Deutsche Bank, Algosaibi unit battle it out in NY court

Deutsche Bank and a banking unit of Saudi Arabia's Algosaibi family battled it out in court on Wednesday over whether to throw out a $74.2 million claim by the German bank, part of a flurry of lawsuits involving billions of dollars and allegations of fraud.

New York State Supreme Court Justice Bernard Fried said he expects to rule by Dec. 9 whether The International Banking Corp, the Bahrain bank whose controlling shareholder is the Ahmad Hamad Algosaibi and Brothers conglomerate, did sufficient business in New York to subject it to litigation in the state.

Several large Middle Eastern companies are caught up in a variety of litigation amid a feud between Algosaibi and the billionaire Maan al-Sanea, who married into the family.

Regulators and bankers are trying to address up to $22 billion of debt restructurings at Algosaibi and al-Sanea's Saad Group.

Last week, Kuwait's Al Ahli Bank of Kuwait KSC sued Saad and al-Sanea for $125 million, alleging breach of contract and fraud.

The issue at Wednesday's hearing was whether Deutsche Bank can recover damages for TIBC's failure to make good on its portion of two foreign exchange transactions, under which the German bank agreed to swap $59.8 million for 40 million pounds sterling.

A ruling favoring TIBC would free up assets that Deutsche Bank attached after it sued in May, court papers show.

H. Barry Vasios, a partner at Holland & Knight LLP who represents TIBC, said his client had only "incidental" contact with New York, and that its correspondent banking activity in the state is not relevant to Deutsche Bank's argument.

Urging Fried to look at the "totality" of circumstances, Vasios said, "Our performance is entirely outside the US The deal was negotiated there. The deal was completed there."

Todd Marcus, a partner at Bingham McCutchen LLP who represents Deutsche Bank, responded that TIBC actually has substantial business in New York, sometimes involving billions of dollars a month.

"This notion of a correspondent bank, I'm not buying it," he said. "This is where they have their account."

The bank's lawyers declined to comment after the hearing.

David Brodsky, a partner at Cleary Gottlieb Steen & Hamilton LLP who represents Mashreqbank, which is suing and being sued by the Algosaibi family, also argued at Wednesday's hearing in favor of jurisdiction.

A Mashreq spokeswoman later said the Dubai-based bank expects to prevail on its own claim against TIBC.

Bahrain's central bank seized TIBC in July, and later named an external administrator to operate it.

Several Algosaibi-related proceedings are being held in New York because some of the parties and claims are located there.

The case is Deutsche Bank AG v. The International Banking Corp bsc, New York State Supreme Court (Manhattan), No.601471/2009. (Reuters)

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