A New York appeals court has dismissed an attempt by Citigroup to block a second round of arbitration proceedings launched against it by the Abu Dhabi Investment Authority (Adia).
It is the latest development in a long-running legal battle related to the fund’s investment in the US bank in 2007.
An appeals court judge in New York ruled on Wednesday that the bank had not demonstrated a clear basis for an injunction against the second arbitration and stated that it was the arbitrators, not the courts, that should decide whether the arbitration should proceed.
The dispute concerns Adia’s US$7.5 billion investment in Citigroup in 2007.
Under the terms of the deal, the investment was to be converted into Citigroup common stock on four dates between March 2010 and September 2011.
Adia launched its first round of arbitration proceedings against Citigroup in December 2009, claiming that its investment was diluted when the bank issued preferred shares – later converted to common stock – to other investors on more favourable terms than those given to Adia.
Adia sought damages, asserting claims of common law fraud, securities fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair dealing.
The authority’s claims were rejected completely by an arbitration panel in October 2011.
Adia launched an appeal against the panel’s decision, which in turn was rejected in February of last year.
It subsequently launched a second round of arbitration proceedings against the bank in August 2013, seeking $2bn in damages.
A New York judge in November 2013 refused Citigroup’s attempt to halt the new arbitration proceedings.
As in this week’s decision, the court ruled that it was up to arbitrators, rather than courts, to rule on the validity of the proceedings.
An Adia spokesman yesterday declined to comment.
jeverington@thenational.ae
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