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      source Human Rights Watch www.hrw.org (Beirut) - The United Arab Emirates attorney general should immediately drop all charges against five pro-democracy activists to halt their trial, Human Rights Watch said today. The charges of "humiliating" top officials relate solely to the defendants' peaceful use of speech to criticize the UAE governmen […]
    • Nakheel Dubai Sunland Case
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      Dubai June 7, 2011 Nakheel said on Wednesday that its CEO Chris O'Donnell had left the company "after completing his contract terms". O'Donnell, an Australian who joined the developer in 2006, said he had decided to leave Nakheel following five years spent with the company, the statement added. O'Donnell has overseen a traumatic time […]
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Archive for March 27th, 2009

After the gold rush: Getting paid in Dubai

Posted by 7starsdubai on March 27, 2009


source building UK

It is claimed that the average contractor is owed £50m, while some consultants’ fees are being slashed in half. Roxane McMeeken finds out just how bad Dubai’s payment problems have become

Dubai is looking more and more like a place with a great future behind it. You can see that most clearly on the billboards erected beside empty sites and motionless tower cranes. “Ordinary is for other people” says the one where the Trump Tower was to have gone. Well, nemesis follows hubris: at least half of the emirate’s construction projects are “on hold” according to research firm Proleads, and nobody knows when, or if, they will start again.

New signs of the desperate state of Dubai’s developers are emerging every day. To look at the top three of them is telling: Union Properties has admitted it would welcome a merger after shelving its flagship £320m Formula One theme park in Dubailand. Emaar recently announced yet more cancelled projects: Asmaran (a 70 million ft2 , £17bn mixed-community scheme billed as “a jewel in the desert”), Maysan (three residential towers, also covering 70 million ft2) and Warsan (500 villas covering 3.4 million ft2). Meanwhile, Nakheel is facing a fraud investigation and has put its £2bn mall expansion plan on hold. It has also been hit by the halving of property prices on its celebrated Palm Jumeira project. Four-bedroom garden homes on a frond are going for £1.2m compared with £2.6m in July.

Where does all this leave the British consultants and contractors who count these developers among their top clients?

The short answer is, cash-strapped. Some are seeing their fees slashed – a Building survey of more than 150 people working in the UAE found that two-thirds of them have been asked to drop their prices recently. Others have been waiting for payments for six months and many are considering legal action.

What went wrong?

The first problem was that many developers were reliant on bank credit rather than oil revenue, as is often thought. Abu Dhabi, the capital of the UAE, has about 10% of the world’s oil, but Dubai has almost none. Banks were happy to keep lending to its developers as long as property prices were going up, and could act as collateral for more lending and more construction. But when property prices started tumbling, this virtuous circle turned vicious and clients ran out of money to pay consultants and contractors.

Abu Dhabi’s $10bn (£7bn) loan to Dubai announced in February appeared to offer a glimmer of hope, especially when the Dubai government said this money would mainly go to state-linked developers. But questions are being raised about how far it will go. For one thing, Dubai has declared that it owes at least $80bn (£56bn), of which almost a quarter falls due for repayment this year. The boss of a UK consultant with a large presence in Dubai says: “The $10bn won’t even cover developers’ interest payments.” He adds that compounding this is the fact that Dubai has so few ways to make money. Last year, 65% of its GDP was from real estate. He adds: “And there is no oil, no exports, no tax and 80% of the population are expats, many of whom are leaving.” Now the fee cuts are spreading to Abu Dhabi, where developer Aldar has written to consultants to ask them to cut fees – on live projects by up to 20%.

Late payments and fee cuts

So how bad has it got for UK firms? Certainly there is no sign that the government cash is filtering through. A senior source at a UK contractor in Dubai is fuming. He says: “The average contractor here is owed about £50m.”

A source at a UK project manager says some payments from Dubai developers are up to six months late; Mace and EC Harris are saying openly that it is taking at least three months to get paid. WSP is estimated to have set aside £4m to cover bad debts and project management consultancy Blair Anderson now employs someone full-time solely to chase payments in Dubai.

Meanwhile, the head of a British specialist working on a major project that stopped in October says his firm was paid 20% of what it was owed in January. He said he has no idea when he will get the rest, although he believes it will come through eventually, as his client is linked to the Dubai government.

Then there are the fee cuts, which are affecting most firms. Evan Anderson, group director of Blair Anderson, says the firm’s fees are between 20% and 30% lower than six months ago. But he is still better off than many architects, whose fees Anderson is renegotiating on behalf of clients. He says: “We are doing a lot of reverse briefing of designers. We’re asking them to cut their fees by up to half and to change the materials they’re specifying to bring down costs by about 30%.”

Contractors across Dubai are having to renegotiate tenders, typically resulting in 15-20% being lopped off their money. The senior contractor says: “Contractors here had been enjoying margins of seven, eight or nine per cent. Now clients are trying to get us to take margins as low as three or even one per cent. They also want to lengthen programmes so that cash flow is less onerous. It’s chaos.”

More pain for consultants is arriving in the form of deferred payment plans. Mark Prior, head of the Middle East for EC Harris, says: “We are discussing deals that would mean we will be paid in six months’ time – or half of what we’re owed in three months and the rest in six.”

Other companies are understood to have been forced to accept payment in the forms of stakes in a development. George Grant, operations director for infrastructure at M&E specialist Drake & Scull, says: “We have no experience of taking equity instead of cash but we would consider it. Our view is we want to work with the clients if it means that work goes ahead.”

“We are doing a lot of reverse briefing of designers. We’re asking them to cut their fees by up to half and to change the materials specified”
Evan Anderson, Blair Anderson

Others are more wary. Anderson has refused payment in shares: “They offer you 1% of a development that you have had no involvement on and no idea how it works. If you invest in something you want to do detailed research on it.”

Meanwhile, the old model of developers paying contractors with money from sales of units in buildings before it has been completed is a thing of the past. Projects launched on this model are being refinanced. Under the new deals institutional investors are brought in and contractors are forced to accept deferred payments.

Anderson says: “The previous model based on off-plan sales is no longer viable, so total financing is being done by investment, and selling is happening when the building is under construction.”

As a result, development is less gung-ho, he adds, which in turn means people are earning lower fees over a longer period. Developments are being built in phases. “Before, a developer would build three high-rises at once; now they are building them one by one. They build a tower, sell it, then use the proceeds to build the next one.”

Such is the state of the market that those who are actually getting paid do not want to admit it. Speaking on condition of anonymity, the head of a British architect’s Dubai office said: “I would rather you didn’t put my name in your article because if other people working for my client find out that I’ve been paid, they’ll be demanding that the client pays them too, and then I’ll have to answer to the client.”

He says at the moment you have the best chance of being paid if you are needed to help with the process of putting a project on hold. “If you are not essential – that is, if you are not putting remedial works in place so the client can put work on hold – you will not get paid.”

Will developers ever pay?

The gravest concern of all is caused by rumours that some developers are about to go bust. Despite their government links, there is no guarantee the state will step in to save these firms. A source at a project manager in Dubai says: “It’s impossible to say whether the government will pay developers’ debts or not. State sponsorship is relatively loose here. Nobody knows whether certain developers are going to be mothballed, merged or go bust.”

Drake & Scull’s Grant, a Middle East veteran, says: “There’s no doubt some clients have run out of money and will disappear. Not the big names though, they need to renegotiate their finance deals but they will carry on.”

He may be right, but the question of when they will pay is still causing UK firms to fret. Emaar, to take one developer, has just had its debt downgraded by Standard & Poor, the ratings agency, from –A to BBB+. It made a loss of 1.6bn dirhams (£304m) in the last quarter of 2008. Meanwhile, the government has warned that the economy may shrink in the second half of 2009.

Most developers are declining to comment on the payment issue, including Nakheel. A spokesperson from developer Limitless did speak to us and insisted that all creditors would be paid. She said: “We’re renegotiating some payment plans, but not all, as part of our overall response to the global situation.”

An Emaar spokesperson also sent the following statement: “Payments for contractors and consultants are based on a credit cycle and set deliverables agreed with them. All payments that meet the criteria have been honoured and will continue to be cleared, in line with our agreements.”

But for those still waiting to be paid and suffering, what recourse is there? Another source says: “Historically, if you’re not getting paid here, you don’t rock the boat; the last thing you do is resort to litigation. But now people are getting highly emotional. If you’re working on a huge project and you recruited a huge team to do it, and you’re owed millions, well maybe it is time to sue.”

He adds that he expects to see “some big disputes in the next three months”, which is perhaps ironic considering that Dubai is aiming to become a regional dispute resolution centre. Prior is among those who admit that “litigation is an option we have our eye on”. It’s a statement that would have been unthinkable in Dubai a year ago.

As the legal cases loom (see box, previous page), it’s clear that relations between clients and project teams are strained to the limit. The head of another UK consultancy, who asked not be named, revealed a conversation he had with a senior emirati working for a big developer. “I said to him, if I don’t get my money, I will sue. He said, you will never work in Dubai again. I said, why would I want to?”

Disputes in Dubai

Dubai’s legal system is facing a sudden rush of disputes, and there are doubts about how well it is going to handle them. The first problem is the absence of adjudication. Paul Taylor, a partner at lawyer HBJ Gateley Wareing, says: “Unlike in the UK, there is no quick fix in Dubai. Here, arbitration and litigation, are the only ways to get your money.” Even worse, arbitration in Dubai takes up to two years – even longer than in the UK.

Another problem is certification. Of course, getting an engineer’s certificate proving you have done the work and are therefore entitled to be paid is an important piece of ammunition in the fight for your fee. However, in Dubai, Taylor says many contracts include a clause saying that an engineer cannot approve a piece of work without the client’s sign off. “These clauses are being disputed, but it’s still tough.”

People are looking at alternative methods of resolving disputes. Next month a “mediation centre” is being set up that will fast-track dispute resolution through an independent party. Taylor says it is a mid step between amicable settlement and arbitration and could resolve a dispute in two or three weeks. The problem, though, is that it will only work if both parties voluntarily accept the verdict.

Most projects are on the FIDIC contract. The 1999 version contains a clause that allows the use of a dispute resolution board, which can take six to 12 weeks. Earlier versions of the contract do not tend to offer this option.

Even if you do resolve a dispute to your satisfaction, then you have the problem of enforcing the decision. Taylor recommends a “more commercial” way of tackling a dispute. “Knock on the client’s door and try to explain your difficulties face to face. And get your local sponsor to act as an intermediary.” As a last resort, you can threaten to terminate the work you’re doing for the client – an approach that will only work if the project is continuing.

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UAE Laws to Address New Types of Financial Crimes Planned

Posted by 7starsdubai on March 27, 2009


source KhaleejTimes

27 March 2009
Dubai – Dr Hadef bin Juaan Al Dhaheri, the UAE Minister of Justice, said on Thursday that the new laws are being mulled by his ministry to address the emerging and relatively new kinds of financial crimes and irregularities as well as public debt, interest rates and credit in the country.

“We are having a look at international laws and financial legislations to come up with laws that would best suit our judicial system here. We are interested in enhancing our practices and standards and, unifying the judicial systems of different emirates.”

He said, “We have a strong system of accountability to bring to justice whoever breaches the law and goes beyond his duties whether by accepting bribes or being involved in corruption.”

The minister was speaking on the sidelines of the Third Judicial Congregation organised by Dubai Courts under the theme ‘Experiences and challenges pertaining to real estate and litigious lawsuits and financial corruption’.

He lauded the forum’s importance as ‘it gives an opportunity to share with the rich and developed countries’ expertise.”  He said the cases of corruption even though they were increasingly emerging in the UAE, were still within reasonable limits.

“The corruption cases we are witnessing in the UAE are similar to others in the world. It is in someway the product of the real estate and construction development boom in the UAE and Dubai in particular,” he said.

Dr Ahmed Saeed bin Hazeem, Director General of Dubai Courts, said a mechanism would soon be in place to find alternative solutions for settlement of disputes before the prosecution and it would mostly benefit the real estate cases.

Hazeem said, “In the last 50 years we have been witnessing new kinds of corruption and crimes. We are constantly working on improving the human resources and the cadre skills to reach up to the highest international standards of judicial practices. The Third Forum is a further step in the path of promoting the judicial work in the UAE.”

Dubai Attorney-General Essam Eissa Al Humaidan pointed out that some of the financial irregularities are still under investigation and indicate the misconduct of individuals and do not express flaws or collective ill practices of the institutions.

Humaidan said, “The investigations take a long time in some cases due to pending technical reports or necessary witness statements.”

He said there was no time limit for the detention of any suspect in connection with investigations in any case.

“A suspect is detained at the beginning of the investigation for 21 days, after which we refer the case to the relevant judge and he decides whether to extend the detention or not, based on our findings. Each detention can be extended for one month at a time. After the end of that month, we have to file for another one-month extension.”

Asked about UAE businessman Abed Al Boum and former American CEO of real estate developer Deyaar, Zack Shaheen, who have been detained for many months now, the attorney general said that an announcement would be?made soon. “Within 10 days the Public Prosecution will take action regarding Shahin’s case as we have completed most of the investigation. We have been?seeking data and gathering pieces of evidence from external banks and financial institutions.”

He added the Public Prosecution would also take a decision on the Al Boom case within a few weeks.

mary@khaleejtimes.com

© Khaleej Times 2009

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Property Disputes Dubai – Mediation Centre

Posted by 7starsdubai on March 27, 2009


source The National

Dubai has created professional groups and a mediation centre to resolve the hundreds of disputes that have arisen among investors and developers as the property sector soured in the global economic downturn.

The initiative, an effort by the Dubai Land Department and the Dubai Real Estate Regulatory Agency (Rera), is designed to integrate the main participants in the property industry into a regulatory framework headed by Rera.

A mediation centre was established to help resolve disputes faster, away from Property Court. Currently, more than 500 cases are said to be pending with the court.

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The British government is being asked to help U.K. investors in Dubai who fear losing millions of dollars in the sheikdom’s collapsing property market.

Posted by 7starsdubai on March 27, 2009


source WallstreetJournal by Stefania Bianchi

A group of investors based in the U.K. have sent a petition to Prime Minister Gordon Brown asking him to intervene in what they claim are “harmful real-estate practices” in the United Arab Emirates.

“We as investors have recently discovered the blatant embezzlement of our money by unscrupulous developers,” the petition, seen by Zawya Dow Jones, says. The petition was referred by Downing Street to the Foreign Office.

“We have been contacted by individual investors,” a spokesperson for the U.K. Foreign & Commonwealth Office told Zawya Dow Jones. “The FCO takes this matter seriously.

A near 50% fall in real estate prices in some parts of Dubai has spurred a rash of increasingly ugly real estate disputes between developers and investors. The industry accounts for 30% of the emirate’s economy.

The Dubai Land Department estimates that British investors own property worth 4.7 billion U.A.E. dirhams ($1.3 billion) in the emirate. British buyers now account for 12% of international property investors in the emirate, behind Saudis and Indian buyers, according to regional investment bank EFG Hermes.

The involvement of the British government on behalf of disgruntled property buyers will further damage the reputation of Dubai as it struggles to clean up its financial image and attract foreign investment that’s vital for its economy.

The Foreign Office spokesperson said that while the British government would advise investors on how to resolve disputes “ultimately this is a legal matter between the interested parties.”

Dubai’s Real Estate Regulatory Authority, the government watchdog, didn’t respond to written questions from Zawya Dow Jones, but Thursday said it plans to set up new “real-estate communities” to increase transparency.

INTERVENTION<br />

British national Nick Jasani is one of a group of investors who is lobbying parliamentary representatives to put pressure on Downing Street to intervene in the rising number of disputes on their behalf.

Jasani, who bought a commercial unit from a developer in Dubai’s Business Bay district for AED2 million in early 2007, is worried because construction at the project hasn’t started, even though he’s already paid AED640,000 or 30% of the unit’s value.

He said the Dubai-based developer is still demanding payment installments even though they’re not working on the project.

A letter seen by Zawya Dow Jones and sent by a number of individual investors to Members of Parliament states that “even though projects have no hope of going ahead due to the current financial climate, the money (investors) they have put down may not be refunded.”

As the bottom falls out of Dubai’s once-soaring property market, developers are scrambling to respond. Many are being forced to cancel or delay projects amid falling sales and property prices.

Last month, a report by investment bank Morgan Stanley (MS) said the United Arab Emirates is delaying or canceling real-estate projects worth more than $260 billion. An earlier HSBC PLC (HBC) report said Dubai is delaying or canceling almost 60 projects worth $75 billion.

Amid growing uncertainty about whether they’ll see their money again, investors are organizing themselves to take on the emirate’s sometimes unscrupulous developers and convoluted real-estate regulations.

This week a group of more than 100 investors delivered a petition signed by more than 350 investors to Dubai developer Nakheel’s office urging the firm to reschedule payment plans for villas on Palm Jebel Ali because of delays.

This followed a petition to Emaar Properties (EMAAR.AI), the Middle East’s largest developer, requesting the cancellation of three of its projects.

Nakheel didn’t respond to questions from Zawya Dow Jones.

“There are certainly a number of investors who seem to have claims with merit. Others simply have been caught out by a falling market and insufficient contractual protection,” said Matthew Hooton, head of real estate in the Middle East for law firm Ashurst.

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