Interview with Perpaprim Kalo, founder and managing partner at the KALO & ASSOCIATES
Albania is losing millions of euros in the complicated international arbitration process and risks losing even more if it doesn’t improve its approach, says Perparim Kalo, founder and managing partner at the KALO & ASSOCIATES, one of Albania’s most prestigious law firms.
First of all, the firm you manage and you, personally, are known as legal counsel that represent and defend the interests of foreign entrepreneurs, IFI-s, development and aid agencies operating in Albania
– I appreciate you have some information about our firm and also about the particularity of the status of legal counsel, who as a professional should be by the side of the party it represents, whoever it is. When the party is foreign, status of counsel remains intact, i.e. the fact you as counsel are Albanian counsel comes second. By this I mean that in our professional walk of nearly 20 years, we had to accept the special status, that is being representative of the ‘adversary” of the Albanian state; this has not prevented us from providing services, with similar devotion, to the Albanian State, as beneficiary, when required. It is normal for a state to seek for legal services firstly from their own structures, such as the State Counsel, Ministry of Justice and legal department of public administration, where in-house lawyers, increasingly having good professional skills, work. Such circumstances have limited the need to seek for counsel outside public administration; however our services inevitably have been sought chiefly in the ambit of big infrastructure projects, development of commercial legislation and privatisations in the strategic sectors, including concessions in energy sector. It is safe to say that the selection of legal counsel in such cases has been made from the international institutions as World Bank, International Finance Corporation, European Bank for Reconstruction and Development, KfW, etc., when they have a role in advising Albanian institutions in specific projects, or in the financing of such projects.
Foreign investors, in contrast, seek for counsel in all stages of their investment, and even in the exit – voluntary liquidation or bankruptcy – or even in case they engage in private arbitration before international arbitral tribunals before the International Court of Arbitration of International Chamber of Commerce (ICC), London Court of International Arbitration (LCIA), Vienna International Arbitral Centre (VIAC), The Arbitration institute of the Stockhold Chamber of Commerce (SCC), or International Centre for Settlement of Investment Disputes (ICSID), or European Court of Human Rights.
For your information, only the ICC last year has received 796 lawsuits from parties representing 139 countries and has rendered awards for 508 of them. Another interesting fact is that in 10 per cent of such cases the disputes are with states, whereas 22 per cent of the cases had a value under 1 million USD
Does this status of your firm create problems taking into consideration that your clients need permanently services from the Albanian public administration? This question is raised taking from the fact that you represent the party that one day ends up in a “fight” with the Albanian State, when its investment interests are affected or when Albanian State has allegedly breached the relevant agreements or Foreign Investments Law provisions.
– I may say that generally the public administration does not demonstrate a “hard line” or “door shuting” against law firms who act as counsel to their “adversaries”, but I do not exclude instances of prejudice on such firms, which is evident especially when it comes to tenders organized by the state or where the state has a say in the process of the selection of counsel. In other words, our technical/financial proposals to calls where our experience is obviously much more significant than of firms with minimum experience, the latter has been selected; and this has occurred even for sizeable and complex infrastructure projects, which we wish anyway to reach the closing, in the interest of all of us. So, the criterion: “this is with us”, “this is against us” is applicable in case of selection of legal counsel, too.
I believe that it is not only my view that it is more difficult to provide legal services in Albania now compared to two decades ago, when the legal profession was newly reintroduced and when the commercial law practice just got started. Two decades ago the first law on commercial companies and the first laws on the private enterprise were in their embryonic phase, it can even be said that they were in a phase where there functioning and implementation in practice were being experimented. The country had an outdated Constitution, a poor commercial legislation and a handful international or bilateral commercial agreement. The first lawyers started their private sole practice jumping from courts or prosecution. Only a few of them could communicate in foreign languages, except Italian language. Things have significantly changed nowadays for the following reasons:
Firstly, the legal infrastructure is more complex and one is required to be updated with the legislation passed, in order to be confident in the provision of accurate and comprehensive legal opinions and advices which have a significant impact regarding the professional liability as they serve as a an guarantee for the sustainment of authentic business strategies and projects from the investors and entrepreneurs and also from the financial institutions;
Secondly, the Albanian legal framework is being completed and approximated to acquis, which dictate the deepening and widening of knowledge for a fair and safe interpretation of the EU legislation, its doctrine and jurisprudence, so that mechanics of its application in the Albanian legal and institutional context can be well understood and accomplished in practice.
Thirdly, the legal market is experiencing an increase of competition due to entry of new law offices, including some Italian and Greek ones, some of which well organized and having recruited lawyers graduated from universities of western countries, thus caring for the standards and also going by the fair competition rules;
Fourthly, a category of counsel who adopt “quick and easy approach”, which I could otherwise translate as “grabbing opportunities” by recruiting lawyers who are affiliated have blood or in-law relations with government officials of various levels, who can facilitate such access to projects financed by the state budget or otherwise;
Finally, and regretfully, in the legal market some other counsel have found as way of successful the easiest one: acting as fixers thanks to special relationships forged with specific judges, who for sake of truth, not only have been seated incidentally on the chair where justice is expected to be rendered, but, oddly enough, have been also promoted in the ladder of the career within the judicial system.
You mentioned in the beginning of the interview that in some cases investors opt for termination of investment of service contracts and consequently they try to exit our market by suing the Albanian state. Can you say something more about this?
– This is a question that deserves consideration and a response, although arbitration procedures are considered as confidential. As a matter of fact, arbitration involving the state as a party should not be considered as confidential, because the arbitration affects the finances and budget of the state, and in case the state is the losing party in an arbitral proceedings it must inform the taxpayers how the budget is affected in any case and at all times. This requirement is hard to be circumvented also due to the fact that contracts that provide arbitration as procedure for the dispute resolution are approved by the Council of Ministers or ratified by the Parliament.
More specifically, the states, including Albanian state, when entering into agreements with private parties for various projects, financed by the state budget or otherwise by private parties as investments, in exchange for the right of privatisation or development, expressly waive the sovereign immunity, thus are being considered as a normal party to a commercial agreement. In case the state terminates the contract or the private party claims that the state is in breach of contract terms, such a private party has nothing but make use of dispute resolution mechanism under the contract. It is understandable that a private investor or service provider, in contracts where the state is a party, and as such, have significant values, will avoid suing the Albanian state before our courts, and it is now broadly known and accepted that even Albanians have lost confidence in the integrity of our judicial system. Such diffidence exists throughout the process, from the random pick up of files, to the dismissal of the recourses “in camera” in the Supreme Court. From our own experience, thanks to the direct involvement in the process, an also from researches of people in the department that handles litigation or arbitration procedures, the Albanian state has appeared as respondent in international arbitration for a dispute with a school project of Soros Foundation, which caused it to pay over 1 million USD; for a dispute with R/N Rhode Nielsen, from Denmark, which put a charge of 2.5 million Euros; for a dispute with General Electric, and the award put the obligation to pay around 17 milion Euros; for a dispute that is in process, with a US company operating in the oil sector, where around 800 millions of Euros are at stake.
You mentioned the International Centre for Settlement of Investment Disputes, located in Washington D.C., as one of the forums foreign investors approach. It would be interesting to hear something more about this forum.
– International Centre for Settlement of Investment Disputes, known as ICSID, is an international forum established as one of the pillars of the World Bank Group and functions in the ambit of the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which was ratified by the Albanian State in 1991, when Albania became a member of the World Bank and International Finance Corporation
ICSID functions as an international arbitral tribunal, but its initial jurisdiction on commercial disputes is conditioned on two facts: first – existence of a Bilateral Investment Treaty between Albania and the country of origin of the claimant, and, second – the claimant should be an investor. In other words, a company that develops an infrastructure under a contract financed by the state budget may hardly sue a state before ICSID, whereas, a company building an infrastructure asset based on a license or concession may, but its own financing, may as his financing is defined as investment. The history of ICSID with Albania takes originate in 1994 when Tradex Hellas brought a lawsuit, which ended up unsuccessful, against Albanian State for an expropriation in violation of Foreign Investment Law, to continue with another case in 1995, which resulted in an amicable settlement in 1997, the content of which is difficult to find. Later on, in 2009, the state was lucky to come out of the process safely, as ICSID dismissed the lawsuit submitted by the claimant Pantechniki S.A. Contractors & Engineers. At present, the Albanian state is threatened by two other lawsuits which are in process, as filed by Mamid Oil and the Joint venture Burimi S.R.L./Eagle Games SH.A. It seems that other cases may be added to this list, given that in the time of crisis anyone who suffers losses in investment ventures ill try find ways out to seek for indemnification, and the procedures just mentioned are perfect for achieving such an aim.
What do you think about the responsibility of the state when it comes to being sued as respondent in one or another arbitral tribunal?
– I would recommend that this question is more appropriate for the Head of the State High Audit or State Counsel or other relevant institutions. What I may say, though, is that the state must pay particular attention to the selection of legal counsel with experience in the area of contract negotiation. In addition, special attention should be paid to the compliance with the procedures in case of termination of contracts, because usually parties sue the state for termination without cause or material breaches of terms of contract. Thirdly, the state must be able to take all the steps for selecting counsel with considerable experience in arbitration, including ICSID, because they have sophisticated which require special experience. It is worth mentioning a fact. When MamidOil filed their case with ICSID, the State Counsel called for specialized legal services in the area of defense before ICSID. It turned out that the tender procedure was cancelled as the fee proposal of firms responding to the call was found to be high from the Ministry of Finance, so to my knowledge, a law firm from an EU country was selected, without a competitive tender, but obviously with limited experience in the area in question. Our firm, along with an international law firm, who ranks amongst the top 5 law firms worldwide, have expressed the willingness to sponsor an activity that would raise the awareness about the challenges that associate the arbitral proceedings and are awaiting e until a round table with attendants from relevant institutions and the legal community in Albania
Finally, what would you say about the enforcement of arbitral awards?
– I find this question to be perfect for ending the interview, as at the end of the day, all issues discussed above would be on hold. Ratification of the New York Convention On the Recognition and Enforcement of International Arbitral Awards in 2001 is a great achievement. Thanks to the adherence to such a Convention many arbitral awards, the overwhelming part of which belong to disputes between private parties, have been recognized and enforced. More specifically, the Court of Appeals in Tirana is the competent court that conducts the procedure of recognition and following the judgment of Tirana Court of Appeals the bailiffs can enforce the award, if the party having obligations under the award fails to do it voluntarily.
An issue that has been recently identified in connection with the arbitral proceedings is the uncertainty regarding the assistance that normal courts ought to provide to arbitral tribunals. Albanian judicial system, in other words, should contribute by giving oxygen to the arbitral proceedings, especially in the area of recognition of interim judgments. To be more specific, in many cases the party that approaches the arbitral tribunal needs to get some assurances that the arbitral award will be enforced and to this end, will seek for an injunction. Such an injection in theory can be issued by the arbitral tribunals, but in reality the formation of the panel of arbitrators requires some time and meanwhile an asset or a right that is the cause for the dispute may be transferred by the respondent thus making impossible the enforcement of the award. To overcome such situation the international conventions provide the right of parties to seek for injunctions from the normal courts of the state where the final award shall be enforced. From a limited number of court cases with this subject, it should be said that in our courts there is no clear understanding about the assistance they should provide to the arbitral tribunals in their preliminary phases of arbitral proceedings.
*Interviewed by Skender Minxhozi
