The United Arab Emirates: Evaluating the Potency of its Insolvency Regulations

Alexander Lewis Edited by Gwen Ha

Alex is a second-year student at UCSB majoring in Economics. Outside of the Pre-Law Society, he is a Financial Analyst for UCSB's Investment Advisory Committee and plans to pursue a career in corporate law after graduation. He is extremely grateful to be apart of UCSB's first Undergraduate Law Journal and would like to thank his editor, Gwen, for her continuous support.

ABSTRACT

To the casual eye, Dubai is a tax haven for foreign investors and entrepreneurs alike, with individuals from all over the world flocking to the city for its ostentatious architecture and thriving business opportunities. Amidst the global financial crisis of 2008, this ‘new frontier’ image came to a halt when the world was made aware of Dubai’s massive debt issues. Unlike the neighboring state of Abu Dhabi, Dubai’s petroleum wealth is relatively scarce with much of its economy being based on commerce and services, hence the emirate is heavily dependent on foreign investment and tourism. As a consequence of this, financial matters are considered to be of the utmost importance, and foreigners are often imprisoned for minor debt issues, with penalties, such as late payments on a single bounced check carrying a jail sentence of up to 3 years. Moreover, if the incarcerated fail to payoff this debt by the end of their sentence, their prison conviction will be extended. In most countries debt is considered a civil matter, but the UAE’s dual legal system, founded upon civil and sharia law, treats unpaid debt as a remarkably

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grave crime. For decades, this negative feedback loop has kept hundreds, if not thousands, of foreigners trapped within the prisons of Dubai, and yet this misuse of power has remained relatively unnoticed by the rest of the world. This paper will elucidate upon the insolvency dilemma of entrapped foreigners within the UAE through points of comparison between the Emirates’ judicial framework and that of the United States. It will introduce two federal statutes that were recently promulgated by the UAE and will argue thatthe loopholes and limitations within these regulations ultimately deem them completely inefficacious in protecting foreign investors. The article will also further examine the UAE’s relationship with Interpol in conjunction with the organization’s issuance of Red Notices, which are international arrest warrants, on behalf of the federation. The purpose of this paper is to further publicize the UAE’s mistreatment of debtors in an effort to continue bringing justice to those who have been wrongfully imprisoned.

INTRODUCTION

A. THE IMPRISONMENT OF RYAN CORNELIUS

The 21st of May 2008 marks the collapse of Ryan Cornelius’ life, wherein a last-minute stop to Dubai on his flight home to Bahrain ensnared him within a perpetually vicious debt trap. As Cornelius exited the Dubai International Airport, he was met by three undercover police officers and thrown into a vehicle en route to Dubai’s police headquarters. In the aftermath of a lengthy interrogation and unaware of his purported crimes, Cornelius was thrown into a bare jail cell and deprived of all outside communication for the next ten days. Prior to his arrest, Cornelius was in the midst of a new business venture in Dubai, and as the second police interrogation revealed, he stood accused of fraud at the behestof the Dubai Islamic Bank (DIB) regarding the alleged misuse of his property business had borrowed. Consequently, Cornelius was convicted of fraud and sentenced to three years in prison. Entangled within

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the incredibly complex apparatus of the UAE legal system, Ryan Cornelius has served 14 years in jail for what was originally a three-year sentence, and currently remains incarcerated in a maximum-security prison in Dubai. A combination of dire financial instability along with the COVID-19 pandemic has prevented Cornelius from seeing his wife or three children since February of 2019. His sentence having been extended twice already, Cornelius is, at present, expected to be released in 2040 at the age of 85.1 At 67 years old, he is desperately clinging to thehope of eventual release, however, given his diminishing health in conjunction with the UAE’s draconian legal system, there are obvious fears that Ryan Cornelius may never live as a free man again.2

B. THE INDEBTED CITY-STATE OF DUBAI

Despite popular belief, Dubai’s economy is not dependent on oil as it contributes to less than 1% of the emirate’s GDP.3 The city-state actively thrives as a business and transportation hub with most of its wealth being generated from various revenue streams, such as the financial, tourist, and service industries. By shifting its attention to the tourist industry, Dubai effectively diversified its economy and has established itself as a luxurious oasis for foreigners. Its towering skyscrapers have caused wealthy tourists and social media moguls to flock to the city in large droves, and its “frontier mentality”4 has eventuated in an overwhelming expatriate majority that

1 Isolde Walters, May Never See My Husband Again, Daily Mail (Jan. 28, 2022), https://www.dailymail.co.uk/news/article-10451575/Wife-British-businessman-lockedDubai-jail-die-prison-repay-millions.html 2 Matthew Valencia, Opinion, The Dubai Debt Trap, Economist (London), Dec. 15, 2021, at 3 Dubai Economy, Dubai.com, https://www.dubai.com/v/economy/ (last visited May 4, 2022) 4 Valencia, supra note 2

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composes 85% of Dubai’s total population.5 In 2004, Dubai created the Dubai International Finance Center (DIFC) via UAE Federal Decree No. 35 of 2004,6 which transformed the emirate “into a commercial hub where service industries such as finance, property and tourism flourish”7. This freetrading zone paired with the UAE’s lack of income taxation8 has crafted a seemingly investor-friendly image and contributed to a massive consolidation of Westerners, such as the likes of Ryan Cornelius, to come in search of new lucrative business ventures. A caveat to this attractive open market is the prominence of illegal activities occurring at large due to a lack of governmental oversight, a shortcoming that was widely exposed during the 2008 Financial Crisis.9 The emergence of a worldwide financial plight revealed that Dubai owed approximately $59 billion worth of debt, a staggering amount that would have most likely resulted in collapse if not for the UAE’s capital, Abu Dhabi, stepping in to provide $20 billion worth of assistance.10 The calamity broadly unveiled Dubai’s shaky financial framework and high dependence on foreign investment, but more importantly, it resulted in a transformation of the city’slegislative system as evidenced by its tight crackdown on insolvency regulations.

C. THE UAE’S LEGAL SYSTEM

The UAE maintains a dual legal system based upon civil law with much of its underlying principles being drawn from Islamic Sharia and is notoriousfor its

5 Dubai Population 2022, World Population Review, https://worldpopulationreview.com/world-cities/dubai-population (last visited May 4, 2022) 6 Laws & Regulations, Difc, https://www.difc.ae/business/laws-regulations/ (last visited May 4, 2022) 7 Valencia, supra note 2 8 Taxation, The United Arab Emirates’ Government Portal, https://u.ae/en/informationand-services/finance-and-investment/taxation (last visited May 4, 2022) 9 Valencia, supra note 2 10 The Economic Crisis in Dubai 2008, IvyPanda, https://ivypanda.com/essays/theeconomic-crisis-in-dubai-2008/ (last updated Oct. 16, 2019)

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approach to financial matters, especially in the case of unpaid debt.11 Inspired by French and Egyptian civil laws, the UAE is a civil law jurisdiction with its regulatory framework being built on strict codified statutes and mandates. This code-based law is implemented in bench trials within the UAE’s Sharia courts12, placing the accused under the jurisdiction of a single judge.13 The DIFC was able to overcome the strict nature of Sharia Law through Federal Law No. 8 of 2004, which created its ownlegal system and principles derived from English Common Law. The common law structure of the UAE emphasizes case law, and its utilization of juries allows for more flexibility than its civil counterpart, thus facilitating economic growth and providing legal support for foreign investors. Unfortunately, the majority of businesses in Dubai are subject to UAE federal jurisdiction-and the scrutinization of financial activity that comes with it-instead of DIFC regulations as they fall outside of the FinancialFree Zone, which maintains remarkably strict qualification requirements that most corporations are incapable of fulfilling.14 As explained by the debt team at Detained in Dubai:

“Unlike Western countries, the UAE treats debt as a criminal matter rather than a civil one. The result being that if a borrower is late with payments, they can be sentenced to jail for up to three years. However, the debt is not cleared because of this sentence, only the ‘criminal’ act of not paying it/the installments due. Afterthe initial sentence, the debtor is freed for thirty days to allow them to arrange payment of the money due. If they do not have the money to pay, a

11 The Federal Judiciary, The United Arab Emirates’ Government Portal, https://u.ae/en/about-the-uae/the-uae-government/the-federaljudiciary#:~:text=The%20UAE%20adopts%20a%20dual,(the%20system%20of%20law ) (last visited May 4, 2022) 12 Id. 13 Difference Between Common Law and Civil Law, Bin Eid, UAE Law Firm, https://bineidlawfirmuae.com/blog/difference-between-common-law-and-civillaw/#:~:text=The%20main%20difference%20between%20the,published%20judicial%2 0opinion%20holds%20importance (last visited May 4, 2022) 14 Valencia, supra note 2

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civil case is then taken by the creditor, and the debt victim is sent back into jail indefinitely until the money is paid.”15

This mechanism essentially places debtors in an incessant negative-feedback loop, leaving them entirely dependent on family and friends to bail them out.

The UAE’s legal system has entrapped hundreds of Westerners like Ryan Cornelius in its inconspicuous laws. After serving three years in Dubai for fraud, Cornelius was sentenced to another ten years of imprisonment for “defrauding the state.” When his sentence concluded, he remained incarcerated for two more years for reasons unknown. Thereafter, he was convicted for an additional 20 years for failing to pay off his debt per Dubai’s Law 37, which had been imposed two years after Cornelius was initially accused of fraud, a retroactive act that is explicitly prohibited in the UAE’s Constitution. Since his arrest, Ryan Cornelius has “not once been allowed to address the judge during the more than 100 court sessions he attended in over ten years of hearings and appeals…” This article will attempt to engage with the UAE legal system at length to shed light on its insolvency regulations and how it compares to that of the United States’ legislative framework. Evidentiary support and analysis will commence in the introduction of two insolvency ordinances issued by the UAE: 1) UAE Bankruptcy Law No. 9 of 201616 and 2) UAE Federal Decree-LawNo. 14 of 2020.17 Further analysis will commence in the form of

15 The Truth About Leaving a Debt Behind in Dubai, Detained in Dubai (Sept. 24, 2020), https://detained-in-dubai.prowly.com/104096-the-truth-about-leaving-a-debtbehind-in-dubai-nbsp 16 Federal Law by Decree No. (9) of 2016 on Bankruptcy, United Arab Emirates Ministry of Finance (Sep. 20, 2016), https://www.mof.gov.ae/en/lawsAndPolitics/govLaws/Documents/Bankruptcy%20law %20in%20English%2004%20May%202017%20%28ready%20for%20publishing%29.p df 17 Federal Decree Law No. (14) of 2020 Amending Certain Provisions of the Federal Law No. (18) of 1993 Concerning the Commercial Transaction Law, United Arab Emirates Ministry of Economy (Sep. 27, 2020), https://www.moj.gov.ae/assets/2020/Federal%20Decree%20Law%20No.%20(14)%20o f%202020%20Concerning%20the%20Commercial%20Transaction%20Law.pdf.aspx

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a comparison between the two legislations and US bankruptcy laws to emphasize how the UAE's insolvency statutes fail to adequately protect the rights of the individual. Additionally, this article will examine the role of Interpol Red Notices in connection to the international detention and arrest of persons by the UAE for matters regarding debt.

I. UAE BANKRUPTCY LAW NO. 9 OF 2016

Since the exposureof its debt issues in 2008, Dubai has gone to great lengths to conduct damage control and re-establish its reputation as a pivotal hub for foreign investment. In 2016, the UAE acknowledged the shortcomings of its legal system and pledged to refine laws inan effort to safeguard the protection and safety of foreign investors and ensure the foreign flow of money into the state. Staying true to its word, UAE Federal Law by Decree No. 9 of 2016 (the ‘Bankruptcy Law’) came into force in December as an edict designed to “provide a legal framework to help distressed companies in the UAE to avoid bankruptcy and liquidation through different mechanisms,” including but not limited to “financial restructuring” and “the potential to secure new loans under terms set by the law.”18 On the surface, this decree appears to be a major step toward financial security and legal support within UAE legislation. By publicly recognizing the flaws and limitations of its legal framework, the UAE has shown a resolute will toward reform; thus, it has made significant progress in restoring its image abroad as one of the foremost locations for overseas investments and commercial undertakings. A. AMISGUIDED ATTEMPT AT REFORM: PROTECTION FOR COMPANIES RATHER THAN INDIVIDUALS

18 Law on Bankruptcy, The United Arab Emirates’ Government Portal, https://u.ae/en/information-and-services/finance-and-investment/taxation (last visited May 4, 2022)

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Nevertheless, upon further review of the legislation, it is difficult to ascertain the potency of the decree and largely calls into question its actual effectiveness. Given that the current framework pertaining to insolvency is primarily found across Commercial Transactions Law and Commercial Companies Law, the scope of UAE legislation to safeguard against debt is principally aimed at companies rather than the individuals who run them.19 The enactment of Decree No. 9 of 2016 has not amended this as the language directly states that “the law does not apply to natural individuals,” rather, it strictly pertains to (i) companies governed by the Commercial Companies Law (Federal Law No 2. of 2015), (ii) companies that are partly or fully owned by the federal or the local government, (iii) companies and institutions established in free zones that are not governed by existing bankruptcy laws, (iv) individuals who are classified as a “trader” under the Commercial Transaction Law relating to commercial transactions and (v) civil companies.20 As described in portion (iii), this new legislation is not applicable to companies governed by existing bankruptcy laws, including but not limited to DIFC and the 3600+ companies under its scrutiny.21 In regard to section (iv), Article 23 of the Commercial Transaction Law explicitly states, “A non-national may not engage in trade in the State unless he has a partner or partners who are nationals of the State on the terms and within the limits provided for in the Commercial Companies Law.”22 Due to the broad nature of written legislation and an inability to translate Arabic texts, the extent of these terms and limits are not explicitly known but given that less

19 supra note 15 20 supra note 18 21 Dubai International Financial Centre, Difc, https://www.difc.ae/ (last visited May 4, 2022) 22 Federal Law No. (18) of 1993 Concerning the Commerical Transactions Law, THE UAE CODE OF COMMERCIAL PRACTICE (Sep. 7, 1993), https://ded.ae/ded_files/Files/%D8%A7%D9%84%D9%82%D9%88%D8%A7%D9%8 6%D9%8A%D9%86%20%D9%88%D8%A7%D9%84%D8%AA%D8%B4%D8%B1 %D9%8A%D8%B9%D8%A7%D8%AA%20PDF/Federal_Law_(18)_1993_Concernin g_Commercial_Transaction_Law.pdf

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than 11% of nationals make up the UAE’s population,23 it is safe to assume that the amount of Emirati businessmen collaborating with foreigners is a rather minute number. Hence, the majority of foreign individuals pursuing business ventures in the UAE are not classified as ‘traders’ under the new legislation and consequently, cannot be afforded the amended protections present in the decree. These limited protections, due to the narrow range of the edict, evade what is at the heart of the UAE’s insolvency problems as it continues to sustain the abandonment of insolvent individuals to the hands of the UAE criminal system and its draconian tactics.

B. THE US BANKRUPTCY REFORM ACT OF 1978

To better understand the limitations of UAE Federal Law by Decree No. 9 of 2016, it can be compared to that of the United States’ bankruptcy legislation, which while not perfect, provides a much wider range of protections for individuals regarding insolvency issues. Bankruptcy refers to “a legal proceeding involving a person or business that is unable to repay their outstanding debts,”24 and has been a prevalent aspect of US legislation since the colonial era. Article 1, Section 8, Clause 4 of the US Constitution states that Congress shall have the power to enact “uniform laws on the subject of bankruptcies throughout the United States.”25 In the 19th and 20th centuries, Congress followed suit with a number of short-lived bankruptcy laws that ultimately failed as they lacked uniformity and impartiality between creditors and debtors.26

23 United Arab Emirates Population Statistics 2022, Global Media Insight, https://www.globalmediainsight.com/blog/uae-population-statistics/ (last visited May 4, 2022) 24 Alicia Tuovila, Bankruptcy, Investopedia, https://www.investopedia.com/terms/b/bankruptcy.asp#:~:text=Bankruptcy%20is%20a %20legal%20proceeding,creditors%2C%20which%20is%20less%20common. (last updated Nov. 15, 2021) 25 U.S. Const. art. 1, § 8, cl. 4 (Constitution Annotated through ) 26 US Bankruptcy Code, Corporate Finance Institute, https://corporatefinanceinstitute.com/resources/knowledge/other/us-bankruptcy-

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The Bankruptcy Reform Act of 1978 amended these issues through the establishment of a uniform federal law that oversaw all bankruptcy cases in the US. This federal legislation, codified as Title 11 of the United States Code, delineated the proper insolvency legal procedures and treatment of bankrupt individuals that we see today.27 It created a framework for honest debtors to repay their dues and start anew with a clean slate, rather than being forced to conceal their accumulated debt out of fear of imprisonment. Chapters 7, 11, 12, 13, and 15 of Title 11 provides crucial information to insolvent individuals concerning common types of bankruptcy cases. The scope of these five chapters cover: 1) liquidation of a debtor’s property, 2) reorganization of a corporation or partnership, 3) adjustment of debts for a “family farmer” or “family fisherman,” 4) individual debt adjustment, and 5) ancillary and other cross-border cases, respectively.28 These diverse options support the varying and unique needs of debtors in the United States, with Chapters7 and 13 being, by far, the most common forms of bankruptcy filed. Those who file for Chapter 7 are required to liquidate their wealth to creditors if their assets cross the legal threshold requirement. That being said, approximately 95% of debtors in this situation do not meet the asset requirements and will not be compelled to relinquish their property. Additionally, 96% of debtors who file bankruptcy with respect to Chapter 7 receive a full discharge of their unsecured debts. Indebted individuals under the scrutiny of Chapter 13 are permitted to form a repayment plan with their creditors based on their own income, and approximately 40% of debtors receive a discharge of their debts.29 Both cases provide insolvent individuals

code/#:~:text=History%20of%20the%20US%20Bankruptcy,was%20later%20repealed %20in%201878. (last visited May 4, 2022) 27 Process- Bankruptcy Basics, United States Courts, https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/processbankruptcy-basics (last visited May 4, 2022) 28 Id. 29 Paul Kiel, Bankruptcy: What’s the Difference Between Chapter 7 and Chapter 13?, ProPublica (Sept. 27, 2017), https://www.propublica.org/article/bankruptcy-differencefiling-chapter-7-13-

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with a near-assurance of financial security and, in most instances, a guarantee of debt relief. There are, of course, repercussions that come with declaring bankruptcy, with the primary example being a greatly diminished credit score. However, a dropped credit is still a significantly more favorable outcome than imprisonment or a complete seizure of all assets. The most significant aspect of the US Bankruptcy Code in comparison to that of the UAE’s insolvency regulations is its universality and impartiality. Section 109(a) states that any “person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title.”30 The US regulation code is a blanket statement that encompasses all individuals residing in the country and as such, foreigners and undocumented individuals are eligible to file for bankruptcy even if they lack proof of a permanent residency.

II. UAE FEDERAL DECREE-LAWNO. 14 OF 2020

At the heart of the UAE’s insolvency problem is its treatment of debt as a criminal matter.31 Disregarding circumstances, if a check bounces as a result of insufficient funds or a false signature, the debtor will be held liable for fines or criminal punishments. As stated in Article 401 of the UAE Penal Code, debtors will “be sentenced to detention or to a fine, whoever draws in bad faith a cheque without sufficient funds or who, after giving the cheque withdraws all or part of the funds, so that the remaining balance is insufficient to cover the amount of the cheque, or gives an order to the drawee to stop payment, or if he deliberately writes or signs the cheque in

success#:~:text=About%2096%20percent%20of%20debtors,a%20discharge%20of%20t heir%20debts 30 Who May Be a Debtor, 11 U.S.C. § 109 (Cornell Law School, Legal Information Institute through 2022) (effective Nov. 6, 1978) 31 supra note 15

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such a manner as to make it non-payable.”32 Furthermore, Article 641 of the UAE Commercial Transactions Law (UAE Federal Law No. 18 of 1993) states that “A fine or imprisonment shall be imposed on anyone who has committed one of the following acts: 1) Deliberately and falsely claiming that there is no consideration for a cheque or that the consideration is less than the amount payable on the cheque. 2) Refusing, in bad faith, payment of a cheque drawn on a bank to a bearer against whom no valid countermand has been issued, despite the existence of the consideration for the check.”33 If a debt is not paid in full, debtors are viewed as criminals in the eyes of the UAE justice system and are subject to criminal punishment. As stated by a legal consulting firm, “The UAE laws are drafted in such a way to protect the interests of the beneficiaries of the cheques and imposes strict criminal charges as well as civil actions against those who offer cheques with insufficient balance. At the point when the cheque is dishonored, the payee is legally entitled to lodge a criminal complaint as well as a civil case in order to ensure punishment to the defaulter while getting their money back. In this way, the creditors are very much protected under the law.”34 Beyond its disproportionate effect on borrowers, this legislation further harms the economy as it signalsa lack of faith in investments, which ultimately dampens the UAE’s market activity.

A. THE UAE’S MISLEADING LEGISLATION

32 UAE Penal Code, Abu Dhabi Judicial Department (2011), https://cdn.expatwoman.com/s3fs-public/UAE%20Penal%20Code.pdf 33 Federal Law No. (18) of 1993 Concerning the Commerical Transactions Law, THE UAE CODE OF COMMERCIAL PRACTICE (Sep. 7, 1993), https://ded.ae/ded_files/Files/%D8%A7%D9%84%D9%82%D9%88%D8%A7%D9%8 6%D9%8A%D9%86%20%D9%88%D8%A7%D9%84%D8%AA%D8%B4%D8%B1 %D9%8A%D8%B9%D8%A7%D8%AA%20PDF/Federal_Law_(18)_1993_Concernin g_Commercial_Transaction_Law.pdf 34 Tony Maalouli, Bounced Cheque and Its Legal Consequences in the UAE, ProConsult, https://uaeahead.com/bounced-cheque-and-its-legal-consequences-in-theuae/ (last visited May 4, 2022)

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In an attempt to protect the interests of investors and bolster its economy in 2020, the UAE promulgated Federal Decree Law No. 14 to amend Certain Provisions of the Federal Law No. 18 of 1993 Concerning the Commercial Transaction Law. The ‘Decree’ amends Articles 600, 641, 642, 643, and 644 of the current UAE Commercial Transaction Law. Additionally, it removes Articles no. 401, 402, and 403 from the UAE Penal Code, and consequently decriminalizes the failure to recompense a check.35 Arguably, the amendment is most noteworthy for implementing a requirement that compels banks to accept partial payment of a check if the debtor does nothave the ability to pay the value in full. Although the provision had already been instituted as part of Article 617 of the Commercial Transaction Law, it was never made a requirement and was therefore largely ignored by the banks.36 To resolve this issue, Article 641 of the new 2020 Decree states that anyone who “reject[s] partial payment of the cheque value, issuing a certificate to this effect, or giving back the originof the cheque as per the provisions stipulated in (2) of Article (617) of this Law... shall be subject to a penalty of no less than 10% of the cheque value, subject to the minimum of AED 5,000 (AED Five Thousand), and no more than twice the cheque value.”37 Nevertheless, the new Decree includes a number of loopholes. As stated by Abu Dhabi litigation firm Al Tamimi & Co., “The newly introduced provisions treat the insufficient funds’ notice of the drawee as a

35 Mohamed Abdelrehiem & Mostafa Emad, Bounced Cheques for Insufficient Funds Is No Longer a Crime in the UAE, International Financial Law Review (May 10, 2021), https://www.iflr.com/article/b1rpvttmqwy8vl/bounced-cheques-for-insufficient-fundsis-no-longer-a-crime-in-the-uae 36 Mohamed Al Marzouqi, Criminal Penalties for Dishonoured Cheques After Legislation Is Repealed in UAE, Al Tamimi & Co., https://www.tamimi.com/lawupdate-articles/criminal-penalties-for-dishonoured-cheques-after-legislation-is-repealedin-uae/ (last visited May 4, 2022) 37 Federal Decree Law No. (14) of 2020 Amending Certain Provisions of the Federal Law No. (18) of 1993 Concerning the Commercial Transaction Law, United Arab Emirates Ministry of Economy (Sep. 27, 2020), https://www.moj.gov.ae/assets/2020/Federal%20Decree%20Law%20No.%20(14)%20o f%202020%20Concerning%20the%20Commercial%20Transaction%20Law.pdf.aspx

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writ of execution according to the executive regulations of the Civil Procedure Law.”38 This preserves the legal rights of the check’s beneficiary and permits them to use the insufficient check as a civil executive deed, which in turn, gives them the right to open a civil case against the debtor in accordance with UAE Civil Procedure Law. A direct result of this can be the seizure of assets or other possessions up to the value of the unpaid check-an inevitable financial catastrophe for the debtor. In most cases, debtors do not have the viable assets necessary to pay for the debt in full and are often sentenced to a jail term that isnot absolved until the debt has been paid off. Despite the decriminalization of debt, a creditor still possesses the right to open a civil case against the debtor, and accordingly authorizes the court system to imprison individuals who fail to successfully pay off their debt.39 As in the case of Ryan Cornelius, imprisoned debtors often have their assets frozen and are issued travel bans, hence trapping them in their predicament. In sum, Federal Decree-LawNo. 14 is a piece of legislation that misleads foreign investors into believing their investment in the UAE comes with little risk. The creditor’s ability to take civil action against the debtor completely undermines the potency of the debt decriminalization regulation and leaves the insolvency dilemma of the UAE still without a clear solution.

B. PROTECTIONS FOR INSOLVENT INDIVIDUALS IN THE UNITED STATES

The US equivalent to the UAE’s ‘Decree’ is found within Chapter 127 of the United States Code, codified as Title 28 US Code 2007 states that a) “A person shall not be imprisoned for debt on a writ of execution or other process issued from a court of the United States in any State wherein

38 Marzouqi, supra note 36 39 Ali Al Shouk, Bounced Cheque Cases Don’t End with Prison Term or a Fine in UAE, Top Dubai Judge Clarifies, Gulf News (Aug. 14, 2019), https://gulfnews.com/uae/bounced-cheque-cases-dont-end-with-prison-term-or-a-finein-uae-top-dubai-judge-clarifies-1.65591285

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imprisonment for debt has been abolished,” and b) “Any person arrested or imprisoned in any State on a writ of execution or other process issued from any court of the United States in a civil action shall have the same jail privileges and be governed by the same regulations as persons confined in like cases on process issued from the courts of such State.”40 Individualsin the US cannot be imprisoned for simply being insolvent. However, similar to the UAE, creditors can still open a civil case against debtors for failing to pay off their debt. That being said, during the span of a case, the Fair Debt Collection PracticesAct of 1977 protects debtors from unnecessary harassment and communication from a creditor.41 Creditors must accurately state the correct amount and due date of the debt and are prohibited from threatening to seize assets or collect more than what the debtor originally owed.42 Under the Sixth Amendment of the US Constitution, accused debtors have the right to an attorney, “a speedy and public trial,” and “to be informed of the nature and cause of the accusation.”43 In contrast, the trials and creditor-debtor relationships within the UAE are rife with corruption and partiality. Drawing upon Ryan Cornelius’ case, throughout the duration of UAE capital trials, “the prosecuting lawyer often sits next to the judge on the bench. Foreigners on trial have observed discussions between prosecutor and judge in which the former appeared to be giving instructions to the latter. Defendants are often blocked from giving evidence. Cornelius has not once been allowed to address the judge during the more than 100 court sessions he attended in over ten years of hearings and appeals since his arrest. He often struggled to understand what was going on because of poor translation.”44 Predictably, a

40 Imprisonment for Debt, 28 U.S.C. § 2007 (Legal Information Institute through 2022) (effective Feb. 1, 2010) 41 Federal Trade Commission Fair Debt Collection Practices Act, X C.F.R. § 2092 (2010) 42 Sean Pyles, 5 Ways the Fair Debt Collection Practices Act Protects You, Nerdwallet (Nov. 30, 2021), https://www.nerdwallet.com/article/finance/fair-debt-collectionpractices-act 43 U.S. Const. amend. 6 (Legal Information Institute through ) 44 Valencia, supra note 2

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deception of information from creditors combined with these Machiavellian court maneuvers will often result in one-sided verdicts that leave the accused ensnared in an indefinite entrapment. Owing to the Bankruptcy Reform Act of 1978 and amultitude of individual protections, debtors in the US are very rarely imprisoned for unpaid debt. Nevertheless, if a debtor is ever imprisoned for failing to act in accordance with a court order, the aforementioned federal statutes grant the individual anumber of rights that are largely neglected in the UAE. Furthermore, the US Supreme Court case Williams v. Illinois (1970) held that the State “may not under the Equal Protection Clause subject a certain class of convicted defendants to a period of imprisonment beyond the statutory maximum solely by reason of their indigency.”45 Moreover, legislation protecting the rights of debtors in the United States is woven into the very foundation and heart of the nation, whereas in the UAE the laws are relatively modern. The United States Constitution, which protects the rights of debtors and the accused, created the basis of US insolvency legislation in 1787 and has been an integral component of the nation’s progression. Issued in 1948 and still in effect to this very day, Statute 28 US Code 2007 ensured that all debtors were entitled to their deserved rights and liberties. Conversely, the only major legal reforms proposed by the UAE concerning debt correspond to UAE Bankruptcy Law No. 9 and UAE Federal Decree Law No. 14, which were announced in 2016 and 2020 respectively. Since the legislations are fairly recent, the UAE’s legal framework will take years to fully adapt to this new legislation, and those who were accused before the first law went into effect in 2016, such as the likes of Ryan Cornelius, remain unjustly imprisoned.

III. INTERPOL RED NOTICES

45 Williams v. Illinois, 399 235 (1970)

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The International Criminal Police Organization, commonly referred to as Interpol, is an intergovernmental organization operating on a global scale through the management of police databases, investigative support, and the facilitation of police cooperation. 46Although the organization does not possess any legal authority to make arrests, Interpol is commonly known for its issuance of Red Notices-“a request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action.”47 Red Notices contain the information necessary to identify a fugitive (name, date of birth, nationality, etc.), as well as information concerning the crime they have committed (armed robbery, murder, rape, etc.).

Article 83 of Interpol’s Rules on the Processing of Data (RPD) provides the specific conditions required for a publication of Red Notices, stating “Red notices may be published only if the offense concerned is a serious ordinary-law crime.”48 Furthermore, Interpol demands that “Red notices may be published only when sufficient judicial data has been provided.”49 This judicial data will be considered sufficient if and only if it includes at least: (i) a summary of the facts of the case, which shall provide a succinct and clear description of the criminal activities of the wanted person, including the time and location of the alleged criminal activity; and (ii) charge(s); and (iii) law(s) covering the offense… Furthermore, “to seek to prevent Interpol mechanisms from being used for minor offenses, if an individual is sought for prosecution, the conduct must be punishable by a maximum deprivation of liberty of at least two years.”50 Under this jurisdiction, Interpol does not have the authority to chase unpaid debts. However, the UAE bypasses this mandate by

46 What Is INTERPOL?, Interpol, https://www.interpol.int/en/Who-we-are/What-isINTERPOL (last visited May 4, 2022) 47 View Red Notices, Interpol, https://www.interpol.int/en/How-we-work/Notices/ViewRed-Notices (last visited May 4, 2022) 48 INTERPOL, INTERPOL’s Rules on the Processing of Data, C.F.R. § 83 (2019) 49 Id. 50 Id.

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“illegally reclassifying the debt as ‘fraud.”.51 Public officials have begun to recognize this practice, such as former British director of public prosecutions, Sir David Calvert-Smith, who “flagged the UAE’s abuse of rednotices and its ‘undue influence’ over Interpol.”52 Nevertheless, neither the UAE nor Interpol have commented on these accusations.

IV. CONCLUSION

This article seeks to accentuate the insolvency conundrum found within the UAE’s convoluted legislative and judicial framework. It introduces two UAE regulatory statutes, Bankruptcy Law No. 9 of 2016 and Federal Decree-Law No. 14 of 2020 andprovides evidentiary analysis to undermine these statutes’ potency and effectiveness. Furthermore, it scrutinizes the roleof Interpol Red Notices in relation to the international detention of insolvent individuals by the UAE. The impetus of this article is to convey why the UAE’s treatment of individuals in debt is a matter that must be addressed. In a disregard for the sanctity of human rights, the UAE has continued to trap individuals, like Ryan Cornelius, within the inextricable entanglement that is its judicial system. Due to the inconspicuousness of the issue, the UAE is able to maintain this practice with very little resistance from abroad. If there is any hope of freeing those who have been convicted under the UAE’s insolvency legislation, foreign countries, such as Britain and the United States must openly warn their citizens of the risks that investing in Dubai entails and publicly denounce the UAE’s corruption. Given its dependence on foreign investment, the UAE is an extremely PR-conscious country53 that responds rapidly to any negative publicity that has the potential of damaging its “frontier” image. Therefore, itsmaltreatment of debtors will only be addressed when financial growth is hindered. Henceforth, until the

51 supra note 15 52 Valencia, supra note 2 53 Valencia, supra note 2

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unthinkable occurs, the UAE’s austere insolvency regulations will proceed in an unobstructed fashion and innocent individuals will continue to be ensnared within a web of deceit and abuse.

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