London, 6 April 2005 – LAWFUEL – The Law News Network – Two major claims due to be heard before the courts of the Cayman Islands and the Bahamas in the Grupo Torras litigation have settled just before trial for a multi-million dollar sum.
The two actions brought to recover assets held in Cayman and Bahamian trusts were due to commence in March this year, in the Cayman Islands, and at the end of the May in the Bahamas. However an overall settlement of both the Cayman and Bahamas claims was reached shortly before the Cayman trial started whereby over US$80 million has been recovered. This represents approximately a 95 percent recovery.
Baker & McKenzie acted for Grupo Torras, a Spanish company controlled by the Kuwait Investment Office (part of the State of Kuwait) in a six month trial in the Commercial Court in London in 1999 when Grupo Torras obtained judgment for sums exceeding US$800 million against various defendants who had been found to have defrauded it before and following the Iraqi invasion of Kuwait in 1990. The case had taken six years to reach trial in 1999 and was one of the largest fraud cases ever dealt with by the English courts.
After winning the judgment in 1999 the team of Baker & McKenzie lawyers led by Partner Nick Pearson began tracing and recovering the stolen assets many of which were hidden in trusts in off-shore jurisdictions. While the case was being prepared for trial they obtained worldwide freezing orders against the assets (including those in trust) of Sheikh Fahad Mohammed Al-Sabah, one of the main fraudsters. Detailed research revealed that the Sheikh had nine separate trusts in Jersey, the Cayman Islands and the Bahamas which contained in excess of US$200 million including money stolen from Grupo Torras as well as other assets. In 2001, with Baker & McKenzie’s assistance, Grupo Torras successfully petitioned to have the Sheikh declared bankrupt in the Bahamas, where he resides. Grupo Torras also commenced proceedings against his trusts in Jersey, the Cayman Islands and the Bahamas. Approximately US$140 million was recovered from the Bahamas, and in Jersey three separate trials have concluded from which recoveries of several million dollars were made.
In the Cayman Islands Sheikh Fahad’s Trustee in Bankruptcy sought to set aside three trusts under Cayman bankruptcy legislation which permits, in certain circumstances, trusts to be avoided if made within ten years of the bankruptcy. The Cayman proceedings were resisted by remaining family member beneficiaries of Sheikh Fahad’s trusts who challenged the Trustee in Bankruptcy’s right to bring the claims in the Cayman Islands right up to the Privy Council.
In January this year the Privy Council concluded that the claims could be brought, permitting the March trial in the Cayman Islands to proceed, and leading to this settlement and the recovery of the further US$80 million.
Nick Pearson, Head of Baker & McKenzie’s Global Dispute Resolution Group explained that this outcome was a tremendous settlement to have reached twelve years after litigation first started. “The history of this case shows that with persistence and careful planning a defrauded party can recover very substantial sums of money. Doing this also sends an important message and acts as a deterrent to fraudsters.”
There remains one action to be heard in the Bahamas against one of the trustees themselves. This is expected to be heard in June this year.
“Whilst it would have been interesting,” continued Nick Pearson, “to have had a court rule on certain obscure provisions of the Bahamian 1870 Bankruptcy Act, or, perhaps more relevantly, on the notion of a sham trust, our clients, of course, are interested in a commercial solution, not academic satisfaction. In commercial terms they are very pleased. ”
