An arbitration court has ruled in long-running litigation between Vilnius and the French energy group Veolia and its subsidiary Vilniaus Energija. The city claims it is a major victory, as it is to be paid more than 83 million euros in compensation. Meanwhile, the company says it is the true victor, since the court rejected allegations of corruption, collusion, overpricing and other wrongdoings.
The Stockholm International Arbitration Court has ruled that Veolia and Vilniaus Energija are to pay to the city and to the municipal heating company Vilniaus Šilumos Tinklai (VŠT) 61.5 million euros and transfer another another 21.5-million-euro worth of assets, the municipality said.
At the same time, Vilnius City Municipality and VŠT will have to pay claims of 26.9 million euros to these companies. The final settlement will therefore be 56.1 million euros in favour of the city and VŠT.
The city originally asked for a compensation of 560 million euros.
According to the statement, the international tribunal found that the 15-year (2002-2017) lease agreement with Vilniaus Energija to manage the city’s municipal heating was not signed for the benefit of consumers, did not include clear obligations to reduce heating prices, and allowed Veolia and Vilniaus Energija to return the infrastructure it was using in a worse condition than it was leased in 2002.
Vilnius Mayor Valdas Benkunskas called it is a special day.
“After seven years of litigation, last night we received an international arbitration award in our dispute with Veolia, the former leaser of Vilniaus Šilumos Tinklai, and its representative in Lithuania, Vilniaus Energija. Vilnius City won the case and was awarded 83 million euros in compensation for damages,” Benkunskas told a press conference on Friday.
Political influence and further litigation
According to the municipality’s statement, the money awarded to the city is “essential for upgrading heating networks and heat production facilities, which were neglected during the time they were leased to Vilniaus Energija, and for the long-term strategy of reducing heat prices”.
The municipality and VŠT had filed a total of 13 claims. They key ones had to do with the manipulation of heating tariffs, which resulted in customers overpaying around 31.8 million euros between 2011 and 2016, failure to meet investment commitments, the purchase of expensive raw materials, services and equipment from linked companies, failure to meet commitments to upgrade the 3rd Vilnius thermal power plant, and misappropriation of subsidies, the proceeds of the sale of emission permits.
In a counterclaim submitted to the Stockholm arbitral court, Veolia claimed that it was in fact the party that had suffered damage as a result of the unlawful actions of the authorities and, in turn, claimed 22 million euros in damages.
Veolia’s investments in Lithuania were highly controversial amid accusations of abuse and opaque political influence.
In 2017, the then Vilnius authorities said that their predecessors, led by Mayor Artūras Zuokas, had made a mistake when they let in a private manager and failed to ensure proper control. Zuokas, who was mayor of Vilnius between 2000–2007 and 2011–2015, has repeatedly dismissed the accusations, calling the agreement “the best public-private partnership agreement, not only in Lithuania, but also in Central and Eastern Europe”.
Once the 15-year contract expired, VŠT took over all assets from Vilniaus Energija on March 31, 2017.
In early 2016, Veolia and its subsidiaries filed a lawsuit to another arbitral court, the International Center for Settlement of Investment Disputes (ICSID) in Washington, demanding around 79 million euros for what they claimed was unfair treatment by the state and expropriation of investments in Lithuania.
In 2017, the Energy Ministry filed a counterclaim for 240 million euros in damages from Veolia, but withdrew it in 2020 and decided to continue litigating in national courts where the case is currently pending.
Lithuania is seeking to prove that Veolia and Icor illegally obtained lease contracts for heating businesses in ten Lithuanian municipalities between 1999 and 2003 and illegally profited from heat consumers.
Updated December 4
Veolia claims victory
In a statement sent by Veolia-owned Vilniaus Energija to LRT.lt, the company says the arbitration court’s decision vindicates its position in litigation with Vilnius municipality and VŠT.
“The Tribunal flatly rejected the entirety of Vilnius/VST allegations of corruption, collusion, overpricing and other alleged wrongdoings, which were at the heart of Vilnius/VST’s case. The Tribunal confirmed that Veolia has always acted in full compliance with the law,” the company says in the statement.
Since, according to the company, the court awarded less than 5 percent of the amount demanded by Vilnius/VŠT (44.8 million plus interest against 850 million), while Veolia was awarded a sum reresenting over 50 percent of its original claims, “the award leaves no doubt as to the fact that this is a major victory for Veolia and a blow to Vilnius/VST”.
“Veolia’s major victory is also reflected in the allocation of legal costs by the Tribunal: Veolia was awarded more than EUR 15M for its legal costs. This is directly connected to the percentage of success of each party, to compensate it for its costs for having to defend itself from baseless allegations,” the company says in the statement.
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