Sri Lanka’s state-run oil company has lost a $60 million hedging case against Deutsche Bank after a U.S.-based arbitrator ruled in favour of the bank, officials said on Friday.
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.
Courtesy: DM Online