Allen & Overy LLP was a British multinational law firm headquartered in London,.United Kingdom. England.
The proposed restructuring of BCCI involved much more than providing additional funds to cover losses.
It required new companies to be established, existing banking operations to be transferred between legal entities, new regulatory applications to be prepared and relationships between institutions operating in different countries to be reorganised.
That required specialist legal advice.
One of the principal firms involved was the major London law firm Allen & Overy.
The precise date on which Allen & Overy was first appointed in connection with BCCI’s restructuring has not yet been identified from the available records. However, Lord Justice Bingham’s report establishes that the law firm was already directly involved in the proposed new UK structure by early February 1991.
Designing the legal structure of the new bank
By the beginning of 1991, the proposed reorganisation envisaged replacing BCCI’s complicated international structure with separately regulated banking institutions.
The proposed UK company raised a number of legal and regulatory questions.
- Which existing BCCI branches could be transferred into it?
- Should overseas operations form part of the UK company?
- Would a holding company be required?
- Where should such a holding company be incorporated?
- How would assets, liabilities, staff and customer relationships be transferred from the existing BCCI entities into the new institution?
These questions were quite different from determining whether BCCI had sufficient capital or whether individual loans were recoverable.
They concerned the legal architecture of the restructuring.
Discussions with the Bank of England
Lord Justice Bingham records that in early February 1991, Price Waterhouse and Allen & Overy discussed the proposed new UK company directly with the Bank of England.
Among the questions considered was whether certain branches outside Britain could form part of the new UK institution.
The possibility of establishing a holding company was also discussed. The Bank of England indicated that it had no objection in principle to such a holding company provided that it was located in the United Arab Emirates.
- This is an important piece of evidence about Allen & Overy’s role.
- The firm was not merely standing by as BCCI’s ordinary solicitor.
It was participating with Price Waterhouse and the Bank of England in discussions about how the proposed successor institution should legally be constructed.
A complex international reorganisation
The need for specialist legal advisers becomes easier to understand when the scale of the proposed restructuring is considered.
BCCI did not consist of one straightforward international banking company.
Its operations were spread principally through BCCI SA, incorporated in Luxembourg, BCCI Overseas, incorporated in the Cayman Islands, and numerous branches, subsidiaries and associated companies around the world.
The restructuring contemplated moving viable operations into new independently capitalised banks based principally in London, Abu Dhabi and Hong Kong.
At the same time, problem assets were to be separated into other entities backed by the Abu Dhabi shareholders.
Carrying this out required legal arrangements concerning ownership, transfer of assets and liabilities, regulatory approvals, corporate governance and the relationships between the different successor institutions.
It was therefore a major international corporate restructuring as well as a financial rescueto which Abu Dhabi was committed.
Working alongside Price Waterhouse
Allen & Overy’s involvement should also be distinguished from the role of Price Waterhouse.
Price Waterhouse was heavily involved in examining BCCI’s financial condition, identifying losses, dealing with problem loans and assisting with the financial arrangements underpinning the restructuring.
Allen & Overy dealt with legal matters arising from those arrangements and from the creation of the successor institutions.
- The two advisers therefore frequently worked together.
- By early February 1991 they were jointly discussing the proposed new UK company with the Bank of England.
This provides another indication that the restructuring programme was not simply an internal BCCI proposal.
Outside accountants and lawyers were already discussing its practical implementation directly with the regulator.
The new UK banking application
As the restructuring progressed, attention increasingly focused on the proposed UK bank.
By late May 1991 the structure had become much more detailed.
The Bank of England received a draft application for the new UK company on 29 May, followed on 31 May by a restructuring presentation from BCCI, Price Waterhouse, Booz Allen and representatives of the Abu Dhabi majority shareholders.
The intention was that the new UK bank should be smaller and more focused than the existing BCCI operation and should begin trading around the beginning of October 1991.
The application was subsequently revised following discussions with the Bank of England.
Allen & Overy remained involved as the legal advisers during this process.
The 13 June meeting
On 13 June 1991, representatives of BCCI, Price Waterhouse and Allen & Overy met officials of the Bank of England to go through the proposed UK bank’s application and business plan.
This was not a general discussion about whether restructuring might someday be possible.
The parties were dealing with the details required for an application for a new banking institution.
Questions concerning capital and the proposed risk-asset ratio were being addressed, and revised documents were subsequently prepared.
On 18 June, BCCI delivered twelve copies of its revised application, business plan and financial projections to the Bank of England.
Lord Justice Bingham later described these as substantial documents.
Allen & Overy’s participation in the process illustrates how serious the programme was and how far it had moved from a broad restructuring concept towards the legal and regulatory establishment of a new bank backed by Abu Dhabi.
Allen & Overy and the Section 41 investigation
Allen & Overy also appears in another part of the BCCI story.
On 4 March 1991, the Bank of England appointed Price Waterhouse to investigate BCCI under Section 41 of the Banking Act 1987.
The investigation was confidential and separate from the restructuring programme, although Price Waterhouse was involved in both.
Allen & Overy was aware of the appointment and subsequently became involved in issues surrounding access to documents sought by the authorities.
These matters became increasingly important as investigations into BCCI’s affairs developed during the spring of 1991.
The “Naqvi files”
One particularly sensitive issue concerned a large collection of documents associated with Swaleh Naqvi, BCCI’s former chief executive who served as acting President after Agha Hasan Abedi was forced to resign because of health issues.
Thousands of files were held by Allen & Overy.
In April 1991 the Bank of England used its statutory powers to seek documents relevant to investigations concerning BCCI, including questions arising from US inquiries.
The matter became the subject of legal proceedings because some documents were claimed to be subject to legal restrictions or privilege.
After BCCI’s closure, the existence of these files received considerable parliamentary and media attention.
In a House of Commons debate in the UK Parliament on 4 November 1991, Keith Vaz MP referred to approximately 6,000 “Naqvi files” held by Allen & Overy, describing the firm at that point as solicitor to the Sheikh of Abu Dhabi.
The document issue was separate from Allen & Overy’s work designing the successor UK bank, but it illustrates the firm's unusually close involvement with some of the major legal issues surrounding BCCI during the final months.
More than ordinary legal advice
For a general reader, Allen & Overy’s role is significant because it provides another indication of the practical stage the restructuring had reached.
By early 1991:
- Price Waterhouse was working on the financial restructuring;
- Booz Allen & Hamilton was helping to review and design the future business organisation;
- Allen & Overy was engaged in the legal and corporate structure;
- new management was being sought;
and the Bank of England was discussing the proposed UK institution directly with these advisers.
This was not simply BCCI management drawing up an internal rescue plan.
A substantial professional infrastructure had been assembled to create the replacement banking institutions, supported by major financial commitments from the Abu Dhabi majority shareholders.
An unfinished legal restructuring
Allen & Overy continued to be involved as the proposed UK bank moved towards a formal regulatory application.
Had the programme continued, substantial further legal work would have been required to incorporate the new institutions, transfer businesses and assets, establish boards and governance arrangements and complete regulatory authorisations.
Those arrangements were never completed.
After the Bank of England changed course in the final days of June 1991 and BCCI was closed on 5 July, the focus of the lawyers, accountants and other advisers necessarily changed from restructuring a continuing banking operation to dealing with the consequences of closure, investigations and eventual liquidation.
Allen & Overy therefore occupies an important, if sometimes overlooked, place in the history of the restructuring.
Its involvement shows that by early 1991 the proposed transformation of BCCI had moved beyond discussion of whether there should be restructuring.
Professional advisers and regulators were already dealing with the detailed question of how the new banking structure was to be legally created.
Key Sources
Lord Justice Bingham, Inquiry into the Supervision of the Bank of Credit and Commerce International, 1992 - records the early February 1991 discussions between Price Waterhouse, Allen & Overy and the Bank of England concerning the proposed UK company and the subsequent development of the restructuring.
House of Commons Hansard, 4 November 1991 - contemporary parliamentary reference to the approximately 6,000 “Naqvi files” then held by Allen & Overy and sought by the Bank of England