A fresh challenge has been mounted against payments being made by the Ceylon Petroleum Corporation (CPC) to five banks led by Standard Chartered in the controversial oil hedging deals.
Public interest campaigner and chartered accountant, Nihal Sri Ameresekere on Monday filed a fundamental rights petition in the Supreme Court arguing that the CPC doesn’t have the statutory power and authority to have engaged in the transactions.
The petition, due to be heard in Court tomorrow, says that irreparable loss and damage would be caused to the people of this country if the agreements are not cancelled, annulled or made void through a Court order. Lawyers for foreign banks involved in the deals were flying to Colombo for the hearing.
Fundamental rights cases over hedging were previously filed in the Supreme Court in December 2008 when it was reported that the CPC was paying millions of dollars to the banks from the contracts after oil prices started sliding from a high of US$140 per barrel in mid 2008. Several hedging and derivative experts said the government was incurring huge foreign exchange losses as a result of the one-sided hedging agreements which did not have a downward cap in the eventuality that oil prices started dropping, thereby heavily favouring the banks. Those petitions were dismissed after the government did not comply with a Supreme Court directive to revise the oil pricing formula.
Subsequently two of the banks, Citibank and Deutsche Bank, opted for international arbitration to resolve the issue, with hearing expected to begin next year. The local banks are said to be in informal negotiations with the government to reach an agreement.
The respondents in the fundamental rights case include the CPC, the Treasury Secretary, Standard Chartered Bank, Citibank, Deutsche Bank, Commercial Bank of Ceylon, People’s Bank, the Controller of Exchange and the Attorney General.
The petition states that the transactions being ‘deals’ in the nature of speculating or gambling are unlawful and/or illegal in Sri Lanka and that the CPC, established by Parliament, ought to have sought and obtained the advice of the Attorney General. Furthermore, the petition states that the commercial banks are required to have ascertained as to whether the CPC was authorized and empowered by the CPC Act No. 28 of 1961 to have dabbled in the transactions and should have known that such deals are unlawful and illegal in Sri Lanka.
The petition further states that it would appear that Standard Chartered Bank had either been the ‘lead Bank’ or ‘initiator’ in mooting and securing the questionable deals and had induced the CPC and its former Chairman and others involved, into unsuspectingly entering into the questionable ‘deals’ which is conduct unbecoming and unworthy of a professional bank. The petition says it appears Standard Chartered acted unprofessionally by inducing, enticing or compromising public officers to enter into questionable ‘deals’ and that available evidence shows air travel costs of the following public officers concerned, appear to have been borne by the Standard Chartered, during the relevant period.
The public officers mentioned in the petition are former CPC Chairman Asantha De Mel, former CPC Finance Manager P.M.L. Karunaratne, People’s Bank officer K. Ariyaratne who is also a member of the committee appointed by then Secretary to the Ministry of Finance & Planning which submitted a report titled ‘Oil Hedging Report of the Study Group’ submitted on 16 November 2006 and People’s Bank officer Vasantha Kumar. The petition also mentions that Mr. De Mel was accompanied (on these overseas trips) by Standard Chartered Bank’s Head of Global Markets Rukshan Dias and three other people, presumably Mr. De Mel’s family members. Three other people also accompanied Mr. Karunaratne which the petition states is presumably his family members.
The petitioner states that four officers of Standard Chartered who had initiated or handled some of the foregoing transactions should be noticed by the Court to be heard in order to assist the Court by adducing relevant facts personally known to them. They are CEO Clive Haswell, former Head of Corporate Client Relationship Kimarli Fernando (currently CEO Pan Asia Bank), Senior Credit Officer Nigel Beebe and Head of Global Markets Rukshan Dias.
In addition to asking the Court to cancel the agreements, the petitioner is also asking that the Controller of Exchange, the Central Bank’s Director of Bank Supervision, the Commission to Investigate Allegations of Bribery or Corruption, the Criminal Investigation Department (CID) and the Attorney General carry out proper investigations into all aspects and persons pertaining to the oil hedging agreements. |
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