Questions & Answers
Enforcement of a lending agreement in the UAE and other countries
I'm going to lend money to someone but I'm afraid they might travel.
If we write a contract where he agrees to pay me back, how do I make this contract enforceable in any country the other party might be residing in?
Can we write a clause that allows me to decide on the arbitrator?
Thanks a lot for the help.
Dear Sir/ Madam,
Thank you for reaching out to me on this.
I really appreciate that you would like to have an agreement in place before lending your money to another person.
I would further stress that the said agreement should be drafted in a way to make it enforceable in UAE or any other country.
For example, any financial assistance given by you, and you claiming any interest upon it, will make the agreement void in the UAE and not enforceable.
This is because giving any loan on interest is illegal when you are not a financial institution. However, if it was India, the agreement plus the interest would be enforceable.
Hence, I would urge that you get your agreement drafted or vetted through a legal professional who will ensure that your agreement is enforceable in both countries.
Of course, you can provide in the agreement to have enforceability in the UAE and other countries. You will have to mention this in the Governing and Dispute Resolution Clause in the Agreement.
With regard to arbitration, you should be very careful to insert a clear arbitration clause, with the procedures, seat and institution of arbitration.
Failure to include may render the clause to be invalid. You as a lender can reserve the right to appoint an arbitrator, however, this has to be expressly reserved.
By the way of additional security, you may take post-dated cheques as security deposit which will enable you to institute criminal and urgent civil case in the UAE.
I trust you will find the above answer appropriate.
You can get in touch with me on 052-9495731 or email for further assistance and clarification.
Regards,
Hari Wadhwana
Your contract should be notarized. Choosing an arbitrator will not help because if the other party objects, then a new arbitrator is appointed.
Also, it depends on the loan amount. If it is a huge amount, then arbitration helps. Enforceability depends on the treaties between the UAE and the other country.
Hi there,
You can certainly have the clauses to protect your rights and jurisdiction clause to enforce it in the UAE or home country.
You can also keep a clause for arbitration, but it has its own pros and cons.
Thanks,
Sudhanshu Singh
00971523782456
sudhanshu@alnassaradvocates.com
