The Dubai World Tribunal has upheld an architect's Dh6.2 million (US$1.6m) claim against Nakheel, the developer behind some of Dubai's largest projects.
The dispute centred on P&T Architects & Engineers' work on Dubai Maritime City, a Dh3 billion industrial, commercial and residential development planned for a 227-hectare man-made island near the Dubai dry docks.
The Tribunal's decision to support the architect's position will be welcomed by contractors wary of challenging Dubai World companies, said Tom Wilson, alawyer with Kilpatrick Townsend, which represented the architect.
"The decision validates the notion that the Tribunal and other courts will be fair-minded in cases brought against government-related companies," Mr Wilson said.
A Nakheel representative declined to comment.
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P&T, an international group based in Hong Kong, has operated an office in Dubai for seven years and has worked on several high-profile projects, including plans for the stalled City of Arabia development in Dubailand.
It was hired to work on the Emirates International Maritime Academy planned to be in Dubai and described in promotional materials as a "state-of-the-art maritime training and research facility". The academy was never built and the project was suspended because of the financial downturn.
The architect took Nakheel to arbitration over the "value of work performed outside the original agreement", said Mr Wilson.
Disputes have escalated in recent years as developers deal with financial issues and work becomes scarce for contractors, construction industry experts say.
"It's unfortunate we went through this process, but it seemed like the only way we would reach a settlement," said James Abbott, the director of P&T's Dubai office, who declined further comment.
P&T won an arbitration award last September and appealed to the Dubai World Tribunal to execute the order. The special court was set up in 2009 to handle claims surrounding the reorganisation of Dubai World and its subsidiaries, including Nakheel.
Last year's appeal focused on procedural issues.
Nakheel argued that the arbitration filing did not correctly mention the location of the case and did not include the required signatures.
"Nakheel has to throw something at [the decision]," said Jonathon Davidson, a Dubai attorney who has handled cases at the Tribunal.
But the Tribunal rejected the claim and approved execution of the arbitrator's ruling, which included legal fees, costs and interest.
The Tribunal has ruled against Nakheel in the past, including a decision in December to block the company's attempt to charge an extra Dh41m in fees to buyers in The World, the man-made islands development off the coast of the emirate.
But this is the first time it has backed a trade creditor's arbitration award against Nakheel, "demonstrating that trade creditors can successfully enforce their contractual rights", said Drew Baiter, a lawyer who also represented P&T.
"This decision reinforces the view that Dubai is growing up, in a legal sense," Mr Baiter said.
Nakheel is in the process of negotiating terms with creditors as it reworks about $11bn of debt. P&T's claim will be "elevated to the top" of the creditor priority list, thanks to the Tribunal's execution order, Mr Davidson said.