Court ends $27mln banking dispute over jurisdiction

TDT | Manama

Email: mail@newsofbahrain.com

A $27 million deposit dispute between two Arab banks has been put to rest, with Bahrain’s highest court ruling that its courts lack the authority to handle the case.

The decision closes a long-running row that hinged on cross-border banking challenges and sovereign restrictions.

The case began in October 2019 when a Bahrain-based Arab bank accused another Arab bank, operating in a different country, of failing to honour an investment agreement.

The claimant alleged it had transferred $25 million to the defendant bank as a deposit, due for maturity on 4 November 2020.

Control

However, the defendant bank cited laws in its home country that barred dollar transfers abroad, claiming the issue was beyond its control.

The claimant sought $1.3 million from the Bahrain-based operations of the defendant bank and its board members.

It argued that the defendant was a subsidiary of the Bahrain-based entity, leaving the parent company accountable.

The claimant also reserved the right to pursue the remaining funds and interest in separate legal proceedings.

Bahrain’s Chamber for Dispute Resolution ruled early on that the case fell outside its jurisdiction.

It dismissed the lawsuit, ordered the claimant to cover legal fees, and rejected claims against all board members involved.

Ruling

The claimant appealed to the Court of Cassation, seeking to overturn the ruling.

Representing the defendant bank, lawyer Dr Abdullah Al Ali argued that Bahrain’s courts can only hear cases involving non-Bahraini entities if the dispute concerns assets located in Bahrain, obligations carried out within the kingdom, or specific ties to the country.

He pointed out that the defendant bank, as a foreign jointstock company, had no domicile or operations in Bahrain.

Jurisdiction

Dr Al Ali emphasised that Bahrain’s rules on jurisdiction are well-established and consistently upheld by its courts, reinforcing the initial ruling.

The Court of Cassation ultimately dismissed the appeal, backing the lower court’s stance.

With this ruling, Bahrain’s judiciary has drawn a clear line on its jurisdiction in cross-border banking matters, wrapping up a case that has simmered for years.