Jan 08 2013
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Dubai Sets Court For Ruler's Son
Tuesday, Jan 08, 2013
(From THE WALL STREET JOURNAL 1/8/13)
By Asa Fitch
DUBAI -- The ruler of Dubai, a Persian Gulf emirate that has developed into the leading financial center in the Middle East, has quietly set up a new judicial panel to hear cases involving claims against an investment vehicle owned by his son.
The 2011 order, not publicly announced but reviewed by The Wall Street Journal, requires those seeking payment from Zabeel Investments to take their claims to a special committee of judges rather than to the courts of the DubaiInternational Financial Center, or DIFC.
Zabeel is owned by Sheikh Hamdan bin Mohammed al Maktoum, the crown prince of Dubai. His father, Sheikh Mohammed bin Rashid al Maktoum, is the ruler of Dubai.
One claimant says it is hard to get information about the special Zabeel panel, let alone lodge claims with it. The panel is apart from the regular DIFC courts, which were set up in 2004 as a way to assure foreign investors and banks that they would face a level playing field in Dubai's financial center.
The issue of fairness is particularly important to foreign investors as companies connected to Sheikh Mohammed and the government are deeply integrated into the emirate's economy.
Dubai is one of seven emirates that make up the oil-rich United Arab Emirates.
"The U.A.E. has, on paper, liberalized its economy and provided some sort of veneer of accountability and regulatory environment," said Christopher Davidson, an academic who has written books about Dubai's economy. But the country's commitment to those issues has been tested at times "when ruling-family matters cross over into the private sector," he said.
Mazen Boustany, a lawyer for Zabeel, declined to comment on the panel or the company's current status. Zabeel's website has been taken down and on a recent visit its offices in the DIFC were deserted. Sheikh Mohammed's media office didn't respond to a request for comment, and Sheikh Hamdan couldn't be reached.
As Dubai's crown prince, Sheikh Hamdan is next in line to succeed Sheikh Mohammed as ruler. The 30-year-old prince is one of Sheikh Mohammed's 22 children. He also is a director of Investment Corp. of Dubai, the emirate's main sovereign-wealth fund; owns a skydiving club; and, according to his official website, is an active sportsman.
The Zabeel panel was created in February 2011 by an order signed by Sheikh Mohammed, according to the text of the order reviewed by the Journal. It says cases involving the company are to be heard by a panel of three local judges, but doesn't explain why the move was deemed necessary.
In a brief interview at his office, one of the judges, Badr Issa Al Samt, said the Zabeel panel wasn't currently able to hear cases as it was being reconstituted with the appointment of a new judge. "We have no hearings until a new magistrate is appointed," he said. He declined to comment further on the workings of the Zabeel panel.
A lawyer for one company trying to bring a claim says she is puzzled about how to proceed.
"We have visited the courts to learn about it, and everywhere we turn there seems to be confusion and uncertainty about it," said Ludmila Yamalova, a Dubai-based lawyer who is representing the German architecture firm Graft Gesellschaft von Architekten. "The orders [creating the Zabeel committee] weren't publicly available and weren't published in any of the legal publications where all the legislation is normally published."
In October, Graft sued Zabeel in the DIFC courts, claiming it hadn't been paid for design work on a luxury hotel project. Graft claimed it was owed $1.79 million for work on the development, which was widely publicized when it was launched in 2008 because the actor Brad Pitt said he would be helping with the designs. The hotel was shelved as Dubai's real-estate crisis took hold.
When Graft brought the action in the DIFC courts, Zabeel's lawyers sought to have the case moved to the new judicial body. Ms. Yamalova says that was the first time Graft learned of the panel's existence.
Graft isn't the only foreign company that has attempted to bring claims against Zabeel. The international law firm DLA Piper sued Zabeel in the DIFC courts last year, but the courts' registrar issued an order in July referring it to the special judicial committee. It isn't clear what happened next in the case or what the lawsuit is about; DLA Piper declined to comment.
Zabeel was one of Dubai's most active investment firms during the Persian Gulf emirate's property boom in 2008. The company also had substantial private-equity stakes and foreign investments, including in the Light Group, a restaurant and nightclub operator in Las Vegas. Like many other large Dubai companies owned by the ruling family or connected to the government, Zabeel was forced to restructure debts when asset values fell and banks pulled their financing in the aftermath of the financial crisis.
Leila Hatoum contributed to this article.
(END) Dow Jones Newswires
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