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Bank Of England Victorious In BCCI Case

by Robin Pilgrim,, London

04 November 2005

The liquidators of BCCI finally threw in the towel this week in their GBP850m lawsuit against the Bank of England, unconditionally withdrawing the case after a 12 year battle.

The Bank of England's counsel, Nicholas Stadlen, described the climbdown as "the most remarkable and humiliating climbdown in the history of English litigation".

Liquidators Deloitte dropped the case after the Chancellor of the High Court said it was no longer in the best interests of creditors for the litigation to continue. Deloittes had already spent GBP38m on the case, which could have dragged on for at least two more years and cost more millions, with no certainty of a successful outcome.

The bank says it will now seek repayment of its own costs, estimated at more than GBP60m.

Deloitte launched the lawsuit against the central bank, which was the UK's financial regulator at the time, in an attempt to secure some form of compensation for BCCI's 6,000 British depositors.

The liquidator claimed that the Bank of England consistently ignored wrongdoing at BCCI, contributing to the US$10 billion in debt that it left when it collapsed. One of the main charges levelled by Deloitte was the fact that the Bank of England knew that BCCI's main place of business was London (despite its being registered in Luxembourg), and that armed with that knowledge, the central bank should have been more vigilant in its regulation of BCCI.

The Bank of England has never been successfully sued, and Deloitte and Touche's campaign for justice has been complicated by the fact that the former financial regulator is immune to all negligence claims. Therefore the liquidator had to prove that the central bank knew that it was acting illegally, and it could have done this only on the basis of internal evidence which, not surprisingly, was not forthcoming.

Mervyn King, the Bank of England governor who was in court on Wednesday, said: "There has never been a shred of evidence to support these disgraceful allegations, and the case has collapsed as we always expected it would."

Deloitte said, however, its liquidation had still been the most successful major financial liquidation ever, with 81% of creditors' claims expected to be repaid, far more than had been expected.

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