Warsaw, Poland : An American & Canadian-owned company EuroPort Inc. Poland, based at Gdansk – the largest sea-port on the Baltic – struggles against the country’s bureaucracy. Renaissance Trust of Mr. Joseph D’Andrea in Pennsylvania, U.S.A., and Dessaport International Corporation of Mr. Donald LeBlanc of Nova Scotia, Canada, invested over US$ 34 Million into a Grain Terminal Project in the Northern Port of Gdansk over 10 years ago. But the construction of a huge, state-of-the-art deepwater transshipment hub for grain and other agricultural products to serve Poland, Eastern Europe and the Baltic Sea area has been stopped by local opposition involved in competing interests.
The EuroPort project was “killed” in 2002 by the then Port Management Board (ZMPG) politically linked to a post-Communist Government and its business interests network. Since then, the American and Canadian investors were fighting against the Polish bureaucracy that was not interested in the finishing of the Grain Terminal, in spite of the fact that it had been half-ready and the construction remained on the site.
Instead of finding a practical solution of the problem, the port management board (ZMPG) started protracted arbitration trials against EuroPort company, demanding excessive lease payments from it for the ground and pier EuroPort could not use, having been earlier deprived of the right to the lease by the same board. The real purpose was to push the foreign-owned company to bankruptcy and to take over its property without any financial compensation. It can’t be called a decent manner to do business and the way the subsequent port management boards acted for several years was clear breach of the bilateral commercial and investment Treaties, signed by Poland with Canada and the United States.
The Polish sea-ports, including the strategic Port of Gdansk Authority Ltd, are owned by the State Treasury, which has much to say about the ports’ economic policy, nominating of the key personnel and drawing Polish and foreign investments. Yet the Ministry of the State Treasury did virtually nothing to influence the port of Gdansk management to change their erroneous policy and to find a practical way to save EuroPort’s investment that could bring millions of US dollars in income to the port over the last ten or more years. It’s a paradox, reminding of the Communist times when almost everything in the country was owned by the state and a state property could be kept idle for years and nobody was held responsible for that. The ground and pier, leased to EuroPort in 1995, was a devastated “no-man’s land” for the last 30 years. When the American and Canadian investors leased it from the Port Authority, it could have begun to work and bring profits.
But, it seems, nobody cares.
EuroPort fights back
The foreign-owned company, EuroPort Inc. Poland, was on the defense for several years past, struggling in Polish courts against illicit attempts to evict it from the legally leased building site in the Northern Port of Gdansk. In 2005, EuroPort won back its right to the lease of the ground and pier by an award of the Arbitration Tribunal at the Polish Chamber of Commerce in Warsaw. But a year later, the company was deprived of its lease rights again by a lawless decision of the Management Board of the Port of Gdansk (ZMPG), for not having paid the lease arrears. That decision was formally confirmed then by a local court. When a decision had been taken to evict EuroPort from its site leased since 1995, Polish authorities did not pay attention to the fact that at least since 2002 the company was being prevented from completing the construction, and thus it couldn’t collect any income from operating the grain terminal. Previous efforts to find new bank loans and investors have been flatly rejected by the post-Communist port management.
But in 2008, the situation changed at least to the effect that the case of discrimination against the American-Canadian company became a public issue, involving the European Commission in Brussels, which received EuroPort’s complaint against the Port of Gdansk Management Board (ZMPG) and the Polish Ministry of the State Treasury (MSP). This fact was widely reported in Polish and international media. For example, in October 2008, The Warsaw Business Journal reported in its cover story ”Profit and Loss” about the EuroPort investors’ sad plight in Poland:
“What happened, as both D’Andrea and LeBlanc explained, is that in 2002 the board of directors at the Port of Gdansk Authority (ZMPG) changed and that’s when their company’s uphill battle began. Since 2002, both investors have been in and out of court, alleging that ZMPG blocked the completion of their investment and has voided their lease and their contract while depreciating their property. “They had a master plan here. They’re clever. But, what they didn’t figure on was us lasting this long,” said D’Andrea. “I’m a 75-year-old guy. I worked in Nicaragua. I worked in Morocco. I worked in Kosovo, and I’ve never been treated like I have been treated in Poland. Isn’t that sad?” he added.”
In 2009, the EuroPort’s complaint was submitted to the Polish competition authority, the Office for Competition and Consumer Protection (UOKiK), where it was processed without any result. At the same time, the case of EuroPort was brought to the attention of several big law offices in theUnited States and in Europe, which were ready to defend the Canadian and U.S. Investors of EuroPort at a chosen international arbitration court in the U.S.A. or in Europe.
The “Global Arbitration Review” in London reported about this in its February 2009 issue:
“A US and Canadian joint venture is said to be days away from filing for international arbitration against the Polish government over a grain terminal (…) According to the Canada-Poland bilateral investment treaty, if a dispute cannot be amicably resolved, it will be settled under UNCITRAL rules. As for the US-Poland bilateral investment treaty, it allows for disputes to be resolved under UNCITRAL rules or registered at ICSID.”
(Note: UNCITRAL is United Nations Commission on International Trade Law and ICSID is International Centre for Settlement of Investment Disputes.)
The London-based professional magazine further presented the EuroPort case in a following way:
”The US$ 76 million project to build a deep-water grain terminal to handle large vessels, the first in Poland, was approved by the Polish Port Authority in 1995 with backing from the European Bank for Reconstruction and Development and the Royal Bank of Canada. The construction began in 1998 but was shut down in 2002 when a new board of directors took over Port of Gdansk Authority. The joint venture says a consortium of Polish politicians and businessmen used local courts, intimidation and threats of violence to stall the project.
The Polish government, however, contends that the investors owe roughly US$ 18 million to the port authority.
Last year, the company sent a letter of complaint to the European Union, accusing the Polish government of “discriminatory and hostile actions”, in its attempt to nullify a 25-year lease for the project without compensation. The investors lodged the complaint with the European Commission’s Directorate General for Competition, alleging EuroPort has suffered losses totalling US$ 183 million as a result of actions by the Port of Gdansk Authority and Poland’s Ministry of the Treasury.
The investors have also approached Polish courts, as well as the Court of Arbitration of the Polish Chamber of Commerce.”
The ball’s back in Poland’s court
A big law firm operating from its HQs in Washington D.C. in America, Europe, Asia and Australia, addressed two letters to the Prime Minister of Poland, Mr. Donald Tusk, averting him of a forthcoming legal action against Poland. It never got any answer from the Prime Minister’s Office in Warsaw but two letters were penned by a State Secretary of the Ministry of the State Treasury, Mr. Jan Bury. At first, the Ministry rejected the accusations of EuroPort on grounds of the Polish law. But in the last letter, dated April 17, 2009, the State Secretary, acting on behalf of the Republic of Poland, opened a way for direct negotiations with the American law firm to solve the dispute amicably. The first consultation took place in the Ministry on June 23, 2009. More talks are expected to find a mutually acceptable solution.
This is not the first time the Ministry of the State Treasury came out with a settlement proposal to the EuroPort investors. The last time was in October 2008, when diplomats of the Canadian and U.S. Embassies met with officials of the Ministry to discuss EuroPort’s case. No results so far. The dispute between the port management board and EuroPort was also discussed at a meeting of the Parliamentary Commission for the State Treasury, in November 2008. Asked about the way to solve the problem, the current President of the Management Board (ZMPG) opted for…pushing EuroPort to bankruptcy by putting the company’s property in the Port of Gdansk on auction.
The port management tried that, too, but a local economic court stopped its action by protests of EuroPort’s lawyer. The last hearing at the Arbitration Court in Warsaw also ended by EuroPort’s success to have presented new witnesses (one of them, a former President of the Management Board of the Port of Gdansk Authority, described hostile actions of the Board against EuroPort). The witnesses’ testimonies are in the court’s official records. A professional property valuation company, chosen by the Arbitration Court, estimated the total value of the EuroPort’s investment assets in the Port of Gdansk at over 90 million Polish Zloty (PLN) or roughly 32 million US dollars. The Port’s management earlier insisted that the investment was of insignificant value, no more than 2 million PLN (over USD 300 thousand). The case will be soon re-examined by the Warsaw Arbitration Court.
The ball’s back in Poland’s court (or “garden,” as Polish people say).
A settlement still possible
Back in 2002, the American and Canadian investors worked out a complete plan of a settlement, involving new financing by major banks and a new grain terminal operator from Germany. But it was rejected by the Management Board of the Port of Gdansk (ZMPG) then.
Now is a new chance. Grain trade is developing fast and some 600 000 tons are transshipped every year by primitive methods in the shallow Inner Port of Gdansk and in the Port of Gdynia. The EuroPort’s grain terminal project is 50% ready. It needs US$ 15-20 million only to be finished in just one year. A modern, deepwater terminal receiving big vessels (up to 100 000 DWT) could handle up to 2.0 million tons of grain per year. Polish grain producers and also European and American grain trading companies, using the Inner Port’s facilities in Gdansk now, could solve their logistics problems by using the deepwater grain terminal constructed by EuroPort’s investors. This could open a big demand for quick completion of the terminal.
Can the Polish Party afford to reject such a chance? At the time of the world-wide economic crisis, the grain trade becomes a strategic asset. The Port of Gdansk disposes of an unfinished hub to develop the grain trade and to make money on it. The Baltic Sea city of Gdansk that used to bePoland’s “grain gate” for centuries and recently was the cradle of the Solidarity Movement that dismantled the communist system at the end of the 1980s, could get another chance to grow.
There’s only one “if”: would the Polish Government have enough imagination to see that big chance for Gdansk? Let’s hope.Better late than never.
Read also:
Investment boom but…
CFP, June 14, 2008
Warsaw Business Journal, 13th October, 2008
Global Arbitration Review | February 24, 2009
