On June 18, 2024, the Arbitral Tribunal constituted to hear the arbitration case between Bankers Petroleum Albania Ltd. (Bankers), the Ministry of Energy and Industry (represented by AKBN) and Albpetrol Sh.A. issued its Final Award in ICC Case No. 21349 dated June 7, 2024.
Bankers has been the operator of the Patos-Marinza oilfield in Albania since 2004, and works closely with its state partners AKBN and Albpetrol. Each of AKBN and Albpetrol have audit rights under the contracts governing Bankers’ activities (License Agreement and Petroleum Agreement). In 2015, prior to the acquisition of Bankers by its current owner GeoJade, Bankers commenced the ICC arbitration to contest AKBN’s and Albpetrol’s audits of Bankers’ declared petroleum costs. A first phase of that case ended in 2018, and the second phase ended with the recent issuance of the Final Award.
Last week, the Ministry of Energy and Industry issued a press release focusing on several aspects of the Final Award that were favourable to the state. For the benefit of all of its stakeholders, including its state partners in Albania, Bankers provides this more complete summary of the dispute and the Final Award.
The initial request for arbitration filed in 2015 dealt only with petroleum costs for the 2011 audit year, but additional years (2012-2017) were later added to the dispute. It is important to emphasize that the arbitration case was initiated prior to GeoJade’s acquisition of Bankers, and that six of the seven audit years in dispute in the arbitration cover a period (2011-2016) before GeoJade started managing the company in late 2016. The arbitration was stayed by agreement pending a decision on the 2011 audit year by a panel of experts from Pricewaterhouse Coopers and Navigant Consulting. They ruled in Bankers’ favour in 2016, finding that 97% of the disputed expenses were properly treated as recoverable petroleum costs. The agency appealed the experts’ decision to the ICC tribunal, which issued a partial award in 2018 upholding the decision.
The recent Final Award dealt with the subsequent audit years from 2012 to 2017. The ICC Tribunal found that over 75% of the expenses disputed by AKBN in this period were recoverable petroleum costs. The Tribunal dismissed AKBN’s counterclaims for profit tax, damages and material breach, and all of Albpetrol’s counterclaims.
The most significant disallowance of costs against Bankers related to inappropriate actions of a few former Bankers employees that pre-dated the acquisition of the company by the current owner. Of the total amount of expenses disputed by AKBN that the Albanian government has reported were declared irrecoverable (USD 236 million, which is a number that is still under review by Bankers), over USD 100 million related to the conduct of those former Bankers employees.
The Tribunal also granted Bankers’ request for declaratory relief on the contract provisions that will guide cost recovery going forward.
The Tribunal’s Final Award is long and complex, mirroring the parties’ dispute. Bankers expects it may need to seek clarification from the Tribunal about a few items in the Final Award, and will then work very closely with AKBN and Albpetrol to fully implement the Final Award.
Bankers is willing to cooperate with the Albanian government in the long term, continuing to use new technologies to develop oil fields.
Rr. Rruga “Murialdo”, Sheq i Madh Fier, Albania
Office: +355 (0) 34 220845/46/47
Fax: +355 (0) 34 220850
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