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.
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