Citigroup failed to persuade a judge that Abu Dhabi Investment Authority was barred under an agreement with the bank from seeking arbitration over $2bn in claims the emirate’s entity already pursued and lost.
Bloomberg reports that U.S. District Judge P. Kevin Castel in Manhattan yesterday said whether the investment authority, or ADIA, can re-litigate issues the bank contends were resolved in a 16-day proceeding two years ago is up to a panel of arbitrators and not the courts.
'The broad arbitration clause was the product of intensive, arm’s-length negotiations between the parties', Castel said in his ruling. 'The preclusive effect of any prior arbitration must be decided by an arbitration panel'.
The dispute centers on how Citigroup treated a $7.5bn investment in the bank, made by the Abu Dhabi government-owned investment authority in 2007. ADIA’s acquisition of a then 4.9% stake in Citigroup allowed the lender to replenish capital after record mortgage losses wiped out almost half it’s market value that year and made the emirate the bank’s biggest investor.
The parties’ agreement called for the ADIA’s money to be converted to Citigroup common stock on four dates from March 2010 to September 2011, with the valuation of those shares being $31.83 to $37.24, depending on market price at the time the capital was converted.
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