Investors and trade creditors may find themselves unable to pursue disputes against Nakheel in the Dubai World tribunal if plans to separate the debt-hit firm from its parent company go ahead.
Nakheel chairman Rashid Lootah said in February the firm would be carved out of state-backed conglomerate Dubai World, as the company sought to restructure $24.9bn in debt.
Investors with outstanding disputes against the developer may find themselves in legal limbo if the tribunal – which was set up to hear disputes linked to Dubai World - may no longer have jurisdiction to rule on cases related to Nakheel.
“As far as the tribunal is concerned it will need to decide whether it can still accept jurisdiction [on] cases after Nakheel has been carved out,” said Jonathon Davidson, founding partner with legal firm Davidson & Co, which last year won a landmark ruling against the developer.
“There are people in the tribunal with cases already lodged against Nakheel and probably lots of people who are thinking about it or may at some stage think about it.”
The decision would have widespread implications for individuals pursuing legal action against Nakheel. The developer has faced a slew of cases since the tribunal was created in December 2009 from unpaid trade creditors and buyers, over real estate that has plunged in value since its mid-2008 peak.
The state-backed company said last week it expected to complete its $10.9bn debt restructuring process in the first half of 2011, which will settle unpaid bills with 40 percent in cash and the remainder paid via an Islamic bond.
Davidson said the tribunal may decide disputes against Nakheel are no longer eligible, or may agree to hear cases lodged before the date of the developer’s separation from Dubai World.
“[It] will have to make its own assessment as to whether it can continue to accept cases after the carve out,” he 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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