Going bust, going home

We yammer on a lot about reform here in the UAE: how all sorts of things, from land sale registration to corporate boards, need to be brought up to international snuff. It's comparatively rare, though, that we get to attach a human face like Simon Ford's to what are for the most part purely abstract issues.

That's why today's story in The National about Mr Ford's internet business, Blue Banana, is so poignant. A number of government officials and economists have in the past month or so urged for more robust laws covering businesses that go bust, partly to prevent against the kind of situation Mr Ford now finds himself in.

I'll spare you all the legal details here (you can read about them in the story), but the situation is basically this: the UAE has laws covering bankruptcies, but they remain largely untested by the UAE's court system. When they run into trouble, companies tend to make settlements out of court, both because of the uncertainty surrounding how courts might treat them and the length of time it might take to process a case, as well as the attendant costs. It takes 3.5 years for a business to close in the Middle East, according to a recent World Bank report, compared to 1.7 years in the developed world. If you want more background on this, check out this story I wrote earlier this month.

In a letter to friends and former business partners, Mr Ford put partial blame for his sudden departure from the country on this underdeveloped insolvency system. "I am not running away from debt," he wrote. "I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions."

Mr Ford isn't alone here, and it's not only the owners of struggling businesses who are taking a hit. Employees of those troubled firms have also been left in the lurch. Take the story of Gary Bell, whom I wrote about in my original story on insolvency this month. Mr Bell hasn't been paid for about six months, and the company he came to the UAE to work for is in some serious financial straits. The company's owner has repeatedly told Mr Bell that he, along with other employees, would be paid, but as weeks stretched into months, no money was forthcoming. He has since filed in court to retrieve what he's owed.

I asked Mr Bell what he thought about Mr Ford's situation because I thought it sounded like they were dealing with some of the same issues: both companies found themselves unable to pay suppliers (and in Mr Bell's case, employees), and neither went to the courts for a resolution. Here's what he had to say:

"I think he is in the same situation as our [managing director], where they got in debt too deep, they tried to keep the dream alive and started to gamble with other people's money on the hope that something would turn up that would save the company," he wrote in an e-mail. "... I have sympathy for Simon and and it's good to see that Simon will try and do the decent thing but at the end of the day, no-one asked him to start a business, run it the way he did or continue when he knew there were financial problems... not his suppliers, financial institutions or staff who will be the ones presumably bearing the cost for the decisions made by Simon."

"It's a bit of a mess in Dubai and a lot of innocent people have been caught in the crossfire," he added. "I only hope lessons have been learned by all parties."