Restructuring of Dubai World and its subsidiaries

INTERNATIONAL AND OFFSHORE GROUP

RESTRUCTURING OF DUBAI WORLD AND SUBSIDIARIES
SPECIAL TRIBUNAL APPOINTED IN THE DIFC

By Decree No.57 of 2009 HH Sheikh Mohammed Bin Rashid Al Maktoum, Prime Minister of UAE and Ruler of Dubai established a special Tribunal and a reorganization code to decide disputes related to the settlement of the financial position of Dubai World and its subsidiaries. The Decree took effect on 13 December 2009.

Dubai World’s subsidiaries include DP World (one of the largest marine terminal operators in the world, with 49 terminals and 12 new developments across 31 countries as of March 2009), Dubai Maritime City and Nakheel (the world’s largest privately held real estate company responsible for the “Palm” and “World” developments). Press speculation assesses Dubai World’s debts to be in excess of US$60 billion comprising the vast majority of the Emirates total debts of between US$80-100 billion. Nakheel requested an extension from its creditors in respect of US$3.5 billion due last month. Dubai World is shortly to begin negotiations for a restructure plan covering around US$26 billion of debt.

The initial members of the Tribunal will be, as Chairman, Sir Anthony Evans (Chief Justice of the DIFC Court and former member of the English Court of Appeal); Michael Hwang SC (Deputy Chief Justice of the DIFC Court and former Judicial Commissioner of the Supreme Court of Singapore) and Sir John Chadwick (Justice of the DIFC Court and also a former member of the English Court of Appeal). Sir John is a specialist in insolvency. The Tribunal will follow the practice, procedure and evidentiary rules of the DIFC Courts. Hearings will generally be held in public, and in English and in the DIFC.

The Tribunal has jurisdiction, amongst other things, to hear and determine any claims against Dubai World and its subsidiaries including any demand to dissolve or liquidate Dubai World or any of its subsidiaies. It may also issue interim and interlocutory orders – no doubt to protect Dubai World’s assets.

The Tribunal will apply a new DIFC Law (No.3 of 2009) applying the DIFC Insolvency Law to Dubai World and its subsidiaries and providing for Voluntary Arrangements (including an automatic moratorium applying to all creditors) but dis-applying or modifying the provisions relating to, in particular, Receivership and Winding Up. The DIFC Insolvency Regulations (again with modifications) will apply to Dubai World and its subsidiaries but will be administered by the Tribunal rather than the DIFC Court. It must, however, be noted that in the past the DIFC Insolvency Regulations have caused some problems because they have not been fully implemented: see Forsyth Partners Global Distributors Limited, Forsyth Partners Group Holdings Limited and Forsyth Partners (Middle East) Limited, (CFI 5-7/2007) and Rasmala Investments Limited v Various Defendants (CFI 001-006/2009).

The Tribunal is also empowered to liaise with the courts of other jurisdictions where insolvency proceedings may have been commenced.

The Tribunal will provide the transparency and predictability in accordance with internationally recognised standards in the restructuring of the liabilities of Dubai World and its subsidiaries that some commentators have claimed have hitherto be lacking in the conduct of their affairs.

XXIV Old Buildings has unparalleled experience before the Court of the DIFC and has been involved in some of the world’s largest corporate insolvency disputes.

Michael Black QC and Tom Montagu Smith