Loading

Resume: The construction of the Samtredia-Grigoleti road’s first section was launched on 8 July 2014. A Ukrainian company, Road Building ALTKOM, was responsible for the construction of this section. The value of the contract signed with the company was GEL 153 million with a construction period of 30 months. During the course of the construction, the company received EUR 18,338,910 as an advance payment which was nearly GEL 40 million according to the then GEL exchange rate. As a result of Road Building ALTKOM’s financial difficulties which emerged during the construction process, the company finished only 24% of the work envisioned by the contract (there are defects in the partially completed work as well. Concrete slabs for the construction of bridges are cracked and parts are gradually coming apart). Therefore, the project which the company was supposed to finish by January 2017 was not completed.

In July 2015, the budget of the Ministry of Regional Development and Infrastructure was cut by GEL 54.5 million. As clarified by the then Deputy Minister of Regional Development and Infrastructure, Tengiz Shergelashvili, the budget cut was largely stipulated by the slow pace of the Samtredia-Grigoleti section’s construction. Mr Shergelashvili stated: “The winner ALTKOM company is carrying out the work at a slow pace. This is a problematic project and it is not expected that the work of this volume will be finished by the end of the year. Therefore, the plan vis-à-vis this project was decreased (by 41 million).”

In summer 2016 after two years from the project’s launch (the project’s duration was two-and-a-half years), only two kilometres of the 11.5 kilometre-long road was completed. The aforementioned facts indicate that ALTKOM was not able to duly carry out the work at any stage after the start of the construction and was constantly lagging behind the work schedule.

The Roads Department of Georgia sent ALTKOM a notification in regard to the termination of the construction contract six months (on 18 July 2017) after the expiration of the contract and sent a request to return the advance payment ten months after the expiration of the contract. Since ALTKOM refused to return the advance payment to the Roads Department of Georgia after several requests, the Roads Department hired an international company, White & Case, on 14 January 2019 in order to open a legal dispute against ALTKOM. The Roads Department of Georgia launched the legal dispute against ALTKOM two years after the expiration of the contract.

The Roads Department of Georgia has indeed taken some actions in order to have the advance payment returned. It was possible, however, to terminate the contract at an earlier date and launch a legal dispute against ALTKOM in order to have the advance payment returned.

Analysis

European Georgia – Movement for Freedom MP, Irakli Abesadze, spoke about the high-speed highway’s Samtredia-Grigoleti section and stated: “A Ukrainian company misappropriated nearly GEL 45 million during the construction of the high-speed highway’s Samtredia-Grigoleti section and in five years the Ministry could not do anything to get the money back. Now, you are going to spend approximately GEL 2 million for a court dispute in Ukraine’s court to return the money?”

The Samtredia-Grigoleti road is a 51.5 kilometre-long section of the east-west highway which is of international significance. The road consists of four lots: the construction of the first 11.5 kilometre-long section envisions building a four-lane asphalt-concrete road, eight bridge passes and 27 artificial edifices.

The construction of the first section of the Samtredia-Grigoleti road started on 8 July 2014. The European Investment Bank is the project’s donor. A Ukrainian company, Road Building ALTKOM, which won the tender, was responsible for the construction of this section. The value of the contract signed with the company was GEL 153 million with a construction period of 30 months.

During the course of construction, ALTKOM received EUR 18,338,910 as an advance payment which was nearly GEL 40 million according to the then GEL exchange rate. It was officially reported that ALTKOM faced financial difficulties which emerged during the construction process and the company finished only 24% of the work envisioned by the contract (there are defects in the partially completed work as well. Concrete slabs for construction of bridges are cracked and parts are gradually coming apart. See video).

As early as July 2015 (in one year after launching the project), the budget of the Ministry of Regional Development and Infrastructure was cut by GEL 54.5 million. As clarified by the then Deputy Minister of Regional Development and Infrastructure, Tengiz Shergelashvili, the budget cut was largely stipulated by the slow pace of the Samtredia-Grigoleti section’s construction. Mr Shergelashvili stated: “The winner ALTKOM company is carrying out construction work at a slow pace. This is a problematic project and it is not expected that work of this volume will be finished by the end of the year. Therefore, the plan vis-à-vis this project was decreased (by 41 million).”

In summer 2016, two years after launching the project (the project’s duration was two-and-a-half years), the construction of only two kilometres of the 11.5 kilometre-long road was completed. The aforementioned facts indicate that ALTKOM was not able to duly carry out the work at any stage after the start of the construction and was constantly lagging behind the schedule.

In accordance with the information of the Ministry of Regional Development and Infrastructure, the Roads Department of Georgia sent ALTKOM a notification in regard to the termination of the contract on 18 July 2017.

In regard to the advance payment (EUR 18,338,910) transferred to ALTKOM as part of the contract, the Ministry reports that the Roads Department of Georgia is pursuing legal action to get the money back from both ALTKOM and a Ukrainian bank (PSC PROMINVESTBANK) which issued the bank guarantee. The Roads Department of Georgia requested multiple times that ALTKOM return the advance payment. In addition, the Roads Department of Georgia twice addressed the bank which provided the bank guarantee to activate that guarantee. However, in both cases it received an unfounded refusal. The guarantor bank did not confirm the money transfer to the intermediary bank.

On 4 January 2019, the Roads Department of Georgia signed a contract with the international company, White & Case. As part of the contract, White & Case will carry out legal procedures to have the advance payment to ALTKOM (EUR 18,339,910) returned and, if necessary, defend the interests of the Roads Department of Georgia in Ukraine’s courts of every instance. According to the International Chamber of Commerce’s rules, the law of the guarantor bank’s residence country is applied in the case of bank guarantees. In this case, the guarantor bank is based in Ukraine and, therefore, the law of Ukraine is applied to the bank guarantee and the legal dispute has to be held in Ukraine. The value of the contract with White & Case is USD 649,000.

If we follow the chronological sequence, ALTKOM should have finished the construction of the first section of the Samtredia-Grigoleti road in January 2017. The company received an advance payment in the amount of EUR 18,338,910 and finished only 24% of the construction work (the company faced financial problems). The Roads Department of Georgia sent ALTKOM a notification in regard to the termination of the contract six months (on 18 July 2017) after its expiration whilst the request to return the advance payment was sent ten months after the expiration of the contract. Since ALTKOM refused to return the advance payment to the Roads Department of Georgia after several requests, the Roads Department hired an international company, White & Case, on 14 January 2019 in order to launch a legal dispute against ALTKOM (two years after the expiration of the contract).

Of note is that almost five years have passed since launching the project. As previously mentioned, it was obvious even from the very beginning of the project that ALTKOM could not fulfil its obligations. Therefore, it is unclear why the Roads Department of Georgia decided to wait until the expiration of the contract instead of terminating it before the end date or, for that matter, why it started legal proceedings to have the advance payment returned only after two years from the expiration of the contract.

Given the aforementioned circumstances, we can see that the Roads Department of Georgia has done relatively little to have the advance payment to ALTKOM returned. The advance payment amounts to EUR 18,338,910 which is more than GEL 40 million according to the then exchange rate. In addition, the Roads Department of Georgia hired an international company to provide legal service in this dispute and this service will cost a total of GEL 1,799,027.

In November 2018, a new company (Akkord), which will carry out the 76% of the remaining work on the first section of the Samtredia-Grigoleti road, was selected in a new tender. The project’s funding is provided by the European Investment Bank and amounts to GEL 89 million. The duration for construction work is 24 months.


Persons

Similar News

2838 - Verified Facts
FactCheck Newspaper
25%
True
22%
Mostly True
13%
Half True
10%
Mostly False
8%

Most read