Problems with different Legal systems

It is well understood that different countries have different cultures and business people try to avoid causing unnecessary offence when dealing with those from different races and religions.  However, sometimes insufficient care is taken to understand the different legal systems that may also impact on the business being conducted.

Traprain recently worked on a slightly unusual case with a client who was in Dubai, United Arab Emirates.  He had managed to get himself involved in what rapidly became clear was a scam, and as soon as he was aware of this he cancelled the cheque that he had given to the fraudster, before it could be presented.  This would be perfectly normal practice in most of the world (including the country which he came from) but, unfortunately, creates major legal problems in many countries in the Middle East.

It is a standard practice, in countries such as Dubai, to provide guarantees for transactions (such as leasing a property) by providing one or more post-dated cheques.  The law then provides that if a cheque is not honoured on presentation, this is a criminal offence whatever the reason for the cheque not being paid. This means any cheque written must be honoured.

Somewhat ironically therefore, having avoided a scam, our client found himself being arrested because the cheque had been dishonoured. Traprain was able to assist to a limited extent by providing expert evidence to prove that our client was indeed the victim of an attempted fraud, and a warrant was issued for the arrest of the fraudster (who had unfortunately by that time left the country).  Our client was still convicted of a criminal offence, although he was only given a fairly small fine rather than being sent to prison.  He had however spent several nights in police cells before the matter could be resolved.

While Traprain does not give advice on criminal law in foreign jurisdictions, we are there to help clients avoid these types of problems.  Also, it is probably fair to say that had our client come to Traprain for advice before entering into the transaction, he might never had written the cheque in the first place.

It should also be noted that the courts in Dubai have recently ruled that a single failure to make payment of a commercial debt allows bankruptcy proceedings to be started against a company, which again means that a single bounced cheque could have far more serious consequences than in many other countries.