CRANE BANK TAKEOVER: London court rejects dfcu bank’s security application in $200M lawsuit

LONDON — A London court has handed Ugandan businessman Sudhir Ruparelia a significant victory in his long-running dispute with DFCU Bank over the takeover of Crane Bank.

In a ruling delivered Tuesday, Mr. Justice Stephen Hofmeyr dismissed DFCU Bank’s application to require Ruparelia and his associates to deposit security in their bid to claim compensation exceeding $200 million.

Mr. Justice Hofmeyr KC ruled:“In the light of the conclusions to which I have come, I do not need to deal with the reliance placed by the claimants on the Bank of Uganda indemnities. The Bank of Uganda indemnities are relied upon by the claimants as an entirely independent reason why security should not be ordered. It is common groundthat these types of factors will only be relevant to a question of security for costs in an unusual case”.

He added:“If it had been necessary for me to form a view on the matter, I would have concluded that they are, at best, of limited tangential relevance in the instant case, would have placed no significant weight upon them and would have dismissed them as sufficient reason why security should not be ordered,” he said.“For the reasons I have given, the applications for security are dismissed,” the judge ruled.

Ruparelia, chairman of the Ruparelia Group, alleges that Bank of Uganda officials conspired with DFCU Bank and its directors to seize Crane Bank and sell its assets at a gross undervalue.

The lawsuit claims unlawful means conspiracy against DFCU Bank, its executives, and four development finance institutions.

Crane Bank was one of Uganda’s largest commercial banks until 2016, when Bank of Uganda placed it under receivership citing financial instability. DFCU Bank subsequently acquired Crane Bank’s assets.

Ruparelia and his shareholders dispute the takeover, alleging that Bank of Uganda officials and DFCU Bank colluded to undervalue Crane Bank’s assets and syphon off public funds.

The UK Court of Appeal previously ruled that Crane Bank’s claims are not barred by the foreign act of state doctrine, which prevents English courts from hearing matters concerning foreign government acts of state.

Tuesday’s ruling allows Ruparelia and his shareholders to pursue their claim in English courts.

“Crane Bank claims that senior former officials at the Bank of Uganda engaged in a corrupt scheme to take control of Crane Bank and sell its assets at a gross undervalue, while also syphoning off public funds. Along with its shareholders, Crane Bank claims that DFCU Bank and the other Defendants took part in the fraudulent scheme and purchased Crane Bank’s assets at a gross undervalue, while also effectively paying a bribe,” the shareholders said in statement dated July 28.

“The Court of Appeal found that there are serious issues to be tried and the claim falls outside the foreign act of state doctrine, relying on the commercial activity exception and the argument that all the executive acts in question engage the English public policy of combatting and not giving legal protection to bribery and corruption.”

Crane Bank shareholders warned that dfcu Bank cannot rely on the foreign act of state doctrine to evade liability.

“Crane Bank and its shareholders will continue to vigorously pursue their claim as part of a fair legal process before the English courts,” the shareholders added.

The UK Court of Appeal found that there are serious issues to be tried in relation to the claimants’ reliance on (i) the Commercial Activity Exception, and (ii) the argument that all the executive acts in question engage the English public policy of combatting and not giving legal protection to bribery and corruption, thereby falling outside the foreign act of state doctrine (the Public Policy Exception).

The Greenberg Traurig team, led by Masoud Zabeti, a shareholder and Litigation chair for Europe at Greenberg Traurig, also comprised Of Counsel Katharine Bond, Senior Associate Miten Vaghela, Senior Associate Bethany Histed, Associate Thai Nguyen, and Trainee Solicitor Francesca Conroy. The team instructed Lord David Pannick KC of Blackstone Chambers and Hannah Brown KC, David Caplan, and Ben Lewy of One Essex Court.

DFCU Bank officials were not immediately available for comment.