Bahrain HC Clears Creditor Payouts After Rejecting $2.8B Claims Against Awal Bank

A landmark judgment by Bahrain’s High Court has paved the way for significant payouts to creditors of the defunct Awal Bank, after upholding the liquidator’s rejection of more than $2.8 billion in disputed claims.

The court confirmed the liquidator’s decision to dismiss claims filed by the bankruptcy trustees of several connected parties against the bank’s liquidation estate.

In a key finding, the court not only rejected the multibillion-dollar claims but also ruled that the connected parties themselves owe approximately $2.56 billion to Awal Bank.

The ruling follows a legal challenge to the liquidator’s adjudications issued in July 2023, which had rejected claims exceeding $2.8 billion. The dispute centred on extensive requests for access to Awal Bank’s books and records during the proceedings.

As Awal Bank remains licensed and regulated by the Central Bank of Bahrain while in liquidation, the liquidator resisted broader disclosure of customer records, citing confidentiality obligations under Article 117 of the Central Bank of Bahrain and Financial Institutions Law.

To resolve the dispute, the court appointed an independent expert in March 2025 to review the contested claims. The final report, submitted on February 12, largely supported the liquidator’s findings.

The judgment is expected to significantly impact the liquidation process. Funds previously reserved pending the outcome of the $2.8 billion claims dispute are now set to be released, enabling further distributions to recognised creditors.

The ruling also confirms the substantial indebtedness of the connected parties to Awal Bank, strengthening the estate’s position in related insolvency proceedings and paving the way for further recoveries.

Awal Bank entered administration in 2009. Since then, a multi-jurisdictional asset recovery process has been underway across Bahrain, Saudi Arabia, the Cayman Islands and the United Kingdom.

To date, gross asset recoveries stand at approximately $998 million, with interim distributions of around $247 million already made to admitted creditors, representing a 15.2 per cent payout.

Following this ruling, the liquidator is expected to proceed with formally registering Awal Bank’s $2.56 billion claim in the bankruptcy estates of the connected parties and continue steps towards finalising the winding-up process.

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