparties that hold assets in other contracting Arab states, the UAE entities may turn to the Riyadh Arab Agreement for Judicial Cooperation, ratified in the UAE pursuant to Federal Decree No. 53 of 1999. Under Article 25, qualifying final civil and commercial judgments shall be recognized as res judicata by contracting states, pursuant to the jurisdictional and other conditions set forth in the Riyadh Convention. A recognised judgment shall be capable of enforcement in another contracting state provided that it is enforceable in the state of origin, and the procedure shall as a rule be governed by the law of the requested state. Article 32 limits the enforcing authority to an assessment of compliance with the Convention and does not allow a re-examination of the substantive merits of the dispute.
Conclusion
Late international payments can create major financial and operational risks for UAE businesses, particularly when assets and counterparties are situated in various jurisdictions. UAE law provides an organized system to deal with such defaults through contractual and statutory interest, accelerated Payment Orders, precautionary and enforcement measures, mediation and specialist forum selection.
Ultimately, the success of the recovery will depend on the terms of the underlying contract, the jurisdiction of the competent court, the location of the debtor’s assets and the availability of cross-border enforcement mechanisms. Businesses can improve their position and increase the chances of recovering outstanding commercial debts by addressing these issues at the contracting stage and acting quickly on default.
