The Bank of England (BoE) described as "unconditional surrender" a decision by Deloitte, liquidators for BCCI (Bank of Credit and Commerce International), to drop its lawsuit - the first ever brought against Britain''s 311-year-old central bank.
The surprising end to a case that began with the BoE accused of leaving "an unsupervised monster on the loose" was described as "the most remarkable and humiliating climb down in the history of English litigation" by Nicholas Stadlen, the Bank''s counsel.
Deloitte dropped the case after the chancellor of the high court said it was no longer in the best interests of creditors for the litigation to continue.
One of the country''s longest-running court cases could have dragged on for at least two more years and cost millions more.
Deloitte said its legal costs for the 256-day case were about 38 million pounds.
The BoE said it would seek payment of its costs, which it expects to be about 70 million pounds. The parties are due to return to court on November 11 for a cost hearing.
MARATHON TRIAL Lawyers for Deloitte had alleged the BoE knowingly failed to protect depositors from the world''s biggest bank fraud, which resulted in BCCI spectacularly collapsing in 1991 owing more than $16 billion.
As the BoE is legally protected from negligence claims, the liquidator pursued the stronger claim that 22 officials were guilty of ''misfeasance'' - acting dishonestly or in bad faith. But that accusation made a settlement hard to reach and last month the BoE rebuffed an approach to settle.
Bank of England Governor Mervyn King, who was in court on Wednesday, said: "There has never been a shred of evidence to support these disgraceful allegations, and the case has collapsed as we always expected it would."
Judge Stephen Tomlinson said: "I have seen no foundation for any allegation of dishonesty against any officer of the Bank at any stage."
The jury-less trial, which began in January 2004, made English legal history for the two longest opening speeches - 119 days for the bank and 80 days for Deloitte - followed by seven weeks of testimony from the defence''s first witness.
Former BoE governors Eddie George, Robin Leigh-Pemberton and Gordon Richardson could have taken the stand, with many of the details dating back to the 1970s.
"If the case were to continue it could last for several more years, allowing for appeals, and involve further enormous costs," Deloitte said in a statement.
It said the case had already run far longer, with far greater costs, than it had expected.
Toby Graham, litigation partner at law firm Taylor Wessing, said the BoE stood a good chance of getting its costs paid.
"I think the Bank of England has been totally vindicated by this. They took a robust stance on this right from the word go ... Deloitte took a huge gamble and it hasn''t paid off. They did not have the evidence to prove their case and were totally reliant on evidence from the Bank of England."
CHEQUERED PAST Founded in 1972 by Pakistani banker Agha Hassan Abedi, BCCI grew from a small Asian bank to an empire spanning 69 countries with $20 billion of assets.
Its executives had been ''stung'' by the US regulators in an elaborate "wedding party" set up in Florida and it was accused by auditors of widespread fraud. The CIA admitted in August 1991 that it had used BCCI "as a way to move money".
Its problems escalated and BCCI was closed in 1991 by the regulators in a world-wide swoop, partly organised by the BoE, after they discovered the lender had disguised losses and was insolvent. Its collapse left more than 6,500 depositors trying to get their money back.
Deloitte said, however, its liquidation had still been the most successful major financial liquidation ever.
It said it expected to return 81 percent to the creditors, or about $6 billion, far more than had been expected.
Deloitte said it expected at least one more payment to be made to the creditors before the world-wide liquidations are closed and the conclusion of the BoE action will result in an earlier release of provisions.
At the heart of its case was that the BoE granted a licence to BCCI to operate in the City of London in 1980, but did not take over actual supervision of it because it was registered in Luxembourg despite having a London headquarters.
The case had become so complex that a stack of files five feet (about 1.5 meters) high - dubbed the Berlin Wall - had grown between the two legal teams in the courtroom.
Located amid the grandeur of the Royal Courts of Justice, the courtroom was home to about 20 lawyers evenly split from the two sides and scattered among dozens of computer screens, six large-screen monitors and, at a conservative estimate, at least 2,000 thick files covering most available wall space.