The Court of the Dubai International Financial Center (DIFC) awarded more than $70 million in damages last November to a wealthy Kuwaiti family to cover losses resulting from the sale of $200 million of structured investment products.
The landmark case was the first-ever DIFC award of US-style multiple or punitive damages. Given the egregious conduct of the defendant, the court opted to follow the aggressive, US approach to damages, rather than the more conservative approach characteristic of English law, according to Mark Beswetherick and Keith Hutchison, partners in the Dubai office of international law firm Clyde & Co., which studied the case. Switzerland’s Bank J. Safra Sarasin and its Middle Eastern subsidiary, DIFC-based Bank Sarasin-Alpen, were found to have sold unsuitable investments to Al Khorafi family members in 2007 and 2008.
“There has historically been a low frequency of claims in the Middle East region for mis-selling and negligence against financial institutions and professionals,” the Clyde & Co. report says. But that trend may be changing. “In recent years,” the study says, “we have seen an increase in claims for negligent advice and/or negligent mis-selling of investments—as well as an increase in negligence claims against professionals generally.”
Mark Beer, the DIFC registrar, told the court that he was “satisfied that this is a clear case of mis-selling unsuitable investments to an unsophisticated investor and his equally unsophisticated wife and mother.”
But the case has turned into a prolonged legal battle. Bank Sarasin immediately paid its share of damages into court pending a March hearing to appeal the award. However, Bank Sarasin-Alpen failed to make its $35 million payment by a February 1 deadline. It had sought a delay of the order, which was handed down on January 18.