The government announced on Monday a company reorganization and debt-arbitration framework, designed specifically to deal with legal issues that might arise from the restructuring of this city-state's flagship conglomerate, Dubai World. The regime, promulgated in a law issued by Dubai's hereditary ruler, essentially sets up a legal framework for holders of Dubai debt to negotiate any restructuring. In a statement, Dubai said the law was “consistent with international standards of transparency and creditor protection that will govern any future formal reorganization and restructuring of Dubai World and any of its subsidiaries.” According to a government adviser, the new law is set up specifically to deal with the problems at Dubai World. But it could also provide a framework for other Dubai government-related companies in financial difficulty. Specifically, the decree sets up a tribunal of three to five internationally recognized judges, empowered to supervise the financial restructuring of Dubai World and preside over disputes arising from the restructuring and Dubai World's corporate reorganization. The panel will be headed by Chief Justice Anthony Evans, a former High Court judge in England and Wales, currently serving as chief justice of a special arbitration court system at the Dubai International Financial Center. The law may provide some comfort to Dubai World debt holders, who have worried about legal recourse in Dubai in the case of default. But it remains an untested system. It could also be used to protect Dubai World assets from debt-holder claims. In the event that a deal with creditors can't be reached, the new law would allow for a structured winding down of the company, but also possible protection for its assets, the adviser said. The decree called for the creation of a tribunal to decide the disputes related to the settlement of the financial position of Dubai World and its subsidiaries The decree establishes a three-judge tribunal which is empowered to supervise the financial reorganization of Dubai World and its subsidiaries. Due to its status as a decree corporation, Dubai World does not have the ability to seek protection under the provisions of the UAE Commercial Code that govern bankruptcy and insolvency. Because of the absence of a reorganization law applicable to Dubai World, the government of Dubai developed the decree, which provides a legal framework for the restructuring of the obligations of Dubai World and its subsidiaries. The intention was to develop a law that would permit a restructuring of the obligations of Dubai World and its subsidiaries in accordance with international best practices.
