Public interest activist demands legal action against perpetrators of hedging deals

Public interest activist Nihal Sri Ameresekere has written to Attorney General Palitha Fernando, urging him to instigate prompt legal action against those responsible for massive losses of public funds in oil hedging deals.

He alleged that those involved in these acts of such illegality had not been taken to task and arraigned before the law, and some of them had even been taken overseas to give evidence, whilst they admittedly had been previously compromised, through foreign jaunts sponsored by the said banks (five banks made up of three foreign banks and two local ones).

In his letter, he asked as to why former Attorney General Mohan Peiris opposed his applications to invoke the jurisdiction of the Supreme Court of Sri Lanka, to have prevented the foregoing foreign legal proceedings, through anti-suit injunctions.

If this was allowed the country will not have to remit huge sums of money of national economic proportions to foreign banks, he added.

He noted that he was quite perturbed upon reading a news report in the Sunday Times of 04-112012 , quoting the Attorney General to have stated that talks were ongoing between the Ceylon Petroleum Corporation and Standard Chartered Bank, to reduce the payment to US$60 million (Rs. 7.8 billion).

The report stated that the payment owed to Standard Chartered Bank is $160 million plus $20 million as interest.

The report further quoted the AG as saying that since talks were going on there was no need to make an appeal to a British court. Such announcement now is different to what was reported by Reuters on 27th July 2012, that the government was looking at the possibilities of appealing in the House of Lords. The said dismissed appeal was against the UK High Court Order of 11th July 2011.

He revealed that the Controller of Exchange by Order dated 16th March 2011 had imposed a fine of Rs. 27.57 billion for alleged violation of the Exchange Control Act, as disclosed in the Court of Appeal Writ Application No. 409/2011 filed on 16th June 2011 by Standard Chartered Bank against the Controller of Exchange, which application is pending.

This fine at the prevalent rate of exchange of $1 = Rs. 130 amounts to $212.1million which is much greater than the aforesaid claim of $180 million, he said.

Over the last weekend, it was reported that the Deutsche Bank claim of $60 million plus interest against the Government was awarded in favour of the Deutsche Bank in Arbitration proceedings before the International Centre for Settlement of Investment Disputes (ICSID), under the Treaty between Sri Lanka and Germany concerning the Promotion and Reciprocal Protection of Investments.

The treaty covers investments, specifically defined such as equity, debt and service and investment contracts, and, it includes a claim for money or claim to performance having economic value.

He noted that no such economic value was received by the Ceylon Petroleum Corporation or the Government.

Costs of defending foreign legal proceedings are not disclosed to the public.

But based upon an answer given in Parliament by Minister of Petroleum Industries, Susil Premajayantha in August 2012, the cost was in the region of Rs. 500 million. This was a huge amount when compared to the fact that the budget for the entire year’s operation of 2013 of the Attorney General Department is only Rs. 434 million, and capital expenditure of only Rs. 29.3 million.

He noted that considering his Fundamental Rights application, the Supreme Court promptly issued interim orders, suspending the operation of these speculative transactions, ultra-vires the Ceylon Petroleum Corporation Act, and even ordered the removal of the relevant Minister and Chairman.

The court has directed the Commission to Investigate Allegations of Bribery or Corruption and the Criminal Investigation Department to conduct further investigations. However the proceedings were terminated on 29th January 2009 since the Government did not comply with certain other interim orders vis-à-vis petroleum prices.

He also pointed out that he filed another application at the Supreme Court when he came to know in May 2009, that the Standard Chartered Bank had remitted $107 million, which had been put in issue by the Controller of Exchange in May 2009.

He revealed that he had instituted an SC (FR) application when he came to know that the foreign banks had instituted legal proceedings in foreign jurisdictions

The former AG opposed the grant of leave in both applications filed in the public interest, making misleading submissions on grounds of ‘time bar’, whilst ‘assuring’ the Supreme Court that he would successfully defend and win the foregoing foreign legal proceedings.

However the AG has failed to fulfill his assurance and the country has to incur a massive loss as the CPC lost in two out of three international arbitrations, Mr Ameresekere said.