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Dubai Group sued over 10 Billion Debt in London by international Banks

Posted by 7starsdubai on September 15, 2012


Sorting out Dubai Group’s $10bn debts was always going to be tougher than most negotiations over the emirate’s total $110 debt pile.

RBS, Commerzbank, Standard Bank and Commercial International Bank of Egypt calling for immediate repayment of their loans after claiming two years of talks had failed.

 Now RBS, Commerzbank, Standard Bank and Commercial International Bank of Egypt have raised the stakes by launching arbitration proceedings in London, calling for immediate repayment of their loans after claiming two years of talks had failed.

RBS was co-chair of a group of partially-secured banks that made up $4.5bn of the $6bn owed to lenders. The remaining $4bn lies in inter-company loans with Dubai Group’s parent, Dubai Holding, owned by Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum.

Dubai Group raked up billions of dollars of debt to acquire mainly minority stakes in financial companies and real estate across the world, including Bank Islam Malaysia and regional investment banks EFG-Hermes and Shuaa Capital.

The value of those assets, put at around $3bn at the start of the debt talks in 2010, has declined to around $2bn, says one person aware of the matter.

The legal action in London stems from a fundamental disagreement between western banks seeking to exit the non-performing loans as soon as possible and local banks that arguing for longer term restructured loans that would have required lower provisioning.

Assuming the banks win an arbitration award against Dubai Group, they could then seek to attach their claims against Dubai Group assets worldwide.

Under the New York Convention of 1958, signed by the UAE, international arbitration awards should automatically be approved by Dubai courts.

One person aware of the situation says the claims threaten to push the investment company into insolvency, putting Dubai Group directors in legal jeopardy for potentially trading as an insolvent company.

But lawyers also point out that these domestic laws are rarely enforced in the UAE against any company, making implementation against a company owned by Dubai’s ruler even less likely.

read the full article  original source ” Dubai’s creditors: playing chicken” Financial Times Blog

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