ICL sues Ethiopian government at The Hague
The Israeli fertilizer giant, Israel Chemicals (ICL), which was involved in potash mine development project in Ethiopia, filed a law suit against the Ethiopian government at The Hague International Arbitration Court, The Reporter has learnt.
The giant fertilizer producer, ICL, abandoned the potash mine development project in the Afar Regional State in the Dallol Depression and pulled out of Ethiopia due to a controversial tax claim in October 2016.
Reliable sources told The Reporter that ICL recently leveled its legal charge against the Ethiopian government at the International Arbitration Court at The Hague. Sources said ICL accused the Ethiopia of impairing its investment project and demanded USD 198 million in compensation payment.
In a statement sent to The Reporter, ICL said it has filed an investment treaty claim against the Ethiopian government in relation to State “violations” of the Agreement on Encouragement and Reciprocal Protection of Investments between Ethiopia and the Netherlands. ICL Europe, subsidiary company based in the Netherlands, filed the law suit. “The violations relate to, inter alia, the state’s imposition of an illegal tax assessment against, and its failure to provide infrastructure support to Allana Potash Afar Plc., an indirect subsidiary of ICL Europe,” ICL said.
ICL Europe filed the claim under the Arbitration Rules of the United Nations Commission on International Trade Law and requested that the Permanent Court of Arbitration at TheHague administer the arbitration proceedings. The company said it has booked a full tax provision in respect of the tax claim.
After buying Allana Potash in May 2015, ICL was working on a potash mine development project in the Afar Regional State in the Dallol depression through its subsidiary company Allana Potash Afar. ICL was trying to transfer the large scale mining license of Allan when the Ethiopian Revenue and Customs Authority (ERCA) claimed 50 million in tax payment from Allana Potash Afar, a subsidiary of ICL.
Last April, the Ethiopian government took over the potash mine concession where ICL was working on.
The Minister of Mines, Petroleum and Natural Gas, Motuma Mekassa, confirmed to The Reporter that ICL filed a law suit at the International Arbitration Court. Motuma said the case is being over seen at the International Court. “We shall decide what we are going to do with the potash mine once the court litigation is completed,” Motuma told The Reporter.
Allana Potash, a Canadian company listed in the Toronto Stock Exchange, was the rightful owner of the Dallol potash concession. In 2013, the then Ministry of Mines granted Allana a large scale mining license that enables it to develop the vast potash deposit estimated at 3.2 billion tons. Due to the commodity market crash occurred in 2013, Allana was unable to raise the required investment capital-700 million dollars-to develop the mine.
Consequently, Allana was sold out to ICL for 150 million dollars and de-listed from the stock exchange. The deal includes the acquisition of Allana Potash Afar, a subsidiary of Allana Potash, and the rightful owner of the potash concession in Ethiopia. ICL through the subsidiary company was planning to develop the potash mine and build three fertilizer blending plants at a cost of more than one billion dollars.
ICL applied to the then Ministry of Mines to transfer the mining license and the ministry was processing the request when ERCA claimed 50 million dollars tax payment from Allana Potash Afar. When ICL bought Allana Potash it assumed 10 million dollars VAT and Withholding tax arrears. ERCA also requested some 40 million dollars capital gain tax for the property acquisition. Allana Afar Potash refused to pay the tax claiming that it was made based on an “illegal tax assessment” and terminated the potash mine development project. According to ICL, the net value of the investment in the project as of June 30, 2016 was approximately USD 170 million.
Officials of the Ministry of Mines, Petroleum and Natural Gas told The Reporter that ICL rushed to the international court while it was possible to amicably settle the issue through negotiations. “They could have appealed to the tax authority. We were also ready to negotiate but unfortunately they opted to take the case to court,” the officials said.The officials told The Reporter that the Ethiopian government was committed to develop all the required infrastructure in the remote concession area known for its harsh climate.
ICL is the 6th largest potash fertilizer producer in the world and the 2nd in west Europe. ICL is a publicly traded company listed in the New York Stock Exchange (NYSE) with a capital of 12 billion dollars. Headquartered in Tel Aviv, the company earns an annual turnover of over six billion dollars. The company was established by the State of Israel in 1968 and was privatized in the 1990s.