CEAC Holding, owned by Russian businessman Oleg Deripaska, has lost an arbitration with the International Centre for Settlement of Investment Disputes (ICSID) against Montenegro on the bankruptcy of the country’s aluminium smelter KAP, the Montenegrin economy ministry said in a statement on July 27.
In 2014, CEAC filed a claim for €600mn against Montenegro with ICSID, saying that the decision of the country to declare KAP bankrupt in 2013 has violated the trade treaty protecting Cypriot investment in Montenegro. CEAC had a 65.43% stake in KAP before the bankruptcy.
“ICSID… has ruled that CEAC does not have a headquarter on the territory of Cyprus, therefore it is not a foreign investor according to the terms of the applicable international agreement for protection of foreign investments,” the government said in the statement.
It added that, according to ICSID, CEAC was not eligible to file this type of claim, and the company has to pay the €900,000 arbitration costs.
“We are disappointed by the tribunal’s decision. We will reach a decision on our course of action once we have studied the entire 80-page decision in full,” CEAC said in an emailed reply to bne IntelliNews.
In June, Montenegro won another case on KAP’s bankruptcy. The London Court of International Arbitration (LCIA) then dismissed arbitration on the claim filed by Russia’s VTB Bank against the bankruptcy of KAP. Following this ruling, Montenegro’s commercial court was allowed to complete the bankruptcy proceedings of KAP, Montenegro's largest industrial company.
VTB Bank had filed a claim with LCIA, seeking a court ruling against the bankruptcy declared by the smelter, and to receive more than €30mn unpaid liabilities. Back in 2010, KAP stopped sending aluminium to its sole client Glencore after it established that the sales revenue paid by Glencore into KAP’s account at VTB had been seized by the lender.
In 2014, Montenegrin privately-held firm Uniprom signed a deal to buy KAP for €28mn. However, a Cyprus court has banned the sale of KAP’s assets at the request of the company's former owner - Russia's En+ Group of businessman Oleg Deripaska. The ban concerned any transactions with KAP's assets, bank accounts and aluminium it has produced.