Austria's Porr Says Arbitration over Failed Motorway Concession Deal in Serbia Underway - Media

“The arbitration has begun, it is progressing according to the procedure of the International Chamber of Commerce in Paris,” b92 (www.b92.net) reported late on Tuesday, quoting Porr's country director for Serbia, Walter Reckerzugl.

Porr and its Austrian peer Alpine, tapped to build a motorway section connecting the southern Serbian town of Pozega with Horgos, at the border with Hungary in the north, said in early May they had filed a request for arbitration over the cancellation of the concession contract, b92 said.

The concessionaires are open for talks with the government in Belgrade, b92 quoted Reckerzugl as saying. He did not specify when the arbitration formally began.

The consortium is seeking $71 million in compensations from the government in Belgrade to cover profit losses and the sum invested in the preliminary stages of the deal, b92 said.

The concession deal, with an estimated cost of 800 million euro ($1.2 billion) excluding interest, was awarded to the Austrian consortium in 2007. The deal included the construction of the left lane of a 108-kilometre north-south motorway linking Horgos with Novi Sad, and the design and construction of a 148-kilometre motorway connecting Serbia's capital Belgrade with Pozega. It also included the maintenance of the existing 68-kilometre motorway connecting Novi Sad and Belgrade.

In August 2008, Alpine-Porr said they would walk away from the concession for the construction deal after the Serbian government refused to guarantee the consortium more than 200 million euro a year in road toll proceeds, extend the construction period by four years and prolong the concession term to 30 years from 25. In September, the consortium sought from Serbia 35 million euro in compensation for the cancellation of the concession deal, or a revision of the terms of the deal. The consortium claimed to have been cut off from most of the profit after having invested around 35 million euro in the project.

In December Alpine-Porr said they terminated the contract with Serbia for the construction of the motorway and would seek international arbitration over the Serbian government's failure to propose a solution acceptable to both parties.

Alpine-Porr are currently involved in projects in Serbia worth more than 160 million euro, one of which is the construction of a bridge over river Sava connecting the Belgrade island of Ada and the mainland.

The Pozega-Horgos motorway will be part of the EU-defined transport Corridor X linking western Europe with the Adriatic coast via landlocked Serbia and neighbouring Montenegro.

($=0.691 euro)