FBiH Government Hid Two Million BAM for Arbitration Costs in Zurich from the Public

(Patria) - The FBiH Government, at its 290th session held on November 11, 2021, adopted a conclusion tasking Energoinvest and BH-Gas to represent the interests of the FBiH Government in arbitration proceedings with the Hungarian gas transporter FGSZ. 

This conclusion was not published in the report from the FBiH Government, thus remaining inaccessible to the public. The dispute arose from the failure to fulfill contractual obligations towards FGSZ, i.e., non-payment of three consecutive advances under the contract with FGSZ, which Energoinvest never terminated despite being obliged to do so at the request of the FBiH Government. The dispute is worth USD 21.1 million, and the defendants are the FBiH Government (as guarantor of contract performance until 2023), Energoinvest, and BH-Gas. The Government decided to task these two companies to represent it in Zurich before the arbitration panel. 

Why this conclusion was hidden from the public is unknown, but it will not absolve the FBiH Government of responsibility for the Letters of Comfort and Consent issued to FGSZ, thereby guaranteeing contract performance until 2023. 

By switching to TurkStream, the FBiH Government knowingly entered into a dispute because the Hungarian transporter will not forgo the revenue guaranteed by the FBiH Government. 

To fulfill the FBiH Government's conclusion, Energoinvest and BH-Gas were tasked with hiring a law firm to represent them before the arbitration panel. This representation is estimated at BAM 690,000, and the engagement of the arbitration panel is estimated at BAM 290,000. 

Almir Bečarević, a gas expert, said that the start of the arbitration process will require approximately BAM 1,000,000, which is not the final amount for this dispute. 

"In addition to these costs, funds will almost certainly be needed for the expert assessment of the entire process related to contract termination. Given that this dispute will be easier to lose than to resolve positively, the estimated value of the costs of losing the dispute, in my opinion, will be around BAM 2,000,000.

To summarize, the dispute value is USD 21.1 million, costs are BAM 2,000,000, and more expensive gas from TurkStream. All of the above for the arbitration dispute will fall on the shoulders of Energoinvest and BH-Gas, while the switch to TurkStream and the higher gas price will ultimately be paid by consumers. In the end, everything will be paid by citizens and industry, which will be visible as early as January 2022. 

I note that during the switch to TurkStream, no analysis was conducted by the FBiH Government, making it clear why the conclusion was hidden from the public," said Bečarević.

We recall that the biggest advocates of switching to TurkStream without first terminating the existing contract were Minister Nermin Džindić (SBB) and Prime Minister Fadil Novalić. Complete dossiers on everything have been submitted to the Federal Police Administration.