(Corrects 7th paragraph to say $55 billion, not $55 million)
By Nate Raymond
March 28 (Reuters) - Citigroup Inc has prevailed in the latest arbitration pursued by Abu Dhabi Investment Authority over the sovereign wealth fund's $7.5 billion investment in 2007 to shore up the then-struggling bank during the subprime mortgage meltdown.
Documents in the case were unsealed on March 20 in Manhattan federal court, where Citigroup filed a petition earlier in the month to have a federal judge confirm a decision an arbitration panel issued in December.
In their December ruling, arbitrators ruled that a contractual clause the investment authority said the bank had breached "does not impose continuing obligations on Citigroup regarding the commercial reasonableness of its decision making."
The panel also awarded Citigroup nearly $9.5 million in legal fees and expenses, the documents said.
Citigroup said in a statement on Tuesday that Abu Dhabi Investment Authority's investment "was a testament to the strength of that relationship, and we regret that the investment led to this outcome."
The investment authority, headquartered in the United Arab Emirates' capital, declined to comment. In court papers, it said it disagreed with the ruling but would not challenge it.
The arbitration arose from Citigroup's efforts to shore up its capital base after announcing in November 2007 that it had $55 billion in exposure to subprime mortgages.
Anticipating $8 billion to $11 billion in losses due to write-downs, Citigroup reached a deal in which the Abu Dhabi fund invested $7.5 billion in exchange for a 4.9 percent stake in the bank.
The investment authority also received securities that could be converted to common stock at $31.83 to $37.24 from March 2010 to September 2011.
As the U.S. financial crisis deepened, Citigroup had to take two government bailouts.
The investment authority filed for arbitration in 2009, accusing Citigroup of fraudulently inducing its investment, in part by issuing preferred shares to other investors that diluted its stake.
A panel of the International Centre for Dispute Resolution of the American Arbitration Association rejected the claims in 2011, and federal courts in New York upheld that ruling.
But in 2013, the investment authority sought a second arbitration, raising two claims, including breach of contract.
Citigroup sued to block the case, which the bank said sought more than $2 billion or to rescind the investment. But in 2015, a federal appeals court declined to block the case.
The case is Citigroup Inc v. Abu Dhabi Investment Authority, U.S. District Court, Southern District of New York, No. 17-01528. (Reporting by Nate Raymond in Boston; Additional reporting by Tom Arnold in Dubai; Editing by Lisa Von Ahn)