A seven year legal battle across the Middle East between a Swiss private bank and a prominent regional family is about to reach a dramatic finale.

In what is said to be the biggest financial mis-selling case in the GCC region, the Al Khorafi family’s action against Bank J. Safra Sarasin of Switzerland and its authorised subsidiary Bank Sarasin-Alpen (a joint venture with Dubai-based Alpen Corporation), is coming to a conclusion.

The long-running legal battle between a wealthy Kuwaiti businessman and the Dubai-based subsidiary of Bank J. Safra Sarasin has escalated with the Court of the Dubai International Financial Centre (DIFC) denying an application by the Dubai-based subsidiary of Bank J. Safra Sarasin for suspension of the requirement to deposit with the Court the sum of US $35 million (as a share of US $70 million damages) pending the banks’ appeal against record damages awarded against it. 

Bank Sarasin-Alpen must now pay the sum to the Court by 1st February 2016 for its appeal to proceed, otherwise it will face possible liquidation proceedings.

Damages Awarded

In November 2015, following on from its definitive Judgement on liability in August 2014, the DIFC Court for the first time used its powers to award US-style punitive damages of up to three times the actual loss sustained.

In its November 2015 ruling the Court determined that the two banks should pay the Al Khorafi family more than US $70 million to cover financial losses resulting from the sale of US $200 million structured investment products between late 2007 and early 2008.

Bank J. Safra Sarasin was ordered to pay US$ 35 million and its subsidiary was ordered to pay the same amount as joint damages and an additional equal amount as punitive damages, together totalling US $70 million costs and interest.

Conflict of Interest

The judgement found not only that the investments were inappropriate to the family’s stated objectives but also that the conduct of the subsidiary Bank Sarasin-Alpen had been deliberate and egregious, including the falsification of documents to make them appear as if they had been completed by the claimants.

The mis-selling by Sarasin-Alpen was motivated in the case of its Managing Director, Rohit Walia, by «a personal interest in the fees that would be generated by the exercise».

Complex Financial Instruments

After seven years of litigation, the Al Khorafi family hopes to see financial resolution in 2016.

«In the industry we see Financial Regulators increasingly holding bankers directly and personally responsible in such cases and it is clear that all banks, wherever they may be, must exercise proper supervision over the activities of their affiliates and subsidiaries,» commented David Rice, until recently Head of Union Bancaire Privée Middle East and formerly CEO Private Banking, HSBC UAE, Qatar and Oman.