The country’s top legal officer Attorney General (AG) Mohan Peiris said that despite losing the disputed oil hedging deal case against Standard Chartered Bank (SCB) in the London Commercial High Court, the Sri Lankan government was confident the decision would be reversed in an appeal to be filed in the UK High Court of Appeal.
Last week the London court ordered the Ceylon Petroleum Corporation (CPC) to pay US $162 million or Rs. 18 billion plus interest to the bank in dues on hedging contracts, after the latter won its claim for compensation.
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The then CPC Chairman
Asantha de Mel |
But if the appeal fails, the country’s finances will be in the doldrums, as the CPC is currently indebted to the tune of Rs.23 billion and is not in any financial position to pay Rs. 18 billion plus interest to the SCB.
Even the (cash-strapped) Treasury cannot dole out money for this purpose unless it resorts to borrowings, a senior official of the Finance Ministry told the Sunday Times.
AG Mohan Peiris however believes the oil hedging case is still wide open as the UK Commercial High Court judgment provides provisions for leave to appeal.
The hearing of the appeal will take at least one year to make its determination, he revealed.
He told the Sunday Times “We are confident of winning the appeal and the question of the payment of US $ 162 million does not arise (as of now)”.
Responding to the question of making the full payment of US $162 million as a deposit as a condition for the appeal, he said that there was no such directive but conceded a certain percentage of the claim would have to be made before the commencement of the appeal.
He added the AG’s Department would handle the appeal against the order.
This move drew criticism from public interest activist Nihal Sri Ameresekere who blamed the AG for the present predicament saying when his (Mr Ameresekere’s) case against the SCB transfer of payments was filed in the Supreme Court, the AG objected saying they were confident of winning the arbitration cases overseas.
Mr. Peiris claimed last week’s order would not affect future rulings in the arbitrations filed by Citibank in Singapore claiming US $200 million, which ruling is expected in late July or in the Deutsche Bank claim for US $60 million hearing in Washington scheduled to start in September.
He believed the London Commercial High Court ruling is unlikely to serve as a precedent for these two arbitrations, though independent legal luminaries thought otherwise.
The state objection to the payments claim (even in appeal) still rests on the issue that the Ceylon Petroleum Corporation had no right to enter into such oil hedging transactions and is thus ultra-vires the Constitution. The London High Court ruling took the position that CPC officials including Mr. Asantha de Mel had full authority to enter into these transactions.
Vehemently denying allegations that Sri Lanka’s case was not properly represented, Mr Peris said a top class British lawyer appeared for the defense.
The members of the Sri Lankan team comprised Senior State Counsel Janaka de Silva and Senior State counsel Milinda Gunatilaka assisted by Senior State Counsel in London, Prof. James Crawford --a world authority on state responsibility.
The Sunday Times reliably learns the Standard Chartered Bank, being unsure of the outcome of the case, had earlier expressed willingness to amicably settle the issue on mutually beneficial terms, before arbitration.
However some persons within government opposed the move, claiming government had a chance to win the case. Unfortunately this was not the case.
Petroleum Industries Minister, Susil Premajayantha said the party to this agreement was not the government but CPC. He said the corporation would appeal the ruling.
He added the cabinet of ministers only took a policy decision regarding the deal and it was done without consultation with the AG or his approval which is the usual practice when state institutions sign agreements with overseas institutions.
Dr. Harsha de Silva, economist and UNP Member of Parliment said, “More than the money that we will end up paying, it is the loss of credibility that will have the bigger impact from an economic development perspective.
“At a time when we are struggling to attract investments in to post-war Sri Lanka, given all the negative publicity surrounding human rights issues, the last thing we need is to be called an arrogant defaulter.
“Obviously this is going to scare investors off. I am afraid this incident will have a lasting negative impact on investor confidence in Sri Lanka as a whole and its business enterprises…”
Dr. de Silva said it was quite apparent from the paper trail of the sequence of events, the Governor Central Bank had pushed the CPC to speculate on oil prices not coming down and in the process perhaps even misled the Cabinet of Ministers into believing the CPC was actually hedging the price of oil.
He called for a thorough investigation to identify all guilty parties and dealt with in the strictest possible manner. |
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