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CPC Loses Appeal In London: Must Pay US$ 162 Million +

By Faraz Shauketaly

The Ceylon Petroleum Corporation (CPC) has lost its appeal in a British Court against Standard Chartered Bank. The Court ruled against the state-owned petroleum company which has a near-monopoly status in the country.
The ruling in London means that the CPC must now pay US$ 162 million plus interest to Standard Chartered Bank although the country’s Minister of Petroleum has indicated that an appeal may be made against the judgment with a higher court. The case stems from the infamous ‘hedging contracts’ that was approved by Sri Lanka’s Cabinet of Ministers who ignored significant warnings at the time that the country stood to lose significant sums if the oil price reversed its upward trends.
The Cabinet of Ministers at the time chose not to insure against falling prices and instead chose to contract only against rising prices. In an unfortunate sequence of events the CPC was exposed to the remarkable rally of the international oil price which saw prices rise to above US$ 147 per barrel in 2008 before crashing to US$ 40 per barrel – precipitating astronomical losses for the cash-strapped CPC.
The CPC acting on advice it received from its political masters, refused to pay five banks including Standard Chartered, Citibank and Deutsche Bank.
The other two banks were Peoples Bank and Commercial Bank – both local banks.
The government position has been that the five banks failed to realise that proper procedure was not followed and that in effect the agreements reached were ‘ultra-vires’ meaning that CPC officials had acted outside of the mandate given to them.
A similar argument was used in Singapore where the CPC had judgment in its favour. The judgment has never been released publicly although our sources speaking on anonymity revealed that the ‘Singapore arbitration was a victory for the CPC based on a legal technicality’.
Petroleum Minister Susil Premajayantha issued a statement saying that discussions were being held with the Attorney General’s Department with a view of appealing that decision in the House of Lords, in England.
The newly appointed Attorney General confirmed that line of action adding that they had to “study the ruling first.” The CPC had a spend of over USD 2 Billion in 2007, importing around 26 million barrels of oil and refined product and had sought to hedge against fluctuating oil prices.

15 Comments for “CPC Loses Appeal In London: Must Pay US$ 162 Million +”

  1. kumar soysa

    The Petroleum Act of Ceylon does not allow the CPC to enter into a contract of this nature. Conversely, the banks are also precluded from such contracts with the CPC. Based on this, both the CPC and the banks are culpable. The best way is to arbitrate with the banks for a good deal;

    • Rubert Vanderkoon

      This is all down to the Gov himself, Ajith-the gamble-maniac-Cabraal. Pyramids, squares or even tetrapods, you name it, his name is affliated to it. He had his fun now, the government should not be too naive but to replace him with a ‘truly qualified’ and an intelligent person.

      • Onna Menna Jayasundera

        Spot On! before being made governor, this nut was seen handing over his visiting cards to every cat and dog in social circles in a dual effort to sponsor more pyramid participants and also boost his political image which was run to the dust when he first contested.Ranil W was a wise man when he detected this man as a useless climber and cast him off early.However, MR and crowd took him on and much to the misfortune of the country and made yhis half-educated fool head of the CB. See what a mess we are in now. Even Burkina Faso has a better economy than ours.

  2. Cricket Buwa

    Standard Chartered bank should be kicked out from Sri Lanka. They even harass customers with high interests rates.

  3. Manu

    Give some more ..we can pay .. wonder of asia ne..US $ 2.2 b in greek bond and lose.. buying 14 Helicopeters for tourism etc.. will pay…nothing to worry…

  4. ranjit de mel

    this happens because corrupted idots are made ministers and heads of g.i..let the idiots responsible for this pay the fines

  5. Ian D.S

    Those responsible for this fiasco have been given higher positions in the government, so why bother after all it is the PEOPLE’S money that will be used to pay this compensation, the de mels, cabraals and all other maggots are free to further plunder the country. AFTER ALL THIS IS THE MIRACLE OF ASIA.

  6. gamarala

    Minister Fowzie who should have obtained expert advice, is responsible. After the debacle, he keeps a low profile, though very vociferous earlier. He should be sacked.

  7. Kos Ata Kabbaraal

    Was the Central Bank sleeping when this sensitive deal was being finalised? Economics is not a plaything for half-educated, political arse- lickers who are clever at organising conga line parties involving saucy indian actresses and political princes with the countrys dwindling funds.Now we go to the IMF againwith begging bowls in our hand

  8. CPC WHY DON’T YOU SEND THE RAJAPAKSA CRIMINAL GANG’S
    THUGS ALSO KNOWN AS P.S.D.(Pakayas’ Security Division) TO LONDON & GET THEM TO
    STONE & BURN DOWN THE LONDON COURTS THAT GAVE THIS RULING,
    ESPECIALLY AT THIS TIME OF THE 2012 LONDON OLYMPICS.
    THEN THE WHOLE WORLD WILL BE MARVELLING AT WHAT A BIG BUGGER THIS RAJAPAKSA CRIME BOSS WHO RULES THIS BOGG
    ISLAND IS.

  9. Jayantha

    I am sure that CPC high officials, ministry high officials, MPs, Ministers and the President will pay this amount without any burden to general public. All of them must attain Nibbana for that noble deed!

  10. vintage voter

    SUSIL WANTS TO APPEAL TO THE HOUSE OF LORDS !!!!!!! IS IT A JOKE??/
    THIS JOKER AND CROOK AJITH NIVARD CABRAAL IS RESPONSIBLE FOR THE
    MESS WE ARE IN. THE FIRST ACTION SHOULD BE TO FIRE HIM AND INVESTIGATE HIS “RACKETS”
    OR IS IT THAT RAJAPAKSES ARE HELPLESS, SINCE CABRAL KNOWS WHERE THE RAJAPAKSES HIDDEN ILL-GOTTEN WEALTH IS STORED.
    THE BILLIONS IN SWISS BANKS

  11. gamarala

    Fowzie was the minister in charge when this diastrous ‘hedging deal’ was made by minions unfamiliar with the negative aspects.
    Fowzie has “wriggled out from under” but should be indicted for failure of using his powers to obtain expert advice.

  12. MAHASEN

    I think MaRaya should send his underworld gang led by Dr.Merawin and crooks and teach a lesson by tying the Hon. Judge who gave this verdict to a London tree .

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