Business Times

Counter affidavit in hedging cases filed

A counter affidavit was filed in the Supreme Court this week on the oil hedging cases by petitioner, Nihal Sri Ameresekere, just over a week before the case is set to be heard on March 22. The affidavit was against objections filed by Standard Chartered Bank (SCB), Citibank, Deutsche Bank and Commercial Bank, four of the five banks that entered into controversial hedging agreements with the Ceylon Petroleum Corporation (CPC). The fifth bank is People’s Bank. In the affidavit, Mr. Ameresekere is asking the Court to grant interim relief sought for in his petitions which is to restrain legal action proceeded in foreign jurisdictions by SCB, Citibank and Deutsche Bank against the CPC and the government.

The counter affidavit states that the CB’s Director of Bank Supervision has submitted copies of hedging deals entered into by SCB, Citibank and Deutsche Bank with SriLankan Airlines, Lanka IOC and ACL Cables which had been under examination by the CB. In the counter affidavit, Mr. Ameresekere states that he has disclosed to the Supreme Court, telephone bills which show that there had been a close nexus or collusion between the Treasury Secretary P.B. Jayasundera and SCB and Citibank and that Dr. Jayasundera had not denied it in Court.

Mr. Ameresekere reveals that in December 2008, the Central Bank (CB) directed that the hedging deals not be proceeded with. Despite such direction and directions not to remit any money out of Sri Lanka, SCB had remitted US$107.7 million and Commercial Bank US$7.7 million by May 2009. This disclosure prompted Mr. Ameresekere to file action in the Supreme Court.

Mr. Ameresekere states that the hedging deals had been carried out secretively and was devoid of disclosure and transparency. He also states that the totality of the claims made by the banks had not been disclosed even to the Supreme Court, nor the high costs incurred by the state utilizing public resources in defending legal proceedings instituted by the three foreign banks in foreign jurisdictions.

The counter affidavit further states that the ‘shrouded secrecy’ surrounding these hedging deals is clearly borne out by the fact that the claims made against the state and the material contingent commitments of the state and costs have been suppressed in the ‘Pre-Election Budgetary Position Report’ issued on 1 March 2010 by the Ministry of Finance & Planning, as mandated under Section 16 of the Fiscal Management (Responsibility) Act No. 3 of 2003.

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