At the height of the furore over Dubai World's debt woes, cooler heads were drowned out by the din of speculation and half-baked analysis. That is the nature of our media-saturated world. Luckily, headlines shape perception not fact - but perception is important. The fallout left by Dubai World's debt problems highlighted how brittle confidence in the UAE was. The response must be to build institutions that ensure that should another crisis happen disputes will be settled justly and the economy will carry on. That is happening, particularly in the courts system, as shown in The National's interview with Sir Anthony Evans, the chief justice of the Dubai International Financial Centre (DIFC) courts. The proposed widening of the DIFC court's jurisdiction is welcome and, if implemented, would do more to bolster confidence in Dubai than any support fund.
The reaction of ratings agencies such as Moody's and Standard & Poor's, admittedly imperfect institutions, to downgrade or threaten to downgrade a host of UAE companies showed how little the world knows of the nation's business environment. That they based their positive ratings largely on a perceived sovereign guarantee is frightening. Little wonder, then, that the threat posed by the global debt market escaped their notice. Confidence must be rebuilt on a firmer foundation of transparency and accountability, not hypothesis and conjecture.
Key to this effort is providing clarity. When a company runs into money problems, both the struggling company and the creditor must have the confidence that their disputes will be heard by a knowledgable and fair arbitrator. That is the strength of the DIFC courts system: foreign and domestic companies know that they will get a fair shake. But it is not enough for companies under the jurisdiction of the DIFC to enjoy this benefit.
The legal system in the UAE has been ill-equipped to handle the complex disputes that arise in an international marketplace. This will undoubtedly improve with time, but the nation cannot wait. Solutions must be found to bridge the gap, and the DIFC courts proposal is one such solution.