A property owner in Nakheel's Jumeirah Islands development has won a Dh2.5 million (US$680,624) cash payout from the developer, the first such award from the Dubai World Tribunal.
It was also the first time the Tribunal enforced an arbitration decision from another court, which could set a precedent for other disputes involving the developer.
The Dubai International Arbitration Centre last May ruled that Vinod Kumar Dang should be paid Dh2.5m plus interest and legal costs in a row over construction defects in a villa. The property owner then took the matter before the Tribunal to have the award verified and paid out.
The Tribunal is a special body hearing all cases relating to Dubai World, the government-owned business group that is finalising a $24.9 billion debt restructuring. Nakheel, which built Jumeirah Islands, is owned by Dubai World.
Nakheel declined to comment.
Lawyers for Jumeirah Islands had argued that the arbitration award should be struck out, claiming there were technical faults in the language of the judgment. Mr Dang's lawyers countered that the award was made legitimately in arbitration and that it was the role of the Tribunal to enforce such judgments.
Large contracts for property purchases, construction and other major transactions commonly include arbitration clauses.
They specify that disputes will be decided by special arbitration bodies instead of local courts, although awards granted in arbitration can typically be enforced through normal judicial processes.
Mr Dang prevailed in the end. The Tribunal ruled last Wednesday that Jumeirah Islands had to honour the arbitration award, which stemmed from what Mr Dang said were major defects in the construction of his villa.
The award is "hereby recognised and ratified by the Tribunal", the judgment said, and Jumeirah Islands "shall pay to [Mr Dang] forthwith the sum of Dh2.5m".
The developer was also ordered to pay 5 per cent interest covering the period from the date of the award to December 26, and a rate of Dh324.47 each day thereafter. The Tribunal assessed an additional Dh219,411 in arbitration costs, a Dh5,000 administrative fee and costs for proceedings in the Tribunal that have yet to be determined.
Shortly after its founding in 2009, the Tribunal issued guidelines for arbitration claims, saying it would be "the policy of the Tribunal to respect and enforce arbitration agreements made between [Dubai World] and its creditors".
Kaashif Basit, a partner at KBH Kaanuun, the law firm that represented Mr Dang, said the case was precedent-setting.
The guidelines had made clear that the Tribunal would respect arbitration clauses in contracts, but until the ruling on Mr Dang's case, he said, it was less clear whether it would enforce judgments coming out of arbitration cases that predated the Tribunal.
Last week's ruling was also the first time the Tribunal had ordered a cash judgment against Nakheel or its subsidiaries, he said.
"It does mean that small investors can take on big companies like Nakheel and get justice," Mr Basit said. "This is also the first money judgment. … That will give more comfort to claimants who want to proceed in the Tribunal."
If Nakheel does not pay the award, Mr Dang could take the case to local Dubai courts that had the power to seize company assets to pay sums due, Mr Basit said.
Dubai World Tribunal judgments are final and cannot be appealed.