Nakheel wins tribunal victory over World contractor

Penguin Marine argues World licensing fees are unfair now island construction has stalled
Nakheel wins tribunal victory over World contractor
The World, Nakheel
By Shane McGinley
Mon 30 May 2011 01:34 PM

A subsidiary of indebted developer Nakheel has won a ruling to
demand licensing fees from a transport firm contracted to provide services to troubled
offshore island project The World.

Penguin Marine Boat Services, which has an exclusive transport contract to
ferry goods and people to the islands, had asked a Dubai tribunal to release it
from an annual licensing fee of AED5m ($1.36m), arguing the lack of activity on
the island made its operations unfeasible.

The firm claimed work on the islands had stalled and that
The World had backtracked on a 2008 deal allowing Penguin Marine to construct a
port and manage deliveries to the development.

Construction on the offshore project ground to a virtual
standstill in the wake of the economic downturn, which saw real estate prices
in Dubai fall more than 60 percent from their peak.

Many buyers on the project have failed to begin work, with
the only notable construction work carried out by Kleindienst Group, the
developer behind the six-island Heart of Europe Project.

Nakheel has said 70 percent of the 300 manmade islands are
sold and that building work is the responsibility of the owners.

In court documents, Penguin said it had spent in excess of
AED20m on set–up and running costs but has been “unable to earn anything more
than a small amounts of income due primarily to the fact that [Nakheel] has not
carried out any development and/or infrastructure works.”

The court heard Penguin had failed to make any of the annual
license fee payments of AED5m and was also required to repay the AED1.86m advancement
fee issued to the firm.

Nakheel executive Ali bin Thalith said the claim Nakheel had
stopped work on the project was untrue, but admitted development had slowed in
the wake of the financial crisis.

“The project is still ongoing and has not been terminated,”
he said.

The tribunal ruled that Penguin was still contracted to meet
its financial obligations while work on the World remained ongoing. The firm
has 14 days from May 22 to appeal.

In a previous hearing, lawyers for Penguin Marine had
claimed the project was falling into the sea, causing channels between the
islands to become clogged with silt as the islands sank.

A spokesperson for Nakheel declined to comment. Penguin’s
legal representative had not returned calls for comment at the time of writing.

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