Public company Srbijagas initiated international investment arbitration proceedings against Lithuania, the specialized international legal portal Global Arbitration Review (GAR) reported.
Serbian state-owned company before a specialized international arbitration tribunal, which has not yet been appointed, accuses the judiciary of the Baltic state of devaluing the million-dollar arbitration verdicts that Srbijagas previously won, which refer to Azotara from Pancevo, with long-term court delays, reports eKapija.
Through this procedure, Srbijagas is trying to compensate claims which, according to estimates, with late interest and the costs of a multi-year trial, could reach up to 20 million euros.
The Serbian side was represented by the Lithuanian law office Motieka&Audzevičius in connection with the dispute over the privatization of Azotara.
Since the Lithuanian businessmen have gone bankrupt in the meantime, the Serbian company is now seeking compensation directly from the state of Lithuania.
The legal basis for this lawsuit is found in the current Bilateral Agreement on the Protection of Investments (BIT), which Serbia and Lithuania signed in 2005, which allows investors to initiate international disputes against the host country.
Corruption, interruption, corruption again
eKapija stated that the root of this complex legal knot goes back to 2006, when a consortium of Lithuanian companies, led by the UAB ARVI ir ko group and the Sanitex company, in partnership with the domestic Universal Holding, bought the Pančevo Azotara for 13,1 million euros, but the cooperation was soon terminated.
In the official reports of the Anti-corruption Council of the Government of Serbia, it was later stated that the investors alienated the key production facility of the Carbamid 2 factory, which was sold to buyers from Russia, contrary to the contract, and that the factory was financially burdened through related companies abroad.
Due to non-fulfillment of contractual obligations, the State of Serbia terminated the privatization in 2009, and Srbijagas took over the management and the majority package of shares.
The termination of the purchase agreement triggered the first major international arbitration in the same year, in which Serbia suffered a financial blow, as Lithuanian investors filed a lawsuit against the Serbian state, claiming that the privatization was terminated illegally and demanding compensation of over 50 million euros.
The International Court of Arbitration ruled in favor of the Lithuanians, obliging Serbia to pay them around one million euros in compensation for the manner in which the factory was confiscated.
The sale and subsequent damage to Azotar had its criminal-legal echo in Serbia as well, given that the privatization of Azotar was part of the report on the controversial 24 privatizations, you stated from eKapija.
HIP Azotara initiated an official lawsuit for damages in the amount of 45 million euros before the Commercial Court in Belgrade.
In 2012, domestic media reported in detail on the actions of the Prosecutor's Office for organized crime, the filing of indictments and the arrest of former local managers and members of the consortium due to suspicion that the state was damaged by the illegal sale of plants in the amount of millions.
Lawsuit
After taking over the management of Azotar, Srbijagas legally inherited the claims for damage caused by the Lithuanians to the factory before the termination of the contract and initiated international disputes before the International Chamber of Commerce (ICC) and the Vienna International Arbitration Center (VIAC). A total of four arbitration decisions were made, confirming the obligation of the Lithuanian side to compensate damages of eight million euros.
During the foreclosure process in Lithuania, the legal portal CEE Legal Matters reported that Srbijagas' lawyers successfully challenged the property transfer contracts that the owners of the Arvi group had made to third parties before the Court of Appeal there, returning assets of around 40 million euros to the bankruptcy estate.
However, due to the final bankruptcy of the Arvi holding, the actual payment was missed, which led to the initiation of the latest investment lawsuit.
The trials before the Lithuanian judiciary lasted for almost ten years.
Although the Supreme Court of Lithuania made a final decision in favor of Srbijagas in February 2024, the Serbian side now has an argument that the long duration of the process made actual payment impossible.
According to the prosecutor's position, during the decade of court waiting, the original debtors from the Arvi group entered bankruptcy and transferred part of the property to third parties, which made the judgments obtained in practice uncollectible, which is why the responsibility for the resulting financial damage is now addressed directly to the state of Lithuania.
As shown by the official chronology followed by the CEE Legal Matters portal, Srbijagas enters this procedure from the position of a proven creditor who already has a final victory before the Supreme Court of Lithuania.
However, in front of the new international tribunal, the Serbian company now has a much more difficult task.
They must prove that the state of Lithuania violated the investment protection treaty by allowing its courts to drag out the enforcement process for a decade.
In the practice of investment disputes, the standard for proving "denial of justice" by a state is extremely high, which is why Srbijagas will have to prove a direct cause-and-effect relationship between the slowness of the courts and the impossibility of debt collection.
If Srbijagas succeeds in the proceedings, the case could represent one of the few examples in international investment arbitration that a state-owned enterprise from a country that is a candidate for membership in the European Union receives compensation from an EU member state due to alleged failures of its judiciary.
New owners – problems again
While Srbijagas in the Baltic is fighting for old debts, the Pancevac plant itself has gone through new ownership transformations.
After bankruptcy proceedings were opened against it in 2018, Azotara was bought in 2021 by the domestic private company Promist for around 5,5 million euros.
A new international economic conflict recently broke out around the factory with the American corporation Nitron Group over alleged debts, which are currently being processed before the domestic judiciary.
While commercial disputes continue, the current plans for the location of the Pančevo factory envisage a change of land use and the construction of a modern data center on the site of the former largest producer of mineral fertilizers and nitrogen compounds in the entire former Yugoslavia.
Source: Biznis.rs
Real journalism costs money, and we will not be bought by tycoons and corporations. Support us with a one-time or monthly donation. The time for it is now!
