Dispute Over $30 Million Payment: Case Highlights Need for Clarity in International Financial Transactions

Citation: [2023] EWHC 2831 (Comm)
Judgment on

Introduction

The case of Sheikh Mohamed Bin Issa Al Jaber v Sheikh Walid Bin Ibrahim Al Ibrahim & Anor ([2023] EWHC 2831 (Comm)) delves into the dispute over the nature of a $30 million payment made from Sheikh Mohamed (“the Claimant”) to an account controlled by Sheikh Majid and/or Sheikh Walid (“the Defendants”). The case, presided over by Mr Justice Henshaw in the High Court of Justice, raises significant legal issues regarding the necessity of written agreements in loan transactions, the establishment and extent of agency authority, and the applicability of limitation periods under Saudi law.

Key Facts

Sheikh Mohamed claims that the payment was a loan to assist in establishing the Al Arabiya television channel, while Sheikh Majid contends it was an advisory fee related to real estate ventures in Saudi Arabia. The claim hinged on the validity and enforceability of an oral loan agreement, the authority of Sheikh Majid to bind Sheikh Walid to the agreement, and whether such a claim was time-barred.

The court applied various legal principles to arrive at its conclusion:

Applicable Law

The governing law for the alleged loan agreement was determined under the Rome Convention and the Contracts (Applicable Law) Act 1990. The court considered the habitual residence of the party who is to effect the characteristic performance of the contract, which in a loan contract is the lender. Despite Sheikh Mohamed’s international presence, the court provisionally concluded his habitual residence to be England. However, the court further provisionally determined that the loan was most closely connected with Saudi Arabia, given the significant ties of all parties involved.

Loan Agreement Requirements

The court examined whether, under Saudi law, a loan agreement must be in writing to be enforceable. It was identified that Shari’ah principles, specifically Verses 282 and 283 of the Qur’an, do not mandate writing for the validity of a loan. The majority view suggests that writing is recommended but not obligatory for a loan contract, which is also observed by Saudi courts.

Agency and Authority

On the question of an agent’s authority to bind a principal, the court found no requirement under Saudi law for such authority to be in writing. The court recognized that actual authority could be conferred by words or customary dealings, and acts of an unauthorised agent could be ratified by the principal.

Limitation Periods

Regarding limitation periods, the court found that Saudi law does not extinguish rights due to the passage of time, but such rights may become unenforceable if not pursued without justifiable reason. The court concluded that the claim for the loan would not be time-barred under Saudi law, given the absence of a clear statutory limitation period for loans and the ability to demand repayment.

Outcomes

Mr Justice Henshaw dismissed Sheikh Mohamed’s claim, finding no satisfactory evidence to support the contention that the $30 million payment was a loan related to the Al Arabiya project. The court favored Sheikh Majid’s account that the payment was an advisory fee concerning his assistance with leasing and refinancing of real estate ventures in Saudi Arabia.

Conclusion

The case underscores the importance of clarity in documenting international financial transactions and demonstrates the nuances of applying foreign law principles in UK courts. The decision also highlights the court’s role in evaluating the credibility of witness testimony and its reliance on documentary evidence when reconstructing events that transpired many years prior. This judgment serves as a cautionary tale for parties involved in cross-border dealings to ensure that their agreements are documented and that the required legal formalities, especially when dealing with foreign laws, are observed to avoid future disputes.