Businesses need not be overawed by legal disputes | KPMG | OM

Businesses need not be overawed by legal disputes

Businesses need not be overawed by legal disputes

As economies grow and the world seems to get smaller, disputes are increasingly seen as an unavoidable consequence of doing business. When agreements are signed, both parties are understandably optimistic and focus more on “what will go right?” rather than mitigating “what might go wrong?”.

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In the Middle East, where there is a great deal of opportunity, it is not uncommon for partners to sign rudimentary agreements that have not undergone a meaningful legal review. These rudimentary agreements may not reflect a clear “meeting of minds”, which is why they sometimes later result in dispute.

While legal reviews are often necessary and helpful in ensuring that an agreement is worded carefully and purposefully, jurisdiction, local law and enforceability also impact clarity between two parties.

While there is no such thing as a typical dispute, real estate and regional joint investments are seeing increasing numbers of disagreements. Historically, real estate in the region has been volatile which often leads to disputes. Real estate investments — like any other — are made with the expectation that values will rise.

When they don’t, as they didn’t in 2008 and 2009, losses result and disputes are born. The current landscape, with declining oil prices and tightening liquidity, makes it more likely that disputes will occur.

There is no doubt that the UAE has made a name for herself when it comes to real estate. From the iconic Burj Khalifa to the intricate beauty of the Sheikh Zayed Grand Mosque, the UAE has shown the world that imagination has no limits. Unfortunately, with great opportunity also comes risk and the real estate crash in 2008 was an example of what can go wrong.

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© 2017 KPMG, a United Arab Emirates partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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