By Shane McGinley
Landmark ruling means panel will still hear cases filed before Nakheel split from Dubai World
A Dubai tribunal has
overruled a legal bid from Nakheel challenging the court’s jurisdiction to rule
on cases linked to the troubled developer following its split from parent firm
The ruling is a blow
to the now state-owned firm, which has seen a slew of lawsuits filed against it
in recent months, and may have significant implications for dozens of investors and trade creditors.
In the case of Gaber
Nema Kerger V Palm Jebel Ali, Nakheel said the Dubai World Tribunal (DWT) could
not rule on cases linked to the company or its subsidiaries as it was carved
out of Dubai World on Aug 23.
But the court ruled the indebted firm could not avoid legal
action in the tribunal by “the simple expedient of arranging for the
shareholding to be transferred outside the Dubai World Group.”
The ruling smoothes the path for investors that
filed against Nakheel before it became wholly state-owned, to pursue their cases
in the tribunal and not Dubai Courts.
“There has been no subsequent legislative act that has
deprived or purported to deprive the tribunal of its jurisdiction in the
proceedings,” court documents showed.
The tribunal was created in December 2009, to hear cases linked to Dubai World’s debt restructuring.
Nakheel’s legal representatives declined to comment.
The ruling suggests a law that strips the DWT of its power
to decide on cases linked to Nakheel would need to be passed before existing
lawsuits would transfer to Dubai Courts, said Adrian Chadwick, partner at Hadef & Partners.
“For cases which
were commenced before Nakheel split away from Dubai World the tribunal has
determined that it retains jurisdiction unless and until there is a decree
expressly depriving it of jurisdiction,” he said.
over the future of lawsuits lodged with the tribunal after Nakheel
became a government-owned entity, Chadwick added. Investors would run the risk
of the tribunal declaring it has no jurisdiction and “ordering the claimant to pay Nakheel’s costs of the jurisdiction
application. This is likely to deter anyone from commencing new claims,” he
Nakheel was one of the biggest casualties of the property
crash after overstretching itself with ambitious projects such as the offshore
World island development.
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 Dubai World Tribunal website shows that 37 cases related
to the developer have been filed.
Nakheel, which wrote down AED78.6bn ($21.4bn) from the value
of its real estate after property prices in Dubai crashed, reported a
first-half net profit of AED526m ($143m) on Monday.
The architect behind Dubai’s palm-shaped island said revenues
stood at AED1.5bn, mainly driven by the handover of development properties in a
number of stalled Nakheel projects.
Cost cuts also reduced overheads by AED 131m compared to the
same period in 2010, the company said.
Why would Nakheel have tried to have all the cases thrown out of the Dubai World Tribunal when the Tribunal was set up by a Decree specifically for Nakheel and the other Dubai World companies?If they had been successful this would have meant millions of dirhams in wasted legal costs.
Also it would be more in the interests of Dubai long term for the cases relating to Nakheel to continue to be heard before the original Dubai World Tribunal set up in DIFC, even new cases with claims that refer to evidence that dates back before the disconnection of the firm from Dubai World.
Sheikh Mohammed has already declared a strategy for the DIFC courts to become a centre of legal excellence and regional legal hub where international law can be applied. That initiative cannot be undermined, creating a legal decree that devolved Nakheel cases from a DIFC court jurisdiction would be a glaringly mistaken move to make, given the objective and ambition as an international legal hub.
Also as many of these cases involve foreign entities it would make sense that all cases against Nakheel remain before DIFC courts anyway.
As an investor you really don't have any rights. When a massive developer like Nakheel can mess around as it has with its creditors what hope does the simple buyer have with any recourse?
Agree, I think DIFC is the last chance for Dubai to maintain its position (provided that Bahrein or Qatar do not move on that direction too)
OTOH pushing the DIFC would mean a loss of rights for certain very important constituencies here, so I would expect strong resistance.
Time (next 6-12 months) will tell.
You spend you lifes savings to buy your dream home with Nakheel and they have taken nearly four years and counting without any recourse! Their marketing people have their work cut out to try and gloss their reputation, especially after they have failed to deliver on their promises and with out any compensation to their valid customers. Worst thing i ever did buying from Nakheel.
Yes I totally agree, unfortunately for property buyers, their contracts provide for arbitration which is very costly and takes a very long time. Even then when you get the arbitration award you have to file it in the Dubai Court and then go through another time consuming and costly process of challenges to the ruling.Yes you can read your contract, consult your lawyers but unless you have deep pockets and years to waste then trying to enforce your contractual rights is not practical.
all complaints fall on deaf ears at nakheel my apartment was 3yrs late they messed up on consolidation and have been charging me 1% per month in penalty fees.
Kiss your money goodbye and get on with your life in another part of the world, like your home country. Have never appreciated the life back in Germany as much as I have since I am back from Dubai.
Daud, you've summarized the situation very well. Those are the very same reasons, a lot of people have just left the country and now the local banks are sitting on all those bad loans and the developers had to write off such vast sums. They, the banks and developers, should have been more forward looking in their approaches to the property investors in the past. Now it is too late, Dubai and the other states of the UAE will have a very hard time to convince potential new property investors to come and spend their hard earned money in UAE rather than in their home countries. I find it quite telling that a lot of investors out of the Middle East are putting the money into London property rather than UAE/GCC.