Clive Haswell, former Chief Executive Officer, Standard Chartered Bank, at paragraph 85 of his Witness Statement dated December 21, 2010 tendered to the High Court of UK, had, inter-alia, stated the following (Emphasis added):
“85. Even later, in 2009, when CPC owed greater amounts under the transactions, President Rajapaksa personally reassured me and the Citibank CEO about both the legitimacy of CPC’s oil hedge contracts and the Government’s willingness to meet its payment obligations. Specifically, he said that these were legal contracts and that he had no desire to fall out with international banks. I recall that this conversation took place at a breakfast meeting at the President’s residence attended by the President, Dr. P.B. Jayasundera (former Secretary to the Minister of Finance, at the time a presidential advisor) Dennis Hussey (CEO of Citibank) and me. Having consulted my diary, I see that this meeting took place on 2 February 2009. All of the discussions SCB had with CPC inevitably led back to the central Government, due to the highly centralized nature of the Sri Lankan state.”
As per the Affidavit dated July 10, 2009 of Ceylon Petroleum Corporation (CPC) tendered to the Supreme Court, in my first public interest action, SC (FR) Application No. 404/2009, Citibank had by then already notified CPC on December 22, 2008 of the legal proceedings Citibank had instituted in the London Court of International Arbitration. The foregoing meeting as stated therefore had taken place thereafter on February 2, 2009.
According to Mr Haswell, President Mahinda Rajapaksa had admitted that these hedging contracts were legal contracts, and that the President had assured him that the Government was willing to meet the alleged payment obligations.
If this had been the case, then the question arises, as to how and why, Attorney General, Mohan Peiris, had been instructed, incurring colossal costs, reckoned to be in the region of US $5 million, on foreign travel and legal fees, to defend the foreign legal proceedings and deny the legality of the said contracts and the alleged claims made by Standard Chartered Bank, Citibank and Deutsche Bank?
Therefore, it is quite evident, that the Government had not admitted that these were legal contracts, and had not admitted that the Government was willing to meet the alleged obligations, as had been stated by Mr Haswell in his Witness Statement to the UK High Court.
On the other hand, in the Affidavit dated July 7, 2009 of Mr Haswell, filed objecting to the grant of restraining orders in my first public interest action, SC (FR) Application No. 404/2009, Mr Haswell made no such assertions, whatsoever, as aforesaid, but had made such assertions only subsequently in his Witness Statement to the UK High Court of December 21, 2010.
The cogent question arises, as to whether Attorney General, Mohan Peiris or Secretary to the Treasury, P.B. Jayasundera, had in fact, fully apprised President Mahinda Rajapaksa of the foregoing statements, which had been made by Mr Haswell in his Witness Statement dated December 21, 2010 tendered to the UK High Court?
As per the so called derivative contracts entered into with CPC by the three foreign Banks, Standard Chartered Bank, Citibank and Deutsche Bank, in the context of the maximum restrictions placed on their side by the banks, to protect their exposures, themaximum total amount that ever could have been received by CPC from all three banks, would have totalled only $9.6 million (legal costs incurred to date is reckoned already to be the region of $5 million).
On the other hand, quite shockingly, the alleged claims now by these banks against CPC are said to be in the range of $500 million, thereby clearly demonstrating the lopsidedness and unreasonableness of this so called derivative contracts!
The Unfair Contract Terms Act No. 26 of 1997, enacted by Parliament, sets out the requirement for contracts to be reasonable. This bears out the intention of the legislature. In any case, without conceding the legality of these hedging contracts, would not justice require, that any contract, whatsoever, ought be just and equitable, reasonable, fair and balanced?
Director Bank Supervision, Ms. T.M.J.Y.P. Fernando, by Motion dated February 22, 2010 in my second public interest action, SC (FR) Application No. 481/2009, tendered the contract sheets in respect of similar purported hedging contracts, entered into at that very same time, by Standard Chartered Bank and Citibank, with SriLankan Airlines, where there had been a floor price restricting the potential losses to Sri Lankan Airlines, inasmuch as there had been restrictions on the potential pay outs by these banks.
In the contracts with CPC, whilst the restrictions on the side of the banks protecting their maximum pay outs had been retained, such restrictions for any pay outs by CPC had intriguingly been omitted, raising the pertinent question, as to why and by whom?
Very significantly, Standard Chartered Bank’s contract with Sri Lankan Airlines had been on May 27, 2008, whilst one with CPC had been on the very next day, May 28, 2008! Citibank’s contract with SriLankan Airlines had been also on May 27, 2008, whilst Citibank’s one contract with CPC had been on June 20, 2008. The cogent question arises, as to why there had been such significantly material omission, and as to what the intention had been thereby, and at whose behest?
(The writer is a public interest activist who also filed a case relating to the oil hedging deals). |
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