Bulgarian state electric utility NEK decided against appealing the arbitration ruling that awarded damages to Russia’s Atomstroyexport for the reactors built for the shelved Belene nuclear power plant, after being advised by its legal counsel that such a challenge was unlikely to succeed.
Legal firm White & Case LLP said in a memo, made public on the Bulgarian government’s website, that NEK had the option of appealing the ruling in Swiss courts, but the grounds for an appeal were limited and Swiss courts “rarely accept challenges”. Additionally, the appeal would not halt the daily penalties imposed by the arbitration ruling and carried the risk that NEK would have to pay the other party’s legal costs in case of a loss.
The memo was drafted at the request of the Bulgarian Cabinet, with Prime Minister Boiko Borissov saying that he wanted full transparency regarding NEK’s decision.
The memo also provided an overview of the arbitration proceedings, revealing some details that were previously unknown, such as the exact claims pressed by Atomstroyexport that the arbitration court accepted and those that it did not.
Specifically, the panel awarded Atomstroyexport 212.5 million euro for unpaid invoices, 27.2 million euro for completed project milestones and about 347.7 million euro for works in progress. Atomstroyexport also claimed 263 million euro in lost profits, but was awarded only 32.5 million euro on that claim.
Its claims for escalation costs (84 million euro), scope of works (168 million euro) and subcontractor tender costs (7.5 million euro) were summarily rejected.
NEK’s own counterclaim to set-off some of the damages using unallocated advances worth 76.1 million euro was also accepted by the panel, but the ruling rejected NEK’s claim for 121 million euro for old equipment at Belene, which was sold to Atomstroyexport, awarding NEK only about 880 000 euro.
NEK was also in the process of correcting the exact size of the damages awarded by the arbitration tribunal. According to White & Case’s memo, Atomstroyexport has already accepted four of the seven errors pointed out by NEK, which will reduce the amount owed by NEK, but the memo did not specify by how much.
According to Deputy Energy Minister Zhecho Stankov, quoted by Bulgarian National Radio, the best case scenario would result in a reduction of the bill by 12 million euro.
Atomstroyexport, a division of Russia’s nuclear corporation Rosatom, was picked to build two 1000MW nuclear reactors at Belene on the Danube River, a project that was shut down by Bulgaria in 2012. It won the international arbitration case in June.
Over the past week, Bulgaria has moved swiftly to lay the groundwork for paying off the damages, with the Cabinet approving a bill on September 20 to give NEK a cash injection, which Parliament passed at first reading the following day and at second reading on September 28.
Still, an immediate payment is unlikely, as the Cabinet stipulated in the bill that it would only pay after receiving the approval of the European Commission, which must rule whether the money would represent legal state aid under EU rules.
(Belene nuclear plant site, screengrab from Bulgarian National Television)