A three-person arbitration panel convened privately in London this week to try to resolve a dispute over Claridge’s hotel that forms the centrepiece of one of the most acrimonious, and potentially lucrative, legal battles of the past decade.
On one side is Paddy McKillen, the wealthy Irish property developer who owns a whiskey distillery with U2 star Bono. On the other, Sheikh Hamad bin Jassim bin Jaber al-Thani, the billionaire former prime minister of Qatar known as HBJ.
McKillen claims he is owed up to £1bn for his work at three of the world’s most glamorous hotels — Claridge’s, the Connaught and the Berkeley — all located in rarefied central London postcodes.
McKillen, 70, and HBJ, 66, were once close allies, spending time together on yachts and in swanky hotels. But this week’s arbitration is unfolding amid a bitter legal battle, spanning at least a dozen claims and disputes in Europe and the US, between the former friends and their associates.
Three arbitrators — one chosen by each side, and a third chosen by the other two, according to those familiar with the terms — will now decide who emerges claiming victory.
While sources said it may take as long as two months for a decision to be reached, a resolution to a dispute that began three years ago may now be in sight.
“It’s high noon,” said one person close to the process.
Claridge’s — the 169-year-old luxury Mayfair hotel that was a favourite of Queen Elizabeth II — is the crown jewel in a multibillion-pound portfolio of high end London properties owned by Qatar and wealthy members of its ruling family.
Belfast-born McKillen, who went into property in the 1980s after a stint working in his family’s exhaust repair business, first invested in Claridge’s in 2004.
His investment came under threat in the wake of the 2008 financial crisis, when the Barclay brothers tried to seize control of Claridge’s, the Connaught and the Berkeley, now known collectively as the Maybourne Hotel Group.
McKillen secured Qatari backing to help resolve his legal battle with the Barclays, former owners of the Telegraph newspaper. The 2015 rescue saw HBJ and the former Qatari emir, Sheikh Hamad bin Khalifa al-Thani (HBK), take full control of Maybourne in a £1.3bn deal that resolved McKillen’s legal case, wiped out his debts and reduced his equity in the hotels to zero.
The Qataris subsequently agreed to an unconventional deal that McKillen hoped would allow him to share in the future upside of the hotels. Under the terms of the seven-year contract, McKillen’s business, Hume Street Management Consultants (HSMC), would refurbish, manage and extend the hotels. The deal granted McKillen 36 per cent of any subsequent increase in valuation across the three hotels, minus the costs of the work.
But his involvement in the hotels — due to end in December 2022 — was cut short in April of that year, when McKillen was unexpectedly told by the Qataris he would no longer be working for them.
The size of McKillen’s unpaid earnings from this arrangement sit at the heart of the dispute playing out this week in London.
McKillen argues that the extensive refurbishment work at Claridge’s — which included adding an opulent underground spa and a £60,000-per-night penthouse suite, replete with 75 Damien Hirst artworks — has helped substantially boost Claridge’s value.
The developer argues that those improvements, allied to a buoyant luxury hotel market post-Covid, means his payout should be in the hundreds of millions.
However, sources close to the Qataris claim the significant costs of work at the hotels means McKillen is owed substantially less than he claims. Even so, those close to the Qataris acknowledge McKillen is still owed something.
One person with knowledge of the dispute said that given the baseline value of £1.3bn, and about £600mn-£700mn in costs, any valuation above £2bn would mean McKillen is entitled to 36 per cent of the upside thereafter. Estimates being talked about by advisers have varied between less than £3bn to over £5bn, according to one person with knowledge of the situation, which would equate to a payout of more than £1bn at the top end.
There have been attempts at mediation, according to one person with knowledge of the situation, with the most recent taking place in autumn 2023, after McKillen withdrew an attempt to extend the claim over a number of newer luxury hotels in the US and France, leaving the focus on the original three sites in London that had been the portfolio over the seven-year period.
In the meantime, the two sides appear to have been waging commercial lawfare. Claims and counterclaims have been filed across multiple countries, relating to developments owned by HBJ, or his associates and companies connected with them, on which McKillen claims refurbishment or development work.
People familiar with the Qataris’ position claim McKillen thought he could “embarrass” them into striking a deal by filing lawsuits that generated headlines and scrutiny of the complex ownership structures that often lie behind property acquisitions. They point to some of the victories secured so far in courts over McKillen.
McKillen’s side argues the Qataris have been equally aggressive in their attempts to get him to back down from the Claridge’s dispute.
Representatives for McKillen and the Qatari owners of Claridge’s declined to comment on the confidential arbitration process.
In a statement, a spokesperson for McKillen said: “It is right that he has taken, and will continue to take, all necessary steps to enforce his rights. As Mr McKillen has made clear over the four-year period since his departure from the Maybourne Hotel Group, he will not be deterred by any attempted campaign to cause damage to his business interests or smear his reputation.”
The FT has identified a dozen legal clashes between the two sides — mainly in the UK, France or the US — often seeking money for work that McKillen and his companies say has been carried out for the Qataris and associated groups. Work for which McKillen claims he has not been paid.
Other cases have been started by the Qataris, which claim McKillen used Maybourne contractors, paid for by Maybourne, to undertake work at his hotel in France last July. McKillen denies the allegations.
The cases involve luxury properties, including hotels on the French Riviera and in Paris and Bel-Air, California, and homes in Manhattan and London. McKillen is claiming tens of millions of pounds of unpaid fees.
In March, a high court judge prevented McKillen’s HSMC from serving a £3.7mn claim outside England, in a dispute over fees for work at Forbes House, a grade II listed mansion in Belgravia, bought by HBJ in 2016.
HSMC has appealed against the ruling and is seeking renewed permission to serve proceedings. McKillen has started new proceedings in his own name.
Separately, McKillen was convicted this year of verbally assaulting a female bailiff in his apartment on the Place Vendôme, a grand public square in Paris. The bailiff had entered his property with a locksmith in a dispute over mortgage repayments to a Qatar-owned private wealth manager.
McKillen is appealing against the decision. He denies any violence or wrongdoing, has filed an ethics complaint before the Paris disciplinary chamber of bailiffs, and his lawyers have in the past described the case as “part of a more general smear campaign” against him.
Most recently, in April, McKillen filed a lawsuit in a California district court alleging that HBK and HBJ, as well as several of their business associates and related companies, sought to defraud him.
He alleges they did not pay for his firm’s work at a number of properties which are already the focus of other cases, using the Racketeer Influenced and Corrupt Organizations (RICO) Act. Qatar has denied the claims.
“Paddy McKillen and associated parties have orchestrated claims across multiple jurisdictions, all of which are either ongoing or have been struck out by the courts. We will continue to contest these claims and prove the assertions and allegations to be unsubstantiated and entirely false,” said a spokesperson for Maybourne.
The latest case under the RICO act adds to a long and costly list of lawsuits. However, the hundreds of millions of pounds at stake in the Claridge’s arbitration is the real prize for both sides.
The sight of expensive tabs being quietly settled is a familiar one in the hotel’s luxurious bars and restaurants. With the panel of arbitration in London totting up how much the Qataris owe McKillen, the owners of Claridge’s will soon find out just how large their own bill will be.
