By Sarah Kent
LONDON--A London court has ruled that Citigroup Inc. isn't
entitled to payment in a $270 million dispute with commodities
trader Mercuria Energy Group.
The dispute revolves around a series of transactions under which
Mercuria sold metal to Citi with an agreement to buy it back at a
higher price at a later date. The copper and aluminum stocks
underpinning the deal were stored at two ports in China where local
traders allegedly used stockpiles of metals fraudulently to secure
multiple loans from Chinese and foreign banks, raising concerns
over the status of the metal stocks Citi had bought from
Mercuria.
Mercuria started legal proceedings against Citi in June after
the U.S. bank demanded early repayment for the metal.
The court ruled in favor of Mercuria's claim that Citi was
unable to deliver back the metal and therefore couldn't expect
payment for it.
However, Citi was also able to claim a partial win because the
court recognized its right to terminate the agreements early.
Mercuria said that Citi's right to claim early termination of
the contracts was largely a technical issue, since it did not
require the company to make any payment to Citi.
"The judgment has justified Mercuria's approach to this matter,"
the commodities firm said.
Citi has vowed to continue to pursue the case.
"Citi will vigorously pursue compensation from Mercuria for
failure to deliver or safeguard the metal once further facts are
established," the bank said.
Write to Sarah Kent at sarah.kent@wsj.com
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