UAE: Foreign Debtor Trapped in Dire Circumstances

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(Beirut) – United Arab Emirates authorities have barred an Iranian national from leaving the country or working for nearly seven years under the country’s abusive debt laws, Human Rights Watch said today. The authorities have refused to renew Mohammad Reza Bahar’s work and residency permits, making it impossible for him to repay his debts or even to meet his basic needs.

The UAE’s justice system comes down hard on those who are unable to pay their debts or fail to repay loans. Bouncing a check is considered a criminal offense, leading to prison time of up to three years or a fine of up to 30,000 dirhams (US$8,200) and a travel ban until the sentence is fulfilled. Because of his inability to pay his debts, Bahar, 68, has served prison sentences totaling nearly four months since 2015.

“The UAE debt system leaves people trapped in dire conditions that they cannot escape,” said Michael Page, deputy Middle East director at Human Rights Watch. “Mohammed Reza Bahar is stuck in a never-ending legal limbo that leaves him no means to rectify or improve his situation.”

Bahar provided medical records to Human Rights Watch showing that he suffers from several medical issues, some of which require surgery, for which he is unable to pay without health insurance. Bahar is also effectively prevented from reuniting with his wife, who is undergoing treatment for metastatic breast cancer in the United States.

Under the UAE system, paying a fine or serving a jail term does not absolve the debtor from the responsibility to pay the debt. Creditors can also apply to civil courts to jail debtors or to impose effectively indefinite travel bans for outstanding personal or business debts exceeding 10,000 Emirati dirhams ($2,700).

If the judge deems the debtor capable of paying or if there are fears the debtor may attempt to flee the country, the judge can order the debtor’s detention for up to a month, renewable to up to 36 months. Under amendments to the Civil Procedure law in 2019, a judge can lift a travel ban after three years if the creditor does not seek an extension. A judge can also approve travel for illness of a debtor or family member if they cannot be treated in the country.

Bahar moved to Dubai in 2001, started a commercial brokerage business, and lived lawfully in the UAE for at least 13 years. Following the global financial crisis that began in late 2008 and that hit Dubai’s economy especially hard, Bahar says, his company ran into serious trouble. At the time, massive job cuts and company downsizing caused individual wealth to shrink or disappear. Banks put intense pressure on people to settle individual loans and tightened previously lax lending requirements. Many people missed rent payments, defaulted on checks and loans, or landed in jail.

In June 2014, one foreign investor to whom Bahar owed money filed a criminal complaint against him in the Dubai Criminal Court for bouncing a check. The court sentenced him to three months in prison and a court of appeals upheld the sentence. He served the sentence.

A second foreign investor filed another criminal complaint against him in late 2014 and the court sentenced him to a fine of 10,000 dirhams in January 2015, reduced to 7,000 dirhams on appeal. Another automatic travel ban was imposed and only lifted once he paid the fine. In November 2014, the court also confiscated Bahar’s passport, returning it only in August 2020.

Both investors then filed civil cases against Bahar in 2015 and 2016. The courts sentenced him to pay 800,565 Emirati dirhams (around $218,000) in total, which Bahar has been unable to pay. “I lost everything [in the financial crisis],” he told Human Rights Watch. “I don’t have [money to pay]. Not now and not later.” In both cases, due to his health, the judge decided not to jail him, but he remains under a travel ban.

On May 15, 2019, one of the creditors again applied to the courts to order Bahar’s arrest, but the court canceled the arrest order and instead again included him in the travel ban list. In 2020, Bahar repeatedly sought permission from the court to visit his ailing wife in the United States. He offered to have his adult daughter, who lives in the UAE, act as his guarantor. He has received no response.

Despite attempting to renew his Emirati ID several times since it expired in late 2015, Bahar said, immigration officials told him he must first resolve his court cases, meaning he remains trapped in the country without valid residency which legally prohibits him from working or accessing most basic rights and government services. In early 2020, Bahar said an immigration official told him he needed to pay $7,000 in immigration overstay fines to renew his Emirati ID. His son, who lives in the US, told Human Rights Watch that he used his savings to pay the fines. But immigration officials still refused to renew his ID, Bahar said, because of the unresolved court cases.

In January 2019, Bahar served another 21 days in jail after his bank filed a criminal case against him for credit card debt.

Human Rights Watch wrote to UAE authorities on April 26, expressing concern about the overwhelming limitations imposed on foreign residents who are indebted to UAE-based creditors. Human Rights Watch also sought clarification of the process for imposing travel bans and the relationship between travel bans and foreign residents’ ability to renew their residency and work permits, as well as relevant laws or regulations that govern creditor-debtor relations and statistics regarding foreign residents affected by the travel bans. Human Rights Watch has received no response.

In recent years, the UAE introduced a number of reforms apparently designed to provide relief for debt-laden businesses and residents. In 2016, it introduced a federal bankruptcy law to help distressed companies avoid bankruptcy and liquidation, but it does not apply to individuals. In 2017, Dubai introduced a criminal order law that punishes a bounced check for an amount less than 200,000 Emirati dirhams ($54,500) with a fine instead of prison.

In 2019, the UAE introduced a much-touted insolvency law that promises to assist people overwhelmed by debt similar to the bankruptcy law for companies. It allows a person to restructure their debt for up to three years, but if they miss a payment, they can still be liable to civil actions. And in November 2020, the UAE introduced amendments to end the criminalization of bounced checks, though under current laws a creditor would still be able to file a civil case that could lead to imprisonment.

In October 2020, the BBC reported on International Monetary Fund forecasts that predict the Middle East is headed for an economic downturn that will be much worse than the 2008-09 global financial crisis, spurred by the coronavirus pandemic and record low oil prices.

The UAE’s current travel ban policies appear to violate articles 11 and 12 of the International Covenant on Civil and Political Rights (ICCPR), Human Rights Watch said. Article 11 states that “No one shall be imprisoned merely on the ground of inability to fulfill a contractual obligation.” Article 12 states that “Everyone shall be free to leave any country, including his own,” subject only to restrictions that are “provided by law, are necessary in order to protect national security, public order (ordre public), public health or morals, or the rights and freedoms of others.”

In addition, article 6 of the International Covenant on Economic, Social, and Cultural Rights (ICESCR) protects “the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts.” The UAE’s imposition of travel bans simply for being in debt is both arbitrary and grossly disproportionate.

The combined violation of these rights impinges on other rights as well, including the right to an adequate standard of living, the right to family life and family unity, and the enjoyment of the highest attainable standard of physical and mental health.

“The UAE government should amend laws and practices to ensure that everyone involved in financial disputes has a way to reclaim their financial standing rather than leave people jailed or destitute,” Page said.