Font Size

- Aa +

Wed 26 Oct 2011 07:52 AM

Font Size

- Aa +

Dubai investors in the dark over Nakheel lawsuits

Confusion reigns over which court can rule on legal disputes linked to indebted developer

Dubai investors in the dark over Nakheel lawsuits
Nakheel is embroiled in at least 12 legal cases linked to The World development
Dubai investors in the dark over Nakheel lawsuits
Nakheel banners

Investors caught in legal disputes with Nakheel remain in the dark over the future of their lawsuits after the indebted developer was carved out of parent company Dubai World in June.

Lawyers say they are still waiting for clarity on whether cases against Nakheel will be switched to Dubai Courts, or will continue to be heard by the specially-formed Dubai World Tribunal (DWT).

Media reports stirred confusion this week after claiming Dubai’s Department of Legal Affairs had issued a decree that ruled all Nakheel-related cases would now be heard by Dubai Courts.

But lawyers told Arabian Business the letter was simply a circular suggesting that it was likely disputes would be referred to Dubai Courts now Nakheel is a wholly government-owned firm.

“In my view the letter… still leaves unanswered the issue of what, if an, jurisdiction is retained by the Dubai World Tribunal over Nakheel and its subsidiaries,” said Adrian Chadwick, a partner at Dubai law firm Hadef & Partners, who is involved in a number of Nakheel cases filed with the tribunal. “The current uncertainty will continue unless and until a new decree is issued or the DWT itself renders a judgment on the scope of its jurisdiction.”

The confusion was likely to continue until a test case comes before the tribunal, setting a precedent for whether Nakheel disputes will continue to be heard by the panel or switched to Dubai Courts, he told Arabian Business.

The judgment would have widespread implications for individuals pursuing legal action against Nakheel. The developer has faced a slew of cases from unpaid trade creditors and buyers since the tribunal was created in December 2009, to hear cases linked to Dubai World’s debt restructuring.

The former Dubai World subsidiary was one of the biggest casualties of the property crash after overstretching itself with ambitious projects such as the offshore World island development.

Nakheel said in September it wrote down AED78.6bn ($21.4bn) from the value of its real estate during the Dubai debt crisis, which saw house prices in the city fall more than 60 percent from their peak.

The state-owned developer became embroiled in a rash of legal battles as it struggled to finish a $16.1bn restructuring, including a lawsuit filed by its former chief executive for $3.7m.

The property developer is engaged in at least 12 legal cases relating to The World, including one lawsuit against Kleindienst Properties which demands almost $200m in unpaid installments and delay fees.

The DWT last month itself warned that it may no longer have jurisdiction to rule on cases against Nakheel now the company has split from Dubai World.

A directive issued by the tribunal said: “issues as to the jurisdiction of the tribunal may arise in proceedings brought by or against Nakheel and those of its subsidiaries and affiliated that have ceased to be subsidiaries of Dubai World.”

The directive, issued by the tribunal's chairman Sir Anthony Evans, said the court would continue to oversee legal cases that commenced before Aug 23.

Jonathon Davidson, founding partner with legal firm Davidson & Co, which last year won a landmark ruling against the developer, said last month that investors and trade creditors who had not yet filed a case against Nakheel in the tribunal could still do so.

“Parties who have not yet filed are at liberty to do so and make their case that the tribunal still retains jurisdiction over cases involving Nakheel,” said Davidson. “The tribunal will decide one way or the other."