Dubai Real Estate: Can investors file a criminal case against a developer who has not started a project or opened an escrow account?

Investors can file a criminal case against a developer on the bases that it has not started a project and/or opened an escrow account, but only if the reason for developer’s default is criminal in nature and there is evidence to prove it on its face.  This is not an easy burden of proof, however.
Some of the causes of action that may give rise to criminal liability include misrepresentation and cheating under the UAE Civil Code and Penal Code.  Also, under Dubai Law 8 of 2007 (Escrow Law), criminal sanctions will be imposed where a developer either: 1) “knowingly offers to sell units in bogus property development” or 2) “embezzles, uses or squanders payments delivered to him for the purposes of construction of property developments, and misappropriates such sums.”
For a case to be considered criminal, however, there has to be undisputed or clear evidence of the criminality, sufficient to convince the public prosecutor to accept the case as a criminal matter.  Thus, for example, if there is a written statement from a developer admitting that he had never had any right to the property, but yet represented to the public otherwise, such written evidence may be sufficient.
More often than not, however, such evidence does not exist, at least at the outset.  Instead, further investigations must be conducted.  This often arises in cases where a contract is at issue, therefore necessitating contract interpretation.  In such cases, a public prosecutor will transfer the case to the Civil Court.  At that point, the Civil Court will lodge an investigation, often by hiring an expert, to determine the nature of the claim.  If at any point in the process, the Court finds that a developer’s conduct was of a criminal nature, it will transfer the case back to the prosecutor.  The prosecutor will then open a criminal case.
Many investors have tried to file criminal cases against developers.  This is done as leverage, mainly, as criminal cases rarely yield monetary compensation to the investor.  Increasingly, however, the public prosecutor transfers such cases to the Civil Court, requiring investors to start from ground zero.


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