Saudi Central Bank wants bank account unblocked

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[NativeNewYorker]

Dec. 16 (Bloomberg) -- Dresdner Bank AG, a unit of Allianz AG, behaved illegally in blocking the London account of the Saudi central bank because the German lender was owed money by government ministries, lawyers for the Saudi bank told a U.K. court.

Dresdner notified the central bank on Oct. 14, 2002, that it won't transfer 49.1 million euros ($61 million) from the London account because the Saudi ministries of Finance and Defense owed that much to Dresdner's Luxembourg branch, according to documents filed at the High Court by the Saudi Arabian Monetary Agency.

``Dresdner London's action in blocking the account is unlawful,'' the central bank's lawyer, Robin Potts QC, told the court. The central bank ``is legally and functionally independent of and separate of the Ministry of Defense and Aviation, and the Ministry of Finance.''

The case comes after Saudi Arabia, the world's largest oil producer, decided to permit non-Arab banks to open branches in the kingdom for the first time since the 1970s, when the banking industry was nationalized. The Saudi Arabian Monetary Agency said in October that it had approved a license for Deutsche Bank AG to set up a branch in the kingdom.

The money was part of a 291.2 million-euro transfer to the central bank's account at Deutsche Bank in Frankfurt, according to court documents. The transfer would have left 1.4 million euros in the London account.

The central bank is seeking an order overturning Dresdner's blocking of its account, which was first set up at Dresdner's London arm in 1974.

The hearing before Justice David Neuberger is expected to last two to three days.

The case is HC03C01669, Saudi Arabian Monetary Agency v Dresdner Bank AG.