Faisal Islamic Bank of Egypt and eight other Islamic banks have lost a legal battle in London to win priority for their compensation claims from the former Bank of Credit & Commerce International (BCCI).

Officials at the Cairo-based Islamic bank declined to comment on a statement by BCCI’s English liquidators Deloitte & Touche that it had failed in its claim for compensation for money placed with BCCI for investment before that bank was shut down by regulators worldwide in 1991 because of fraud. Faisal Islamic Bank initially sought $362 million in compensation, the London Arabic daily Asharq Al-Awsat newspaper reported.

The basis of the Islamic banks’ claims for priority in receiving total compensation of up to $600 million is understood to be that the money they placed with BCCI was for investment purposes and not as bank deposits like other creditors.

Following the failure of the claim, the banks are now expected to fall in line with other BCCI creditors waiting for a payout. A group of former employees of BCCI also failed in a bid to get priority treatment, while a third claim from a fund set up for bank employees has been referred to a court in Luxembourg, where BCCI was based.

Payment of compensation to BCCI creditors has been delayed by a long series of legal disputes. The London High Court was expected to rule by the week ending 17 July on a request by British creditors to have their claims met under British accounting rules, which are more favourable than the laws of Luxembourg. The majority shareholder in BCCI was Abu Dhabi, which signed a compensation agreement with the liquidators in May (MEED 7:6:96).