The Saudi business group that collapsed under a US$9 billion (Dh33.05bn) tide of debt yesterday performed a dramatic $250 million reversal at London's High Court.
Ahmad Hamad Al Gosaibi and Brothers had defended loan repayment claims by five banks, but has now conceded it is contractually bound to pay up.
The company had claimed it fell victim to the "brazen" activities of "master fraudster" Maan al Sanea, the one-time managing director of its investment division, who is alleged to have covered up the group's increasingly desperate financial state while simultaneously bleeding it dry.
However, just a week into what was expected to be a seven-week hearing, the Al Gosaibi group's barrister, Ewan McQuater, QC, yesterday told the High Court: "[the Al Gosaibi group] does not now intend to maintain its defence of the contractual claims by the claimants [the banks] under the facilities."
The Al Gosaibi group had argued it was not bound by the loan facilities as they were "not authorised". But Mr McQuater said: "The [Al Gosaibi group] defendants now propose to withdraw that denial and instead to admit that, as between them and the claimants, each of the pleaded facilities was contractually binding on [the Al Gosaibi group]."
He said the company was making "an unqualified admission of the claimants primary pleaded allegations that contracts were entered into between the claimants and [the Al Gosaibi group].
"The consequence of that admission is that the claimants' contractual claims succeed and they are each entitled to judgment in the amount claimed."
The Al Gosaibi group's concessions mean the case in London is effectively over, although the court was expected to "take stock" yesterday afternoon.
Other claims by the banks against the company - including alleged deceit, based on the liability of Mr al Sanea, and restitution - "no longer arise" as a result of the settlement, Mr McQuater said.
He added that the issue of whether, or to what extent, the loan facilities "were authorised as between [the Al Gosaibi group] and Mr al Sanea" also "does not arise". Mr McQuater concluded: "The consequence of [the Al Gosaibi group's] admission of liability is that the claimants are entitled to the costs of the action, to be assessed."
Gregory Mitchell QC, for the British Arab Commercial Bank, said that after 14 months of immensely complex and expensive litigation, the Al Gosaibi group had "finally realised their evidential case [on the contract issue] was entirely without foundation".
He said the banks were now, in principle, entitled to have their legal costs of the case paid by the company on the punitive "indemnity" basis.
Mr Mitchell said steps would now be taken to enforce the judgment in other jurisdictions, including Saudi Arabia, Dubai, the Cayman Islands and the US.
"We know there are substantial land and assets held by [the Al Gosaibi group] and its partners in Saudi Arabia," he said, ading there were also "substantial assets in the Cayman Islands in the name of Mr al Sanea and his group of companies".
Mr Mitchell said there were currently "bitter proceedings" on foot in the Cayman Islands between the Al Gosaibi group and Mr al Sanea and his companies.
The result of the case in London, he added, may have an impact on those proceedings, making it possible to "cut through much of what is in issue in the Cayman Island".
David Wolfson, QC, for Credit Agricole, said the Al Gosaibi group's defence to the banks' contractual claims "has been shown to be utterly without foundation" and the French bank was currently pursuing a parallel case in Dubai.
Mr Justice Flaux observed there were "regrettably problems in enforcing [English] judgments in Dubai"."It would be highly dangerous to try to second guess what may, or may not, happen in the Cayman Islands," he added.
Mr McQuater told the court: "The total value of bank claims against the Al Gosaibi group and the [group's] partners vastly exceed their assets." Urging the judge not to do anything that might jeopardise the Al Gosaibi group's ongoing case in the Cayman Islands, he added: "It should be regarded as in the interests of [the Al Gosaibi group's] many creditors that any right of recovery against Mr al Sanea or otherwise be preserved."
Mr Justice Flaux concluded: "The question of whether [the Al Gosaibi group] is liable to lending banks on the facilities is, of course, a different question from whether Mr al Sanea is liable to [the Al Gosaibi group] for committing it to the facilities and/or misappropriating the proceeds."