The National Bank of Umm Al Qaiwain is refusing to release Dh48 million (US$13m) of investor funds to the liquidators handling claims against the failed White Bay resort development.
The liquidators have filed a civil case against the bank seeking the funds, which represent deposits from buyers in the project, once billed as a US$3 billion venture. More than 380 buyers, most from overseas, have filed Dh400m worth of claims against the developer, Al Murjan Real Estate.
White Bay is the first master-planned development in the UAE to go through liquidation.
"I think this is going to be a long-drawn-out process," said Ludmila Yamalova, a partner in HPL Yamalova & Plewka, which is representing investors.
"It is unprecedented, and with so many parties involved it could take a long time to be settled."
White Bay was one of the most ambitious developments planned for Umm Al Qaiwain, promising more than 8,000 residential units, retail space and a marina covering 19 million square feet on two islands.
Al Murjan Real Estate, is an equal partnership between Sheikh Abdullah bin Rashid, Deputy Ruler of Umm Al Qaiwain, and Al Khalijia Investments, according to a letter sent to investors by the liquidators assigned to the case.
But the developers were unable to obtain approvals from Umm Al Qaiwain to build the project, the liquidators, who were appointed by the court in November to handle the case, told investors.
In addition, "nearly 50 per cent of the buyers failed to pay the amounts due", which affected the company's ability to arrange financing, the liquidators said. They also said there were enough assets to repay investors. The primary assets are 170 hectares of land set aside for the project and the escrow fund with National Bank of Umm Al Qaiwain, which is owned by the Government.
It is unclear why the liquidators are seeking control of the funds at this stage of the process. Their office referred enquiries to a public relations agency, which did not reply.
The bank is reportedly arguing it has a contractual obligation preventing it from releasing the funds. The lawyer for the bank could not be reached for comment. The bank "may have legitimate grounds" to withhold the funds, Ms Yamalova said. "It is unclear under what grounds they should be releasing funds to the liquidators."
Liquidators have previously told investors they might be able to trade their investment in the project for land, once it is sub-divided.
Some investors have been offered the opportunity to shift their equity to an apartment project under construction in Dubai Sports City. The buyers would be offered financing terms on the balance they would be owed if they moved their equity to the Dubai Sports City project.
The alternative is to swap for land in the project or wait for the White Bay land to be sold to receive refunds.