Nakheel, the real estate arm of troubled conglomerate Dubai World, on Tuesday lost its attempt to raise AED41m in late fees from a buyer on the offshore World development in a landmark ruling by a Dubai tribunal.
The ruling requires Nakheel to finalise a ‘consolidation agreement’, and credit nearly AED30m in downpayments on two islands to a plot in Jumeirah Village, owned by one of the claimants, Diamond Developers.
Nakheel offered these credit swaps in the wake of Dubai’s real estate crash, to enable buyers to transfer cash from unfinished or halted developments to completed real estate.
The deal, agreed in March 2010, would enable Diamond to pay off its plots and secure the certificates needed to hand over nearly 1,400 units to its buyers.
In exchange for the payment, Perseus- the company behind the World purchases – would receive real estate to the value of its credit.
In July, however, Nakheel issued a demand for an additional AED41m in ‘delay fees’, a penalty for late payment on the two islands.
Nakheel said it had not signed the consolidation agreement and refused to issue five of the outstanding ‘no-objection’ certificates (NOC), stopping Diamond from handing over properties to end users.
The tribunal, however, ruled that a binding contract was in place and that Nakheel’s claim for AED41m in late fees was unjustified.
The two-day trial was the first completed by the Dubai World tribunal, a panel set up to resolve disputes relating to Nakheel’s parent company.
The subsequent ruling could have widespread implications for other buyers on the World development.
Jonathon Davidson, managing partner of UAE-based legal firm Davidson & Co, which represented the claimants, said the result could bolster the confidence of investors.
“It is certainly a clear indication of the manner with which their cases will be dealt,” he said. “The result is already drawing interest from other purchasers in a similar situation.”
The litigation process itself – which can often take up to eight months – was concluded in ten weeks, after Davidson & Co appealed for an urgent hearing.
“The tribunal sat till 7pm both nights of the trial to ensure that all of the evidence could be properly presented,” Davidson said.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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