Abu Dhabi Loses Fight to Citi over Bailout

(March 5, 2013) — The Abu Dhabi Investment Authority (ADIA) has lost a multi-billion dollar dispute with Citigroup over a deal it made to help shore up banking giant during the financial crisis.

A judge in the Southern District Court of New York yesterday ruled against the sovereign wealth fund, which had sought to overturn an arbitration panel ruling that had favoured Citigroup in a dispute over a $7.5 billion investment ADIA had made in the bank.

The court document set out the details of the case: “In November 2007, ADIA made a $7.5 billion investment in Citi. The investment agreement contained an arbitration clause, whereby ADIA and Citi agreed to submit any dispute that arose out of the transaction to binding arbitration. After irresolvable differences arose, ADIA filed a Statement of Claim with the agreed upon arbitration organization, the International Centre for Dispute Resolution of the American Arbitration Association in December 2009.”

At this hearing, ADIA asserted claims against Citi for common law and securities fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair dealing, the court document said. ADIA demanded either rescission of the contract and the return of its investment, or monetary damages of over $4 billion.

In May 2010, each side of the dispute nominated an arbiter, and a third independent was brought in to make up a panel. After several days of evidence from a range of witnesses, the panel found in the favour of the bank.

ADIA sought to overturn this decision, citing “three tribunal decisions that it contends were made in manifest disregard of the law, and which left it unable to present its case”.

Yesterday, the judge dismissed ADIA’s claims and concluded that the process had been fair and upheld the judgement.

The decision said: “The tribunal granted 56 of ADIA’s 58 document requests, allowing ADIA access to over 550,000 pages of documents concerning Citi’s expected capital needs. ADIA cross-examined several of Citi’s top level officers regarding Citi’s expected capital needs, including Vikram Pandit, its former chief executive officer, Gary Crittenden, its former chief financial officer, and Zion Shohet, its former treasurer.”

Judge George Daniels added that the tribunal had allowed ADIA “more than an adequate opportunity to present evidence to support its case”.

ADIA declined to comment on the legal process when contacted by aiCIO this morning.

A spokesperson from Citi said: “We are pleased with the panel’s decision.”

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