Court revokes €20.4m garnishee order

A judge yesterday revoked a €20.4 million garnishee order issued against Fimbank saying the bank had enough liquidity to guarantee the payment of the amount a Maltese company is claiming.

Mr Justice Mark Chetcuti accepted the bank’s arguments for the revocation of the garnishee order, which, it insisted, would seriously damage it and its operations.

The temporary garnishee order was issued by Mr Justice Silvio Meli on the request of Azrow International Trading Company Ltd, which is expecting the bank to honour a letter of credit it had approved.

The Maltese company said it had struck a business deal to take charge of the construction of a motor vehicle recycling plant in Libya. The other party undertook to pay it through a letter of credit for the full value of the project, €29 million.

The letter of credit was issued by the National Commercial Bank of Libya and received and confirmed in Malta by Fimbank. The first claims made by Azrow against the letter of credit were honoured by Fimbank but then, Azrow was informed by Fimbank that the National Commercial Bank of Libya claimed there was some default in their internal procedures. In turn, Fimbank stopped honouring the letter of credit and this gave rise to a lawsuit.

In asking for the revocation of the garnishee order, the bank argued that the legal avenue chosen – freezing a debtor’s assets pending the outcome of a lawsuit – was only availed of four months after the company filed the suit and that the bank’s solvency position had not changed since.

Lawyers Louis de Gabriele and Marisa Azzopardi, for Fimbank, said the company chose this avenue to put pressure on their client. They said there was nothing to prove that the bank could not honour the payment of the amount following a court judgment.

In their reply, lawyers Shazoo Ghaznavi and Robert Galea, for Azrow, said a lot had changed since the case was filed in March, primarily the degenerating situation in Libya and the blacklisting of the National Commercial Bank of Libya due to international sanctions. They claimed that, in 2009, Fitch Rating Agency had given Fimbank a BB rating, defined as being “moderately weak”. They said the company had tried to reach an out-of-court settlement with the bank but the latter insisted the matter had to go to court for it to be solved.

In his decree, Mr Justice Chetcuti said the garnishee order could have ripple effects on institutions, companies and other Maltese clients.

He said the prospect that the bank would not be able to honour its commitment if the court had to decide against it was “unfounded”. If the bank had to be adversely affected by the garnishee order, it would not help anyone, least of all Azrow, the judge noted.

He said the court felt the garnishee order was not necessary “at this stage” and therefore revoked it.