In 2009, I wrote that The World project in Dubai might be in trouble due to the economic downturn. The ambitious development in the Gulf may have another problem on its plate. Reports came out yesterday stating that the islands shaped like countries are sinking back down into the water.

The project has been in trouble for years due to the debt-ridden state of Dubai as well as the logistics of building hundreds of islands in the middle of the water. The picture above shows the project back in 2006 but more recent reports tell of a more misshapen development plagued by erosion. At a property hearing, Richard Wilmot-Smith QC, a British lawyer for a company that ferries people to the islands, told the tribunal that the land is gradually falling back into the sea. Penguin Marine sought to get out of its contract with the developer Nakheel, saying that fewer people are going to the islands is and that the project is essentially falling apart.

Work on the islands has reportedly been stopped for over a year. The project is becoming an ocean wasteland, a half-finished project of rocks and sand surrounded by breakwaters. Work has stopped inside the manmade lagoon and instead of neatly defined islands in the shape of recognizable countries and continents, ragged sandy blobs pushed barely above the water remain.

It’s a far cry from the early glamorous days of the project when countries, developers and celebrities around the world clamored for their own country-named islands. Richard Branson planted a Union Jack on one of the islands as one of his infamous stunts. Fashion designer Karl Lagerfeld signed on to design limited edition homes on Isla Moda, the world’s first dedicated fashion island, located in the project. Isla Moda was to have a fashion hotel and a variety of luxury residential villas as well as design studios and dedicated areas for fashion shows and project launches.

Shortly after it was first announced, the World project has had many visitors including Michael Jackson and golfer Vijay Singh. Rumors once had Rod Stewart and David Beckham buying into the project and Mötley Crüe drummer Tommy Lee once said he was buying the “Greece” Island for Pamela Anderson but a developer later claimed “Greece” as the site of a luxury hotel. Brad Pitt and Angelina Jolie were reported to have purchased the island “Ethiopia” but that was pure rumor as well. Formula One race car driver Michael Schumacher was given a piece of The World by Dubai’s crown prince. Schumacher’s island was part of ‘Antarctica’ on the artificial globe. The 21 islands that make up Australia and New Zealand were to be developed as a resort named Oqyana. In 2007 the Shanghai island was sold to Chinese businessman Bin Hu for $28 million amid a flurry of sales that also included “Greece” selling for $15.5 million, and “Tokyo” going for $45 million.

Developer Nakheel says that 70 percent of The World’s 300 islands have been sold but the developer has admitted that the project has slowed down. The Telegraph reports that the only inhabited island is Greenland, which has a show home owned by Dubai’s ruler. The Telegraph also mentions that John O’Dolan, whose company bought Ireland for £24million, committed suicide and Safi Qurashi, who bought Britain for £43 million, is serving seven years in jail in Dubai for check fraud.

A spokesman for Nakheel told the Dubai tribunal the scheme was not dead and that it will be completed. That seems ambitious considering that Nakheel is still struggling to deal with its massive debt. Nevertheless, the tribunal found for Nakheel on Thursday, saying it would give full reasoning later.