Energy, EU – Baltic States, Investments, Legislation, Lithuania

"Going to international arbitration is the only is way left to Veolia. The lengthy and expensive process that we face may have adverse implications for the reputation of the participants, but it is international arbitration that guarantees neutrality and objectivity, which perhaps would not be guaranteed under other circumstances," Malika Ghendouri, Veolia's vice-president for Central and Eastern Europe, said in a press release on Wednesday.

Veolia claims that Lithuania is unwilling to compensate it for losses suffered by its subsidiaries –- Vilniaus Energija (Vilnius Energy) and Litesko – due to allegedly discriminating legislative changes and regulatory decisions.

According to the press release, Veolia tells the ICSID that Lithuania continues a persecution campaign against the companies for political reasons.

Veolia is represented at the arbitration tribunal by the international law firm Sidley Austin LLP.

Lithuanian courts have recently issued rulings that are unfavorable to Vilniaus Energija, including the rejection of its claim over a 19-million-euro overpayment for expensive gas supplied by Gazprom to Lithuania.

A court is currently hearing a case in which charges have been brought against Jean Sacreste, a former chairman of the management board at Vilniaus Energija, and other top managers of the company.

The Lithuanian Competition Council has recently imposed a 19-milion-euro fine on Vilniaus Energija.

Also, prosecutors suspect that Vilniaus Energija's top executives made it possible for Bionovus, an associated company, to profit from the sale of biofuel.

Vilniaus Energija has until April 2017 to return the Vilnius district heating grid, which it leased from the city for 15 years back in 2002 and in which it has invested around 160 million euros (over 200 million euros in Lithuania in total), to the municipal company Vilniaus Silumos Tinklai (Vilnius Heating Grid, or VST).

However, it may be a difficult process due to the valuation of the assets to be transferred back to the city and the funds that Vilniaus Energija believes the city should return to it. It is not ruled out that the dispute may go to arbitration.

Vilniaus Energija has invested around 160 million euros in the heating system in Vilnius and over 200 million euros in Lithuania in total.

Litesko operates the district heating systems of eight Lithuanian towns under lease agreements, some of which are for several decades.