Nakheel has been forced to call a press conference to persuade the world that the troubled developer’s World Development, an artificial archipelago of 300 islands off Dubai’s coast, was not sinking.
But Wednesday’s technical press conference and boat tour – no cameras allowed! – did little to take attention away from a flurry of media coverage over the Dubai World Tribunal, where Nakheel’s parent is working out its $25bn debt restructuring.
The common-law tribunal – which was set up by the Dubai International Financial Centre (DIFC) – is beginning to shine a light on Nakheel and its finances. The government-owned company has accumulated an alarming amount of debt since the shuddering property crash in Dubai.
The DWT emerged from the DIFC courts, which has jurisdiction over the Dubai International, the emirates tax-free zone that has attracted many international banks to set up regional headquarters.
The government set up the DIFC courts and an independent regulator to assuage foreign investors’ fear that the UAE was living up to its reputation as a centre for lax financial regulation and erratic legal enforcement.
By happen stance, the DIFC Courts is now mulling whether to take on a case in which a Greek pipe manufacturer accuses Barclays Bank PLC of complicity in a $24m fraud.
Barclays, like many other banks, has operations in the DIFC – which operates as a non-retail, regulatory island within the UAE – as well as ‘onshore operations’ spanning commercial and retail banking.
DIFC Courts, if they take jurisdiction, could then become the Dubai court for other banks, such as HSBC and Lloyds, which have operations both inside and outside the DIFC.
The geographical expansion of these courts beyond the marbled walkways of Dubai’s financial centre might not have been the intention of the Dubai government, nor may it be welcomed by federal authorities in the increasingly-powerful Abu Dhabi.
But while Barclays is keen to kick the fraud case into the long-grass of the Dubai Courts, banks may welcome the more transparent processes at the DIFC Courts, led by eminent judges.
Foreign companies that have sought arbitration know the unpredictable nature of Dubai courts is best avoided. Lawyers at a recent conference conceded that the notion of tracing assets in Dubai is a tough business.
As the dust settles around Dubai’s great crash from the supercharged heights of its real estate bubble, cases continue to pile up at the courts, from construction firms seeking payment, to real estate speculators trying to get out of contracts.
Neither the government nor foreign companies should have too much to fear from this independent wielding of justice: the tribunal has fought both for and against Nakheel in recent months.
Perhaps a greater role for the DIFC Courts could help the city wade through the growing backlog of litigation in the emirate, thereby helping revive confidence in an economy that has been sorely knocked in recent years.