TIRANA, Dec. 2 – The Albanian government and the country’s largest foreign investor, Canada-based Bankers Petroleum, saw an escalation of their $57 million tax dispute this week after Albanian authorities refused to unfreeze the company’s bank accounts. The dispute seemed to be headed for an amicable solution last week after a ruling in the company’s favor, but the Albanian authorities’ failure to acknowledge the international arbitration court’s temporary ruling on the accounts and statements on the matter by both parties could now affect the company’s operations in Albania.
A warning by Bankers Petroleum of a phase-down of its operations in Albania last Monday, sparked a fierce reaction by the Albanian government which said it could not accept threats and the misuse of the country’s national treasured assets without specifying whether it would comply with the arbitration court order to unfreeze Bankers’ bank accounts.
David French, the CEO of Bankers Petroleum, toned down the threat on Wednesday in an open letter appealing for the unfreezing of the company’s bank accounts in Albania so that it can continue its operations as usual while the government and Bankers work on a solution to the tax dispute.
“Bankers believes that it is in the best interest of the government, the company and country to reach a joint solution,” said French.
Earlier on Tuesday, the Albanian government issued a statement saying that “it is clear about the threats made by Bankers Petroleum to close down or limit the activity in the Patos-Marinza oilfield and that Albania’s national assets are a property of all Albanians and cannot be misused or used as threats to the country.”
“All companies operating in Albania, be they foreign or domestic, have to abide by the regulations and laws in force in the Republic of Albania,” said the government.
The statement came after Bankers Petroleum said that ten days after the ruling by the Paris-based ICC International Court of Arbitration, the Albanian government has not yet complied with the order issued by the tribunal which is preventing its activity.
“Bankers is now forced to consider a phase-down of its Albanian operations since lack of access to the bank accounts will begin to restrict its ability to pay local contractors, import goods and export oil,” the company said in a statement.
While the Albanian government is expected to comply with the stop order in order to continue its participation in the ICC Tribunal process, the conflict has already escalated.
National oil producer, Albpetrol, which also supervises concession deals with private oil exploration and production companies, has already selected prestigious U.S.-based Curtis, Mallet-Prevost, Colt & Mosle LLP in the arbitration case with Bankers over the $57 million tax dispute involving $250 million in disputed costs from the company’s operations in 2011.
The selection of the law firm reduces chances of an out-of-court deal after the Albanian government and Bankers agreed last September to hire an international audit firm to settle a dispute over $57 million in claimed taxes by the country’s National Agency for Natural Resources.
Energy Minister Damian Gjiknuri has said the Albanian government was determined to the end to unveil the truth about the company’s tax position.
“The audits carried out by specialized agencies have unveiled excess costs. The contract could also have other issues and the Albanian government is taking all measures and has recruited one of the best international firms to defend the state interests. The Albanian government is prepared to go the end of what is considers fair, without harming any investor, without infringing the security of the investment but at the same time defending public interest,” said Gjiknuri.
Reacting to the 2011 tax row in his open letter, David French said “we believe all our expenses are necessary to support our ongoing operations in the oil sector and this trade dispute is following a normal previously agreed procedure which involves the third party auditor and if necessary an independent international legal body.”
Bankers Petroleum says it has invested $1.4 billion during its 11 years of operations in Albania, becoming the largest foreign investor and employing over 1,500 people.
In the midst of tax dispute with Albanian authorities, the Canada-based company announced last week it has diversified its investments to Hungary by acquiring an oil exploration block where it plans to invest a total of €12.3 million over a three and a half year contractual term.
Bankers Petroleum has been struggling with modest profits during this year from its operations in Albania as international oil prices stand at a record low. The country’s biggest foreign investor and exporter reported a net income of U.S.$4.77 million in the first three quarter of this year, down 94 percent compared to the same period last year when international oil prices hit a record high.
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.
Back in April 2015, Bankers Petroleum came under fire after an incident involving the explosion of two oil wells forcing the evacuation of some sixty local households. The Albanian authorities also questioned if the country’s largest foreign investor and exporter has paid all its taxes.
