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Sun 4 Dec 2011 09:28 AM

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Ex-Nakheel CEO’s legal battle may spur new lawsuits

Legal experts say former employees of state-owned developer watching verdict carefully

Ex-Nakheel CEO’s legal battle may spur new lawsuits
Nakheel was one of the biggest casualties of the Dubai real estate crash

Former employees of Nakheel may press ahead with legal action against the state-owned developer if ex-CEO Chris O’Donnell wins his upcoming $3.7m battle against the firm, legal experts have said.

The success of the case, which will see O’Donnell seek $3m in long-term incentives, $290,850 related to currency fluctuations and $180,000 in interest, could be seen as a landmark decision for other former employees with grievances against the developer.

“A good outcome may lead to more cases been taken by ex-employees of Dubai World, Nakheel’s parent company,” said an associate at legal firm Davidson & Co, which represents around 30 cases against the developer. A flood of lawsuits was, however, unlikely, he said.

A former employee, who has begun legal proceedings against Nakheel over disputed commission payments, said he believed a positive verdict in could spur the developer to offer a settlement in his case.

“I feel Nakheel could give me a call any time to settle… As soon as they feel they may lose the case they come calling,” he told Arabian Business.

Australian O’Donnell issued legal proceedings in August, alleging breach of contract. Nakheel has argued its former CEO is not entitled to long-term incentives as he resigned a week before the close of his five-year contract. The case is due to be heard before the year-end.

Nakheel, which was carved out of parent company Dubai World in June, has seen a flurry of lawsuits against it following the collapse of Dubai’s property market in late-2008.

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

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 company made hundreds of staff redundant as it struggle to stem losses.

Former Nakheel General Counsel David John Nicholson last August won a AED752,000 ($205,000) ruling against the developer after his role was terminated with a month’s notice.

His contract stipulated three months’ notice, court documents showed.

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Investors and employees caught in legal disputes with Nakheel are still waiting to see whether their cases will continue to be heard before the Dubai World Tribunal (DWT), which was established in

2009 to hear cases linked to Dubai World’s debt restructuring.

The tribunal may no longer have jurisdiction to rule on the former Dubai World subsidiary, meaning cases would be switched to Dubai Courts.

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

The confusion is likely to continue until a test case comes before the tribunal, legal experts said in October.

Dubai, arguable the GCC market worst hit by the financial crisis, saw a spike in legal disputes between companies and employees as hundreds of workers lost their jobs during the downturn.

The Dubai Court of First Instance received 7,146 labour cases in 2010, compared to 4,837 in 2009, representing a 48 percent in employment disputes.

Many cases centre of end-of-service benefits – the lump sum owed to employees at their end of their contract, which is calculated on the length of their service and their salary.

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