Bank of England escapes action over BCCI
Law lords yesterday ruled that the Bank of England could not be sued under European law for failing to force closure earlier at the fraud-ridden Bank of Credit and Commerce International.
The House of Lords decision won the Bank of England further advantage in its long-running battle with Big Five firm Deloitte & Touche, the liquidators of the failed BCCI.
The Bank of England shut down BCCI in 1991 after false entries were found on its $20bn balance book, and left more than 70,000 creditors worldwide, many with private accounts, pursuing claims.
Law lords rejected an appeal that the case should pass to the European Court because the Bank had allegedly breached a 1977 banking directive by licensing and then not adequately supervising BCCI.
The directive was considered by the law lords to oblige states to regulate banks, but gave no legal right to pursue damage claims.
The law lords – who will meet again in October – also cleared up the legal requirements for Deloittes to pursue a separate action using an old law of misfeasance in public office.
Both sides claimed the ruling as a victory stoking fears that the highly technical use of misfeasance, which relates to the wrong use of power by public officials, would create further confusion in the long-running legal battle.
Deloittes are using the tort of misfeasance to bypass the Bank’s immunity to litigation and recover £500m for British depositors with BCCI.
Lord Justice Bingham’s 1992 report into BCCI’s collapse found that the Bank did not take appropriate action despite receiving warnings of fraud.
Deloittes paid a $1bn dividend to creditors worldwide earlier this week bringing total payouts to almost half the $9bn owed.
Deloittes moves forward on BCCI liquidation with $1bn payout
