5:27am , Wednesday 20th January 2021

The Issues Surrounding Egypt’s Promissory Notes

28 December 2014

Cairo, November 2014 (VETO Magazine) – “Watch out Um Hanan, the police are here” shouted the neighbour. This was enough to make Um Hanan stop the household chores she was doing and jump from her roof top to another building to escape a police raid.

Had she been by caught by the law execution unit of the 2nd precinct of Shubra Al Khaima police in the governorate on Al Qalyoubiah, she would have had to face a jail term of 16 years in accordance with the ruling issued against her for the crime of reneging on a promise to pay a debt. She had missed paying instalments for the payment of household items worth six thousand Egyptian pounds ($850).

When she bought the items in 2007, part of her daughter’s trousseau, the storeowner placed a condition that she signs “promissory notes” for unspecified amounts (on a blank piece of paper) as guarantee that she would make the instalments.

However she stopped paying when the small transport vehicle (microbus) she owned ended up as scrap metal after a traffic accident; it was her only source of income. She was shocked to find that the original debt amount had multiplied several times reaching 200 thousand pounds ($28,000) after the storeowner had sold her notes to a lawyer who was approaching her with demands, having put down unrealistic numbers.

After failure to reach an agreement, the lawyer went to court to have a sentence issued against her for the crime of reneging on promises to pay. Um Hanan is hoping that these sentences would be dropped with the passing of time:  three years after the sentence of June 2012. In the meantime she has to avoid being caught by anyone trying to execute the sentence and keep way from random raids and police stations.

“Um Hanan” is one of thousands of Egyptians who have been indicted for the crime of “reneging on promises to pay debts” because of promissory notes they had been pressured to sign (on blank paper). This phenomenon spread after 1999 when Trade Law No. 17 was issued. As a result cheques were turned into a civil debt that one cannot be imprisoned for. Since then lenders would only accept cheques after making borrowers sign “promissory notes” and lawyers would take advantage of the consumers’ “need” by adding astronomical figures so that they can receive higher fees, especially since the courts calculated really low fees for them based on tight numbers, in accordance with article 187 of the Attorney Law issued in the year 1983.

This investigation reveals the plight of the “offenders”, mainly the borrowers whose lives become threatened because they had signed promissory notes. It also sheds light on the legislative and legal wrongs that hamper these cases, as well as the lawyers’ tampering with the promissory notes to force the offenders to pay their fees.

The punishment for reneging on the promise to pay these debts ranges between one month and three years and a fine of not more than 100 pounds ($14), according to article 341 of the Penal Law.

“Misr Al Kheir” is a private NGO that aims to save many of these “offenders” by paying their debts. In a written response, which this reporter received in June 2014, the corporation claimed that it had “settled the debts of 16,493 borrowers who had been indicted for promissory note debt, since the start of this project in February 2010.”  Since the payment of the debts of borrowers is one of the legitimate forms of Zakat (Almsgiving) in Islam, a number of charitable organizations started projects for the payment of debts owned by borrowers such as “Al Risala” and “Orman.”

“Misr Al Kheir” is a charitable organization that obtains funding from contributions and large amounts of that money comes from Zakat.

(H.M) recounts her story with the corporation. Her husband wanted to improve his income so in 2010 so he bought a three wheel vehicles (tok tok) that had gained popularity in under-privileged areas in Egypt. The price of the vehicle is 25 thousand pounds ($3500) to be paid in 25 instalments; the wife signed a promissory note guaranteeing her husband and he was regular with his payments. Eleven month later, he stopped paying the instalments because the vehicle broke down.

The lender filed a court case against the wife which included a debt of 60 thousand pounds ($8500). When the husband discovered that his wife was threatened with a jail term he suffered a heart attack and died, leaving his wife as the sole provider for the her sons.

The lender refused to halt the judicial process leading to a three-year jail term for the wife. While she was filing for an “injunction”, a legal procedure to stop executing a sentence while an appeal is in process she met with a lawyer from Misr Al Kheir Corporation.  She took her to the organization’s headquarters. Then she took over negotiations with the lender and his lawyer, paid the debt and helped the wife set up a clothes selling business that brought in a steady income.

Emad Abdullah, the legal consultant of the offender’s program at the corporation says that Misr Al Kheir was placing a number of specifications for the payment of offenders’ debts, the first of which is that the debt should be for a legitimate issue as the money is coming from Zakat funds. The offender should be sentenced to jail with the term having commenced or about to. The organization also pays the debts of small debtors so that can help as many offenders as possible.

Abdullah also says that when they started the project the corporation used to visit the jails to help pay the debts of imprisoned offenders and once they established a reputation they started to receive offenders at their offices in addition to continuing the prison visits.

According to records from the Ministry of the Interior, the number of prisoners jailed for the crime of reneging on debts reached 3,881 in May 2014, but there are no official figures on the total number of offenders in addition to those succumbing to pressures to pay amounts much higher than they owe because they are afraid they would be accused and tried.

When buying on credit from one of the stores, the buyer signs a number of cheques one for each instalment, and one promissory note that is left unspecified. Some stores might stipulate that he/she sign a promissory note with a specified amount for each of the instalments and one that is unspecified. This is accepted by the buyer after some urging from the seller and he is usually shamed with the question: “why are you afraid of signing if you have no intention of reneging on your debt?” This question works like magic making him/her immediately show his/her good intention by signing the papers, as Um Hanan recalls and she adds: the buyer usually has a source of income he/she can rely upon and payments falter only if that stops!”

Abdul Nabi is the owner of a goods store in Cairo and he says that not specifying an amount when signing the promissory note is in order to give the lawyer a chance for a good payment when negotiating his fees should he/she purchase the promissory note.

Despite the fact that the court sets an amount for the lawyer’s fees and makes the accused pay it when a final sentence has been declared, Abdul Nabi says that lawyers do not accept those amounts and want more. That is why “prior to filing a case he sets an amount for his payment and adds it to the promissory note which would have been signed on a blank document by the borrower. Should the borrower which to settle out of court he would negotiate with the lawyer.

(N.M.) sits in a small office on the first floor in one of the popular areas of Cairo; a lawyer who has become well-adept at filing court cases against those who have reneged on their debt payments, such as Um Hanan.

This reporter paid him a visit, but the minute she introduced herself he erupted in anger threatening that he would sue her if she mentioned him in any report. He refused to give any information on his activities.

Attorney Mervat Fawzi says that the “highest fee that the court sets would be 200 pounds ($28) which is a completely unacceptable amount for lawyers.”

Mervat adds that some lawyers consider the promissory notes a great opportunity to obtain huge fees through fraud, taking advantage of the borrower’s fear of imprisonment.

She points out that there are lawyers who have mastered these cases to the point that they buy the promissory notes for prices less than the original amounts they are worth, because they have to make sure that they get the sums of money or place the borrower in jail.

In one of the cases, Mervat asked that the promissory note be sent to a forensic expert to prove “that the dates had been tampered with.” This was a final attempt to save her client from the crime of reneging on his debts. However, the court does not take into consideration any such proof between the time the amount was added on the paper and the signing, as she says. Mervat adds, “I knew that it was simply an attempt to lower the sentence, it would not have worked to clear my client.”

She also says that the courts do not recognise forensics reports “as long as the signature is clear on the paper, this indicates that the borrower owes a sum of money that needs to be repaid, no matter the amount.”

Mahmoud Magdi, consultant at the Court of Misdemeanours in Ismailiya  says forensics, which may prove time differences between when the money amounts were added on the paper and the signing are considered evidence in favour of the accused but are not considered clear proof in his favour.

What is considered the principle of handing over what is owned or the financial principle is the crux of the case and the fact that there is a difference in the time when the amount was added or when the paper was signed is simply evidence that this principle does not exist, however it is not clear proof. The lawyer therefore rules “ in accordance with what he/she sees fit with his/her conscience; some may show clemency and pass an innocent ruling or send the case to civil court.”

The use of promissory notes is not limited to stores selling goods; it can also be used as a guarantee in other situations, as what happened in the case of (M.F.) He signed a promissory note for the taxi he was working on.

With the lapse in security that took place after the January 25, 2011 revolution, the cab was stolen; his boss filed a 15-year jail term worth of cases against him including some filed with the names of six people he didn’t even know. He was forced to sell his apartment in order to settle the 75 thousand pounds ($10,700) with the lawyer even though he was declared innocent of having stolen the car after the investigation.

The care owner (H.M.) says: “ I know he did not steal the car…but I want it back; it is my source of income and that of my children’s.” He adds “ when he signed the promissory note before being handed the car, he knew something like this could happen; the car was his responsibility.” The owner refused to provide any further details about using other people’s names in the cases that he filed against him.

The Forensic Science Laboratory is situated in the middle of the Sayeda Zainab district; the analysis of the promissory notes is usually relegated to the department of forgery within this authority.

Dr. Mona Sa’ad, Director of the Department of Forgery says that the administration uses many methods and approaches to determine if a document has been tampered with starting with the expert eye and heading to equipment that measure paper pressure, differences in writing, types of ink or whether there was empty space prior to the adding of words. Dr. Mona adds that in most of the cases involving promissory notes, tampering is proven. But she did not disclose a figure. She says “sometimes the forgeries and tampering are of a very high quality and as such we are forced to send reports to the court of our inability to prove fraud because there are no witnesses.”

She adds that analysing any note starts with the signature. “If we can prove that the signature is not valid then the case is non-existent. However if it does prove legitimate we continue with the analysis and check if the writing matches the signature and whether it has been added at a different time; if this can be proven we can then show that forgery has been committed.”

Dr. Mona adds: “We attempt to prove this by determining the amount of pressure that was applied on the paper when writing was carried out as well as the type of ink used and the handwriting style.”

The financial amount is not the biggest part of the crime of the promissory note. Sha’ban Ali, director of the legal group for the “offenders” project at “Misr Al Kheir” corporation says that the main point in the court case isn’t the amount of money as the principle of the crime of reneging on debts as set by the project is exemplified in the answers to the following questions: Has a crime of reneging on the promise to pay debts been committed or not?” “Is there a debt that has to be settled?” He adds, “If the signature is proven to be legitimate then the tenet stands! The judge does not take the amount into account but whether or not the financial principle to the crime exists and based on that the sum of one thousand pounds would be the same as one million pounds and has no significance on sentencing which could range between one month and three years.”

Sha’ban also says that the sole judicial method to obtain no jail term is to prove that such cases do not involve any reneging on promises to pay debts and are simply civil debt lawsuits that do not require imprisonment but detainment and performance. Some of these cases are rather difficult to prove and include tampering by the lawyers such as filing the case in a name other than that of the shop owner’s; it becomes impossible to prove the trade relationship between the lender and borrower. In some instances the borrower commits a mistake when getting rid of all the documents that he has such as receipts and payments by either burning or shredding them.  These documents can prove that a business relationship exists and without them as proof the judge will have to come to a decision based on his/her own conscience.

The court cases that are part of the misdemeanours involving reneging on promises to pay debts usually last between four and eight weeks in each of the court stages in Egypt: first instant, appeals and cassation. The cases are usually dropped with the progression of time after three years from sentencing.

The legal consultant at “Misr Al Kheir” Emad Abdullah says “those with modest means have to buy on instalments or through borrowing and are usually not protected from the lenders and the lawyers.” He calls for the establishment of “legislation to determine the buying and selling process and set up guidelines for the signing of promissory notes which would protect the offender or the person buying on instalments without taking advantage of the borrower. Such legislation should create an authority that would govern neutrally between the lender and borrower without taking advantage of the rights of either party and take into consideration the social aspects.”

Egyptians are aware of the dangers of signing on blank sheets of paper but they do perform this for two reasons: need and the hope of being able to pay the debt from a source of income whether stable or not, according to Abdullah. He explains that the majority of offenders signed blank pieces of papers with unspecified amounts and were blackmailed with larger sums; they were unable to reach settlement agreements with lawyers.

He stated that this phenomenon in Egypt can only be dealt with through the intervention of the state and the establishment of a governmental institution that would act as intermediary between the offender and the lender as well as the existence of legislation governing payment on instalments.

And until the state pays attention and issues such legislation Um Hanan is awaiting June 2015 when her sentence would be dropped. Until then she has to pay heed to her neighbours’ calls of “Watch out Um Hanan, the police are here!”

This investigation was completed with support from Arab Reporters for Investigative Journalism (ARIJ) 


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