Albania has been ordered to pay the construction consortium of the Tirana-Elbasan highway over $ 44 million in unpaid bills and taxes plus almost $ 1 million in court costs.
The Tirana-Elbasan highway began construction in late 2012, financed with a $220m loan from the Islamic Development Bank.
The builder was a Greek-Kuwaiti consortium consisting of Copri Construction Enterprises WLL of Kuwait and Actor SPA of Greece.
A dispute between the construction consortium and the Albanian Road Authority arose in 2015, when the builder submitted two requests for payment of additional construction costs and extension of the construction deadline, respectively for Segment III (Tirana until the entrance of the tunnel) and Segment I (from the exit of tunnel to Elbasan) of the highway.
The additional costs required by the builder were approximately $ 31.2 million for Segment I and approximately $ 14 million for Segment III.
Under the contract, these requirements were evaluated by the project’s independent engineer — the Lebanese company Spectrum Engineering Consultants SARL., respectively $ 25.2 million and about $ 11.7 million.
The Albanian government did not agree with the evaluation of the independent engineer claiming a lower cost, but the builder also did not agree with the evaluation by insisting on the cost presented by him.
Consequently, the parties had to undergo the dispute resolution process.
Because a body provided for in the contract for the amicable settlement of disputes, the Dispute Resolution Board was not established, the parties agreed to establish for each case of dispute a special board called the Amicable Dispute Resolution Board.
This board should consist of three members, one representative from each party and a chairman elected by consensus by two representatives.
In order to enable this solution agreed between the parties, the initial contract had to be amended in an agreement between the parties. The amendment was signed in July 2017 by representatives of the Copri + Aktor consortium and the Director of the Albanian Road Authority Dashamir Xhika.
For the two uncoordinated claims for compensation, a special board was set up to review the disputes, in September and October 2017. The board found the engineer’s assessment fair by confirming the value of unpaid government costs to the builder for each road segment.
According to the amendment of the contract, if neither party objects to the decision of the board within a certain period, it becomes binding.
The road authority did not challenge the decision within the deadline and as a result it became mandatory by December 2017 to pay the builders.
The authority refused to make the payment, which forced the builder to turn to the International Court of Arbitration in Paris.
In addition to paying the obligation for the cost of the works, the builder also demanded the payment of VAT on these works.
For its part, the government opposed the builder’s lawsuit with some technical arguments, claiming three points:
– The changes made in the contract for the establishment of the friendly board were made in an irregular legal manner and in violation of the contract itself, therefore they are invalid and consequently the decisions of the board are invalid.
– Since the builder is registered as a joint-stock company in Tirana and the changes in the contract are administrative changes, the validity of these changes is the jurisdiction of the Albanian administrative judicial system and not international arbitration.
– The government also opposed the payment of VAT on the grounds that the works financed by the loan are exempt from VAT.
The arbitral tribunal, in addition to the allegations of the parties’ arguments, reviewed the written assessments and heard two experts agreed by each party: technical and heard the expert selected by the plaintiff Fato Lazimi for the plaintiff Copri + Vektor and Joana Qeleshi for the government.
After reviewing the case, the arbitral tribunal decided to accept the builder’s claim by ordering the government to pay:
—An additional unpaid cost to the builder in the value set by the independent supervisor engineer of approximately $ 36.9 million — $ 25.2 million and $ 11.7 million, respectively, for Segment I and Segment III.
– Payment of VAT on the above cost approximately in the amount of $ 7.4 million.
– The cost of arbitration costs in the amount of approximately $ 593 thousand.
– The cost of the plaintiff, the winning party, in the amount of $ 162 thousand.
In total, the government has to pay about $ 45.1 million— $ 44.3 million in unpaid costs plus VAT and about $ 761,000 in process costs.
To the total cost must be added hundreds of thousands of euros more costs of the Albanian state for defence in international arbitration.