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Last Updated: Monday, 30 January 2006, 19:44 GMT
BoE rejects 73m BCCI costs offer
BCCI sign
BCCI collapsed in 1991, owing millions to its investors
The Bank of England has rejected a 73m offer that would have brought to an end a 12-year legal battle stemming from the sudden collapse of lender BCCI.

Instead, the Bank wants a ruling from the High Court that would exonerate it.

BCCI, or Bank of Credit and Commerce International, failed in 1991 owing 10bn and some 6,500 people lost money.

BCCI's creditors sought 1bn in damages claiming the Bank knowingly failed to protect investors, but dropped the case after a ruling in November last year.

Not enough

Liquidators Deloitte, which had handled the lawsuit on behalf of the creditors, on Monday offered to pay costs of 73m and 8m in interest.

However, the Bank of England rejected the offer saying that it wanted a ruling from the High Court that repudiated the "disgraceful and entirely unfounded" allegations made against the Bank.

Deloitte did not appear in court on Monday and the move was derided by the Bank of England's legal team.

According to one of the lawyers, Nicholas Stadlen, Deloitte was "seeking to skulk in the shadows without any suggestion of apology".

He continued that the offer was a "get out of jail free card" that would allow the company to avoid a critical ruling from the High Court.

Mr Stadlen called on the court to hear the Bank's application for costs and then give its written judgement.

The High Court hearing is expected to last four days starting on Monday.

Huge costs

In November, liquidators Deloitte withdrew their claim against the Bank after a reserve judgement from the High Court said the case was no longer in the best interest of creditors.

After the case collapsed, the Bank had warned it would be seeking the "largest possible compensation" for its costs.

It is now believed to be looking for at least 70m in costs on an "indemnity" basis - the highest possible amount, which is often regarded as a punitive measure - as well as any interest incurred.

Any interest payment could prove to be a substantial sum as the lawsuit began 12 years ago.

The lawsuit, which eventually entered the courts in January 2004, was the first the Bank had faced in its 300-year history.

It also made legal history for the longest two opening speeches because of the complexity of the matter. The opening statements by both sides took more than six months.

BCCI was founded by Pakistani banker Agha Hassan Abedi who began his career running a small Asian bank.

It expanded into 69 countries but lost huge sums of money from its lending operations, foreign currency dealings and deposit accounts.

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