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 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 for
Citigroup.
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 his decision."
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' conclusion
stand.
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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.
(Reporting by Jonathan Stempel in New
York; Additional reporting by Andrew Torchia; editing by Jonathan Oatis)
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