In March 2010, the Albanian government was fined USD 20 million over the unilateral annulment of a 2003 railway contract, worth Euro 74 million with General Electric
TIRANA, Oct. 27 – A U.S based company is seeking $359 million in damages at an arbitration court in Paris after the Albanian government has unilaterally cancelled a 15-year screening concession in Albania’s customs points. In August 2013, U.S-based Rapiscan System was awarded a 15-year concession to provide turnkey cargo and vehicle security screening services at various sites throughout the country, but the contract was suspended after fierce opposition by the business community which claimed the high tariffs would increase costs and reduce their competitiveness.
The Albanian State Advocate’s Office has already initiated procedures to select a law firm that would defend Albania at the International Arbitration Court in Paris.
In June 2014, the Albanian government settled a dispute with Czech giant CEZ Group which had its Albania licence revoked in early 2013 avoiding possible losses of $200 million in arbitration proceedings.
Under the deal signed by the Albanian government and CEZ, whose 70 percent stake is owned by the Czech government, Prague-based CEZ will get in annual installments in the next four years a total of Euro 95 million, an amount slightly lower to its initial investment in the Albanian distribution system, but half of the Euro 200 million CEZ had warned it would claim in international arbitration proceedings.
In March 2010, the Albanian government was fined USD 20 million over the unilateral annulment of a 2003 railway contract, worth Euro 74 million with U.S giant General Electric. The project cancelled in 2005 was aimed at modernizing the Tirana-Durres railway segment, known also as the electric train, which would have been linked with Mother Theresa International Airport.
Earlier this year, Albania’s Competition Authority recommended that the Albanian government reviews a concession deal with U.S-based Rapiscan Systems on cargo and vehicle security screening services at various sites throughout the country as running counter to Albania’s EU’s commitments and violating tender procedures.
The Authority said it examined the concession contract after concerns by the business community which complained that its costs would increase by 20 million euros a year from the scanning service.
“The concession contract, signed in April 2013 but which has not been made effective yet runs counter to the Stabilization and Association Agreement (SAA) Albania signed with the EU which has a priority over other law and by-laws.”
The Competition Authority says that since the SAA entered into force in 2009, no new customs duties on imports and exports or other tariffs can be imposed, and existing tariffs between the EU and Albania cannot be raised at a time when the concession deal foresees extra fees of Euro 39 per screening which will be paid for scanning of containers and vehicles.
The Authority says the concession deal was made without the necessary assessment by the Competition Authority as a deal awarding exclusive rights.
The concession procedure was also an unsolicited procedure and not an open tender procedure that would place all potential bidders under equal competition positions.
In addition, the installation of scanners in five customs points, of which three in determined points and two remaining mobile does not cover all customs points to justify the goal of the concession, argues the Competition Authority.
The Authority also recommended that the Finance Ministry could contract the concessionaire only for the purchase of equipment and carry out the service on its own.
U.S-based Rapiscan Systems, which last year was awarded a 15-year concession on cargo and vehicle security screening services at various sites throughout the country, was supposed to charge Euro 39 for each screening while the Albanian government will get 2 percent of the income.
The business community had expressed its concern over rising costs, warning of protests.
Reacting to the producers’ concern, Prime Minister Rama has recently assured the business community government would review the concession which he described as running contrary to the country’s interest by increasing costs for both importers and exporters.
“We will negotiate and see what solution of interest we can reach which in no case will be to the detriment of importing and exporting companies,” Rama had earlier assured.
While the concession contract was due to have entered into force on April 1, 2014, government temporarily suspended the concession and is negotiating over tariffs with the concessionaire.
Experts were sceptical over the results of the negotiations as the contract has already been signed and any unilateral cancellation would have severe financial consequences to the Albanian government.
The contract was expected to cost Albanian business community an estimated Euro 20 million annually, a cost which would also be reflected on consumer prices due to the huge dependency on imports.
Containers or vehicles with a weight of up to 1,000 kg or goods worth up to Euro 1,000 would be excluded from the Euro 39 tariff. The former government said the contracting of a concessionaire was a necessity considering that the customs administration lacks both qualified staff to carry out the scanning and necessary financial resources to maintain the equipment and fight contraband and undeclared materials. The company anticipated that total gross revenues could range from $150 million to $250 million over the term of the agreement.
Case with Sky Petroleum
The Albanian State Advocate’s office is also looking for a law firm to collect around $383,000 in favour of the Albanian government which won an Arbitration case against U.S based Sky Petroleum oil and gas exploration company. Back in May 2013, an arbitration court in the United States dismissed a claim by U.S based oil exploration company Sky Petroleum which was seeking a staggering USD 1 billion in damages for the unilateral cancellation of its exploration contracts in Albania, says the Albanian State Advocacy which represented Albania in the case at a Texas court.
Sky Petroleum had been given exploration rights in the Blocks 4 and 5 and Dumre in southern Albania in June 2010 but had its contract cancelled by the National Agency of Natural Resources of Albania (AKBN) because of failing to meet contractual obligations. The oil exploration blocks were given back to state owned Albetrol oil company which in early 2013 officially failed to be privatized.
