Arbitration dispute with Slovenia: BiH faces compensation of almost 700 million euros

(Patria) - The last day of October marks the deadline for the temporary suspension of arbitration before the court in Washington, initiated by Slovenia against BiH seeking compensation for investments made by the Slovenian Elektrogospodarstvo in the Ugljevik Mine and Thermal Power Plant.

The arbitration was temporarily suspended to allow the parties to attempt to reach an agreement and arrange the payment of damages that the Ugljevik Mine and Thermal Power Plant must pay based on commercial arbitration.

If an agreement is not reached, Bosnia and Herzegovina could face one of the largest compensations, amounting to almost 700 million euros, writes BHRT.

The temporary suspension of the arbitration proceedings before the court in Washington expires in two days, and it is not yet known whether Elektrogospodarstvo Slovenia and the Ugljevik Mine and Thermal Power Plant will reach a final agreement.

This agreement would concern the implementation of the commercial arbitration ruling, according to which RiTe Ugljevik must pay Elektrogospodarstvo compensation for undelivered electricity from June 2011 until the decision on the amount of damages on December 31, 2021.

More open issues have been resolved. The agreement on the payment of interest awarded by the commercial arbitration, as well as the issue of concluding the proceedings before the arbitration court in Washington, remain to be settled.

"The arbitration proceedings are currently on hold at the request of the parties, while negotiations are underway for a possible amicable settlement of the case. As the arbitration proceedings are still ongoing, we cannot comment on other details," stated Slovenian power companies.

While Slovenian power companies do not disclose negotiation details, the director of the Ugljevik Mine and Thermal Power Plant, Diko Cvijetinović, is optimistic. He says that negotiations are intensive and an agreement could be reached soon.

- Negotiations are intensive, almost on a daily basis, and we expect to have a final agreement very soon regarding the resolution of the remaining open items, so I expect the signing of the contract and a final solution to the dispute with Slovenia very soon.

The remaining issues are the agreement on resolving the interest portion and on closing, or withdrawing from, the arbitration in Washington - says Cvijetinović.

In case of failure to reach an agreement on the payment of the debt from the commercial arbitration, Bosnia and Herzegovina faces a compensation claim of 700 million euros, as arbitration proceedings against BiH were initiated simultaneously in case the obligations from the commercial lawsuit are not met.

If this is resolved, the BiH Legal Counsel believes that the dispute against Bosnia and Herzegovina would become moot.

"According to the opinion of the BiH Legal Counsel, which there are indications that the ICSID arbitration tribunal shares, the full implementation of the decisions from the commercial arbitration would render the investment arbitration proceedings moot.

The BiH Legal Counsel is monitoring the negotiations between EGS and RiTE Ugljevik and will take measures and activities within its jurisdiction as needed to conclude the investment arbitration in the interest of Bosnia and Herzegovina," announced the BiH Legal Counsel.

The Ugljevik thermal power plant, majority-owned by Elektroprivreda RS, must pay the Slovenians around 190 million euros. It is also obliged to deliver one-third of its produced electricity to Slovenia while operating. Agreements have been signed for most of the debt, but 67 million euros remain disputed.