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Govt. mum over billions owed in hedging deal gone wrong
Authorities are tight-lipped as the Government tries to renegotiate billions of rupees in fines owed to foreign banks over the ‘illegal’ hedging deal. “Why do we have to pay, we don’t have to pay a cent, we are appealing the case,” Petroleum Industries Minister Susil Premajayantha told the Sunday Times regarding billions of rupees owed to foreign banks over the Ceylon Petroleum Corporation (CPC) hedging deal.
Earlier this week, the Minister said in Parliament that the Government hasn’t made any payments to the banks adding that the Attorney General is working on negotiating with the banks to pay a lesser amount in dues. The CPC owes Deutsche Bank US $60 million plus US $7 million in legal fees following a ruling by a U.S.-based arbitration panel, and another US$ 160 million plus US$ 20 million in interest owed to Standard Chartered Bank following a British court ruling.
“What matters right now is that we have appealed this case and the lawyers know on what grounds we are appealing,” Minister Premajayantha said.
When asked whether more interest would accumulate as the payments are delayed further, the Minister said, “That is not your matter,” and did not answer further questions.
CPC Chairman Thilak Collure refused to comment on the issue claiming it is a legal matter and redirected all questions to the CPC legal department. The CPC legal department head C. Ariyaratne said she is ‘not aware of any negotiations’ and referred other questions to the Attorney General.
Attorney General (AG) Palitha Fernando said papers are already filed for the purpose of an appeal.
“All I can say is we have advised the involved parties for an appeal against the court order,” Mr. Fernando said. “I don’t know what’s going on with the negotiations. I wasn’t involved in this as it was the previous AG Mohan Peiris who handled this matter. The AG is not involved in this; we only said it’s better to appeal against the decision,” he said.
The legal fees for the case have run into additional billions of rupees as previously reported by the Sunday Times.
“These legal bills should be paid by the involved parties,” Mr. Fernando said. “The Attorney General’s department has no money to pay legal fees. Parties should pay their lawyers,” he said.
Public interest activist Nihal Sri Ameresekere opined the Government should have taken appropriate action as these deals were illegal in the first place.
“Financial transactions are complex but these proceedings were illegal, gambling debts not investments protected under international treaties,” Mr. Ameresekere said. “These were speculative agreements not involving any purchase or sale of oil. It is an illegal wager and corporations don’t have any power to enter such agreements. Police arrest people in villages for gambling, but government hasn’t taken any action against these people so far. Also, the same people who were involved in this deal gave evidence in settlement proceedings.”
He added that while Standard Chartered bank got a settlement though the British High Court, the Controller of Exchange has fined Standard Chartered for the same transaction.
“Standard Chartered Bank was required in May 2009 to show cause for remitting US$ 107 million between December 2008 and April 2009 without the prior approval of the Controller of Exchange on this purported oil hedging deals,” Mr. Ameresekere said. “Anything over US$ 3, 000 can only be for capital repayment. A fine of Rs. 27.57 billion had been imposed on Standard Chartered Bank by the Controller of Exchange in March 2011, which is being contested by Standard Chartered. So I don’t understand the settlement they got.”
The Controller of Exchange P. H. O Chandravansha was not available for comment.Deutsche Bank and Standard Chartered Bank refused to comment on the allegations and ongoing negotiations. “Deutsche Bank was pleased with the ruling, however does not have any further comment on this matter,” the Bank’s Asia Pacific Head of Communications Michael West said in an email.
“Standard Chartered has no comment on this,” CEO of Standard Chartered in Sri Lanka Anirvan Ghosh Dastidar said. “We will go by what the courts say.”
“When the Government has moved to impeach the Chief Justice on alleged wrongdoing, it is baffling as to why the law has not been enforced against all those concerned, who has been involved in these illegal deals as had been asserted by the former AG Mohan Peiris to the Supreme Court and which have caused colossal losses to CPC and the government enriching the banks and others,” Mr. Ameresekere added.
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