Knowledge Series Volume VI: A Comment on Criminal Liability Provisions Against Debtors under the Execution Law
Our Associates, Hisham Almansoor and Fatima Alsayed explain the provisions governing criminal liability of debtors.
Hisham Almansoor ([email protected]) & Fatima Alsayed ([email protected]) – Associates
Our previous Volume in the Raees + Co Knowledge Series examined the provisions pertaining to Provisional Attachment in the context of cases heard before the Urgent Matters Court under Chapter Five of Decree Law No. 22/2021 on the Issuance of the Law of Execution in Civil and Commercial Matters (“Execution Law” or “the Law”). In this volume, we address the provisions governing criminal liability of debtors, whether the same is an individual or commercial company.
Criminal Liability on Natural & Legal Persons
The Execution Law introduces criminal liability provisions on natural and legal persons for various offences by virtue of Articles 58-59.
Where the debtor is a legal person, a fine of a minimum BHD2,000 and maximum BHD100,000 may be imposed on legal persons who take measures to frustrate the execution of judgements. This includes the act of deliberately concealing all or a portion of money that would have otherwise been available to use upon execution, or to deliberately overstate the legal person’s debts such as the disclosure of a fictitious creditor, or where the legal person provides false or misleading information, documents and records, as well as refraining from disclosure of finances to the Execution Court or the Private Executor.
Meanwhile, where the creditor is an individual, a fine of a minimum BHD500 and maximum BHD100,000 and/or imprisonment for a maximum term of two years may be imposed onto the individual debtor where he/she has carried out any of the acts stated above.
Prior to the Execution Law, the Civil and Commercial Procedures Law (Decree Law No. 12/1971) (“CCPL”) was silent on criminal liability applicable to legal persons and did not prescribe any fines for attempts to obstruct the enforcement of Execution Deeds. Instead, it had a more robust approach where the debtor was an individual as it granted the Execution judge the power to order the arrest of the debtor (upon the creditor’s application), or the deportation and cancellation of residency permits for expatriates. As such, the potential for criminal liability on companies is a welcome development that may deter the hiding of assets and transfer of money to impede the enforcement of Execution Deeds.
It is also noteworthy that the Execution Law has discontinued the procedure previously available to creditors to apply for the arrest of individual debtors where the same does not deliver payment or performance under the Execution Deed. This has given rise to a mixed response from the legal industry, though it is nonetheless important to stress that the direct attachment mechanisms applied against the funds and assets of the debtor (whether an individual, commercial company or financial institution) is a welcome improvement which increases the efficacy of execution mechanisms. Removal of the arrest procedure would also fall in line with the Arab Charter for Human Rights, as enacted in Bahrain by Law No. 7/2006 on the Accession to the Arab Charter on Human Rights, which states under Article 7 that “[i]t is not permissible to imprison a person who is lawfully proven unable to pay his debts arising from a contractual obligation.”
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