How the international dispute over Tunisia’s first bank failure ended in drama

A high-profile businessman seeking billions of dollars after a botched deal over the famous BFT bank was awarded a tiny fraction by an international panel

Banque Franco-Tunisienne (BFT)
Banque Franco-Tunisienne (BFT)

How the international dispute over Tunisia’s first bank failure ended in drama

A long-running international dispute over Tunisia’s first ever failed bank has ended in dramatic fashion, after four decades of clashes in international courts.

And even the most optimistic observers this epic case did not expect it to produce what looked like victory for the country, in a ruling that saved Tunisian state coffers billions of dollars. This is the story of Banque Franco-Tunisienne (BFT), founded over 150 years ago, its equally historic demise and the international implications of series of events that ended on Friday, 22 December 2023.

That was when the World Bank Group’s International Centre for Settlement of Investment Disputes (ICSID) issued a final arbitration award obliging the Tunisian State to pay compensation of just $350,000 – or 1.1mn Tunisian dinars – to ABCI Investment, which had taken the Tunisian State to international arbitration for expropriating its shares in BFT.

The size of the award contrasted sharply with the amount of compensation being sought: $12bn, or about half of the state’s budget for 2024.

And before the ruling, ABCI had obtained an arbitration award in 2019 in its favour, saying it was eligible to a $1bn penalty and a freeze of BFT’s assets in France, led by Tunisian Foreign Bank.

The Tunisian minister of state property and land affairs, Mohamed Rekik, told a local radio that the State was also obligated to pay ABCI Investment an amount of $705,693, which it incurred in fees and expenses of ICSID arbitrators and administrators.

He said the award represents a judicial victory for the Tunisian State. He stressed that this award is final and that it isn’t subject to appeal.

The ruling is indeed a resounding victory that saved the country from a long-feared financial predicament, as a multibillion-dollar compensation would be a fatal blow considering the country’s current financial situation.

Known in the media throughout the case as “the State’s opponent”, it was the famous Tunisian businessman Abdelmajid Bouden who was demanding billions in compensation. A source close to the matter told Al Majalla that Bouden was seeking payment equivalent to the market value of the Banque de Tunisie and the Arab Tunisian Bank, which are the leading private commercial banks in Tunisia.

The roots of a multi-billion dollar dispute

The dispute is one of the oldest proceedings of its kind at the World Bank Group’s arbitration body. Its roots go back to 1982. Since then, the country has known six presidents – from late leader Habib Bourguiba to the current president, Kais Saied – and at least 15 prime ministers.

BFT was not just any bank, it has deep symbolic resonance in Tunisia. It was the oldest bank in the country, founded in 1879 by the Frenchman Raoul Daninos. It was the first bank to be nationalised, in the early 1960s, as part of the process as the “Tunisianisation of the economy,” which was launched alongside the process of building the national state after independence from France.

BFT was not just any bank, it has deep symbolic resonance in Tunisia. It was the oldest bank in the country, founded in 1879 by the Frenchman Raoul Daninos.

In 1980, a privatisation process was launched by increasing its capital and opening BFT up to private ownership. ABCI Investment, which then owned 4.68% of Tunisia's total banking sector, was granted a license to acquire 80% of the bank for 2.5mn dinars, worth $6.25mn at the time.

The payment was made, on time, but the Tunisian authorities froze the process in 1982 and nullified the agreement to increase the bank's capital. This sparked the dispute between Tunisia and ABCI, with Bouden as the chairman of its board.

Since 1989, BFT  has been flooded with unsecured loans and losses of 700mn dinars, with and ABCI representative claiming on France 24 that the bank was robbed, emptied via collateral-free loans after it was one of the best banks in the country.

ABCI accused "influential economic families" of intervening to prevent it from taking  ownership of BFT, cancelling the agreement due to fears over competition. The lawyer, Mohamed Bouden,  claimed "crooked methods" were used to these ends, including prosecutions against the group's chairman, who was convicted of committing financial crimes and sent to jail.

After concluding a reconciliation with the Tunisian authorities, the chairman was released from prison. Soon, he fled the country and sought international arbitration, hoping to regain some of the money he had lost.

Banque Franco-Tunisienne (BFT)

Liquidation and lawyers

At the beginning of 2022, BFT filed for bankruptcy and its liquidation process began. This happened two years after an arbitration award in favour of the Tunisian State's opponent, which was appealed.

That award set compensation at $1bn. Economist Ezzedine Saidane said BFT's was the first case of the complete collapse of a banking institution in the history of the Republic of Tunisia. It harmed Tunisia's financial reputation and that of its central bank as the supervisor of the banking sector.

Saidane also told the local radio station Jawhara FM that the losses resulting from BFT's liquidation will be in the range of 500mn dinar, or £180mn, on top of £90mn, or 270mn dinars, in bad loans.

Due to the sensitivity of the case and its serious financial repercussions, the Tunisian authorities hired two law firms – a French and an American one. According to official information, the total value of litigation expenses amounted to $4.2mn, while the head of the l'Association Professionnelle Tunisienne des Banques et des Etablissements Financier (APTBEF), Noomane El-Euch, told local media that litigation cost the State $70mn.

The BFT case has been settled at the international level, but it's still stalled in the domestic Tunisian courts.

Dramatic twists

The BFT case has been settled at the international level, but it's still stalled in the domestic Tunisian courts.

Since its referral to the judiciary, investigations into the case have included former ministers, senior officials in the Tunisian administration and the Central Bank, and senior banking executives and businessmen, as well as Sihem Bensedrine, the former head of the Truth and Dignity Commission (a committee in charge of transitional justice), who was banned from traveling months ago by judicial decision.

It is seen as the biggest corruption case and the largest financial crime that the country has known and it has featured dramatic twists. The former state advocate who was looking into the case was arrested during the summer of 2021 while trying leave Tunisa on the so-called "death boats" that head for the Italian coast.

This former official is now among the defendants in a complex domestic financial corruption case, which may yet reach more influential people who received millions of dollars in collateral-free loans.

And some influential figures have pointed to the contrast in the government's success with the case internationally and the slower progress at home, where there are suspicions of collusion between the accused and the machinery of state.

The minister of state property and land affairs said the  "secret of victory" after the long in international process came after Bouden and his sphere of influence was kept away from it.  "The case was managed by a very small group and in complete secrecy," the minister said.

Threat lifted

Until recently, the story of Bouden and the size of the compensation claim he was using to threaten the state was used by other businessmen in their own conflicts with the authorities.

A senior source told Al Majalla that businessmen had explicitly threatened to resort to international arbitration if any measure was issued to force them to pay toward state efforts to combat COVID-19.

During the pandemic, it was unofficially proposed to business leaders to make exceptional contributions to support public health measures, along the lines of a policy in Morocco. But rather than responding to appeals to patriotism, businesses in Tunisia used Bouden's precedent in suing for billions of dollars to resist the moves.

The cabinet that suggested the moves ended up being dismissed just six months after it was formed.

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