U.S. District Judge Kevin Castel has rebuffed Citigroup (C) and ruled that arbitrators and not federal judges can decide whether the Abu Dhabi Investment Authority (ADIA) can seek a second arbitration in a dispute over the sovereign wealth fund's $7.5B investment in the bank in late 2007.
ADIA is seeking $2B in damages or to rescind the investment, for which it received a 4.9% stake in Citibank, which needed the cash six years ago to help shore up its finances following writedowns for sub-prime mortgages.
ADIA is claiming breach of contract, and breach of an implied covenant of good faith and fair dealing. Citibank issued preferred shares to other investors that diluted ADIA's stake.
ADIA lost the first arbitration decision two years ago.