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US judge junks Citigroup's injunction blocking Abu Dhabi's second arbitration

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November 26
1:17 AM 2013

A US judge has rejected Citigroup Inc.'s effort to block the Abu Dhabi Investment Authority (ADIA) from seeking a second arbitration over its investment in the then-struggling bank. 

ADIA is a sovereign wealth fund owned by the Emirate of Abu Dhabi. In November 2007, it invested USD7.5 billion in exchange for a 4.9% stake in American multinational Citigroup, Reuters said in a report. 

According to the report, Manhattan district judge Kevin Castel said on Monday that arbitrators, not federal judges, had power to decide whether Citigroup's success in the first arbitration prevents ADIA from pursuing a second one. 

ADIA is seeking a USD2 billion compensation for damages or to rescind its investment, Reuters said. 

Two years after it made its investment, ADIA accused Citigroup of fraudulently inducing its investment in part by issuing preferred shares to other investors. ADIA said that the move diluted its stake in the bank, Reuters reported. 

An arbitration panel rejected ADIA's claims in October 11. The ruling was subsequently upheld by Manhattan district judge George Daniels in March, the report said.

Reuters said that ADIA sought a second arbitration in August, charging Citigroup with breach of contract and breach of an implied covenant of good faith and fair dealing. 

Citigroup sought an injunction to bar the second arbitration, calling it an assault on the first. Citigroup said that a second arbitration will threaten US judges' ability to enforce their own rulings, Reuters said.

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