Czech Republic delays EU-Georgia deal over Energo-Pro dispute

By bne IntelliNews March 13, 2015

Monica Ellena in Tbilisi -


When Georgia signed the Association Agreement with the European Union last June, Prime Minister Irakli Garbashvili enthusiastically predicted that the country “will become a full member of the European family”. Then European Commission President José Manuel Barroso cautiously added that the agreement is “not the end of the road”.  

The road has indeed not been bump-free for Georgia, which is also battling with an economic slowdown and a depreciation of its national currency. On March 9 the Czech Republic postponed to April 1 the ratification of the European Union’s Association Agreement with Georgia, proving that the confirmation process is not a pure formality. The decision came as a Czech energy company, Energo-Pro, is entangled in a dispute with Georgia’s finance ministry, which demands the company pay $60mn.

According to Georgia’s finance ministry, Energo-Pro was fined following a financial audit in 2014, while the company calls the fine “a special tax”. The Czech company, one of Georgia’s biggest foreign investors, has disputed the legitimacy of the financial demand and has so far refused to pay.

Energo-Pro Georgia, a 100% subsidiary of Czech company Energo-Pro, owns 15 hydropower plants and one gas-turbine power plant in Georgia and has over 1mn customers in the country. Besides the Czech Republic and Georgia, Energo-Pro operates in Bulgaria, Armenia, and Turkey, with a total installed capacity of more than 860MW, and it employs about 8,000 people.

Georgia’s Finance Minister Nodar Khaduri said the current dispute is “just an ordinary revenue case” related to the company and shouldn’t have any influence on diplomatic relations between the two states.

Khaduri said the ministry asked the company at the last meeting to present additional documentation in support of their position. “In certain part we satisfied their demands, as we considered them to be fair. In another part we didn’t agree. There is a third part of the case for which the company will have to introduce further documents to prove that the money was spent for its own activities,” Khaduri continued.

Georgia’s Energy Minister Kakha Kaladze, who also serves as vice prime minister, downplayed the whole affair, saying that “nothing special” is happening. He told reporters that the finance ministry discovered violations and reacted, and if the company believes that anything was unfair, the dispute can be negotiated to reach some consensus.

Kaladze called the speculation “unhealthy propaganda” as the dispute “has nothing to do with this Association Agreement, and it is a part of the dirty propaganda that some television are conducting”.

Czech Foreign Minister Lubomir Zaoralek confirmed to the Czech daily Lidove Noviny that the agreement has been sitting in the lower house of the parliament for the past six months. Its ratification has been delayed in order to protect the investments of Energo-Pro in Georgia, the paper added.

A large part of the Association Agreement and the Deep and Comprehensive Free Trade Agreement already came into force provisionally starting from September 1, 2014, but the agreement has to be ratified by all  EU member states.

So far, 13 countries gave the green light to the agreement, plus the European Parliament (EP), which voted in favour last December. In the accompanying resolution the EP welcomed the Georgian authorities’ “recent reforms” to “strengthen” democratic institutions, but it also expresses concern about “the lack of accountability of the prosecutor’s office” and about numerous former government officials and current opposition figures being charged and imprisoned.

The resolution also “expresses concern” over “the potential use of the judicial system to fight against political opponents, which could undermine Georgia’s European course and the efforts of the Georgian authorities in the area of democratic reform”.

The country’s reform agenda was also central in a recent meeting in Brussels between Georgia’s PM and the European Council’s president, Donald Tusk, who called on the country “to advance substantially” its reforms, including in rule of law, judiciary and prosecutor’s office, and to foster “political climate of respect”.


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