DUBAI (Rahnuma): Habib Al-Mulla is used to media attention, but last Wednesday he had even more than his usual share of interaction with the world’s news outlets.
He had just successfully defended his client in one of the most high-profile legal cases to come out of the UAE in years — the long-running saga of the decline and fall of Abraaj, and its founder and CEO Arif Naqvi.
Al-Mulla, the doyen of Emirati lawyers, was called in by Naqvi to defend criminal charges brought by Sharjah business leader Hamid Jafar after checks totalling $300 million written by the Abraaj CEO were dishonored on presentation.
After weeks of shuttle diplomacy between Dubai and London, where Naqvi had remained to avoid the threat of imprisonment in the UAE, Al-Mulla clinched a deal with Jafar that lifted the criminal charges — in exchange for Naqvi handing over millions of dollars of personal assets.
“I’ve been calling for action on bounced checks for years now,” said Al-Mulla. “In the Abraaj case, it was clearly a commercial issue that was converted into criminal proceedings. It’s a big problem for the UAE legal and financial system. I believe it leads to people leaving the country with huge debts left behind.”
The system of using personal and corporate checks as security in financial transactions is one of the characteristics of the UAE business scene, but has been increasingly criticized as a legal blunt instrument, unsuited to the country’s “smart” entrepreneurial ambitions.
Last year Emirati policymakers changed some details of the law to make it less draconian, as part of the plan to bring in a modern bankruptcy structure in the UAE. Al-Mulla thinks it still has not gone far enough.
“What is the point of a bankruptcy law if it cannot protect a defaulter while he restructures his business? For smaller checks there is no automatic imprisonment, and that is an important refinement. But it’s a half-cooked solution. I think we should do like other jurisdictions in the world, and decriminalize it entirely. I think we should get rid of security checks altogether and scrap imprisonment for civil debts,” he said.
He does not agree with the UAE banks which argue that security checks impose a financial discipline on the country’s business culture. “Banks and finance companies will always want to continue with the current status because it is in their interests to do so, regardless of what dangers the economy faces as a result,” he said.
“I don’t believe the criminalization of debt leads to financial discipline. It just means that less due diligence is done on a client or business partner before a transaction, because the banks believe they have the security of a paper cheque,” he said.
The criminalization of checks is one of a number of measures weakening the UAE legal system’s global image, Al-Mulla believes. Barely a week goes by without some outcry in the international media about a perceived injustice in the UAE.