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I wouldn't be surprised if people yawned at yet another blog post about Al Madina al Zarqa (Blue City), but I want to mention two recent articles about the project for the sake of keeping references up to date.

To recap briefly, AAJ Holdings of Bahrain, headed by Mr Ahmed Abubaker Janahi, claims to hold 70% of the shares in Ocean Developments, the caretaker company for the 'Blue City' project, a tourist and urban mega-development proposed for the Al Sawadi area on Al Batinah, west of Muscat. See details of company holdings.

Mr Ahmed Abubaker Janahi brought his case to the attention of the Bahraini press early in February. Virtually identical articles appeared in both Gulf Daily News - Lawsuit 'is testing global confidence' and Trade Arabia - Blue City lawsuit 'testing global confidence'.

According to February's articles, "AAJ Holdings had acquired its 70pc shareholding in the project company in two stages; 58pc on May 22 2005 and 12pc on October 17, 2005."

Cyclone LLC, the Omani partner, with 30% of the shares, took AAJ Holdings to court claiming that,

"AAJ Holdings had violated the Commercial Companies Law in Oman, which states that partners in a company shall have the pre-emptive right to acquire shares that any partner in that company intends to dispose of to third parties.

Cyclone claimed that the terms of the sale offered to it to exercise its right of first refusal were not the same as the terms under which the sale of the project company shares was actually concluded."

The Primary Court in Muscat rejected Cyclone's case and confirmed "AAJ Holdings' shareholding in the project company and the validity of the share sale and purchase process."

Cyclone has appealed the decision. The verdict of Oman's Court of Appeal has yet to be announced.

Mr Janahi spoke of his confidence in the Omani Judiciary but also of his concern that a new expert had been appointed to adjudge the case. His lawyers had objected to the appointment of an academic from Sultan Qaboos University, who Mr Janahi says is not an accredited expert with the Ministry of Justice, nor allegedly experienced in commercial litigation. In fact, claims Mr Janahi, this is the expert's first case.

Furthermore, Mr Janahi claims that he sent a representative to company offices in Muscat following the court's verdict, in order to access company records and carry out administrative tasks, but that the representative was 'thrown out' by Cyclone's staff.

Mr Janahi maintained that global investor confidence in Oman could be tested by the prolonged dispute over ownership. Regardless of problems with the slowdown of construction and real estate development in other parts of the Gulf, he "believes the effects of the economic meltdown are less substantial in the GCC, as governments are actively involved in the regulation of investment activities and many of the regions' central banks adopt a conservative approach."

Maybe so, but the Gulf is not immune from the effects of the 'credit crunch.' Does Mr Janahi believe that government is going to step in to keep Blue City solvent? Or is he betting on taking over the company with its new management team?

The other article of note reports an interview with Mr Richard Russell, currently CEO of Blue City Company One, which has the task of delivering Phase 1 of the Blue City project, high-end residential and tourist sectors. The interview appears in this month's issue of Euromoney, which provides information briefings for financial institutions and professional investors.

Mr Russell affirms the original concept of the Blue City as a commercial centre. Indeed, he suggested that some people already speak of Al Madina al Zarqa as the potential trade centre of Oman, built on the "back of six economic drivers: tourism, entertainment, education, medicine and healthcare, sports and wellness, and trade." The scheme ties in with Vision 2020, conceived in 1995, to direct Oman away from reliance on sales of hydrocarbons as a source of revenue, towards economic diversification.

I noted that the previous CEO of BCC1, Professor Fari Akhlaghi, has been retained as an advisor to the Board of Directors.

Mr Russell was at pains to point out that the redesign of the master plan, by Norman Foster and partners, had put the project back by nine months. He says that he is now working with the ratings company Fitch, who put "$526 million of the debt on ratings watch negative in July after it fell behind revenue targets," to review the debt documentation and align it with actual sales.

Mr Russell made an interesting aside that the original design had been inefficient. Go back to review some history on the project. He did not shy from outlining the current dispute over legal ownership.

Euromoney challenged Mr Russell over freehold rights for foreigners. Mr Russell replied that Oman's laws concerning freehold and inheritance were very straightforward, without actually providing detail on what foreigners' status would be.

As I understand it, foreigners can buy property in designated tourist projects, but this does not give them a right to work in country. So you'd need a stash of cash to go and live in Oman, without being able to work there. I know that some residents with work permits have found ways around this, but that option isn't available to all.

Even though Blue City is being funded by private financing, one suspects that considerable influence is being wielded to keep the project afloat.

There are rumours that another real estate development at Yiti, on the other side of Muscat, which was being undertaken jointly between Sama Dubai and Omran, a fully government owned company with the aim of expanding tourism in Oman, appears to be in abeyance. You can still register your interest on the Sama Dubai website but you can't view the masterplan. Or at least, you couldn't when I looked earlier.

I have fond memories of camping on the beach at Yiti, overnight at Eid, with the waves breaking on the beach and the sound of gunfire as the men of the village fired off their rifles to celebrate the dawn. Bet modern tourists wouldn't experience that!