Westford Trade Services and Dubai Insurance Co have settled a long-running lawsuit in Dubai involving a dispute over transactions involving scandal-hit Phoenix Commodities. 

Westford entities in the UK and Dubai filed two lawsuits against Dubai Insurance in 2022 over unpaid claims arising from Phoenix Commodities’ insolvency two years earlier. 

The Hong Kong-headquartered trader and trade finance lender had acquired several cargoes of rice in late 2019, which were immediately sold onto Phoenix. Westford did not receive payment after Phoenix fell into financial difficulties, and submitted claims totalling US$7.7mn to Dubai Insurance. 

However, the insurer refused to pay, arguing there was no evidence Westford legitimately acquired title to the rice being sold on, and in some cases, that the same goods appeared to have already been sold in previous transactions. 

The case had been set to go to trial late last month, but a court order shows the parties reached a confidential settlement agreement in June. Neither company commented when contacted by GTR. 

The settlement brings closure to one of several cases involving Phoenix. Westford previously won a case against Malaysia’s Archipelago Insurance Limited, also related to non-payment by Phoenix, after Kuala Lumpur’s High Court found the insurer had failed to prove transactions were not legitimate. 

In the Dubai case, court filings show Phoenix would arrange purchases of goods from a supplier before asking Westford to step in. Westford would then purchase the goods itself and immediately sell them onto Phoenix on deferred payment terms. 

For one of the disputed rice cargoes, goods were purchased from Singapore-based Uno Trading and sold onto Phoenix, with Westford using financing provided by White Oak Trade and Specialty Finance Cayman. The other trades were financed by GPB International, part of the Gazprombank group. 

In the Uno Trading case, Dubai Insurance had alleged that Westford proceeded with the trade even though a due diligence report requested by Westford was unable to verify the supplier’s business registration, website, address or phone number. 

It also said that rather than use a US$3.6mn loan from White Oak to pay Uno Trading, it reassigned the company an existing receivable deriving from a sale to Darintech – a company that appeared to have ceased trading more than two years earlier. 

Westford responded that it had been introduced to Uno Trading personally in 2019, and had obtained copies of its trade licence and financial statements. It also said Darintech was still active at the time the receivable was reassigned, and that Uno Trading has never claimed it was not paid.  

Westford repeatedly argued it had obtained original bills of lading from sellers and delivered them to Phoenix, and so legitimately acquired and sold title to the goods. 

Dubai Insurance had also attempted to link Westford to allegations of wrongdoing against Phoenix. 

Documents disclosed by the insurer cited findings by Phoenix’s liquidators, including that the trader appeared to have constructed an internal sub-ledger of transactions that did not appear to correspond to real trades, but were used to raise financing from lenders. 

The insurer argued that Westford and Phoenix “appear to have been capable of arranging for the creation of invoices”, including by Uno Trading. It said documents from liquidators included a template Uno Trading invoice spreadsheet. 

But Westford strongly refuted those claims, saying the spreadsheet was for internal use and was only shared with Phoenix in an attempt to recover debts on time. It was never shown to third parties for financing purposes, nor used to amend existing documents, the company said. 

Westford also said it was unaware of Phoenix’s internal record keeping, and of allegations it had financed cargoes multiple times or where there was no genuine underlying trade.