TIRANA, Sept. 21 – The Albanian government has been advised by a U.S.-based law firm to continue its legal battle with the country’s biggest oil producer over a $57 million tax dispute after an independent auditor ruled in favor of Canada-based Bankers Petroleum three weeks ago.
U.S.-based Curtis law firm which the Albanian government hired in late 2015 when the conflict with Bankers Petroleum escalated following the freeze of the company’s Albania bank accounts and the initiation of Arbitration proceedings by Bankers, has recommended the Albanian government to challenge the final decision issued by an expert panel led by PwC, one of the Big Four auditors.
“If Bankers were dissatisfied with the decision, it’s sure that they would have made use of their right to Arbitration,” Curtis writes in a letter to the National Agency for Natural Resources.
“It is standard, normal practice to appeal or challenge a decision of any court, arbitration tribunal or expert panel and that is why both parties agreed in the terms of reference to preserve the right of challenge,” adds the prestigious law firm.
“It is premature to simply stop now and not pursue the available remedies. The expert decision is manifestly erroneous, insufficient and unacceptable on numerous grounds. Allowing that decision to stand without any challenge would be unusual and surprising,” says Curtis.
Sources quoted by Top Channel TV say government agencies are seriously considering the possibility of challenging the auditor’s decision which reduced the initial amount claimed by the Albanian government by $20 million.
In late August, an expert panel led by PwC and Navigant Consulting Company ruled the Albanian government will have to pay back Canada-based Bankers Petroleum $37 million, in a situation which could put Albania in new financial straits following a mid-year budget cut. The initial $57 million tax dispute involved $250 million in disputed costs from the company’s operations in 2011.
The outcome comes after Bankers Petroleum suspended arbitration proceedings over a $57 million tax dispute dating back to 2011 last February and agreed to pay back the disputed amount in instalments.
Canada-based Bankers Petroleum, the country’s largest oil producer which is about to be taken over by a Chinese company, posted record high losses of about $34 million in the first half of this year due to a slump in international oil prices affecting oil production, exports and government revenue.
The Canada-based company which has been operating in Albania for more than a decade expects the C$575 million (€392 mln) sale deal with China’s Geo Jade to conclude by late September.
Eleven years after launching its operations in the Patos-Marinze heavy oilfield under a 25-year concession deal with the Albanian government, Bankers Petroleum has not started paying profit tax yet, which under Albanian law, companies operating in the oil industry pay at a 50 percent rate only after meeting their investment costs.
Energy Minister Damian Gjiknuri has earlier said Albania will renegotiate its oil output-sharing contracts with Bankers Petroleum and other oil companies and impose a limit on expenses that can be used to offset their tax liability.
The amount the Albanian government will pay back to Bankers Petroleum is almost twice higher compared to the mid-year budget cut.
The 2016 budget faced a surprise mid-year cut in late July when spending was cut by 0.7 percent (€22 million) to 450.2 billion lek (€3.24 billion) to handle overoptimistic forecasts.
Last year, the Albanian government cut the budget three times to handle the sharp decline in international oil and mineral prices affecting exports and handle a slowdown in consumption. The GDP was also revised to 2.6 percent, down from initial expectations of 3 percent.
The Albanian government expects growth to accelerate to 3.4 percent in 2016 and 3.9 percent in 2017, forecasts which are 0.2 percent to 0.4 percent more optimistic compared to expectations by the European Commission and international financial institutions.
