Attorney General Mohan Peiris and two senior state counsels flew to London earlier this week for consultations of arbitration proceedings in relation to the controversial oil hedging deals, an AG Department source told The Sunday Times FT.
The newspaper reliably learns that Standard Chartered Bank has also filed papers for arbitration, joining Citi Bank and Deutsche Bank in the international arbitration process after talks between a ministerial committee and the five banks involved in the deals to reach a negotiated settlement, collapsed.
The banks refused to renegotiate any of the contracts and instead offered to re-schedule payments, which the committee was not in favour with. The Attorney General and the Central Bank governor are learnt to have told the committee that there were serious problems with the contracts.
If all the contracts with the five banks, Deutsche, Citibank, Standard Chartered Bank, Commercial Bank and People’s Bank, are to be enforced, the Ceylon Petroleum Corporation (CPC) stands to lose hundreds of millions of dollars with some estimates as high as US$800 million, making a sizeable dent in the country’s foreign reserves. Crude oil prices which reached a high of US$143 per barrel in July 2008 plummeted in the second half of 2008, dropping down to US$51 in November and hovering around US$48 this week.
Deutsche Bank has filed a case against the Sri Lankan government (case number ARB/09/2) in the Washington-based International Centre for Settlement of Investment Disputes (ICSID).
In the complaint filed on March 24, 2009, the Bank – according to one international news report -- is learnt to have invoked the arbitration provisions of the Germany-Sri Lanka bilateral investment treaty. A tribunal is yet to be appointed to examine the complaint, according to the ICSID website.
ICSID, a World Bank body, is an autonomous international institution established under the Convention on the Settlement of Investment Disputes endorsed by over 140 member states. Its primary purpose is to provide facilities for conciliation and arbitration of international investment disputes. The complaints could be heard in any country of choice through a panel that is linked to the ICSID.
Deutsche Bank’s Chief Country Officer Rohan Rodrigo told The Sunday Times FT that he was not authorized to comment on the matter and that it was being handled by Deutsche Bank's London office. Citibank Sri Lanka’s CEO Dennis Hussey also could not be reached for comment on how it will proceed with arbitration.
Standard Chartered Bank CEO Clive Haswell also had no comment on the issue although corporate affairs released the following statement which said ‘as an international bank, recognized globally for our high levels of governance, we always seek to comply with relevant local and international law and regulations.’
Informed sources said the government plans to vigorously contest the claims in these international tribunals. Separately, the Commission to Investigate Allegations of Bribery or Corruption is continuing with investigations against officials from some of these banks on allegations of bribery and corruptions relating to the hedging deals.
The controversy over the hedging agreements which began in November 2008 went all the way to the Supreme Court and led to the removal of the then CPC Chairman Asantha De Mel and the CPC’s Deputy General Manger of Finance Lalith Karunaratne. The Supreme Court even suggested that Minister of Petroleum and Petroleum Resources A.H.M. Fowzie, also a member of the ministerial committee appointed to negotiate with the banks, resign from public office. Furthermore, the Treasury Department was given charge of importing fuel after the responsibility was stripped from the CPC.
|
E-mail