The lawyer for embattled private equity CEO Arif Naqvi says his client is not to blame for the collapse of his Abraaj investment fund, but admits that the scandal has done "some damage" to the reputation of Dubai.

"There has been some damage, definitely," Habib Al Mulla, executive chairman of Baker & McKenzie Habib Al Mulla, told CNBC's "Capital Connection."



"Now does this mean that this damage is irreparable? Absolutely not," he added.

The high profile downfall of Dubai-based Abraaj — now reportedly the world's largest insolvent private equity fund — has raised questions about corporate mismanagement and transparency in the United Arab Emirates (UAE) and beyond.

Al Mulla, who drafted many of Dubai's modern legislative structures and created the concept of financial free zones in the UAE, declined to say whether or not Naqvi accepts responsibility for the downfall of the fund. Instead, he points to local regulators including the Dubai Financial Services Authority (DFSA).

"Is this incident due to a lack of regulation? I would say categorically no. If you ask me, could the DFSA have done a better job to contain this issue after it happened? I would have said yes," Al Mulla said. "I think they probably didn't realize the magnitude of the situation."

The DFSA, the regulatory arm of the Dubai International Financial Centre (DIFC), had been investigating a range of matters within the Abraaj Group. A spokesperson for the DFSA declined to comment when contacted by CNBC.

"It was the regulators duty to try to circumvent these incidents and try to contain the public damage that has been done," Al Mulla added. "Had the DFSA come earlier, addressed these concerns and addressed the media, I think yes, this would have been avoided," he said.