Henriette Schröder
The Turkmen Initiative for Human Rights (TIHR) reports the most recent information about the contracts for construction projects in Turkmenistan, which were concluded between the German Chemnitz-based engineering company Unionmatex Industrieanlagen GmbH and Turkmengallaonumleri Grain Products Association (GALLA) in 2008. The projects were to include the turnkey construction of five flourmills and two small shopping centers with integrated bakeries in several Turkmen localities.
A further contract was signed in the course of 2008 for the construction of one more shopping center.In total, the contract sum amounted to around 144 million Euro.
The building works were to be finished by 2011.
However, the shopping centers and flourmills were never built.In summary, between 2008 and 2014, due to, among other things, the regular intervention of Turkmen authorities at the construction site as well as GALLA’s persistent refusal to pay the German company Unionmatex was eventually forced to discontinue their business operations and file for insolvency in 2014.
After several attempts at an out-of-court settlement failed, the insolvency administrator of Unionmatex Dr. Herzig of the law firm Schultze & Braun filed a lawsuit against Turkmenistan with the International Arbitration Court for Investment Disputes, based at the World Bank. On 14th November 2018 the court accepted the lawsuit.
The TIHR contacted the law firm Schultze & Braun for information about the lawsuit.Ingo Schorlemmer, their press spokesperson, provided the TIHR with the below press release, which was issued on the day the court accepted the lawsuit.
Currently arbitrators for the case are being chosen.As soon as the hearings before the arbitration court regarding the content of the lawsuit proceed the TIHR will report the latest developments.
Schultze & Braun
Press Release
November 2018
International Arbitration Court accepts lawsuit by the insolvency administrator of Unionmatex Industrieanlagen GmbH against Turkmenistan
Massive unlawful obstruction of the Unionmatex Industrieanlagen GmbH’s construction projects by the Turkmen state is primarily responsible for the subsequent insolvency of the Chemnitz-based company.
Insolvency administrator Dr. Herzig of Schultze & Braun claims at least 32 million euros plus interest.
Herzig: “I believe this to be a significant step along the way for the creditors of the Unionmatex Industrieanlagen GmbH to receive at least to some extent rule of law and justice.”
Chemnitz. The insolvency administrator of the former engineering firm Unionmatex Industrieanlagen (industrial plants) GmbH, Dr.Dirk Herzig of Schultze & Braun has filed a lawsuit against Turkmenistan with the International Centre for Settlement of Investment Disputes (ICSID).
He thereby draws on the German-Turkmen investment agreement of 1997.Dr.Herzig accuses the Turkmen state of being primarily responsible for the insolvency of Unionmatex by exerting massive influence on joint construction projects.
With this lawsuit Dr.Herzig asserts claims amounting to at least 32 million Euros plus interest.The ICSID has registered the case under case number ARB/18/35 on 12.
October 2018. “I believe this to be a significant step along the way for the creditors of Unionmatex Industrieanlagen GmbH to receive at least to some extent rule of law and justice.
We also want to make a contribution to ensure that investments by German entrepreneurs are effectively protected in future.As the Unionmatex case illustrates, there is still a lot of room for improvement.”
Background:
In 2008 Unionmatex initially concluded contracts with the Turkmengallaonumleri Grain Products Association (GALLA) regarding the turnkey construction of five flourmills and two small shopping centers with integrated bakeries in several Turkmen localities.
GALLA is a state-owned company for agriculture and grain processing under the control of the Turkmen Ministry for Agriculture.In the course of 2008 yet another contract was signed for the construction of a further shopping center.
In total, the contract sum amounted to around 144 million Euro.The building works were to be finished by 2011.
However, from the outset of the work there were delays, as Turkmen authorities didn’t issue customs and visa releases in time or GALLA didn’t make agreed deposits.
Furthermore, there was no gas, water or energy at the construction site, even though GALLA had assured this.At the same time, GALLA and other Turkmen authorities regularly intervened at the construction sites, making it even more difficult to complete the plants on time.
The delays led to a massive increase in Unionmatex’ costs.After a temporary construction freeze at the end of 2010, Unionmatex and GALLA finally agreed on an additional remuneration of the extra costs for the Chemnitz-based company amounting to 14 million Euro.
Subsequently though there were further difficulties due to the interference of Turkmen authorities and GALLA’s persistent refusal to pay.After another construction freeze at the end of 2011, GALLA initially took over the further construction itself with unauthorized workers, but was unable to finish the projects.
After unsuccessful negotiations involving the highest political circles, GALLA finally filed a lawsuit against Unionmatex with a Turkmen court in August 2012 to have the existing contracts annulled. The court granted this, GALLA awarded the projects to Turkish companies.
However, the course of the proceedings contradicted all fundamental principles of the rule of law. For example, Unionmatex was prevented from bringing a translator to the hearing. Unionmatex’ lawyer felt pressured by the Turkmen government to such an extent that he resigned his mandate even before the hearings began.
An action filed by Unionmatex in October 2012 for payment of the company’s final remuneration and the release of expropriated construction machinery, has been delayed by Turkmen courts for years. The outstanding payments eventually forced Unionmatex to discontinue their business operations and file for insolvency in 2014.
After several attempts at an out-of-court settlement failed, Dr.Herzig is now taking legal action with the international court of arbitration for investment disputes, which is based at the World Bank.
Dr.Herzig is supported by a number of specialists from the international section of Schultze & Braun (Dr.Annerose Tashiro and Manuela C.Becker-Schnurr) as well as by an experienced legal team from the law firm Gleiss Lutz (Dr.
Stephan Wilske, Todd J.Fox, Dr.Laura Bräuninger), which has already successfully contested a comparable case.
Contact: Press spokesperson: Ingo SchorlemmerMail: ISchorlemmer@schultze-braun.de,Telephone: 07841/708-128