Dubai World Standstill

There's an interesting article in today's Gulf News "Bankers Expect "Standstill" Nod".

"Bankers expect Dubai World to make a formal request for a "standstill" on its $26-billion (Dh95.4-billion) debt at Monday's creditor meeting, but it could be more than a month before banks agree, bankers said yesterday."

As I read the law, all Nakheel and Limitless need to do to get an effective legal standstill in the UAE is to nip round to the special DIFC Court and persuade the judge to give them one as part of a company voluntary rescheduling proposal.  There is no requirement for any bank agreement to the standstill.  There is of course one to the voluntary rescheduling program - more than 75%.

And as I argued in my earlier post, it is likely that many jurisdictions will accept the DIFC proceedings as taking place under a reasonable regime and law.  Therefore, it's also likely that they will agree to hold enforcement in their own jurisdictions pending the resolution of the case in Dubai.

So this article is puzzling.  In effect the banks don't have to agree for a standstill to become effective.  Since they don't appear to have a  choice in the matter, what sense does it make to talk of the law as giving them an "incentive"?

I'd also note that in applying the DIFC bankruptcy law to these companies, the Government of Dubai has  in effect given itself the right to impose a standstill.  Though to be fair, the law includes important protections for lenders and represents an improvement over local law.