The bank claims that the Sri Lankan government violated the bilateral investment treaty between German and Sri Lanka.

The dispute arose after the CPC suspended payments in several oil derivatives transactions, sold in 2007, when the deals went against it after oil prices collapsed in 2008.

Deutsche Bank sold a contract worth 100,000 barrels to the CPC.

The Sri Lankan government has appointed a committee to re-negotiate the deals, which, apart from Deutsche Bank, were also sold to CPC by Citibank, Standard Chartered, and two Sri Lanka banks; state-run People's Bank and public listed Commercial Bank of Ceylon.

Citibank had sold contracts worth 400,000 barrels, Standard Chartered 300,000, People's Bank 100,000 (including 50,000 bought from Commercial Bank), and Commercial Bank 20,000 direct (and 50,000 via People's Bank).

The original contracts were at half the volumes, but under the terms of the contract, volumes doubled when prices collapsed.

CPC did the derivatives deals to protect itself when oil prices were surging and the contracts were initially profitable for the refiner when prices hit record highs.

But CPC incurred heavy losses when oil prices fell steeply in the latter part of 2008.

Sri Lanka's Supreme Court suspended CPC payments to banks when the deals were challenged in court on the grounds of corruption.

However, that suspension was lifted in January 2009 when the petitioners withdrew their cases.

But then Sri Lanka's Central Bank stepped in and ordered CPC to suspend the transactions on the grounds that they were flawed.