Qatar-based real estate company Barwa International has won a legal battle against two Bahraini companies who invested funds on its behalf in a project in Saudi Arabia without obtaining the appropriate licenses from the Central Bank of Bahrain (CBB).
As part of a judgement by the Bahraini Chamber of Dispute Resolution (BCDR), Bahrain-based Inovest and Al Khaleeji Development Company have been ordered to repay Barwa’s it investment of QR61m ($16.9m). They were also ordered to pay Barwa compensation of 1.5 percent, plus additional costs and expenses.
According to a statement released by Barwa, it has presented an order to the Central Bank of Bahrain (CBB) to instruct all banks in Bahrain to freeze both companies’ accounts to the value of the amount of the judgement.
The two firms were ordered to repay Barwa its investment of $16.9m and compensation of 1.5 percent, plus additional costs and expenses.
The case was filed in June 2012 and centred on Barwa’s investment of $16.9m in an investment vehicle called Dannat Resort Development Company Limited in April 2008.
The investment vehicle related to a real estate development project to be known as Half-Moon Bay in the Eastern Province of Saudi Arabia. The investment was to be managed by Inovest and Al Khaleeji Development Company and completed within three years.
The two firms were only able to raise 40 percent of the finance needed to fund the project and more than five years after the investment by Barwa no substantial works had commenced on the site in Saudi Arabia.
The BCDR further ruled that the two Bahraini firms also used investors’ funds in a way that constituted a major deviation from the agreed contract under the Civil Code of Bahrain.
The main crux of Barwa’s case also hung on the fact that Inovest was not licensed by the CBB to be able to offer investment products or invest money on behalf of others, which was a violation of regulations in Bahrain.
“Barwa is delighted with the outcome of the BCDR proceedings and the clear judgement that was handed down in our favour. Barwa diligently pursues those parties that do not honour their commitments to us or act in breach of applicable regulations. Barwa follows a clear and comprehensive legal strategy to ensure, as far as possible, that our interests and those of our stakeholders are protected,” Barwa group chief executive officer Abdulla Abdulaziz Al Subaie said in a statement.
Last month, it was revealed Qatar was forced to step in with $7.1bn of financial support for its ailing property firm Barwa Real Estate, buying some key assets to help the company reduce its debt pile, Reuters reported.
Qatar Diar, the real estate arm of the Gulf state's sovereign wealth fund, owns 45 percent of Barwa, according to Reuters data and is stepping in after Barwa notched up liabilities of about QR37bn ($10.16bn) at the end of 2012 due to overexpansion. Its profit plunged 46 percent in the first quarter.
"The sale proceeds will be directed towards extinguishing the company's debts, reducing financing costs and improving the company's financial position," Barwa said in a bourse statement.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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