Entes Industrial Plants Construction and Erection Contracting Co Inc v The Ministry of Transport and Communications of the Kyrgyz Republic - UNCITRAL Arbitration - Final Award - 29 September 2015
1. This arbitration arose out of a Contract concluded on 30 August 1999 between ENTES Industrial Plants Construction & Erection Contracting Co. Inc., acting as the Contractor, and Claimant in the present proceedings, on the one hand and the Ministry of Transport and Communications of the Kyrgyz Republic, acting as the Employer, and Respondent in these proceedings, on the other hand.
2. The Contract concerned the Second Road Rehabilitation Project Bishkek - Osh Road Civil works. It required that the Contractor rehabilitate two road sections of the Bishkek-Osh Road in the Kyrgyz Republic. The total Contract Price was US$43'839'882 plus 20% VAT in the amount of US$8'767'976.40.1 The project was funded by a loan of the Overseas Economic Cooperation Fund of Japan.
3. The contractual Time for Completion was 1'065 days with 3 December 2002 as completion date. The works were seriously delayed and completed only on 12 October 2005, 1043 days later than provided in the Contract. During the performance of the works, the Contractor made 5 extensions of time (EOT) requests which were partially granted.
4. At the end of the Project, in the Statement at Completion, the Contractor claimed for the cost of the prolongation in an amount of US$22'982'039.25.2 In his Determination of 18 May 2006, the Engineer decided that all 1043 days were "excusable"; he found that out of these only 150 days were "compensable" and granted US$1'161'870.19.
5. In the Statement at Completion, the Contractor also claimed additional compensation for a number of specific incidents which the Engineer granted partially.
6. The Contractor expressed dissatisfaction with the Engineer's Determination and requested an Engineer's Decision. This decision was issued on 16 October 2006 and confirmed the Engineer's Determination.
7. The arbitration was commenced by a Notice of Arbitration dated 15 January 2009. The Notice of Arbitration was communicated to the arbitrators on 31 July 2009. The Respondent sent Preliminary Comments on 21 August 2009. After consultations with the Parties about a draft Procedural Calendar and Outline Directions, including also financial conditions sent on 14 December 2009, the constitution of the Tribunal was completed and the directions issued on 22 December 2009.
8. The time limits set out in the procedural calendar had to be extended at several occasions, due to extensions requested by the Claimant, change in Government and suspension of powers of Counsel on the Respondent's side. Following the submission of the Statement of Claim on 15 March 2010 and the Statement of Defence on 31 March 2011, accompanied by large volumes of documentary evidence, expert reports and witness statements, the Tribunal held a Procedural Consultation by telephone on 27 April 2011 and gave further directions, concerning written submissions and an evidentiary hearing.
9. After a further Procedural Consultation by telephone on 6 September 2011, an evidentiary hearing was held from 18 to 21 October 2011 in Bishkek.
10. The Parties submitted further expert reports and Post-Hearing Briefs on 20 February 2012, followed by subsequent correspondence and claims for arbitration costs submitted in February 2015.
11. The Tribunal deliberated in person at the end of the hearing in Bishkek and by correspondence. It adopted this award unanimously.
12. The Tribunal and in particular the Presiding Arbitrator regret that, due to a number of unusual events during the course of the proceedings, the extraordinary factual complexity especially of the principal claim for Prolongation Costs and other circumstances delaying its work, this Final Award is rendered later than the Tribunal had hoped.
19. THE DECISION
779. On the basis of the considerations set out above, the Arbitral Tribunal renders the following decision:
(i) The Respondent must pay to the Claimant
(a) US$16'275'156.88 on account of the claim for Prolongation Costs;
(b) US$59'506 on account of the claim for interest on late payment;
(c) US$53'968.71 on account of the claim for Guardrails;
(ii) The claims on account of (a) Value Added Tax, (b) Road and Emergency Tax, (c) Equipment Damaged During Political Unrest, (d) the Interakt case, (e) the Road Grader Case and (f) debts of the Nominated Subcontractor JASU are dismissed;
(iii) The amounts awarded bear interest at one month LIBOR plus 2% from 13 May 2006 until full settlement;
(iv) The Respondent shall pay US$225'000 to the Claimant on account of the share of the Tribunal's costs and fees advanced by the Claimant plus interest as per above (iii) from the date of this award;
(v) A party that pays the share of the other Party in the additional amount ordered by the Tribunal in the Procedural Order on Cost shall be entitled to reimbursement of this payment.
(vi) Each Party shall bear its own costs of the arbitration.
Done at Bishkek on 29 September 2015
Professor Turgut Öz
Professor Sergei Lebedev
Michael E. Schneider
Footnotes omitted from this introduction