- CPC can appeal to UK Supreme Court
- London Appeal court ruling on CPC hedging case goes in favour of Standard Chartered Bank
- Analysts say compensation and interest to be nearly $ 200 m; Ruling could have an influence on pending Deutsche Bank arbitration case
- Given local cases some analysts toy with idea of out-of-court settlement
The latest ruling by the London Appeal Court over the controversial oil hedging deal of CPC has placed a US$ 200 million axe on the Government, drawing the wrath of the main Opposition UNP (see boxed story), with some analysts toying with the idea of an out-of-court settlement as well.
Reuters reported that Ceylon Petroleum Corporation (CPC) 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.
Last year, CPC appealed against the ruling in favour of Standard Chartered, which went to court after the oil firm refused to make hedging payments to the bank.
“It has been reported that the order is against us,” Attorney General Palitha Fernando was quoted as saying to Reuters. “First of all we have to see what the order was; then we are looking at (the) possibilities of appealing in the House of Lords.”
Petroleum Minister Susil Premajayantha said: “We are in consultation with the Attorney General’s Department to appeal against the judgement.”
Ceypetco had refused to make hedging payments to five banks, including Standard Chartered, Citigroup and Deutsche Bank. The CPC won the arbitration case filed by Citigroup.
CPC, 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 record oil rally of 2008, when oil hit an all-time high above $ 147 a barrel for US crude CLc1 in July, before crashing to less than $ 40 a barrel in December of that year.
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.
Analysts, who put the total liability on the Government at $ 200 million, said that the London Appeal Court ruling was based on the position that CPC had the capacity to honour the contract.
The CPC has a window of 28-day opportunity to go before the UK Supreme Court and make a case for the appeal to be heard by the House of Lords
They also noted that the latest ruling could have an impact on the pending arbitration case filed by Deutsche Bank. Though a similar view was expressed last year, the Citibank case went in favour of the Government.
“Since there are several local cases pending too, Standard Chartered Bank and the CPC can go for an out-of-court settlement aimed at a lower compensation figure,” these analysts opined.