The parents were denied because the kids weren't living in the U.S. or denied because the kids weren't living with their parents, and their parents happened to live in the U.S.? The form 8832 could not be used to shift the CTC from grandparents to the parents like it can between divorced/separated parents. So if the kids didn't live with their parents for at least half the year (which would have meant they had to live in the U.S. for at least six months since that's where their parents were) then they would not qualify for the CTC.
Martin18's situation is, of course, different because the Form 8832 can shift the CTC to NCP so the kids would not have to live with the NCP over half the year for the NPC to get the CTC.
Right, the grandparents could potentially have claimed the CTC if the grandparents were subject to U.S. tax. But the grandparents lived outside the U.S. so if they were not citizens or residents of the U.S. and did not have any U.S. source income there would be no tax return to file and there would be no CTC for them to claim.