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Dubai-based asset manager Rasmala Investment Bank has rejected claims it misled a Saudi investor over the health of its since-suspended trade finance fund.

In a court filing, the bank denies allegations by investment firm Alawwal Capital, filed in a Dubai court last year, that Rasmala representatives made “untrue representations” about how the fund was managed and that the bank failed to disclose overdue payments by the fund’s borrowers.

Rasmala suspended its trade finance fund in March 2020, citing market turmoil caused by the Covid-19 pandemic, and the filing says the fund suffered a US$66.5mn loss for the year.

While Alawwal was still able to make almost US$5mn in redemptions, it is suing Rasmala for the remaining US$5.17mn of its investment and US$2.37mn in profit it argues it could have made from investing in another trade finance fund.

The two sides entered mediation in July last year but failed to settle the dispute, with proceedings resuming in January, court orders show.

Alawwal claims in the suit that Rasmala said during meetings in 2018 and 2019 there was a “0% chance of making a loss” when investing in the fund because of its strict low-risk lending policies and risk mitigation measures.

Alawwal says the statements made by Rasmala include that the fund only lent money to reputable counterparties, conducted inspections of goods, over-collateralised loans and used credit insurance. It also alleges that Rasmala made similar claims in a request for proposal (RFP) it completed for the company.

In a defence document filed on February 15, Rasmala denies almost all the statements attributed to it by Alawwal.

The bank also argues that Alawwal had no grounds to rely on verbal statements, or the RFP, when deciding whether to invest in the fund.

A clause in the offering memorandum produced by Rasmala meant Alawwal could only rely on that memorandum and the trade finance fund’s most recent annual accounts to make its decision, the defence filing says.

“None of the statements alleged by Alawwal to have constituted misrepresentations were contained in those documents”, Rasmala argues. “Alawwal is therefore precluded from relying upon them.”

Alawwal says it relied on Rasmala’s risk management policies contained in the RFP, but Rasmala points out in the defence that the document contained numerous disclaimers making clear that the RFP did not constitute investment advice, including that “readers are expected to make their own independent assessment and should not rely on this RFP for entering into any arrangements with [Rasmala]”.

Alawwal argues that Rasmala failed to disclose a default by Farlin Energy & Commodities on the majority of a US$22.6mn loan, as well as a lawsuit the bank filed in India against UAE company Met Trade, and its owner, over a failure to make repayments on a US$14.2mn facility.

But Rasmala says in the defence that both cases were disclosed in its 2017 accounts, which were sent to Alawwal during the negotiation of the investment.

Rasmala admits it wrote in the RFP that “the company has not taken any legal action against other entities or individuals during the last two years”, but said the statement clearly referred to Rasmala Investment Bank rather than the trade finance fund.

It denies breaching legal duties owing to Alawwal, or that it caused Alawwal to lose money from any such breaches.

Rasmala’s trade finance fund remains suspended with limited redemptions, according to the filing. Rasmala’s UK parent company, which was renamed G33 Global 1 Limited in November last year, had £1.14bn in assets under management at the end of 2022, according to its accounts for that year.

Rasmala and Alawwal did not respond to requests for comment from GTR.