Dec 29, 2011 (LBO) – A Singapore arbitrator has ordered Citibank to pay Sri Lanka’s state petroleum refiner 2.5 million US dollars as legal fees in an oil hedging deal dispute, a statement said. The arbitrator in August 2011 voided an oil hedging deal between Ceylon Petroleum Corporation and Citibank, rejecting the bank’s demand for 192 million US dollars and interest payments, the petroleum ministry statement said.
The dispute arose when Ceylon Petroleum Corporation refused to pay up under complex options positions sold by banks to hedge its oil imports when oil prices collapsed in 2008.
The derivatives were sold by Standard Chartered, Deutsche Bank, Citibank and Sri Lanka’s state-run People’s Bank and listed Commercial Bank.
In July 2011, Sri Lanka lost a case against Standard Chartered Bank in the same oil hedging deal.
A London court ruled the state-owned oil refiner Ceylon Petroleum Corporation owed nearly 162 million dollars plus interest to Standard Chartered Bank for non-payment of hedging dues.
But government sources have said the Singapore rulings in favour of Ceylon Petroleum Corporation placed it in a stronger position in an appeal in Britain.