Court Stands By Citigroup Arbitration Win
Thursday, February, 20, 2014
This week, the U.S. appeals court chose to reject the attempt to void a Citigroup arbitration win, put on the table by Abu Dhabi Investment Authority. The dispute involves more than $7.5 billion of investment funds that were placed in the bank just prior to the 2008 financial collapse.
The appeals court determined that the foreign wealth fund had failed to meet the “high hurdle” to show that the panel from the American Arbitration Association had showed a “manifest disregard of the law” or that the panel had exceeded their own powers in the ruling, which favored Citigroup.
The investment was made in 2007, with the goal of improving Citigroup’s financial standing as the bank was struggling to handle rising numbers of subprime mortgages. The ADIA later said that their investment was fraudulently induced when Citigroup issued preferred shares to other investors. This move, according to the ADIA, diluted their own stake in the company.
In the aftermath of the 2008 financial collapse, Citigroup needed three federal bailouts. While those monies were eventually repaid by the bank, the ADIA alleges that Citigroup was fraudulent in the previous investment dealings. The ADIA argued that the arbitration panel made errors with a conflict of New York law rules. According to those involved with the case, the contention that an error was made was not enough to overturn an existing arbitration decision. ADIA is also involved in a second arbitration case with Citigroup where they are attempting to rescind damages.