The UAE's tough penalties for defaulting on cheques were relaxed for Emirati citizens in October after a royal decree, but the threat of jail for the country's large expat population remains.

In the UAE writing cheques that bounce is a criminal offence instead of a civil one. Post-dated cheques are frequently used as a guarantee by businesses and individuals for everything from apartment rentals to multi-billion dollar deals.

Officials were not available to comment on Tuesday, which is a national holiday.

"In line with the directives of Sheikh Khalifa... and in the spirit of fairness and equality, the courts have stopped as of last month accepting collateral cheques presented as a criminal tool against expatriate debt defaulters," Ali Khalfan Al Dhaheri, head of the legal affairs department at the Ministry of Presidential Affairs was quoted saying by The National.

The paper also quoted judge Jassem Saif Buossaiba, head of the judicial inspection department at the Justice Ministry, as saying: "Federal public prosecutions in the country have, indeed, released expatriate detainees as has been the case of their Emirati counterparts who were freed last October."

However, Gulf News then quoted deputy minister of Presidential Affairs Ahmad Jumaa Al Zaabi as denying the report, saying: "There is no relaxation or debt waiver for expatriates".

In July a British businessman who had been jailed for nearly three years in Dubai for writing bad cheques was released when his conviction was overturned following a seven-week hunger strike.

The UAE has no bankruptcy laws to protect debtors and many have called for the decriminalisation of bounced cheques.

New legislation aimed at simplifying the process of bankruptcy and allowing failing companies to restructure is expected in 2013. (Reporting By Rania El Gamal; Writing by Angus McDowall in Riyadh; editing by Patrick Graham)

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