A Kuwaiti firm has become one of the first to use the UK legal system in order to enforce a foreign $1.7bn debt-restructuring deal on a minority of its creditors.
Global Investment House has designed a deal that will see creditors given a 70% share in the company as a payment on their loans. Under the terms of the deal the company will become debt free.
The deal is a first because it concerns a foreign firm seeking to use UK courts to enforce their debt-restructuring plan.
The motive for using the UK is a lack of sound bankruptcy laws and regulations in Kuwait or in other Gulf states. This is driving Gulf businesses to look abroad for legal systems to support their ambitions.
Ahmad Alanani is an executive officer at Etotix, a debt-focused investment bank based in Dubai.
"This is the first case where we've seen a regional borrower take full advantage of the UK legal system in a manner that is forceful without disenfranchising lenders," he told The Financial Times.
The practice seems to be part of a wider trend, which has seen other Gulf firms use the US legal system for similar purposes recently.
Now it seems that Saudi Arabia may be about to approach the UK Government to ask if a confidential UK court could be set up in London, allowing Saudi companies to settle high-value commercial disputes in an established legal system setting.
The advantages of using the UK legal system include the stability of the courts and the certainty that an established legal system can offer businesses in expensive legal cases.
The future of this kind of agreement is uncertain however, as many Gulf states have already enacted legislation relating to bankruptcy and others have similar legislation in the pipeline.
Source:
UK courts used for Kuwaiti debt workout (The Financial Times - free signup)
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