International Arbitration Newsletter - May 2021 | Regional Overview: Europe

REINO UNIDO

UK energy company files ICSID claim against Congo

British energy company, World Natural Resources (WNR) has filed an ICSID claim against the Republic of Congo based on the provisions contained in the UK-Congo bilateral investment treaty.

Specifically, WNR is claiming damages for the alleged expropriation of its subsidiary WNR Congo's rights in the Marine XI oil block, located in shallow waters off the town of Pointe-Noire. WNR is claiming approximately US$ 450 million.

BELGIUM

Update in Antwerp Port dispute

The repossession of part of the land granted to DP World Antwerp N.V. (DP World), a UAE logistics group’s subsidiary, under a 40-year concession agreement of a container terminal in the Antwerp Port has been under an ICSID dispute since 2017.

Recently, the tribunal rendered an interim order on jurisdiction and liability. Specifically, this interim decision has confirmed the lawfulness of the Port Authority’s decision to repossess part of the unused land granted under the concession but it is yet to be determined if adequate compensation was provided by the Kingdom of Belgium to DP World, quantum of which is to be determined in the following stages of the process.

The ICSID claim was filed under the Belgium-UAE bilateral investment treaty by DP World against the Kingdom of Belgium and the final award is still to be rendered.

SPAIN

New partial award in the arbitration between Repsol and Sinopec

Repsol has announced rendering of a new partial award in the arbitration proceedings initiated by the Chinese company Sinopec Petroleum & Chemical Corporation (Sinopec) in 2015, for the purchase of the 49% of the subsidiary Talisman Energy UK, back in 2012 (prior to Repsol´s acquisition of Talisman Energy Inc. group in 2015).

According to Sinopec, Repsol’s 2015 acquisition generated substantial damages. Thus, it is seeking compensation for more than 5 billion euros. An initial arbitration award in 2017, framed in the arbitration proceedings initiated by Sinopec in 2015, established that the proceeding would be divided into two distinct phases: a liability phase, in order to determine the existence or (not) of liability, and a quantum phase, in which the Arbitral Tribunal would decide on the amount of the damages.

Subsequently, in 2020, the Arbitral Tribunal ruled on the first of the aspects included in the liability phase, related to “Fraudulent Misrepresentation” and the application of several “Indemnities” on hydrocarbon reserves; which the Arbitral Tribunal resolved partially in favor of Sinopec. This award has led to the Spanish energy company to make a provision of 837 million euros for the entire litigation.

In April the Arbitral Tribunal published a new partial award within the arbitration proceedings initiated in 2015 by Sinopec, in which it considered two subsidiaries of the Spanish energy company, Talisman Energy Inc. and Talisman Colombia Holdco Limited, as liable "in relation to a production claim" raised in the arbitration. The Arbitral Tribunal has dismissed Sinopec’s claims in relation to three of the four remaining aspects included in the liability phase: “abandonment, projects and maintenance”.

Following the end of the liability phase, the arbitration proceedings initiated by Sinopec will continue with the quantum phase and are not expected to conclude until 2023.

CZECH REPUBLIC

A US$ 100 million claim before the PCA: the ‘blue poppies’ case

In 2017 Fynerdale Holdings, a Dutch company, started an arbitration proceeding against the Czech Republic, based on the Agreement on Encouragement and Reciprocal Protection of Investments that entered into force on 1 October 1992. The Dutch company had invested in form of loans into the Czech Republic through YTRIX, a Czech company, and Poppyseed Limited, an intermediary Maltese company, for trade in poppy seeds produced in the Czech Republic.

The claim submitted by Fynerdale before the Permanent Court of Arbitration (PCA) alleged that the company was victim of a fraud. The claim, which amounted to US$ 100 million in for damages, was related to the alleged lack of action by the Czech authorities against the breaches of the bilateral investment treaty´s provisions. The claim was dismissed at a jurisdictional level establishing the investments were connected to criminal activity.

UKRAINE

LCIA tribunal to decide on Kiev shopping mall dispute

A group of Estonian individuals and companies have once again issued a claim concerning a massive investment in a shopping mall in Kiev. This time, it is the state of Ukraine which is going to be the counterpart of the dispute, according to the notice of arbitration submitted before the London Court of International Arbitration (LCIA). Estonian investors –with Mr. Hillar Teder at the forefront– are threatening Ukraine with a claim worth more than US$ 750 million, accusing it of “theft and a raid” of their interests.

Mr. Tederis the project’s early investor, involved in the process of construction and design of the Sky Mall (one of the biggest malls in Kiev) from the very beginning. In 2008, he formed a company registered in Cyprus, Arricano Real Estate (Arricano), which then, through the agency of its subsidiary, took over the Ukrainian company owning the mall. The whole project was completed in 2010, while the first part of the mall started to operate in 2007.

The subsidiary, called Assofit, was partly taken over by the British Virgin Islands’ company called Stockman Interhold (Stockman), which invested US$ 30 million in the project when the last cash infusion was needed, i.e. just before the opening in 2010. On the grounds of shareholders’ agreement and call option agreement, Arricano reserved its rights to repurchase Assofit’s shares after the investment was eventually finalized. Stockman, however, terminated the agreement in order to retain its shares in the company, thus keeping its shares in the mall, which gave the grounds for the dispute.

The claimants accuse Stockman’s owner, Mr. Dmitry Adamovsky, together with Latvian and Ukrainian banks as well as Ukrainian courts and government institutions of draining millions of dollars from the project. They claim, among other things, that Mr. Teder was deprived of at least US$ 100 million of loans that he made while the mall was under construction. They also allege, that as Ukrainian courts issued several injunctions initially, they all disappeared and were replaced by mortgages granted to Ukrainian banks. Subsequently, the Kiev court reclaimed the land from the company and made it possible for the bank to become the mall’s legal owner..

The claimants also refer to an LCIA award from 2014, in which the sole arbitrator ordered Stockman to return its shares in Assofit to Arricano pursuant to the share and call option agreements, which did not happen despite of the ruling. They also claim that even if the award had taken effect, it would have changed nothing, as Assofit was no longer the owner of the mall.