Barclays May Face $10 Billion Lawsuit For “Corrupt Activities” In Saudi Arabia


 A prominent Saudi businessman is reportedly seeking $10 billion in damages from U.K. financial group Barclays after he claimed that the bank had conducted “corrupt activities” in Saudi Arabia, which ultimately cost his companies billions in lost revenue over the past decade.

According to the Financial Times, Mohammed bin Issa al Jaber, chairman of MBI International and founder of the Jadawel property group, filed legal proceedings against U.S. law firm White & Case last week, demanding that the firm hand over documents related to a 10-year-old “confidential” settlement between Barclays, the firm’s former client, and two Saudi Arabian ministries.

Al Jaber’s case centred around two properties that were leased by his company Jadawel to the Saudi Ministry of Defence and Aviation (MoDA) in 1999 for what would have been $1.4 billion of rental payments over 10 years, according to the documents.

Jadawel had used the repayments as collateral to secure a $900 million syndicated loan from Barclays and other lenders two years later, but the MoDA then made a single late payment before defaulting on the rest in 2002.

To recoup the amount, Barclays had used White & Case to sue the MoDA in New York, but the action was discontinued without prejudice in April 2003. Al Jaber and MBI believe that Barclays intentionally procured the defense ministry's payment default, thus interfering with the business relationship over the property leases.

Describing Barclay’s decision to have “amounted to…bribery”, Al Jaber also said that the default subsequently caused other banks to refuse credit to MBI, which resulted in $10 billion in damages. He is now seeking White & Case to reveal the settlement documents between Barclays and the MoDA, in order to pursue a larger lawsuit against the U.K. bank.

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“In exchange for assistance in obtaining a valuable licence to conduct banking activities in the Kingdom (of Saudi Arabia) and other undisclosed corrupt activities, Barclays conspired with certain officials of the Kingdom to injure petitioners’ business, reputation and access to credit,” wrote the official legal documents filed by Al Jaber’s lawyers.

A hearing has been ordered for next month where White & Case can argue against any order to release the settlement documents. Analysts however say that Al Jaber will face difficulty in his proceedings.

Al Jaber’s lawyers “are seeking discovery before they have commenced any action and they are using a rather arcane provision” of state law to do so, told Brad Simon, a defence lawyer who is not involved in the case, to FT. “That provision allows for pre-action discovery only under very narrow circumstances. One example is when the evidence is likely to be destroyed. There is no such showing in this situation.”

Nonetheless, Al Jaber’s case appears to have arisen out of a wider U.S. Department of Justice inquiry into the bank’s dealings in the Middle Eastern state. The bank has been accused of making illegal payments to members of the Saudi royal family in order to secure business ties.

Additionally the bank also remains under investigation in the U.S. and U.K. over the terms of a crucial capital injection by Qatar in 2008.

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