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Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC  EWHC 3781 (Comm),  All E (D) 79 (Dec)
The claimant (the Bank) brought a claim, against various defendants in respect of a debt for some US$432m, which it contended was due under a restructuring agreement, following an event of default. The Commercial Court held that, on the facts, the Bank was entitled to the sums claimed.
In Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC, the Bank provided banking and financial services in accordance with Islamic law. The Bank entered into a restructuring agreement (RSA) with one of the defendants after the bank discovered that it had been a victim of a long-standing major international trade receivables fraud. A lease of land held by a company owned by two of the defendants was the principal security provided to the Bank under the RSA. Three of the five defendants also granted guarantees for amounts owing under the RSA. Following an event of default under the RSA, the Bank claimed under the guarantees for amounts due and unpaid and also contended that it was entitled to trace monies applied in breach of fiduciary duty into shares in a company which was owned by one of the defendants. Flaux J gave judgment for the claimant bank in the sum of $432m.
The defences put forward were extensive and many turned on the facts of the case. The key points were:
Accordingly the court upheld the bank’s claims and also allowed the tracing claim.
It is unusual to see a case involving a breach of a restructuring agreement—often such matters result in an insolvency process where the borrower companies are under the control of an insolvency practitioner. Given the number of failed restructurings that have taken place over the last few years, cases like this will become more common. While this case was very fact specific, it does demonstrate that the court was keen to uphold the terms of the restructuring agreement as documented by the parties and allow the bank to pursue the guarantors of the restructuring agreement.
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