Georgia loses dispute with Russian energy company Inter RAO

Georgia has lost a dispute with the Russian energy company Inter RAO in international arbitration and is required to pay the company about $76 million for illegal termination of contract.

The case concerns a failed 2012 contract. At that time the current mayor of Tbilisi, Kakha Kaladze, was the Minister of Energy of Georgia. Under the agreement, Georgia pledged not to reduce the electricity tariff for fifteen years, and in return the company invested $190 million in Georgia and built three hydropower plants.

In 2014 the National Regulatory Commission of Georgia decided to change the method ofcalculating electricity tariffs. The amendment did not mention the currency devaluation guarantees mentioned in the 2013 agreement.

In 2016, before filing a complaint with the court, the company applied to the Georgian government with a request to change the tariffs, which the government did not satisfy.

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“This contract was terminated for one reason — the ruling Georgian Dream party partially fulfilled its populist promise, the tariff for certain categories of consumers was reduced, and therefore the contract was terminated. However, the tariff increased again at the end of that year and has been rising irreversibly ever since. As a result, Georgian taxpayers will lose about 300 million lari [about $113 million], and another 600 million lari [about $226 million] of foreign direct investment in Georgia was not realized,” Tazo Datunashvili, a member of the opposition Lilo party, said.

He also wonders why, during the Georgian Dream period, the Georgian government completely withdrew its stake in Telasi and why “there was no leverage to control the management of the company.”

“We immediately demand from the government, from the Minister of Economy, an assessment of this fact and explanations of this matter,” Datunashvili says.

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In 2021 Georgia lost a dispute related to the same companies in the Stockholm Arbitration Court, although the authorities then appealed this decision.

As the Ministry of Justice of Georgia has reported so far, the Russian company demanded a payment of $200 million, but according to the decision of November 23, 2021 the government was ordered to pay $80.5 million.

The Russian company appealed for the amount of compensation and raised it to $112 million.