The UAE government has an initial draft for a new bankruptcy law, an official at the ministry of economy said, a move seen simplifying existing legislation for lawyers and companies.

Lubna Qassim, director of economic legislations department at the UAE ministry of economy, said although the legislation was in early stages, there had been progress since talks to change existing laws - considered cumbersome - began about two years ago.

'There is a draft - yes, it's in the initial stages but now its more than dialogue. It is time that effort is put in for the exit of companies,' Qassim said on the sidelines of a conference in Dubai, declining to comment on a timeframe for approval.

She added that the intention was to replace the existing law.

The UAE's bankruptcy laws came into focus in the wake of debt troubles at flagship holding company Dubai World which is in the final stages of a restructuring agreement with creditors to defer repayment of some $25 billion between five and eight years.

Decree 57 created a special tribunal for Dubai World to oversee the restructuring process and handle any cases that might arise from any claimant related to Dubai World's debt problems.

The Special Tribunal Related to Dubai World was established in the Dubai International Financial Centre and incorporates elements of other international bankruptcy laws.

Those championing the need for new UAE-wide legislation say the current laws do not help companies in financial distress or the legal community, and are ridden with slow and ineffective processes.

'In most cases in the past, the courts have not been in favour of applying the bankruptcy law - the tendency has been to go around the bankruptcy law and go straight for liquidation,' said Essam Al Tamimi, senior partner at Al Tamimi & Co.-Reuters