The Court of Appeal from the High Court of Justice Business and Property Courts in England delivered a ruling reversing a lower court judgement exonerating DFCU Bank and its stockholders from illegally taking over Crane Bank.
According to Sudhir Ruparelia and seven other petitioners, DFCU Bank and its stockholders purchased Crane Bank Limited (CBL) in a well-crafted corruption scheme involving Bank of Uganda officials.The Court also recommended that Bank of Uganda officials involved in the transaction face corruption charges.
The result follows on the heels of a lower court decision in which a High Court of Justice of England and Wales judge, Lord Pelling QC, sitting in London, cleared both DFCU and BoU of wrongdoing in a $211 million dispute on October 19, 2022.
Judge Pelling based his decision on the fact that there was no significant issue to be tested, finding that the Court lacks jurisdiction to hear the appellants' claims against the respondents and dismissing service of the Claim Form on them.
The Judge dismissed the appellants' contention that their claims, or portions of them, fit under one or more of the exceptions to the foreign act of state rule.
However, three Court of Appeal judges ruled that the High Court should have found at least a serious issue to be tried, including that the sale by BOU to DFCU was commercial rather than sovereign in nature, and that all of the executive acts in question engaged the English public policy of combating and not giving legal protection to bribery and corruption, thus falling outside the foreign act of state rule ("the Public Policy Exception").
The three justices heard that the Appeal presented problems about the scope and application of the foreign act of state norm, as well as the restrictions and exceptions to which it is subject.
"The first appellant, Crane Bank Limited ("CBL"), was a major commercial bank in Uganda at the time." The second through eighth appellants are CBL stockholders. In these proceedings, the appellants claim that, beginning around Spring 2016, senior Ugandan government officials and officials of the Bank of Uganda ("the BoU") engaged in a corrupt scheme to seize control of CBL by abusing statutory and regulatory powers, and then sell its assets to benefit the scheme's participants.
The appellants claim that the first respondent ("DFCU Bank"), another Ugandan commercial bank, participated in the fraudulent scheme by purchasing CBL's assets from the BoU (as receiver of CBL), at a gross undervalue. DFCU Bank's holding company (the second respondent) and several current and former DFCU Bank employees and directors (the third through fifth respondents) are also accused of participating in the conspiracy.'
As a result, the appellants seek damages in excess of £170 million for conspiracy to hurt by illegal means, as well as an account of profits allegedly generated by the respondents (and all other defendants) by their dishonest facilitation of the corrupt plan, or equitable recompense. The appellants further contend that DFCU Bank is obligated to account for funds acquired as a result of knowing receipt of assets transferred in violation of fiduciary obligation. All of these claims, it is agreed, are regulated by Ugandan law."
Ruling
"I would allow the appeal on the grounds that there are serious issues to be tried as to whether part or all of the appellants' claims fall within the Commercial Activity Exception and/or the Public Policy Exception." Lord Justice Philips issued his decision.
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