MALTA, WILLEMSTAD – A Maltese bank urged a New York state court Monday to pause a $135.8 million arbitration initiated by a Curacao bank stemming from a dispute relating to a loan purchasing deal, saying it can’t be forced to arbitrate because it never signed the underlying agreement.
IIG Bank Malta Ltd. is asking the court to permanently pause arbitration initiated by Girobank NV and Girobank International NV before the International Chamber of Commerce, in which it accuses Malta Bank and others of causing Girobank to purchase participation interests in loans that were falsely represented as financially sound. Girobank is seeking more than $135 million in damages in the dispute, according to the suit.
Malta Bank told the court in its petition Monday that it never signed the applicable participation agreement that contained the arbitration provision, and that even though it is indirectly owned by one of the entities that did sign the agreement, it can’t be forced to arbitrate on that basis.
It’s asking for an immediate preliminary injunction staying the arbitration with regard to Malta Bank while the court weighs whether to grant a permanent stay.
“If Malta Bank does not obtain an immediate preliminary injunction staying the arbitration as to Malta Bank pending the determination of this verified petition for a permanent stay, it will be constrained to serve an answer in the arbitration thereby risking waiver of its ability to have its request for a permanent injunction considered by the court,” the bank said in its petition.
The arbitration, which Girobank filed last fall, accuses Malta Bank and a slew of others of forcing Girobank to purchase participation interests in loans, which it claims were falsely represented as financially sound even though due diligence was never conducted on the loans. Girobank claims that this conduct was part of a complex fraudulent scheme, according to the suit.
Malta Bank denies being involved in any alleged scheme and says it did not participate in the transactions at issue.
Malta Bank claims that the purpose of the participation agreement Girobank inked in 2010 with IIG Trade Opportunities Fund NV and IIG Capital LLC was to establish terms so that Girobank would purchase interests in certain trade finance loans originated by IIG Trade Opportunities Fund, which would then be managed by IIG Capital. It was those two entities that signed the agreement, which contains the arbitration provision, the bank argued in its petition.
And while those entities are named in the arbitration, Malta Bank says that it and several other entities are also wrongly named in the proceeding as defendants. Malta Bank alleges in its petition before the New York court that the arbitration doesn’t include any specific allegations concerning its involvement in the alleged fraud.
Attorneys and representatives for the parties could not immediately be reached for comment on Tuesday.
IIG Bank is represented by Ralph A. Siciliano and Carl F. Regelmann of Tannenbaum Helpern Syracuse & Hirschtritt LLP.
Attorney information for Girobank wasn’t available on Tuesday.
The case is In the Matter of the Application of IIG Bank Malta Ltd. v. Girobank NV and Girobank International NV, case number 650676/2019, in the Supreme Court of the State of New York, County of New York.