Nakheel is ordered to pay costs in $13m claim

The Dubai World Tribunal heard its biggest case yesterday as Nakheel was accused by a contractor of withholding payments in a Dh49 million claim.

The Dubai World Tribunal heard its biggest case yesterday as Nakheel was accused by a contractor of withholding payments in a Dh49 million (US$13.3m) claim. The Palm islands developer suffered an early setback when it was ordered to pay the legal costs of the claimant, Construction Delivery Group (CDG). The judge made the award after deciding Nakheel had failed to comply with legal procedures of a tribunal that was established to handle claims against the developer's parent company Dubai World.

Sir Anthony Evans, the tribunal chairman, warned the developer's representatives, Dalmook Mohammed Dalmook, that it was the responsibility of lawyers to be familiar with the rules of the court. "I have no doubt that this situation has come about because of the defendant's representatives failure to become familiar with the rules and to comply with them," said Sir Anthony. The hearing at Dubai International Financial Centre (DIFC) Courts yesterday was only the first stage in a legal case filed by CDG claiming unpaid bills for managing more than 1,200 homes on the Nakheel-developed Palm Jumeirah. CDG had a facilities management contract but alleges it was not paid between 2008 and this year.

It is the biggest claim heard at the tribunal, where 17 cases have been filed so far, together worth more than $53.8m. The tribunal was set up in December last year after a ruling by the Dubai Government to handle disputes and hear claims arising from Dubai World's restructuring. Nakheel has been hit with claims after a slowdown in Dubai's property market triggered by the global financial crisis led to delays and cancellations in the developer's pipeline of projects.

Companies owed money by Nakheel, and their lawyers, are observing how disputes involving state firms will be handled. The tribunal's success may also determine whether it becomes a model for corporate restructuring involving other companies. After virtually all Dubai World bank creditors last month agreed to a restructuring plan for $24.9bn worth of debt, attention is now turning to a resolution for Nakheel's trade creditors.

They have been offered a 40 per cent cash payment of the agreed amount due and the rest in the form of a five-year sukuk that pays 10 per cent a year. Most contractors are likely to use arbitration channels to reach an agreement with Nakheel as the developer's contracts usually contain a clause requiring it. Dalmook Mohammed Dalmook's problems arose because it had not at first realised CDG's contract with Nakheel had been amended to remove an arbitration clause. It then failed to comply with the tribunal's regulations regarding the application of paperwork.

"It's the duty of practitioners appearing before the court to become familiar with those rules and to make themselves familiar with them if they were not previously so," said Sir Anthony. "The first requirement is that they should learn what the rules say, secondly that they should take care to comply with them and thirdly that they should give full consideration to any steps taken before the court."

He ordered Nakheel's defence team to pay legal costs for CDG, represented by the law firm Fulbright & Jaworski, between September 7 and yesterday.