Hydro S.R.L. (Italy) v. Republic of Albania

Case summary

At a glance

Parties: Hydro S.r.l. (Italy) v. the Republic of Albania
Case no.: ICC Case No. 20564/EMT/GR (the case record gives 20654/EMT/GR; the Award and the Paris judgment give 20564)
Forum and rules: ICC International Court of Arbitration; ICC Arbitration Rules 2012; seat Paris
Treaty: Contract claim: Article 30 (formerly Article 31) of the Kalivaç Concession Agreement of 24 May 1997; Albanian law governs
Tribunal: Bernard Hanotiau (President), Eduardo Zuleta-Jaramillo, Bernard Rix
Court: Paris Court of Appeal, Pôle 5 – Chambre 16 (François Ancel, presiding; Laure Aldebert; François Melin), in a related case (ICC No. 22919/GR)
Sector: Hydropower; BOT concession
Outcome: Partial Award (8 January 2018): Hydro's claims rejected or dismissed and the Concession Agreement declared terminated for Hydro's breaches. Final Award: Hydro ordered to pay delay penalties and damages to Albania. In 2022 the Paris Court of Appeal rejected Hydro's annulment action against a revision award made in a separate, related ICC arbitration.
Amount: Hydro claimed up to EUR 147,872,749. Albania was awarded EUR 1,693,157 in delay penalties and EUR 5,182,535 in damages, each with compound interest at 12-month Euro LIBOR + 2%. Albania pays Hydro's second-phase legal costs of EUR 142,975.78. Arbitration costs of USD 1,100,000 are split 80/20 against Hydro: the operative part orders Hydro to reimburse USD 325,000, while ¶ 211 computes USD 365,000. Paris Court of Appeal: Hydro to pay EUR 60,000 under Article 700 CPC.

The dispute

In 1997 Albania granted BEG S.p.A. a 30-year build-operate-transfer concession to build and run the Kalivaç hydropower plant on the Vjosa river. The concession was amended by Addenda I (2000) and II (2007) and was later held by Hydro S.r.l., a vehicle of the Becchetti group originally part-owned by Deutsche Bank. Works began on 30 November 2003 and stopped in June 2014, when 30–40% of the project was complete. Hydro filed for arbitration in October 2014. It blamed Albania for the delays (permits, expropriations, VAT refunds, energy sales assurances, floods) and claimed damages and declarations on its tax exemptions under Law 8708. Albania raised objections to jurisdiction and admissibility and counterclaimed: it sought termination of the agreement for Hydro's breaches, delay penalties under Article 14 and lost concession fees. The Final Award published here fixes the amounts owed under the liability findings of the 8 January 2018 Partial Award.

Key holdings

Partial Award, as recited in the Final Award: Hydro's claims under Article 6 are inadmissible. The Tribunal has no jurisdiction over the VAT and customs claims. The exchange-rate and termination claims are dismissed. The Concession Agreement is terminated for Hydro's breaches from the date of the Partial Award. Hydro owes Article 14 delay penalties, capped at EUR 12.9 million, and damages measured by lost concession fees until 31 December 2020. It must also pay EUR 1,208,642 and GBP 40,649.46 of Albania's first-phase costs. Final Award ¶ 81
The amounts must be calculated on the same data that was before the Tribunal when it issued the Partial Award, as if the experts had known its date. Updated electricity prices are not to be used. Delay penalties for 16 July 2011 to 8 January 2018 are fixed at EUR 1,693,157. Final Award ¶¶ 124–130
Damages run from 9 January 2018, which is treated as the plant's virtual start of operations. The concession fee rate for the first three years of operation, 10.5%, therefore applies. The Tribunal rejected HUDEX prices from January 2018 because using them would be incompatible with the Partial Award's method; it applied HUPX prices from March 2016 and the 9.5% WACC used in the first phase. Damages are EUR 5,182,535. Final Award ¶¶ 161–169
Interest is part of damages and is permitted under Albanian and French law. Pre-award and post-award interest at 12-month Euro LIBOR + 2%, compounded, runs on delay penalties from 16 July 2011 and on damages from 9 January 2018 until payment. Albania's proposed 5.05% rate (German Bund plus a country risk premium) was rejected. Final Award ¶¶ 188–200
Hydro prevailed on the quantum phase, so Albania bears Hydro's second-phase legal costs of EUR 142,975.78. Albania prevailed for the major part of the proceedings, so Hydro bears 80% of the USD 1,100,000 in arbitrators' fees and ICC expenses. The operative part orders Hydro to reimburse USD 325,000, although ¶ 211 computes USD 365,000. Final Award ¶¶ 208–211; operative part
In a related case, the Paris Court of Appeal rejected Hydro's annulment action against the 11 February 2020 revision award in ICC No. 22919/GR. The revision award gave reasons, and the Court cannot review their merits. Hydro could not rely on the Terms of Reference of another tribunal. Hydro had based its revision request only on the withholding of decisive documents (Article 595(2) CPC), not on fraud. Its due-process and public-policy complaints targeted the 4 June 2019 merits award, which Hydro had not challenged. Paris CA, 31 May 2022, ¶¶ 57–79

Procedural history

24 May 1997Concession Agreement for the Kalivaç plant signed; later amended by Addendum I (2 November 2000) and Addendum II (8 May 2007).
16 October 2014Hydro files its Request for Arbitration with the ICC (Case No. 20564).
9 July 2015Tribunal constituted: Bernard Hanotiau confirmed as President.
27 June 2017Procedural Order No. 9 refuses Hydro's amendment adding an expropriation claim. Hydro files a separate arbitration (ICC No. 22919) on 30 June 2017.
8 January 2018Partial Award: Hydro's claims fail, the Concession Agreement is terminated for Hydro's breaches, and the method for calculating Albania's penalties and damages is fixed.
21 February 2018Procedural Order No. 10 sets the timetable for the quantum phase. The Tribunal answers the experts' joint questions on 20 March 2018.
7 September 2018Final Award on quantum, interest and costs.
4 June 2019Final award in ICC No. 22919 rejects Hydro's expropriation claims. Hydro's request for revision is rejected on 11 February 2020.
31 May 2022The Paris Court of Appeal rejects Hydro's annulment action against the revision award and orders Hydro to pay EUR 60,000 to Albania.