Banking Dispute Topics

Credit facilities are among the principal ways banks finance companies and individuals. They may take the form of a fixed-term loan, an overdraft facility or a revolving credit facility. Each facility is governed by an agreement setting out its amount, term, interest rate, fees and security. The agreement may also specify circumstances in which the bank can suspend or terminate the facility, or demand early repayment.

The firm reviews facility agreements and negotiates their terms before signature. We also represent clients in disputes arising from these agreements, including disputes over their interpretation, a bank’s decision to suspend a facility or accelerate repayment, and claims for repayment before the Economic Courts where they have jurisdiction.

A letter of guarantee is a bank undertaking issued at its client’s request in favour of a beneficiary. Depending on its terms, it may require the bank to pay a specified amount following a demand made within the stated period. Letters of guarantee are widely used in tenders and construction and supply contracts.

A documentary credit is widely used in international trade. Under its terms, the issuing bank undertakes to honour a presentation that complies with the credit’s requirements and any rules incorporated into it.

Disputes may arise when a beneficiary makes a demand under a guarantee, when a bank rejects documents presented under a credit as non-compliant, or over the validity or renewal of a guarantee. The firm reviews the wording of guarantees and credit terms before issuance, advises clients when a demand is made, and represents them in related disputes.

Banks commonly require security for the financing they provide. This may include a real-estate mortgage over land or buildings, or a commercial pledge over assets such as a commercial establishment, equipment, goods or securities. Subject to applicable law, registration requirements and competing rights, a secured creditor may enforce against the secured asset and seek payment from the proceeds in accordance with its legal priority.

Because enforcement may put a company’s assets or property at risk, careful review of the security documents and registration is essential. The firm reviews mortgage and pledge agreements and related registrations before signature, follows up on the release of security once the secured debt has been paid, and represents clients in enforcement proceedings, including by challenging procedural or legal irregularities where appropriate.

A company may face circumstances that make it difficult to repay its bank on time, and litigation is not always the most suitable course. Depending on the circumstances, an amicable settlement may benefit both sides. Possible arrangements include extending the repayment period, rescheduling instalments, negotiating interest or fees, or agreeing on a final settlement amount.

The firm analyses the client’s financial and legal position, reviews the amount claimed, negotiates with the bank towards the best achievable settlement, and drafts the settlement agreement to define the parties’ obligations, protect the client from unforeseen future liabilities and address any pending claims or proceedings.

Some banking disputes turn on the figures: how the bank calculated the amount due, what interest, fees or penalties it added, and whether those amounts were calculated in accordance with the agreement and applicable law. Egyptian law restricts the charging of interest on accrued interest, while recognising exceptions under commercial rules and for bank current accounts. The applicable treatment depends on the account, transaction and agreement.

The firm reviews account statements and facility agreements in detail, with accounting expertise where needed, to identify amounts that may have been charged contrary to the agreement or applicable law. Where appropriate, we challenge those amounts before the competent court, including the Economic Courts when they have jurisdiction.