International arbitrator voids Sri Lanka’s hedging deal with Citi Bank

Aug 01, Colombo: The A Singapore-based international arbitrator has dismissed a Citi Bank claim against Sri Lanka’s state-owned Ceylon Petroleum Corporation (CPC) on the payment of soured hedging deal, Reuters report said citing anonymous sources .

The bank has demanded the CPC to pay US$ 192 million plus interest in payments it said it was owed.

“The decision has said that the entirety of the transaction is not right and Citibank’s claim has been dismissed,” one of five sources involved with the case at the International Centre for Settlement of Investment Disputes told Reuters.

The CPC entered into a hedging agreement with five local and international banks to buy crude oil at a capped price of $130 per barrel. The deal went sour when the oil prices fell below US$ 50 in the world market and CPC stood to lose nearly US$ 500 million.

Sri Lanka’s Supreme Court intervened and in November 2008 the Court ordered the CPC to suspend the controversial hedge payments to banks until a Central Bank probe into the matter is over.

The three foreign banks, CITI Bank, Standard Chartered Bank and Deutsche Bank sought redress with the arbitration panel in Singapore and Commercial High Court in London.

A London court last month ruled that Sri Lanka’s petroleum authority Ceylon Petroleum Corporation (CPC) owes nearly US$ 162 million plus interest to Standard Chartered Bank for non-payment of dues resulted from a failed hedging deal.

Leave a Reply