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Abu Dhabi Investment Authority Arbitration Claim Can Proceed

Tuesday, December, 3, 2013


CitiGroup, Inc. failed to block an attempt by the Abu Dhabi Investment Authority (ADIA) to bring claims totaling over $2 billion to an arbitration panel.  Judge P. Kevin Castel in Manhattan ruled that under the existing arbitration agreement entered into by both parties two years ago, it is up to an arbitration panel to determine whether or not the ADIA’s claims have merit.


The dispute stems from a 2007 investment in CitiGroup by the ADIA totaling $7.5 billion.  This bought the ADIA a 4.9% ownership stake in the bank, and helped CitiGroup survive the record losses its mortgage division suffered in the housing bubble crisis.  The dispute centers on the dates used to calculate stock value when the investment was converted to common stock, with the valuation difference totaling almost $2 billion.


Both parties engaged in a 16-day binding arbitration agreement in 2011, involving 24 witnesses and 6,000 separate pieces of evidence.  That arbitration panel ruled against the ADIA’s claim of $4 billion in damages and should have put the issue to bed, as far as CitiGroup is concerned.  The ADIA attempted to overturn the arbitration decision in 2011 but was denied by a U.S. court.  They filed the new $2 billion claim earlier in 2013 and CitiGroup sought to block the move as an attack on the prior, legally accepted decision, but the judge ruled that the arbitration clause required these disputes to also be settled via binding arbitration.


Neither party has commented on the ruling, which will lead to a second 16-day arbitration panel being created, likely with many of the same witnesses and evidence.  It is unclear whether the ADIA has any new evidence to enter, or if it simply believes the lower damages claim will increase its chances.