Arcapita verdict favours investors
Manama, May 29, 2014
A long-awaited court verdict on Bahrain-based Islamic investment firm Arcapita has opened the door for investors to start reclaiming their cash.
Arcapita filed for bankruptcy in the US in March 2012 after failing to reach an agreement with creditors on a $1.1 billion syndicated Sharia-complaint loan, said a report in the Gulf Daily News (GDN), our sister publication.
At the time, it listed assets of $3.06billion and liabilities of $2.55 billion and subsequently emerged from bankruptcy in September last year.
However, questions remained over whether Bahrain's courts could accept cases brought against the firm by investors and depositors in the country - and whether jurisdiction with regards to Arcapita Bank even lay in Bahrain.
But now a High Civil Court decision, which was accepted by the Execution Court at the start of this week, has paved the way for action to be taken - and has sent "the clearest message to date that the courts of Bahrain do not recognise actions or orders issued in the US," according to Almoayed Chambers managing partner Aymen Almoayed.
"The judgment is in force effective from last Sunday and is clear on the fact that jurisdiction in the Arcapita case specifically lies in Bahrain - considering the company was formed, continues to reside and has assets in the country," he said.
"The courts' judgments, which confirm the rights of investors and depositors, are currently being executed by authorities.
"Those who have been affected can approach the execution department with a copy of the judgement, and a letter will be sent to the bank demanding that the money is paid back."
"If the monies owed are not repaid before the next hearing in the case - which usually takes place within a month - it will force a public auction of the firm's assets," Almoayed explained.
"The court has already sent a letter to the bank to this effect and alongside this has intimated to the concerned authorities that they should find out its share details," he said.
Meanwhile, another case is underway in the Bankruptcy Court to assess whether Arcapita's claims of bankruptcy are actually valid under Bahraini law.
"Our request to the court is to enforce Bahrain's bankruptcy law if the claim is true - which would mean the firm will be under investigation and its owners or managers will be under a travel ban," said Almoayed.
"And if proven otherwise then it is falsification of information against which the Central Bank of Bahrain (CBB) will have to take action - which could mean a fine to the tune of a million dinars."
Any investor or depositor - on providing proof of association with Arcapita - can become part of the "class-action-style" legal suit that is currently underway without having to pay prohibitive court costs, by quoting case number 739/2014 and paying a nominal fee, Almoayed added.
Arcapita's creditors include British-based Barclays and Royal Bank of Scotland, Malaysian-based CIMB, South African-based Standard Bank, Hong Kong-headquartered Standard Chartered and the CBB - its largest creditor with $255.1 million owed. No one from Arcapita was available for comment when contacted by the GDN yesterday. - TradeArabia News Service