ABU DHABI // The Supreme Court has invalidated part of a bank's claim against an oil company in the latest turn in a 13-year-long lawsuit over a multimillion-dollar deal gone bad.
The case dates to 1998 when the oil company, which was operating in the UAE, struck a deal with a buyer from China to provide 30,000 metric tonnes of fuel oil. The unidentified local bank agreed to finance the deal, which had an initial value of US$3.83 million (Dh14m).
But the bank delayed payment, which caused the sale to fall through, so the oil company had to sell the oil off at a below-market price. The loss eventually led to the company's dissolution.
In the Supreme Court ruling, released in documents yesterday, justices held the bank had admitted before a lower court that it had received sufficient guarantees of payment from the company, and therefore its delays in payment were unjustified.
The company lost US$13,500 for each day's delay; the documents did not say how many days were involved.
Documents show the Chinese customer provided a letter of guarantee of US$4.5m to the oil company, which passed the letter to the bank and then found a tanker to ship the oil to China.
The delivery was to be made between September 15 and 20, 1998. But the bank provided the finance required for the oil to be loaded only on September 16.
The Chinese customer terminated the contract due to the delays, the documents say.
Both the company and the bank filed lawsuits. The company demanded US$10m in damages; the bank sought US$3.47m it said it had loaned the oil company, plus nine per cent yearly interest since November 7, 1998.
On June 26, 2000 the Federal Commercial Court rejected the company's lawsuit and ordered it to pay US$3m, plus US$275,055 in interest, to the bank. Both the bank and the company appealed, and the Federal Court of Appeals upheld the earlier verdict, ordering the company to pay an added US$1.7m.
The company appealed to the Supreme Court, which sent the case back to the appeals court. The appeals court raised the amount of damages again, to US$12.2m, and upheld the interest penalties.
The company then took the case back to the Supreme Court, which said the lower courts had erred in ignoring the bank's admission it had received sufficient financial guarantees for the value of the purchases.
"Despite admitting before a court, the courts did not examine this defence," Justice Amin al Hajeri wrote in a ruling issued on January 17. "And because the ruling was issued accordingly, the decision is considered erroneous and should be rejected."
The justice sent the case back to the appeals court to be examined by a new panel.