• Bank withholds customer deposit records sought to confirm beneficial ownership of ISBs
• Joint status report filed in New York outlines unresolved disputes over scope of discovery
• HRB reversed earlier agreement to provide auditor communications: SL
• Court has previously ruled that discovery may determine whether HRB has standing to sue

Hamilton Reserve Bank (HRB) has refused to disclose its customer deposit information in the ongoing additional discovery process initiated pursuant to Sri Lanka’s request, which seeks to determine whether the bank’s internal records indicate that it is the beneficial owner of Sri Lankan International Sovereign Bonds (ISBs).

Both parties submitted a joint status report dated 9 December before the US District Court for the Southern District of New York outlining the discovery disputes that had arisen in the litigation instituted by HRB against Sri Lanka in respect of its defaulted ISBs. 

Sri Lanka asserted that, despite the discovery hearing held on 10 July, HRB failed to produce any of the requested documents until 9 December, at which point it served only 17 documents. Sri Lanka further informed the court that three discovery disputes had emerged.

First, Sri Lanka noted that HRB had refused to produce its customer deposit information, which the country contends is essential to ascertain the beneficial owners of the Sri Lankan ISBs.

“HRB refuses to produce customer deposit information based on purported concerns about Nevis confidentiality law. In its 30 July responses, HRB expressly agreed to produce the requested information, but yesterday proposed for the first time producing with personal identifying information redacted. 

“This is unworkable, as it would prevent a meaningful analysis of who beneficially owns the bonds. To the extent HRB maintains this position, court intervention may be necessary.”

Secondly, Sri Lanka highlighted that the parties had to date not reached an agreement on a document search protocol, including the scope of document sources, custodians, and search terms. The country maintains that HRB’s proposed protocol is unreasonably narrow and intends to elaborate on these concerns in a subsequent submission. 

Thirdly, Sri Lanka objected to HRB’s withdrawal of its prior express agreement to produce communications with its auditors, noting that the bank now claimed such production was unnecessary on the basis that it had obtained audited financial statements for 2022–2024.

In contrast, HRB asserted that Sri Lanka had insisted on search protocol parameters that the bank considered unreasonable and unduly burdensome. 

HRB stated, however, that it had nonetheless substantially agreed to those parameters and, on 1 December, proposed a final search protocol. It further informed the court that it was proceeding with the searching, review, and production of documents in accordance with that protocol.

The bank also revealed that, in addition to the documents it produced on 19 December, it expected to substantially complete its document production within the next two weeks.

It added: “HRB is also considering options for how to produce depositor information without violating Nevis law and has advised Sri Lanka that it will abide by any applicable court orders.”

Sri Lanka had previously submitted to the US District Court that new evidence had come to light to suggest that HRB was holding the ISBs on behalf of Benjamin Wey and/or HRB’s corporate parent, Fintech.

Judge Denise L. Cote had similarly in her order dated 24 April, whilst granting Sri Lanka’s request for additional discovery, held that the country had adequately demonstrated that discovery could reveal that HRB had acted on behalf of another person or entity, including reference to a 2023 declaration from one Avinash Persaud to that effect. 

“Sri Lanka has shown that limited additional discovery is warranted. It seeks to explore whether Hamilton’s internal records reflect that it is the beneficial owner of the bonds and whether any other person or entity holds a beneficial interest. If Sri Lanka obtains evidence that Hamilton is not the beneficial owner, that could lead to the dismissal of this action due to Hamilton’s lack of standing,” she had noted. 

She further pointed out that HRB must provide some evidence of its beneficial ownership of the ISBs that formed the subject matter of the said proceedings. 

The judge further said that HRB should provide evidence in the form of declarations from its CFO stating that the bank was the sole beneficial owner of the bonds, account statements from Morgan Stanley and Interactive Brokers that were in HRB’s name, and a resolution from its Board of Directors stating that it “currently owns” the bonds.