7th APRIL 2015 - Vol.XXXVIII No.018
Business News

Lawsuit 'is testing global confidence'

MANAMA: Global investor confidence in the GCC could be at stake in a protracted legal battle over the ownership of a massive development project, says a Bahraini entrepreneur.Bahrain-based AAJ Holdings is locked in a dispute with Omani company Cyclone over ownership of the $15 billion Blue City Project in Oman.

Cyclone took the dispute to the Omani Court of Appeal, after losing a case last March in which it accused AAJ Holdings of illegally acquiring a majority stake in the project.

AAJ Holdings holds a 70 per cent stake in the project, while the remaining 30pc of the shares are held by Cyclone.

But AAJ Holdings chairman and chief executive officer Ahmed Abubaker Janahi says his company has effectively been locked out by Cyclone since the ruling by the Primary Court.

Mr Janahi said the implications of the dispute were 'huge', with global investors watching to see how the appeal court rules.

"Lots of things are at stake here," he said.

"The investors injecting their money into the region during the past period are now awaiting the verdict in this dispute, in order to get the necessary comfort that their investments are safe in this region.

"From the moral point of view, justice in the GCC is under scrutiny and is now facing a major test. We hope that the ruling of the Omani judiciary will be fair as it has always been.

"There are international implications related to the financing of the project, which are overseen by international parties that have a right to protect their interests and intervene if they feel that matters are getting out of control."

AAJ Holdings had acquired its 70pc shareholding in the project company in two stages; 58pc on May 22 2005 and 12pc on October 17, 2005.

The legal dispute started when Cyclone instituted proceedings at the Omani courts claiming that AAJ Holdings and the two companies from whom AAJ Holdings bought the shares had violated the Commercial Companies Law in Oman, which states that partners in a company shall have the pre-emptive right to acquire shares that any partner in that company intends to dispose of to third parties.

Cyclone claimed that the terms of the sale offered to it to exercise its right of first refusal were not the same as the terms under which the sale of the project company shares was actually concluded.

The Primary Court in Muscat, however, rejected the case, confirming AAJ Holdings' shareholding in the project company and the validity of the share sale and purchase process.

Mr Janahi alleged that Cyclone had since rejected all overtures to start afresh and push ahead with the project, denying him and his representatives access to the company and the project.

"Following the issuance of the verdict in our favour, we reached out to Cyclone in an attempt to start a new page and preserve the livelihood of this huge project, particularly seeing as there are international parties which contributed to the financing of this project, in addition to the fact that the project companies and partners have made international and local financial commitments," said Mr Janahi.

"Unfortunately, Cyclone rejected all our attempts. Therefore, we are now awaiting the ruling of the Court of Appeal, hoping that the Omani judiciary will once more restore justice to its rightful owners.

"We do have rights; we own 70pc of the project's shares, and no one will take this away from us.

"Cylcone is continuing to prevent us from exercising our management rights as partners and board members and have even prevented us and our representatives from physical access to the company's premises in order for us to carry out our administrative tasks."

He said he and his representatives had been kept away from the project since the beginning of the dispute.

"Consequently, we are not responsible in any manner whatsoever for the commitments made and actions taken by Cyclone during the period in which we were shut out from the project," said Mr Janahi.

"After the issuance of the Primary Court verdict, I dispatched our professional representatives to gain access to the company's premises, carry out certain tasks and review the company's records.

"Sadly, they were thrown out of the company and prevented from entering. Until this date, we are still not granted access to the company nor its records, by Cyclone, without them actually having any legal backing for such actions."

He said his legal team had lodged an objection to the appointment of a new expert by the appeal court to examine the case, but this had been rejected by the court.

"We objected to the appointment of this expert right from the beginning, based on the fact that he is not one of the experts registered in the list of accredited and approved experts often utilised by the Ministry of Justice and does not have any experience in commercial adjudication," said Mr Janahi.

"He is an academic at Sultan Qaboos University and has no previous experience as an expert to the court, as this is the first task assigned to him.

"However, the court rejected our objections, which we found surprising, as a case of such magnitude and level should definitely be handled by a prominent experienced firm or an expert who has the necessary expertise, impartiality and professionalism."

He said his company had done everything it could to solve the dispute amicably.

"We did not leave any stone unturned in our attempts to reach an amicable resolution between the two parties," said Mr Janahi.

"Our position was clear right from the beginning; to preserve the interests of the project and the reputation of the region from the investors' point of view.

"The reason behind this is simple: we own a majority interest, and any amicable resolution will ultimately be to the benefit of all parties.

"We exerted all possible efforts, approached all officials and ministers, and conveyed messages to those of interest.

"Despite the fact that we were confident that we are in a position of strength in the case filed against us by Cyclone, we knocked on all doors out of our desire to preserve the Blue City Project, a desire that some interpreted as weakness and lack of confidence in our legal position.

"Unfortunately, such efforts to communicate were in vain."

Mr Janahi said the dispute had not daunted his commitment to engaging in further development projects in the region.

"This is an experience, and experiences only make you stronger," he said.

"Despite the tough economic conditions experienced all over the world, including this region, I believe the effects of the economic meltdown are less substantial in the GCC, as governments are actively involved in the regulation of investment activities and many of the regions' central banks adopt a conservative approach."

Mr Janahi said he remained confident that justice would prevail.

"I'm fully confident that the Omani judiciary will restore justice and restore my rights," he said.

"The case is quite clear and does not even require the appointment of experts, and I am confident that our legal position is sound."

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