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* Deutsche Bank's US$ 60 million hedging case is against Sri Lankan government, not against CPC
Tue, Nov 13, 2012, 09:45 pm SL Time, ColomboPage News Desk, Sri Lanka.

Nov 13, Colombo: Sri Lanka's petroleum authority, Ceylon Petroleum Corporation (CPC) has said the ruling early this month by the United States -based arbitrator on the US$ 60 million case against Deutsche Bank is against the government and not against the petroleum authority.

"It is against the government and not against us," Susantha Silva, CPC's managing director has told Reuters.

Deutsche Bank has in March 2009 filed arbitration proceedings against the government of Sri Lanka over non-payment in oil derivatives deals with the CPC.

Washington-based International Centre for Settlement of Investment Disputes on October 31, 2012 rendered its award in favor of the Deutsche Bank.

Under the ruling the CPC would have to pay US$ 60.3 million plus interest and legal costs to the Deutsche Bank, the government said.

However, in a statement to Reuters, Silva has said that the Deutsche Bank has not obtained any arbitral award against the CPC in relation to any hedging agreement.

A Deutsche bank official in Colombo has confirmed to Reuters that the arbitration was against the government and not against the CPC.

Petroleum Resources Minister Susil Premajayantha earlier this month said necessary measures have been taken through the Attorney General's Department to challenge the ruling.

Legal action is being drafted by the Department to annul the ruling, the Minister said.

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.

In August last year a Singapore-based international arbitrator dismissed a Citi Bank claim against the CPC to pay US$ 192 million plus interest in payments over the breached hedging agreement.

However, in July this year the government lost its appeal against the order given by a UK court to pay nearly US$ 162 million plus interest to the Standard Chartered Bank on the controversial hedging deal.

** Related Story :: Sri Lanka prepares to challenge the ruling on hedging case against Deutsche Bank



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