VIDEO: Govt. has not paid foreign banks over hedging deal - Minister
November 7, 2012 09:01 am
The government of Sri Lanka has not paid any losses to any foreign banks or companies with regards to the hedging deal, the Petroleum Industries Minister Susil Premajayantha stated.
He also said that the Attorney General’s department is currently working on overturning the recent decision given against the Sri Lankan government with regards to a US $60 million case with Deutsche Bank.
The Minister stated this in parliament yesterday in reply to questions put forward by UNP MP Ravi Karunanayake.
Sri Lanka’s state-run oil company lost a $60 million hedging case against Deutsche Bank after a U.S.-based arbitrator ruled in favour of the bank, officials told Reuters.
A source familiar with the ruling said Ceylon Petroleum Corporation (Ceypetco) would have to pay Deutsche $60.3 million plus interest for non-payment of dues.
“It’s against us,” Sri Lanka’s Attorney General Palitha Fernando told Reuters. “Now we are considering what actions to be taken to annul this.”
Oil Minister Sisil Premajayantha told Reuters he was not aware of the ruling but would appeal if the case went against the company.
Three foreign banks, Standard Chartered, Citigroup and Deutsche, took legal action after Ceypetco refused to make hedging payments of more than $460 million, including to two local banks. Deutsche had asked the Washington-based International Centre for Settlement of Investment Disputes to arbitrate.
Ceypetco, which imported some 26 million barrels at a cost of $2 billion in 2007, needed to hedge its purchases of crude oil and refined products on the international market.
It was exposed to the oil rally of 2008, when oil hit a record high above $147 a barrel in July before crashing to less than $40 a barrel in December.
In July, Ceypetco lost an appeal against a London court ruling which ordered it to pay nearly $162 million plus interest for non-payment of dues to Standard Chartered Bank linked to hedging deals.
Standard Chartered argued that Ceypetco had always been aware that a fall in oil prices would have made it liable to make payments to the UK-based bank.