Thursday, July 29, 2010

AlGosaibi v Maan AlSanea - Almost "Fixed"


There has been a remarkable reversal of fortune of late for AHAB.  

First was the decision by Trowers and Hamlins back in June to sue AHAB and which gave what I described as the first indication that the concerned authorities in the GCC were moving to make this messy problem "go away."   And that the Grant Thornton settlement proposal might be seen as a promising vehicle. to achieving that end.  Essentially GT's Plan involves a pooling of assets of the two companies to settle global creditor claims and the dropping of lawsuits between the two parties.  Those lawsuits have been the primary venue for the charges of fraud levied against Mr. AlSanea by AHAB.  Charges as we always note here on Suq Al Mal Mr. AlSanea continues to deny.  Ending the lawsuits probably allows "diplomatic cover" for jurisdictions to quietly let these difficult and embarrassing matters expire.

Yesterday (28 July) Asa Fitch at The National reported the Caymans Court decision to put its proceedings "on ice" to allow the special Saudi committee to make a determination.   I commented that it looked to me like the "fix" was in as this step increased the pressure on AlGosaibi to agree to the Grant Thornton settlement proposal and that:
A similar movement by the New York Supreme Court would, I think, confirm that this is what is happening. 
In what might be a remarkable judicial coincidence, but just maybe  is not,  today (29 June) NY Supreme Court Justice, the Honorable Richard Lowe III issued final disposition rulings effectively terminating the cases he was adjudicating based on "forum non conveniens".  

Frank Kane's article in The National provides some useful information.   But there's a bit more.  Judge Lowe did not just terminate the Mashreqbank cases but also that of AlAhli Bank which did not involve any countersuit by AHAB.

The three cases and their NY Supreme Court reference numbers are:
  1. 601650/2009 - Mashreqbank v AHAB to which AHAB had added Mr. AlSanea and Awal Bank as a Third Party Defendants
  2. 602171/2009 - Mashreqbank v the Individual Partners of AHAB
  3. 602847/2009 Ahli Bank of Kuwait v Mr. AlSanea and Saad Trading Contracting and Financial Services
The decision (some 19 pages ) is Document 134 in Supreme Court Case Reference 601650/2009 which can be accessed at the NY Supreme Court Website  http://iapps.courts.state.ny.us/webcivil/FCASMain.

What's interesting about the decision?
  1. First, Judge Lowe ruled that NY courts did have jurisdiction but dismissed the cases on the grounds of forum non conveniens.  Key reasons cited were: (a) availability of other judicial venues for the cases; (b)  presence of key witnesses in the Middle East; (c) local laws govern some key documents. (d) documents in Arabic language and witnesses English language skills, etc.  From the ruling it seems he sees Dubai as the venue for Mashreq's cases (with AHAB then able to raise its claim against Mr. AlSanea in Dubai or Saudi).  And Kuwait as that for AlAhli Bank's case.
  2. Second, another significant "bit" of Judge Lowe's rationale for accepting the forum non conveniens argument was that Mashreqbank stated that it was happy to litigate in either NY or Dubai.  And  that in fact Mashreqbank had commenced a lawsuit in Dubai which includes (but is not solely restricted to) the FX transactions which are the subject of NY cases.  See Page 16 of the ruling.   Now, at first blush, this seems a bit surprising.  Why would Mashreqbank incur the not inconsiderable costs of launching a case in New York and then cavalierly toss it away by telling Judge Lowe that it was indifferent to venue?  Perhaps, the answer is to be found in AHAB's defense:  that Mashreq knew the FX transactions were disguised loans and that therefore they were somehow colluding with Mr. AlSanea.  A rather messy situation.  One complicated by AHAB's motion to have the NY Supreme Court compel disclosure under the very strict requirements of NY law.   Perhaps the shift to the more "convenient" judicial venue in Dubai would allow this issue to be dealt with in a more "convenient" way (at least for Mashreq).  And then again perhaps not.  Perhaps it was just a cost cutting measure - Mashreq decided to husband cash by running one instead of two expensive litigations.  And the case in Dubai is for almost twice that in New York.  So there is more "bang" per lawyer "buck" there.  Perhaps it was a belief that justice would be more swift in Dubai.  Perhaps it was another reason entirely.
  3. The dismissal of the Ahli case is a bit more concerning - or perhaps should be to BNPP and Fortis who have lawsuits against Abu Dhabi International Bank.  If the Honorable Justice Melvin Schweitzer (who is handling the Fortis and BNPP actions) takes Judge Lowe's ruling as a useful precedent - both banks might wind up  in judicial venues they'd rather not.  NY has a very  large  well reasoned body of case law on letters of credit.  Bahrain would appear to have much less.  At least this could be a conclusion drawn from the Bahraini Court's ruling in ADIB's favor in both actions.  There the Court seemed remarkably unperturbed by the fact that ADIB's case was commenced after both banks had incurred irrevocable payment obligations.  Though to be fair, as I understand it, the Bahrain judgment is not final. 
AHAB does have the right to appeal Judge Lowe's ruling.  Overturning the ruling will I think be as the Japanese say "Possible but very difficult".

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