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A five-year-old dispute between the Sri Lankan Government and the Standard Chartered Bank (SCB) over flawed oil hedging deals finally ended last week with a US$ 60 million (Rs.7.5 billion) payment settlement.
The money was paid to the SCB by the Ceylon Petroleum Corporation (CPC). “We have taken a commercial decision and (concluded) an agreement with the CPC to end this long-standing issue,” SCB CEO Anirvan Ghosh Dastidar told the Sunday Times but declined any further comment.
The payment is higher than what was allocated to some of the Ministries from the annual budget and is a considerable sum compared to allocations for ministries such as Education and Higher Education.
The Ministry of Education was allocated Rs. 37.9 billion this year and the Higher Education Ministry Rs. 27.9 billion. Ministries such as Environment, Technology and Research, Foreign Employment, Fisheries and Rehabilitation received much less than the Rs. 7.5 billion – the money paid to the SCB last week.
In early April, the Cabinet decided that the CPC would pay SCB US$ 60 million, in lieu of the US$ 180 million ($160 million plus 20 per cent interest) awarded by a British court last November to the SCB, as an out-of-court settlement payment. Other sources in the banking sector said the settlement also included the annulment of a Rs. 27 billion fine imposed on the SCB in around 2008 by the CB for the alleged violation of exchange control laws. Without paying the fine, the SCB had appealed to the Ministry of Finance against the penalty.
These sources said the SCB is unlikely to get involved any more in hedging contracts on any commodities with the Sri Lankan Government given the 2008 oil deal that went awry and triggered losses worth billions of rupees to the state.
Sri Lankan authorities have been grappling over claims by SCB, Deutsche Bank, Citibank, Commercial Bank and the People’s Bank – claims that run into billions of rupees with additional legal costs for oil hedging contracts with the CPC. The deals were flawed and contested in the Supreme Court with a ruling that the payments should not be made. The banks then sought international arbitration.
http://www.sundaytimes.lk/130630/news/rs-7-billion-settlement-ends-oil-hedging-dispute-with-scb-51022.html
The money was paid to the SCB by the Ceylon Petroleum Corporation (CPC). “We have taken a commercial decision and (concluded) an agreement with the CPC to end this long-standing issue,” SCB CEO Anirvan Ghosh Dastidar told the Sunday Times but declined any further comment.
The payment is higher than what was allocated to some of the Ministries from the annual budget and is a considerable sum compared to allocations for ministries such as Education and Higher Education.
The Ministry of Education was allocated Rs. 37.9 billion this year and the Higher Education Ministry Rs. 27.9 billion. Ministries such as Environment, Technology and Research, Foreign Employment, Fisheries and Rehabilitation received much less than the Rs. 7.5 billion – the money paid to the SCB last week.
In early April, the Cabinet decided that the CPC would pay SCB US$ 60 million, in lieu of the US$ 180 million ($160 million plus 20 per cent interest) awarded by a British court last November to the SCB, as an out-of-court settlement payment. Other sources in the banking sector said the settlement also included the annulment of a Rs. 27 billion fine imposed on the SCB in around 2008 by the CB for the alleged violation of exchange control laws. Without paying the fine, the SCB had appealed to the Ministry of Finance against the penalty.
These sources said the SCB is unlikely to get involved any more in hedging contracts on any commodities with the Sri Lankan Government given the 2008 oil deal that went awry and triggered losses worth billions of rupees to the state.
Sri Lankan authorities have been grappling over claims by SCB, Deutsche Bank, Citibank, Commercial Bank and the People’s Bank – claims that run into billions of rupees with additional legal costs for oil hedging contracts with the CPC. The deals were flawed and contested in the Supreme Court with a ruling that the payments should not be made. The banks then sought international arbitration.
http://www.sundaytimes.lk/130630/news/rs-7-billion-settlement-ends-oil-hedging-dispute-with-scb-51022.html
