Albania wins arbitration against Bankers Petroleum

On June 7, 2024, after several years of arbitration proceedings, the international court operating under the International Chamber of Commerce (ICC) in Paris delivered its final ruling on the dispute brought by Bankers Petroleum against Albania’s Ministry of Energy and Industry (MIE) and Albpetrol. The dispute, initiated by Bankers, revolved around the cost recovery procedure under the license agreement and the hydrocarbon agreement associated with Bankers’ operations in the Patos Marinza oil field. Over $236 million of the disputed costs claimed by Bankers were declared unrecoverable, marking a substantial financial victory for Albania.

Why is this relevant

The decision reinforces the importance of transparency and proper procedures in subcontracting, which can enhance the efficiency and profitability of state assets. The financial implications are substantial, as Albania stands to gain significant revenue from recovered costs, which can be redirected to national development projects.

Context

The core of the dispute was Bankers’ attempt to retain all sums generated from the Patos Marinza oil field through its cost recovery procedure. However, Albania successfully argued that the recoverable costs were specifically listed in the agreements. Costs such as payments for Bankers’ Canadian operations or settlements with other companies for oil supplies were deemed non-recoverable by the court, contrary to Bankers’ claims. The court also rejected exaggerated community relations investments and excessive land lease payments as recoverable costs.

Furthermore, the tribunal sided with Albania on the necessity for rigorous tendering processes for significant subcontracting agreements. This decision promotes transparency and project efficiency, aligning with Albania’s goal of maintaining high standards in its energy sector operations. Consequently, over $236 million of the disputed costs claimed by Bankers were declared unrecoverable, marking a substantial financial victory for Albania. The outcome mandates that Bankers must return funds to Albania, boosting the historical profits from the Patos Marinza field and increasing tax revenue for the state.

This favorable result was achieved through the concerted efforts of a working group composed of experts from the Ministry of Infrastructure and Energy, AKBN, the State Advocacy Office, and an international legal team from Hogan Lovells Paris, supported by international oil experts. Although the arbitration process took many years, Albania now enjoys a conclusive, successful, and verifiable outcome, providing much-needed clarity for future operations in Patos Marinza.