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13th August 2012
Hon. Susil Premajayantha, M.P.
Minister of Petroleum Industries
No. 80, Sir Ernest De Silva Mawatha
Colombo 7.
Dear Minister,
Purported oil hedging deals by Ceylon Petroleum Corporation (CPC)
SC (FR) Applications Nos. 404/2009 & 481/2009 and purchase of petroleum oil of questionable quality
I refer to my letter dated 4.5.2010 forwarding copies of the Petitions in the aforementioned two Applications. I subsequently telephoned you and you assured me that you will instruct Hon. Attorney General, Mohan Peiris P.C., to support my endeavours.
Previously, as had been requested by him, as per my Note dated 23.3.2010, I had forwarded copies of relevant diagnostic notes and documents to be of assistance to him and State Counsel defending the foreign litigations pertaining to the foregoing.
Rather than support me, Hon. Attorney General, Mohan Peiris P.C., intriguingly vehemently opposed me on a preliminary objection, on a purported ‘time bar,’ I verily believe not wanting the facts pertaining to this matter of national economic proportions, being heard and exposed before the Supreme Court and the people of this country. Hence, you ought ascertain, as to who instructed him to so oppose me, whilst appearing for CPC, which came under your purview, as the Minister in charge.
Hon. Attorney General, Mohan Peiris P.C., asserted with supreme confidence in the Supreme Court, that he will successfully defend the foreign legal proceedings, and required me to ‘lay my head at rest’; I pointed out, that he was on the defective, whereas I was on the offensive in instituting action to impugn these transactions, and for the Supreme Court of the country to deal with those involved, as warranted.
On the other hand, Dr. Harsha Cabral, P.C., who appeared for the Controller of Exchange and the Director of Bank Supervision, I believe on the instructions of the Governor, Central Bank of Sri Lanka, specifically intimated to the Supreme Court, that he was not taking such preliminary objection of ‘time bar’, thereby indicating that those statutory law enforcement authorities required the mattes to be adjudicated upon by the Supreme Court of Sri Lanka.
The aforementioned two Applications filed in the public interest were dismissed on 11.5.2010, with the Hon. Attorney General, Mohan Peiris P.C., vehemently opposing them, on the preliminary objection, that I should have invoked the jurisdiction of the Supreme Court, within one month from 27.1.2009, the date on which the Supreme Court, had terminated the proceedings, having previously, inter-alia, suspended ex-facie the said purported oil hedging deals, of two previous Applications by other parties in SC (FR) Nos. 535 and 536/2008, in circumstances of the Government not having complied with certain interim orders made by the Supreme Court.
I consequently addressed my Letter dated 24.6.2010 to Hon. Attorney General, Mohan Peiris P.C., with copies to you, and Secretary to the President, for H.E. the President to be apprised. (Copy of Letter attached for easy reference.)
I had filed on 25.5.2009, SC (FR) Application No. 404/2009 in completely new circumstances, specifically upon the discovery that Standard Chartered Bank, in violation of the provisions of Exchange Control Act and disregarding specific direction given by the Central Bank, had remitted US $ 108 m, up to April 2009, which came to be known, only after the Exchange Controller’s Letter dated 13.5.2009 addressed to the Standard Chartered Bank, putting them on notice of the said violation. My Application SC (FR) No. 404/2009 was thus made within one month thereof on 25.5.2009.
Thereafter on 25.6.2009, I filed SC (FR) Application No. 481/2009, upon coming to know on 2.6.2009, when the above SC (FR) Application No. 404/2009 was mentioned in the Supreme Court, that Standard Chartered Bank, Citibank and Deutsche Bank had commenced legal proceedings in foreign jurisdictions, as was disclosed by their respective Counsel. My Application SC (FR) No. 481/2009 was thus made within one month thereof on 25.6.2009.
Consequently, when the Secretary, Ministry of Finance and Secretary to the Treasury and the Hon. Attorney General filed Objections on 10.7.2009 in SC (FR) Application No. 404/2009, it was disclosed for the very first time that:
i)notice of initiation of Arbitration proceedings before the International Centre for Settlement of Investment Disputes had been given by Deutsche Bank in February 2009, and responded to in March 2009
ii)Citibank had resorted to Arbitration in the London Court of International Arbitration against CPC, and
iii)Standard Chartered Bank had filed action against CPC in the Commercial High Court of UK.
CPC appearing through the Hon. Attorney General, Mohan Peiris, P.C., also filed on 10.7.2009 Objections in SC (FR) Application No. 404/2009, inter-alia, disclosing that CPC had received on 24.6.2009 the Plaint of Standard Chartered Bank filed in the Commercial High Court of UK, and that Citibank too, had commenced Arbitration proceedings before the London Court of International Arbitration.
Pointedly, in the said Objections admittedly as advised by Hon. Attorney General, Mohan Peiris, P.C., CPC had affirmed that these purported Oil Hedging Deals were inter-alia illegal and ultra-vires and are null and void and unenforceable.
As set out aforesaid, it was an impossibility and a ‘fiction’ for me to have been required to have file the above two Fundamental Rights Applications, within one month of 27.1.2009 i.e. by 27.2.2009, when, in fact, the foregoing acts did not even exist at that time. I filed the said two Applications within 30 days of my knowledge thereof, which the Hon. Attorney General, Mohan Peiris, P.C., could not have been unaware of.
By SC (FR) Application No. 481/2009, I sought anti-suit injunctions, citing two well-known authorities one in the Privy Council and the other in the House of Lords, namely, SNI Aerospatiale v Lee Kui Jak and Another, and Spiliada Maritime Corp v Cansulex Limited. Such anti-suit injunctions were to have restrained foreign legal proceedings, and accordingly would have confined the legal proceedings to my said two Fundamental Rights Application before the Supreme Court of Sri Lanka.
The criteria for the grant of such anti-suit injunctions, inter-alia, are the following – vide submissions I made before the Supreme Court:
“i) No standard fixed guidelines, but criteria which would be relevant to the particular Case
ii) The most natural and appropriate forum, and not necessarily the convenient
iii) The place where the principal transaction took place
iv) To ensure equitable and fair justice to all parties
v)The costs involved in litigating
vi)The availability of Witnesses
vii)To avoid multiplicity of litigations
viii)The unique facts of each case necessarily has to be taken into account
In this instance it is abundantly evident that the three foreign Banks have acted in concert and collusion, as borne out by the facts disclosed by their very own documents in dealing with their Sri Lankan Customer, CPC. The three foreign Banks have been operating under Licenses granted by the Central Bank of Sri Lanka, under and in terms of the Monetary Law and the Banking Act and is subject to several other Statutes of Sri Lanka.
Hence, natural and appropriate forum would be Sri Lanka, where in one litigation, this collusive transaction perpetrated in concert by 3 Banks and 2 other local Banks could be just and equitably adjudicated upon, inasmuch as the perpetrated transactions are illegal and unlawful in Sri Lanka
In the given facts and circumstances, a transaction/s of one Bank could not be isolated to be adjudicated upon, whether in London or Singapore, inasmuch as they are all interconnected by acts of collusion and concert, and ought be only adjudicated upon in Sri Lanka in the pending Applications before the Supreme Court, the highest judiciary of Sri Lanka.”
It has been reported in the media that you have admitted that legal costs incurred to date on foreign legal proceedings on these has now amounted to about Rs. 467 m, whereas comparatively the budgeted operational costs for the entire year 2012 for the Attorney General’s Department is only Rs. 372 m.
The Standard Chartered Bank Case was lost in the Commercial High Court of UK on 11.7.2011, precipitating a Claim of US $ 161.7 m, in 2008, with a rate of reasonable commercial interest compounded on a daily basis.
Ironically, whilst the defence taken by the Hon. Attorney General, Mohan Peiris, P.C., was that these were ultra-vires and illegal transactions, some of the very persons involved in such transactions had been taken to give evidence against the Banks, who peddled such transactions, whilst some of them had been afforded overseas trips, including your predecessor Minister in Office, to Houston and New York, US to be educated in such transactions, as was revealed by documents filed in the Supreme Court.
Whilst asserting this matter of national economic proportions to have been illegal, intriguingly the Hon. Attorney General, Mohan Peiris, P.C., did not cause any action to be taken against those involved on such illegality, thereby rendering nugatory such allegation of illegality!
After the Judgment by the Commercial High Court of UK against CPC, The Sunday Times of 17.7.2011 reported as follows:
“The country’s top legal officer Attorney General Mohan Peiris said that despite losing the disputed oil hedging deal case against Standard Chartered Bank in the London Commercial High Court, the Sri Lankan government was confident the decision would be reversed in an appeal to be file in the UK High Court of Appeal.”
However, notwithstanding such public assurance given by the Hon. Attorney General, Mohan Peiris, P.C. the UK High Court Appeal was recently lost. It is known that an Appellate Court would be restricted to the evidence placed before the Primary Court.
In the meanwhile, among other books, I had authored a book comprehensively analysing these questionable oil hedging deals, published by a leading US publisher, distributed globally.
The Citibank Arbitration held in Singapore before the London Court of International Arbitration was dismissed on 31.7.2011 by a three-Member Arbitral Panel, notwithstanding the aforesaid UK High Court Judgment of 11.7.2011 having been tendered to the said Arbitration Panel, who had dealt with the same in their unanimous Arbitral Award dismissing the Citibank’s Claim of US $ 195.5 Mn., in 2009, with a rate of reasonable commercial interest compounded on a daily basis.
Just before the favourable award delivered on the Citibank Arbitration, I had credible information that endeavours were made to have discussions to reach a settlement, which was reported in the media.
Persons who had been involved as was disclosed in the Supreme Court, in the foregoing ultra-vires and illegal transactions, as was the position taken by Hon. Attorney General, Mohan Peiris, P.C., among others, had been the following:
Ajith Nivard Cabraal, Governor Central Bank
P.B. Jayasundera, Secretary, Ministry of Finance & Secretary to the Treasury
The Members of the ‘Study Group’ appointed by P.B. Jayasundera, Secretary, Ministry of Finance and Secretary to the Treasury (had admittedly met on three days within a period of one month) and had recommended these transactions;
Y. M. W. B. Weerasekara, Asst. Governor, Central Bank of Sri Lanka
H.N. Thenuwara, Asst. Governor, Central Bank of Sri Lanka
Saliya Rajakaruna, Chief Financial Officer Bank of Ceylon
now Director / Chief Executive Officer, Nations Trust Bank
Kapila Ariyarathne, Head- Corporate & Institutional Banking People’s Bank
now Deputy General Manager, Corporate & Institutional Banking, Nations Trust Bank
Kanthi Wijethunga, Addl. Secretary, Ministry of Petroleum & Petroleum Resources Development
Lalith Karunaratna, Deputy General Manager (Finance) Ceylon Petroleum Corporation
Chartered Accountant & Master of Business Administration
V. Kanagasabhapathy, Financial Management Advisor, Ministry of Finance & Planning
Chartered Accountant & Master of Public Administration
The Board of Directors of the Ceylon Petroleum Corporation, who held office when these transactions had been entered into, with the advice of Nithya Partners, Attorneys-at-Law, short circuiting the Attorney General, whose advice is ordinarily sought by public corporations, had been:
Ashantha De Mel – Chairman & Managing Director
Kanthi Wijetunga – Director
S.N.P. Palihena – Director
M.D. Wijegoonewardena – Director
M.I.M. Ali Sabry, P.C. – Director
D.Charitha Gooneratne – Director
Paragraph 330 (8) of the aforesaid UK Commercial High Court Judgment had stated thus:
“330(8) The Master Agreement, including the terms of its Schedule, was considered by and negotiated between SCB and CPC’s Chief Legal Officer (Geetha de Fonseka) and Nithya Partners, over a number of months.”
Supreme Court on 14.7.2009 directed that Statements be tendered to the Supreme Court by the following persons, in terms of the following prayer (c) in SC FR Application No. 404/2009;
“c) make Order to issue Notice on the following Officers of the 3rd Respondent Bank, to provide information within their personal knowledge, in relation to the Agreements referred to as ‘Oil Hedging Agreements’ entered into by the 3rd Respondent Bank, with the 1st Respondent (CPC), as referred to at paragraph 10(f) of the Petition, and also on the following persons, who have been involved in the ‘Oil Hedging Agreements’ and whose Air Travel Costs had been paid for by the 3rd Respondent Bank, as per paragraph 10(e) of the Petition,
i)Clive Haswell, Chief Executive Officer, of Standard Chartered Bank
ii)Kimarli Fernando, former Head of Corporate Client Relationships, of Standard Chartered Bank
iii)Nigel Beebe – Senior Credit Officer, of Standard Chartered Bank
iv) Rukshan Dias, Head of Global Markets, of Standard Chartered Bank
v) A. De Mel, former Chairman, CPC P.M.L. Karunarathne former Finance Manager, CPC,
vi)K. Ariyaratne, of People’s Bank/ Member, Committee on ‘Oil Hedging’.
vii)Vasantha Kumar, of People’s Bank.”
Kimarli Fernando aforesaid filed an Affidavit setting out that she had consistently objected to and had opposed these transactions.
Though the CID was reported to have raided the CPC Head Office and taken into custody documents, nevertheless no action, whatsoever, has been taken; nor have you taken any action, or caused any action to be taken vis-à-vis this matter of national economic proportions.
Furthermore, in the context of the intriguing procedure followed in the procurement of Petroleum Oil, I cite the following paragraph 13 and prayer (s) in my Petition in SC (FR) Application No. 481/2009 filed on 25.6.2009;
(a) Petroleum oil imports, which causes the public a huge burden, are being carried out in the most questionable and dubious manner.
(b)In one instance, in respect of the purchase of 220,000 to 300,000 barrels of gas oil, invitations for offers dated 4.6.2009 had been faxed on the same night by the Ministry of Finance and Planning, with the closing date and time for offers being the following day i.e. 5.6.2009 at 3.00 p.m.
(c)According to practicalities and realities, making of such competitive offers, is an impossibility; and that it is quite apparently evident that this has been a ‘fix’.
A true copy of letter of invitation for offers dated 4.6.2009 of the Ministry of Finance and Planning is annexed marked “P8”, pleaded as part and parcel hereof”
In objecting to my aforesaid Application, Hon. Attorney General, Mohan Peiris P.C., also thereby objected to the foregoing. Though having been put on notice of the foregoing facts, apparently no remedial action had been taken or caused to have been taken by the CPC, Secretary, Ministry of Finance and Secretary to the Treasury and the Hon. Attorney General, who were all Respondents in the said Application.
Consequently, in July 2011 a scandal was reported in the media on the import of low quality petrol, with the CPC reported to having paid compensation to consumers affected by the use thereof. At present you have acted to replace the CPC Board for a controversy vis-à-vis the import of low quality diesel, which has affected motor vehicles, buses and trains.
Please clarify to the public, as to why no action has been taken against any of those involved vis-à-vis the foregoing transactions, with the Attorney General, himself, having asserted that they were ultra-vires and illegal; and you too being an Attorney-at-Law, thereby being able to well and truly comprehend the foregoing.
Yours truly,
Nihal Sri Ameresekere
cc:
Mr. H.A.S. Samaraweera, Auditor General
Mr. Lalith Weeratunga, Secretary to the President, for H.E. the President to be apprised
