Leaked Justice Ministry Report Critical of Namakhvani HPP Accord

Georgian online media outlet Mtis Ambebi said today it has obtained a “classified” letter composed by the Justice Ministry, containing critical remarks on the Georgian Government’s agreement with the controversial Namakhvani Hydropower Plant project investor. Protesters against the powerplant have been for months calling for the annulment of the “anti-state” deal.

The agreement “on Construction, Ownership and Operation” of Namakhvani HPP cascade was signed on April 25, 2019, between the Government of Georgia and the Government-owned companies (JSC Georgian Energy Development Fund, JSC Electricity Market Operator, JSC Georgian State Electrosystem) and the Clean Energy Group Georgia, the key investor in the project. The Clean Energy Group Georgia was later renamed Enka Renewables after 90% of its shares were acquired by ENKA Insaat ve Sanayi A.S., a Turkish industrial conglomerate.

The leaked four-page document, addressed at Economy Minister Natia Turnava and signed by then-Deputy Justice Minister Mikheil Sarjveladze and dated March 30, 2019, allegedly precedes the signing of the agreement and presents 22 critical remarks on the terms of the investor contract.

Key Points

According to the document, “the absolute majority of obligations“ within the agreement applies to the Government of Georgia and affiliated companies, while the rights of the Clean Energy Group Georgia in the same accord “are maximally protected” and its “liabilities and obligations are limited.” Thus, the Ministry recommends concluding the agreement pursuant to principles laid out in the Law of Georgia on Public-Private Partnerships.

The Justice Ministry document points at “already a high risk” the government assumes on fulfilling “certain obligations towards the key project participants.” For instance, the document advises replacing the formulation of “assuming full responsibility” by the government to aid the project implementation with “within its competence, use its best efforts” to do so.

The Justice Ministry report further reads that the provision which only allows for the payments of penalties for breaching the contract by the company in favor of the government needs correction since the creditor party also has the right to additionally demand compensation for the damage if there is any.

The document also calls certain force majeure terms in the agreement as “lacking expediency” since they are used as a “punishment mechanism” against a party: “particularly under the terms when the majority of force majeure-related circumstances, despite their unpredictable nature and acknowledged absence of party’s fault, still apply to a single contract party – the Government of Georgia and, also, amounts to a liability in terms of defining force majeure as ‘instances requiring compensation’.”

Also, the Justice Ministry says that, as per terms of the investor contract, “non-physical” force majeure and, in certain cases, force-majeure in general, does not free the Government and relevant state agencies of their liability, unlike the company which is granted such benefits by the contract.

The letter says additional assessment, with the considerations of Georgian legislation and positions of the relevant body, is needed for the provision that obliges the Georgian government to exempt the company from the obligation to acquire a license for extracting natural resources.

The letter also recommends further specification of terms and vague provisions, such as those concerning “legislative changes” or “instances of expropriation,” and advises additional expediency assessments by the relevant Ministries on issues such as time periods, handing of non-agricultural lands, or freeing the company from taxes.

Activists, Ruling Party MP React

The authorities have not yet confirmed the authenticity of the leaked document. Civil.ge contacted the Justice Ministry to comment on the leak. The response will be added to the article once we receive it.

Mikheil Sarjveladze, then-Deputy Minister who currently serves as the MP of the ruling Georgian Dream party, said today he has trouble “recollecting the details” of the assessment, describing it as a “standard procedure” ahead of any important agreement concluded by the government.

“There were terms which, we found, for example, as needing concessions by one party or another,” MP Sarjveladze said. “It is now up to the negotiating party and I think that our advice, in this case, was correct,” he added.

Varlam Goletiani, leader of the Rioni Valley Movement that organizes protests against the construction of the controversial powerplant, commented on the leak during today’s address at the Tbilisi rally, saying that “to date, [the document] has been confidential precisely because the executive authorities decided to implement the project without considering the conclusions by the [Justice] Ministry.” Goletiani called the “anti-state agreement” with the company a “criminal act.”

Background

The Namakhvani HPP Project in Rioni River Valley of western Georgia encompasses two separate HPPs on the Rioni River, the longest river flowing solely within the Georgian boundaries: the Lower Namakhvani HPP (333 MW) and the Upper Namakhvani HPP (100 MW). The local protests with a major focus on environmental concerns gradually grew into a major movement, with massive rallies currently underway in Tbilisi.

The investor agreement came at the center of Rioni Valley protests after it was made public and activists and CSOs cited “cabal” and “anti-state” provisions. The authorities have been reportedly refusing to make public the relevant assessments of the agreement, prepared by the Justice and Finance Ministries. Social Justice Center, a Georgian CSO working on the Namakhvani cause and the respective investor agreement, stated on May 17 that it had filed lawsuits to contest the refusals.

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Follow our Namakhvani tag for earlier developments about the controversial project.

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