The Attorney General Prosecutor's Office has announced that the government and the Italian company Enel Green Power have reached an agreement to end the conflict over the ownership structure of LaGeo.
From a statement issued by the Attorney General of the Republic of El Salvador (FGR):
Washington, DC The State of El Salvador and the Italian company ENEL Green Power have reached a framework agreement with a comprehensive solution to the existing dispute over the ownership structure of the company LAGEO SA de CV.
At the request of the parties, arbitration and dialogue has been suspended for 30 days in order to reach an agreement over the shareholding structure of the company LaGeo.
From a statement issued by the Government of El Salvador:
Talks to find solutions to disputes between the State of El Salvador and the Italian company ENEL Green Power, over the ownership structure of the company LAGEO SA, de CV, started today in Washington, DC, with a meeting taking place on the premises of the International Centre for Settlement of Investment Disputes (ICSID), which is the forum for arbitration and conciliation of the World Bank Group.
The Italian consortium Enel has filed a case against the Salvadoran State with the ICSID over a dispute on equity interest in the geothermal plant.
The case was filed with the International Centre for Settlement of Investment Disputes (ICSID).
The lawsuit, according to the company, is due to the government trying to be more involved in LaGeo, and also because they believe they have been denied their legitimate rights.
The President of El Salvador has expressed suspicions that the original contract with the Italian company was changed "in the dark" by government officials.
The president referred to the subject in his radio program last Saturday, saying, "I've asked a group of lawyers to study the documents surrounding all investments with the Italian shareholders and it will be these specialists who might be able to shed a light on this illegal act, including even asking the Attorney General's Office to establish whether criminal liability be established in the future. "
After the last judgment which was unfavorable to El Salvador, officials have announced the continuation of the legal battle against Enel.
Representatives from the Executive Hydroelectric Commission of the Lempa River (CEL) reported that they will abide by the decision of the Parisian Court of Appeals which means that the Italian company ENEL can capitalize the geothermal company LaGeo and become the majority shareholder in the company.
The decision of the Paris Court of Appeals means that ENEL can become the majority shareholder in the geothermal company La Geo.
This new resolution validates the verdict of the International Chamber of Commerce (ICC)’s Court of Arbitration, issued in July 2011.
According to Elsalvador.com: "In a note sent to the National Stock Market Commission (CNMV), Enel’s renewables subsidiary reports that the French court "had rejected Ine’s appeal to override the award in its favor, confirming that the trial was conducted fairly," according to the news agency Europa Press.
The dispute between the Italian company Enel and the CEL and INE commissions has sent a negative message to foreign investors.
In the opinion of experts, the fact that by the Ente Nazionale per l'Energia elettrica (Enel) and the Lempa River Hydroelectric Executive (CEL) are going through an arbitration process in order to decide who gets majority control of the geothermal plant, could be affecting the country’s attractiveness in terms of foreign investment.
CEL has filed a motion to quash the ruling that would allow Enel to have a majority stake in LaGeo geothermal plant.
Tóchez Irving, president of the Commission of the Lempa River Hydroelectric Executive, said: "It is inappropriate to put a country’s strategic resource, such as a geothermal plant, into private hands," when presenting the proceedings before the court of appeals in Paris, France.
The way that the government handles the arbitration failure at the International Chamber of Commerce on the La Geo case could dictate the success or failure of state-business partnerships.
The private-public scheme has been promoted recently by the Salvadoran government for the implementation of large public infrastructure projects because they can free the state from the significant investments that such works require.
The decision means that ENEL will be able to capitalize the geothermal GEO and become the majority shareholder in the business it maintains with the Executive Hydroelectric Commission of the Lempa River (CEL).
According to an article in Elsalvador.com, ENEL had sued its partner for breach of contract in November 2008 because CEL had blocked a $100 million investment, which meant that ENEL went from having just over 36% the company's shares to almost 53%. "The contract, signed in 2002, provides that Enel has the right to capitalize on their investments, that is to say, investments in La Geo are transformed immediately into shares."
The International Chamber of Commerce will communicate its ruling on the arbitration trial filed by Enel for $120 million.
The complaint filed by Italian company Enel in October 2008 is based on noncompliance by the Salvadoran government with its commitment of handing over shares of company LaGeo.
"Nicolás Salume, president of CEL, informed he has been cited by the International Commerce Chamber for January 10, date when the entity will communicate its ruling on the case", published La Prensa Gráfica in its website.
The case was presented before an international tribunal in France, which the parties had established to settle conflicts that might arise in the preparation of the LaGeo.
Italian company, Enel, which partnered with the Salvadoran government in the operation of the LaGeo geothermic electric generating plant, took the government to court internationally for $120 million for not allowing it to hold the majority of shares that corresponds to the investments carried out, based on the contract between the two parties.