Dubai World Tribunal orders Penguin Marine Boat Services to pay Nakheel Dh10m

The Dubai World Tribunal has ordered Penguin Marine Boat Services, the company in charge of sea transport logistics for The World islands, to pay Dh10 million to a Nakheel subsidiary.

In their judgment, passed on December 6, Sir Anthony Evans and Sir John Chadwick, two members of the special tribunal, said: “The tribunal holds that the claimant (The World) is entitled to judgment for the amount… Dh7.5 million, together with the further installment that became due on April 2011, making a total of Dh10 million.”

Penguin Marine had applied to the Tribunal in January 2011 for injunctions restraining The World from obtaining payment under two guarantees: a performance guarantee limited to Dh5 million and an advance payment guarantee of Dh1.86 million. Their application was dismissed in May 2011.

Penguin had alleged that by not going forward with the project, The World had breached a contract signed in 2008 under which Penguin was to build a port and handle delivery of construction materials and labour to projects on the man-made islands.

In the December 6 judgment it was mentioned that The World had recovered the full amount (Dh5 million and Dh1.86 million by cashing the guarantees), leaving Dh7.5 million outstanding in respect of its claim for license fee installments until November 2010.

But on May 21, 2012 hearing the total claim rose to Dh15 million as three installments of Dh2.5 million became due on April 1, 2011, October 1, 2011 and April 1, 2012.

Although Pengiun, the judgment said, admitted “nothing has been paid in respect of licensing fee, at any time,” it contended that “no part of the fee has become due under the agreement.”

During the case, Nakheel flew in Christopher Goshow, a licensed professional coastal engineer from the state of Florida, USA, who has extensive experience of waterfront developments projects in the Middle East, including many islands in The World, to give evidence. The expert was also present during a site visit undertaken by the Tribunal members on May 21, 2012.

The Tribunal members, in the judgment, said: “We were told that there have been no substantial problems with erosion of the reclaimed islands or with the silting of the separating channels and that remedial works would be carried out if they were to become necessary.

“The World consists of a series of independent islands surrounded by breakwaters and separated by navigable channels. The islands are formed from reclaimed sand which has to be consolidated - compacted - before it can support any kind of development.

“The commercial arrangements are such that purchasers from The World are responsible for the costs of compaction required by their proposed developments, and in addition they have to provide services such as water, gas, electricity, sewage disposal etc for their individual islands until such time as The World, as master developer, introduces a centralized system, or one or more regional systems.

“The World, as Master Developer, therefore seeks property developers as purchasers of islands when their reclamation is completed and it exercises overall control over the kinds and scale of individual developments, but it does not carry out the development itself. The purchasers have to undertake the substantial civil engineering works required for compaction before any property development can take place.”

The Dubai World Tribunal was set up in 2009 to hear disputes involving Dubai World and its subsidiaries as the government-owned conglomerate underwent a $25 billion debt restructuring. Nakheel, a subsidiary of Dubai World, came under direct ownership of the Dubai government in mid 2011.

In May, the Legal Affairs Department of Dubai government said Dubai Courts will hear cases involving Nakheel and its subsidiaries, following Nakheel's separation from Dubai World, which took place on August 23, 2011.

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