More than two years after the Dubai debt crisis erupted, the restructuring of corporate debts remains in legal limbo as it is unclear how banks can get back their money from government-linked enterprises in the Gulf state. The impasse, which is aggravated by deficient bankruptcy legislation, is finally pushing some banks to lose patience and consider legal action.
But their tougher stance is being matched by a hardening of the government's attitude to bailing out state-linked entities, raising the risk of further delays in completing these restructurings. In other jurisdictions, the spectre of legal action would have loomed long before now.
Local and international banks have been waiting nearly two years in some cases for resolutions to drawn-out restructurings of entities hit by the debt crisis in 2009, when Dubai was forced to request a standstill on flagship conglomerate Dubai World's $25 billion pile of debt.
While Dubai World reached agreement on a debt restructuring a year ago, a string of other state-linked entities have not, leaving banks unable to get back money they are owed. As well as being hampered by a lack of legal remedies to force the issue, banks are also undermined by the fact that potential plaintiffs are companies ultimately owned by the emirate's ruling family.
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