DIFC Court grants $70m to Al Khorafi family

The Courts of the Dubai International Financial Centre (DIFC) have ruled in favour of the Al Khorafi family to the tune of $70 million plus costs and interest, according to a media statement.The statement added that the latest verdict comes after the Court of First Instance published its judgment in November 2015, where the first and second defendants, Bank Sarasin-Alpen (ME) and Bank J.Safra Sarasin, respectively, were ordered to pay the mentioned sum to the claimants.

In a ruling with broad consequences for the international investment community, the DIFC Courts ordered Bank Sarasin-Alpen (ME), a joint venture entity between Swiss based Bank Sarasin and Alpen Corporation, to pay losses sustained by the Al Khorafi family from the sale of inappropriately structured real estate, commodity-backed and equity sector products in late 2007 to early 2008.

Based on the rules and regulations of the DFSA, the Court concluded that Bank Sarasin had committed “a clear case of mis-selling unsuitable investments to an investor without regard to the protection that the Regulatory Law was intended to afford Retail Customers”.In 2007, the investors engaged in discussions with Bank Sarasin through its Middle East wealth management and marketing affiliate Bank Sarasin-Alpen, to identify an investment product or strategy that would meet their requirements.

Bank Sarasin-Alpen was created to do business within the DIFC, and so was subject to Dubai Financial Services Authority #DFSA# regulation.The Government of Dubai has made sure that all such dealings are transparent and enforce the DFSA law, which required Bank Sarasin-Alpen to independently determine whether Claimants were Clients or “Retail Customers”, as per DFSA regulations and definitions.

Within the DIFC’s exclusively “Wholesale” business zone, Bank Sarasin-Alpen was barred from dealing “with or for a Retail Customer”, and could only offer financial services or products to clients of sufficient expertise or experience, who are able to participate in complex financial transactions.The conclusion that Bank Sarasin-Alpen’s dealing with the Khorafi family was a prohibited transaction under the Financial Services Prohibition in DFSA Article 41 was legally sufficient to dissolve the agreements between them. The AlKhorafi family will now await the Court’s decision following the banks’ appeal.