A defunct trade finance bank owned by steel tycoon Sanjeev Gupta and a Dubai insurer have settled a legal dispute over US$3.18mn in trade credit insurance claims.

The Commonwealth Trade Bank (CTB) was seeking payment from Dubai Insurance Co for policies covering US$4.2mn owed to the lender by Phoenix Commodities, a trader which collapsed in early 2020.

A five-day trial set to begin in Dubai on October 16 was averted after the two sides reached a confidential settlement over the weekend, according to a court document and staff.

CTB was part of the GFG Alliance, a group of companies under Gupta’s control, before it ceased operations in 2020. A spokesperson for the group declined to comment on the settlement.

Before the settlement, Dubai Insurance had defended its refusal to pay by alleging that the Phoenix transactions financed by CTB were not genuine. Instead, the insurer claimed, Phoenix used recycled bills of lading from previous deals to raise financing.

Dubai Insurance, which could not be reached for comment, is still facing two similar claims in the Dubai courts filed by Westford Trade Services and Malta’s Fimbank.

Westford is demanding Dubai Insurance honour trade credit policies covering a US$3.6mn transaction with Phoenix, but the insurer is arguing that the companies never had title to the goods.

The insurance provider has also alleged that Phoenix had a sub-ledger of deals which were used to raise financing but recorded “in a way that strongly suggests that the transactions being recorded do not relate to a real trade”.

In the Fimbank case, the lender is suing to force Dubai Insurance to pay out US$5.43mn on a trade credit insurance policy invoked after oil trader Gulf Petrochem failed to repay a trade finance facility.

In that dispute, Dubai Insurance has again hinged its refusal to honour the claim partly on an alleged lack of evidence that the financed trades actually took place.

The disputes in Dubai are among a spate of cases in Singapore, Malaysia and Australia stemming from policies covering small and medium-sized traders that foundered during the onset of the Covid-19 pandemic in 2020.

Most are still before the courts, although a judge in Sydney last year ordered an insurer, the Bond and Credit Company, to honour a policy it had granted to an Australian financier for trades with Phoenix Commodities. The court found, in part, that any fraud perpetrated by Phoenix did not void the policy, a decision later upheld on appeal.