Business Law

Dubai investment fund: ACI ordered to pay compensation

A court in Germany has ordered the operator of several Dubai investment funds, Alternative Capital Invest, to pay compensation to duped investors.

Dubai investment fund: ACI ordered to pay compensation © Africa Studio - Fotolia.com

Dubai investment fund: ACI ordered to pay compensation © Africa Studio – Fotolia.com

Dubai investment fund

The Hamm Higher Regional Court in Germany has ordered the investment fund management company, Alternative Capital Invest, to pay compensation to some of its investors.

The company had specialised in property investment projects in Dubai and attracted investors with the promise of benefiting from the city’s property boom. A number of investment funds were set up but went sour.

Under the so-called Dubai funds VI and VII, investors were given profit participation certificates. These certificates grant investors the right to receive a share of the profits created by a company, without obtaining a right to vote on the management or obtaining shares in the company. In the case of Alternative Capital Invest, investors were promised rights to profit participation in a property company based in Dubai.

However, the court in Germany has now ruled that the literature used to sell the products, which promised a 20 – 22% yearly increase in the value of the certificates, were misleading (case refs.: 34 U 214/12, 34 U 216/12, 34 U 219/12, 34 U 221/12, 34 U 226/12, 34 U 43/13). The brochures also lacked information on the procedure to be initiated in cases of a liquidity shortfall and there was insufficient information on how the business model worked.

As a result, investors in the Dubai funds VI and VII should receive their original investment sums ranging from 5,000 to 50,000 euros.

Misleading information

If misleading information is presented by an investment fund company to potential investors about the risks of an investment, a right to compensation arises.

Investors who find themselves in this position should approach a lawyer in order to clarify whether there is a possibility of pursuing legal action.

 

Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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