DUBAI // Emirates Airline's groundbreaking attempt to allow investors in its planned dollar bond to seize assets if it cannot repay could be undermined by conflicting laws.
Emirates, which is wholly owned by the Dubai government's investment arm, has exempted investors from a decree that blocks the seizure of its assets in a default, according to its bond prospectus.
The move, unusual for Dubai government-linked firms, may have been aimed at easing investors' concerns.
But the Arab world's largest carrier warned there were "uncertainties" on whether the exemption would stand given another Dubai law that gives the government and linked firms immunity.
Sheikh Ahmed bin Rashid Al Maktoum, the Emirates chairman, made the exemption on February 28 at a time when the carrier was first testing the market for a potential bond issue.
Emirates, one of the region's most recognised brands globally, postponed that plan after unrest in North Africa made rates more expensive.
The prospectus noted a 1985 decree that founded Emirates has provisions that prohibit the seizure of its assets to meet obligations owed by the carrier.
"However, the chairman of Emirates has ... issued an irrevocable written decision, dated 28 February 2011, which exempts the noteholders from these provisions," the prospectus said.
"Notwithstanding this, there are some uncertainties under the laws of Dubai as to the effectiveness of the exemption afforded by the decision ... as a result of Dubai Law No. 3 of 1996 on Government Lawsuits.
"The Dubai Lawsuit Law grants the Government of Dubai (which includes its corporations) immunity in respect of its assets."
Emirates picked four banks for a possible dollar bond issue last week, on the back of posting record profit as it seeks to raise cash for massive expansion plans.