ICL Group subsidiary ICL Europe Coöperatief UA has had its claims against the Ethiopian government rejected by the Hague-based Permanent Court of Arbitration, the Tel Aviv-based company said on July 12. The court rendered its award on July 9 and has ordered ICL Europe to pay approximately $2.5 million as reimbursement of arbitration costs.
ICL Europe started the arbitration in May 2017 to assert claims against Ethiopia under the Netherlands-Ethiopia Bilateral Investment Treaty (BIT), seeking compensation for losses to its investment in its Ethiopian potash project due to alleged mistreatment by the Ethiopian Government (GM May 12, 2017). ICL first bought into the project in 2014, taking full control the following year.
In particular, ICL Europe claimed the Ethiopian tax authority imposed a “discriminatory, arbitrary and baseless” tax on ICL Europe’s Ethiopian project company, Allan Potash Afar Plc.
“Despite indications that Ethiopia’s tax assessment was flawed, the tribunal interpreted the BIT as significantly limiting the BIT’s protections in relation to the disputes regarding taxation,” ICL said in its July 12 statement.
“Among other things, this had the significant effect of precluding ICL Europe’s claims that Ethiopia violated the requirement to accord fair and equitable treatment to ICL Europe’s investments in Ethiopia,” the Israeli group said.
The ICL Group expects that the arbitration award will not have a material impact on its financial statements.
ICL closed down its Ethiopian potash venture in October 2016 amid deteriorating relations between the company and the Ethiopian government (GM Oct. 7, 2016). The venture originally had envisaged the development of a new mine for the production of up to 1 million mt/y of potash.
ICL had cited several factors behind its decision to pull the plug: lack of support for the construction of the necessary infrastructure; the regulatory environment; a tax authority decision regarding an appeal; the price of electricity from the state-owned utility; and issues with water supplies.
Later that same month, the Ethiopian government confiscated ICL bank accounts in the country (GM Oct. 21,2016). Israeli media reports at the time said that ICL had taken the possibility into account and had left only small sums of money in the accounts.
In May the following year, Ethiopia took over Allana Potash Afar’s potash mine concession.
ICI acquired a 16 percent stake in 2014 in potash junior Allana Potash Corp., Toronto, which owned the potash assets, with an option to increase its holdings to 37 percent (GM Feb. 17, 2014). But in the following year, the Israeli group acquired all outstanding shares that it did not already own for C$137 million from Allana Potash Corp., which gave it full control of the project. (GM March 30, 2015; June 22, 2015).