Gov’t Cancels Contract with Anaklia Development Consortium

The Government of Georgia has decided to cancel its contract with the Anaklia Development Consortium and to launch appropriate legal procedures. The issue was the first to be discussed at Thursday’s governmental meeting.

The Anaklia Development Consortium (ADC) was to fulfill its duties by December 31, after the government postponed the term for reaching an agreement with potential investors, and international banks (EBRD, OPIC, ADB, AIIB) for a loan of $400 million.

The ADC was also expected to have signed a contract with construction contractors but the Georgian government says the Anaklia Development Consortium failed to meet its obligations.

“The Georgian government is looking for a new investor for the construction of the Anaklia deep-sea port," Maia Tskitishvili, Georgia's Minister of Regional Development and Infrastructure, said at a news conference after the governmental session, emphasizing that Georgia needs the deep-sea port by all means.

“We have said many times that our country needs the deep-sea port of Anaklia for security, economic security and the full realization of the country's logistic potential. The Anaklia port project belongs to the State and not to any private investor. It was the State that initiated the implementation of this project; it was the State that expressed interest in implementing this project as early as 2014,” she said, noting that a financially stronger investor is needed.

“Georgia needs this port, so we will search for a new partner who will be able to implement this project quickly and get the results that our country needs," she said.

She added that the Anaklia Consortium will have to pay a fine for failing to fulfill its contractual obligation but did not specify the amount. However, she said the State had already forgiven the Anaklia Development Consortium a $10 million fine.

The ADC will also have to return the land received from the State for the deep-sea port project.

“All these procedures are set out in the contract and we will strictly follow the requirements of said contract,” she said.

ADC’s founder Mamuka Khazaradze stated the case will be taken to the international courts.

“We will take this dispute to the international court. We will not give up and will expose the actions of all the officials and politicians who deliberately fought the Anaklia project," said the founder of Anaklia Development Consortium, TBC Bank and the Lelo Movement.

He then claimed that Bidzina Ivanishvili, the leader of the Georgian Dream party, Prime Minister Giorgi Gakharia and Minister of Infrastructure Maia Tskitishvili were personally involved in the disruption of the Anaklia port project and that he has “documentation proving the fact.”

“It is a lie that the Consortium did not fulfill its obligations. Even today there is an investor and I declare with full responsibility that all the requirements have been fulfilled under the contract. The State deceived the public by extending the deadline and continued taking destructive steps against the implementation of this project. There will be a serious dispute over this. Our government carried out an orchestrated attack on the Anaklia project," he said.

The Ministry of Regional Development and Infrastructure released a statement reading that the Government of Georgia considers that a further extension of a term for the implementation of duties will not bring the desired results.

“As of December 31, 2019, the Anaklia Development Consortium, which had gained the right to build Anaklia's deep-sea port, failed to comply with the obligations under a 7-point investment agreement. It failed to obtain $120 million capital, failed to submit a $400 million loan agreement with international banks, or contracts with the first phase terminal operator or the first phase construction contractor, thereby giving the Georgian Government full and unconditional right to cancel the contract. Although the State had shown unprecedented support to the investor for the project and extended the term for the implementation of basic and necessary obligations several times since 2017, after the above was requested by the Consortium, they failed to meet the deadline, did not make significant progress and failed to present a real action plan for the fulfillment of obligations,” reads the statement.

The Ministry notes that since the delay in contractual relations with the ADC could harm the port construction project, the government is launching procedures to cancel the contract with the Consortium, as well as for further development of the Anaklia port project.

Natia Turnava, the Minister of Economy and Sustainable Development, said after the government meeting that the decision to cancel the contract with the ADC was correct.

“The decision to cancel the Anaklia Development Consortium contract is absolutely logical given that we have been providing unprecedented support to this project and its investors since 2017: financial, legal, organizational, political. According to the conditions that led to announcing a tender and revealing the winning company, we should have had a new port by 2020. Unfortunately, this could not be achieved, which is the responsibility of the investor. You can't name another project that the government has shown so much support for. This is the only commercial project mentioned in the Constitution of Georgia.

"The decision to cancel the contract is the right one because we need a deep water port. We see the need for this project to continue, but we do not see the resources to continue this project with its current investor. Giving more chances and postponing the project deadline further is impossible and hurts state interests,” Turnava said.

The Minister noted that the conditions for selecting a new investor will be changed and renewed.

“There is yet another opportunity to revise and renew the requirements for an investor, to make them more adequate today since much has changed globally and regionally since 2017. All this will be taken into consideration and we are sure that with the new conditions we will start the process of finding a new investor, again in a transparent and competitive environment,” she said.

By Ana Dumbadze