Bosnia/Republika Srpska: Slovenian 50MEUR arbitrage claim over HPPs concession

, SEE Energy News

Slovenian company Viaduct from Portorož, majority owner of HES Vrbas, that should have built two hydro power plants on Vrbas River, shall initiate before the International Center for Settlement of Investment Disputes in Washington (ICSID) arbitration procedure worth around KM 106 mil, as Nezavisne found out.

As claimed in the request for arbitration, which Nezavisne possess, that is allegedly the damage they suffered due to impossibility to implement the construction of two hydro power plants – Krupa and Banjaluka niska on Vrbas. They stated that preparations for request submission are ongoing.

Therefore, Office of Attorney General of Bosnia and Herzegovina sent the notice to the Council of Ministers of Bosnia and Herzegovina regarding all these events, but also the last warning by Viaduct, whose aim is to negotiate prior to arbitration initiation. All those documents shall be submitted to the Council of Ministers on the first following session.

That warning, which Nezavisne possess, was sent by American Law office Scrantom Dulles International PLLC from Washington, which is one of the representatives of Viaduct.

Mladjan Mandić, Deputy Attorney General of Bosnia and Herzegovina, said that the case here is that the Government of RS in 2004 concluded concession agreement with Viaduct for the construction of hydro power plants on Vrbas, but did not fulfill obligations from that concession agreement and in 2013 it concluded concession agreement on the construction of Hydro power plant Bočac 2 on that territory.

– That means that all of this was ‘stirred up’ by the Government of RS, since it did not fulfill obligations from concession agreement and gave the same concession to two different companies. Deadlines expired and this company pressed charges against Bosnia and Herzegovina since entities cannot be pressed charges against before the international court – said Mandić and added that Office of Attorney General received letter before action but not claim. He added that according to the agreement RS had the obligation to solve this amicably.

– This three-month deadline expired and RS, i.e. Government of RS and Ministry of Energy did not react. Bosnia and Herzegovina is only formally legally filed a suit, since it is impossible to press charges against RS as a party in arbitration. Now we shall wait, if charges are pressed against Bosnia and Herzegovina we will address to the Government of RS and wait for its response – said Mandić.

In the request for arbitration legal representatives of Viaduct stated that their action is in accordance with the Agreement between Bosnia and Herzegovina and Slovenia on the protection of investments, which Bosnia and Herzegovina broke as a signatory, but also due to the breach of Customary International Law and also the Law regarding claimant’s investments.  In total, their claim amounts to around EUR 54 million, which is more than double than the previous KM 46 million.

Goran Marić, the lawyer of Vrbas Hydro Power Plant Company, as intervener, said that there would be no arbitration if the proposal for initiation of bankruptcy  in HES Vrbas, due to unsettled tax liabilities in the amount of around KM 40,000 was adopted.

– District court in Banjaluka rejected this proposal, to which Tax Administration of RS did not file a complaint that would be accepted, for some unexplainable reasons. That is how good chance to solve everything in favor of RS is missed, since when bankruptcy is initiated, according to the law, concession cease to exist and thus also the possibility to initiate arbitration- said Marić, transmits