Al Ahli Bank of Kuwait v AlSanea & Saad Trading - NY Case Dismissed Forum Non Conveniens

A Rather Inconvenient Place After All

Judge Richard Love III of the Supreme Court of the State of New York decided last July that New York was indeed a forum non conveniens and so dismissed ABK's suit against Mr. Al Sanea and Saad Trading, Contracting and Financial Services Company.

(In case you're wondering why the delayed posting, while the judgment was electronically filed 11 August, I didn't get an email until today).

I suspect the new venue will turn out to be much much more convenient for Mr. Al Sanea.  Under AA's law of the conversation of legal energy, that may make it much much less convenient for ABK.  Such is life.

You can find the judgment as Document #28 at the NY Supreme Court's website under Case # 602487/2009.

If you use the tag "Al Ahli Bank of Kuwait" you will find earlier posts on this topic.

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".

AlAhli Bank Kuwait v Maan AlSanea - Allegations and Analysis

This post reviews documents e-filed at the Supreme Court of New York website in connection with the case brought by Ahli Bank of Kuwait ("ABK") against Mr. Maan AlSanea and Saad Trading Contracting & Financial Services ("STCFS") (Case Index #602847/2009). As before I'd encourage you to take a look at the original documents yourself as this is the best way to form your own opinion. To that end you need to visit the Supreme Court of New York's website  and use the Case Index Number above to search for documents.

We'll use the plaintiff's allegations since the defendants' counsels' argument is more of a technical one - that New York is a forum non conveniens  and thus the suit should be dismissed to be tried in Saudi Arabia or Kuwait.  On that basis then they would not answer the charges but focus solely on dismissal.

You will find ABK's description of the transaction as well as their basic allegations in NYSC Document #1 pages 7-18.

ABK claims to have granted STCFS a US$60 million facility in September 2007 with US$50 million for letters of credit for building materials for Saad Construction business only and US$10 million for a working capital loan. In April 2008 the facilities were amended to increase them to US$100 million with US$80 million again for letters of credit for building materials for Saad Construction and US$20 million for a "clean" loan.

The court case is about four letters of credit ("LCs") that STCFS asked ABK to open in favor of three beneficiaries in the Kingdom of Saudi Arabia in an aggregate amount of US$24,999,545.00. The LC's were to be advised through The International Banking Corporation to the beneficiaries and called for the delivery of certain equipment. ABK is asserting the transactions were fraudulent. That the beneficiaries of the LCs were "front men" for Mr. AlSanea, that no shipment of goods took place and that the funds were not paid to the beneficiaries but were paid to STCFS.

In its allegations in the Complaint pages 7-18 in Document #1, ABK states that: 

1. Paragraph 8: Mr. Delijan "has since been discovered to be the General Manager of Saad Travel Tourism & Cargo Co, an affiliate of the Defendants, and not in the business of selling air conditioning and waterjet cutting machine systems". 
2. Paragraph 10: "The address for Safar stated by Defendants on the L/C application actually is the address for the Saad National School for Girls – another affiliate of the Defendants and not in the business of selling air conditioning equipment". 
3. Paragraph 11 D: During January 14-17, the beneficiaries submitted drafts. 
4. Paragraph 11 E: TIBC confirmed the signatures on 19 January. 
5. Paragraph F: Defendants presented ABK with commercial invoices supposedly signed by authorized signatories of beneficiaries along with signed delivery receipts including defendants' confirmation.   (AA:  Under UCP the beneficiary not the applicant submits documents to the bank.  And documents generally are submitted through the advising bank - though this is not a requirement).
6. Paragraph 11 G: ABK advised STCFS of discrepancies in the documents.  (AA:  Frankly, this boggles the mind.  As you'll see from below the documentary requirements were extremely simple - an invoice and a signed delivery note.  Hard to see why these wouldn't be in apple pie order).
7. Paragraph 11 H: ABK receives letters from STCFS approving discrepancies and requesting ABK to honor the LC and make payment to beneficiaries' accounts at TIBC. 
8. Paragraph 11 I: ABK makes payment of US$24,999,545 on 26 January.

Let's start with the four LC's. For that purpose we'll use the documents submitted by Mr. AlSanea's counsel Robert F. Serio, Esq., of Gibson, Dunn & Crutcher as part of his Affirmation dated 22 December 2009 (NYSC Document #17). That way we are using a source that is not hostile to Mr. AlSanea or STCFS. 

The LC applications are his Exhibit #9. As filed on the Supreme Court's website, Mr. Serio's Exhibit 9 only contains three of the LC's. For the fourth LC, we'll use Exhibit 1 to the 19 January 2010 Affidavit of Charles H. Camp, one of ABK's two counsel, (NYSC Document # 20-1). (The Exhibits in Documents 20-1, 20-2 and 20-3 appear not to be in the same order as in the Camp Affidavit. Unclear why this is.  Filing problems at the NYSC?)   Copies of the LCs applications are in his Exhibit #2 and the LCs actually issued are in Exhibit #7 (SWIFT format). 

Based on a review (and yes the LC applications match - at least three of them), here are some common details.

1. All four are dated 12 January 2009. 
2. All call for payment against commercial invoices and delivery notes. No shipping documents such as bills of lading are required as these are being shipped from the beneficiary's warehouse to the applicant Saad's. 
3. All are domestic LCs.  The LCs do not finance imports from outside the Kingdom.
4. All four LCs are to be advised through The International Banking Corporation with funds to be remitted to the beneficiaries' accounts at TIBC. 
5. All four LC's expire 12 March 2009 in Bahrain (at TIBC's counters).
   

First LC. 

1. Amount: US$7,825,815. 
2. Beneficiary: M/S Emad Youssef AlGamea Trading Establishment. AlKhobar. 
3. Goods: Air Horizontal Units, Chilled Water Fan Coil Units Thermostats and Accessories for Airconditioning Systems as per the Beneficiary's Proforma Invoice Dated December 14, 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200010.
   

Second LC. 

1. Amount: US$8,194,830. 
2. Beneficiary: M/S Walid Ahmed Safar Trading Services Est. AlKhobar. 
3. Goods: Supply of 30GTN Series – Dual Refrigerant, Multicompressor, A/C Equipments as per beneficiary's proforma invoice dated 11 December 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200033.
   

Third LC. 

1. Amount: US$3,003,700. 
2. Beneficiary: M/S Delian Fahed Al Delijan Est. –Trading AlKhobar. 
3. Goods: Supply of Waterjet Cutting Machine Systems as per beneficiary's Proforma Invoice dated 29 November 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200009.
   

Fourth LC. 

1. Amount: US$5,975,200. 
2. Beneficiary: M/S Delian Fahed Al Delijan Est. –Trading AlKhobar. 
3. Goods: Supply of Air Horizontal Units, Chilled Water Fan Coil Units Thermostats and Accessories for Airconditioning Systems as per the Beneficiary's Proforma Invoice Dated December 14, 2008. 
4. Beneficiary Bank and Account: TIBC A/C #001-200009.
   

(I'll post something on ABK's "approval" of these transactions in due course.  This looks like a strong entry for the NBP "Credit War Chest" Award Contest).

Now let's turn to the flow of the payments. As part of the discovery process, ABK's counsel obtained information from Bank of America NY on the clearing account they hold for TIBC.   Exhibit 4 to the Camp Affidavit (in Document 20-1) consists of material provided by BoA.  In an accompanying certificate a BoA officer attests under oath to the accuracy of the documents.  The certificate is notarized. This information shows that TIBC's account at BoA received four credits from ABK on 26 January 2009.   Each credit is in the full amount of the four LCs above. 

Exhibit 1 (in Document 20-1) contains copies of additional information provided by BoA  – again sworn and notarized. This is even more interesting.  This submission contains the details of four payments made by TIBC from its account on  27 January 2009.  Each one is in the exact amount of one of the four letter of credit payments received the previous day from ABK.  Each of the  27 January debits from TIBC's account is directed to HSBC for credit to Saudi British Bank for credit to the account of Saad Trading and Contracting. 

But what I did not see mentioned in the Affidavit are two very curious things. 

1. The By Order Party and the Originator are identified as Saad Trading and Contracting.  That means that TIBC is saying that its customer Saad Trading is remitting the funds.  Under normal banking procedure this means the funds came from an account belonging to Saad Trading and Contracting. 
2. The Originator to Beneficiary Information says "Intercompany Funds Transfer"! Again this means that the owner of the funds is Saad.

Putting the best face on this on this information, it is a rather remarkable coincidence that STCFS just happens to have its own funds which exactly (to the penny) match the funds owed the beneficiaries on the four LC payments made by ABK the day before. And that it transfers them in the exact same four amounts the next day.  

As before a legal note.  At this point, as far as I am aware, no Court has issued a verdict in this or any other case against Mr. AlSanea or his companies.  Mr. AlSanea continues to maintain his innocence of any wrongdoing.