NEW YORK Feb 19 A U.S. appeals court on
Wednesday rejected the Abu Dhabi Investment Authority's effort
to void Citigroup Inc's arbitration win in a dispute over
a $7.5 billion investment in the bank less than a year before
the 2008 financial crisis.
The 2nd U.S. Circuit Court of Appeals in New York said the
sovereign wealth fund did not meet the "high hurdle" of showing
that an American Arbitration Association panel demonstrated a
"manifest disregard of the law" or exceeded its powers in ruling
The ADIA's November 2007 investment was designed to shore up
Citigroup as it struggled with mounting losses linked to
subprime mortgages, and gave the fund a 4.9 percent stake in
what was at the time the largest U.S. bank by assets.
But the ADIA later claimed that New York-based Citigroup
fraudulently induced its investment, in part by issuing
preferred shares to other investors that diluted its stake.
Citigroup ultimately required three federal bailouts, which
it has since repaid. It is now the third-largest U.S. bank.
"Awards are vacated for manifest disregard only in those
exceedingly rare instances in which some egregious impropriety
on the part of the arbitrator is apparent," the 2nd Circuit said
in an unsigned order.
"ADIA contends that the panel erred in its analysis of New
York's conflict of law rules, but it would not matter if it
did," it continued. "The fact that a court is convinced the
arbitrator committed serious error does not suffice to overturn
An ADIA spokesman had no immediate comment. David Elsberg, a
partner at Quinn Emanuel Urquhart and Sullivan representing the
fund, did not immediately respond to a request for comment.
Citigroup spokeswoman Danielle Romero-Apsilos said the bank
was pleased with the decision. It upheld U.S. District Judge
George Daniels' March 2013 ruling letting the arbitrators'
Wednesday's decision is separate from the ADIA's effort to
pursue a second arbitration against Citigroup, in which it
sought $2 billion of damages or to rescind its investment.
In November, U.S. District Judge Kevin Castel in Manhattan
said it was up to arbitrators, not judges, to decide whether
Citigroup's success in the first arbitration barred the ADIA
from trying again.
Citigroup shares trade at a little over one-tenth of their
level when the Abu Dhabi fund made its investment, after
accounting for a reverse stock split. At midday on Wednesday,
the stock was trading at $48.79 a share.
The case is Abu Dhabi Investment Authority v. Citigroup Inc,
2nd U.S. Circuit Court of Appeals, No. 13-1068.