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Sun 27 Mar 2011 04:37 PM

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Nakheel split may see buyers shut out of Dubai World tribunal

Moves to separate developer from Dubai World could leave trade creditors, buyers in legal limbo

Nakheel split may see buyers shut out of Dubai World tribunal
Nakheel said last week it expected to complete its $10.9bn debt restructuring process in the first half of 2011

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.

savid odgood 8 years ago

this is just another way for the uae to give investors the run around, they (Nakheel) are trying to hide

james 8 years ago

It was the Ruler, HH Sheikh Mohammed, who set up the Special Tribunal because he wanted to demonstrate a transparency and respect for the law. Now that Nakheel has lost a few cases it wants to "carve itself out" so that it won't lose any more cases. Then claimants will no doubt have to go to the local courts where I am sure they will be delayed and delayed and delayed in order to protect Nakheel. If this is not the case then I ask Chairman Rashid Lootah make a statement to this effect.

Paolo C 8 years ago

This sounds very a very familiar way of doing. It's clearly an attempt to defraud the investors.

Red Snappa 8 years ago

It is essential that Nakheel creditors retain a right to tribunal arbitration for the preservation of a 'good to do business' environment in the eyes of foreign businesses.

Who in their right mind would wish to do future business with a former state company, that can elect to delay repayment of loans as well as service and supply bills by up to 6 years and yet there is no mechanism to resolve value disputes, additional claims, no ombudsman, office of fair trading that has the power to rule whatever the status of the company.

Without these features the emirate cannot be referred to as commercial democracy enshrined in a sound regulatory framework with firm laws or a safe developed business environment.

Peter Peter 8 years ago

Unfortunately for all of us who invested in the Dubai Dream, here is one more example of abrogation of responsibility by the powers that be.

I guess it is time for us to realize that we should stop expecting transparency or fair play from the authorities , particularly if it goes against their interests. Time and again they have shown that profit comes before principals. Government owned or semi government entities are allowed to flout initiatives that were meant to protect expat investors. How can one go up against the government it self without incurring their wrath or some retribution ?

As one who has suffered personally through one major government department reversing it policy over night without any explanation or justification I can sympathize with the major creditors who are going to lose an arm and a leg. I only lost a few fingers !

Jag 8 years ago

Carving out Nakheel as a separate entity is not going to fool anybody.

Nakheel's debt is sovereign debt and must be repayed if Dubai is to do the honorable thing.

Sandpiper 8 years ago

When one side in a deal has the power to alter the law, and appoint/change the adjudicator or jurisdiction, then any contract the other side is party to has no protective value. Nakheel have an absolute sovereign right to make and change the rules to suit their side of any disagreement. You should have done your research before contracting not after, there is no point in complaining, just sit back and wait to be told how much money you are going to lose. Oh, and if you don't like it, you know where the airport is!

Bob 8 years ago

Peter Peter's comments says it all. I made the right decision to close my business in the UAE (75 employees) and move it to Singapore where transparency exists and laws are followed. My business is thriving in a hassle free, stress free, open and honest environment. Good luck to all who remain, you need it.

Habeeb 8 years ago

Good for you. But why bother reading/commenting about a place that polarises your experience.

I don't get this about this AB site. So many commentators dissing the place and wanting to leave or have left but still hang around.

X-UAE 8 years ago

To Habeeb,
We do it because we can. Plus there are down times in everyone's day, and this is a way of killing time. I read and comment about everywhere I have lived before, and that includes the UAE.