Latvia and Norway signed a bilateral investment treaty in 1992. Currently, Norway is planning to end such treaties with all European Economic Area countries, and Latvia has also ended a few. According to a representative of Latvian Foreign Ministry, Dace Liberte, many states are trying to get rid of aged, vaguely-written treaties which pose large risks of losses in case of legal dispute.
Latvian and Norwegian authorities have begun the process to end the treaty, but an obstacle – an old legal dispute over snow crabbing in Svalbard – is in the way.
As previously reported by LSM, in January 2017 a Latvian snow-crab ship was arrested in Norwegian waters off the Arctic island of Svalbard. Latvia claimed that Norway illegally restricted fishing opportunities for European Union (EU) member states and violated international treaties, and took the case to EU Court, eventually losing. The Norwegian Supreme Court in 2019 banned the ship from crabbing in Svalbard waters.
Businessman Pēteris Pildegovičs is the owner of the banned ship. Based on the 1992 bilateral investment treaty, he and his company North Star Ltd will seek international arbitration. The International Court of Arbitration will begin the proceedings next week. His claim against Norway is around €400 million. And while the Ministry of Foreign Affairs repeatedly stresses that the agreement will not affect investment disputes that have already started, Pildegovičs wants to delay the termination of the agreement. During the meeting of the Saeima Foreign Affairs Commission, he and the Ministry of Agriculture were on the same page, asking that the bilateral treaty be terminated in such a manner that existing investors can file claims for another ten years after it has been ended.
Pildegovičs said at the meeting of the Foreign Affairs Commission on October 12: “If, in your view, an investment of 17 or 20 million for a Latvian company in such a very complicated market as Norway is small, let it remain your private opinion or the views of the Ministry you represent. I think it is not right toward Latvian businesses who are looking for new markets in this way.”
On the other hand, Deputy State Secretary of the Ministry of Agriculture Kaspars Cirsis stated at the same meeting: “The essence is that, as Mr Pildegovičs said, it affects any possibility of initiating any new proceedings, even if, for example, a change in the composition of the [court] is needed or if any new circumstances regarding these existing investments are revealed.”
The continuation of liabilities after the end of the contract is not beneficial for the Latvian State, said the Ministry of Foreign Affairs. Because Latvia's direct investment in Norway is less than twenty million, while Norway's investment in Latvia is 460 million, Latvia has infinitely higher risks. If someone resues the Latvian side, the costs for arbitration can be unpredictable even if Latvia wins the case.
The continuation and adoption of the draft law on ending the treaty will be in the hands of the 14th Saeima which will meet for the first time this week.
According to publicly available documents relating to the forthcoming arbitration panel, North Star Ltd considers fishing vessels and their equipment working there as its investment. There is no information about a subsidiary in Norway in the firm's accounts. Pildegovičs refused to be interviewed before the hearing.
North Star has previously been caught up in a number of scandals, both in relation to the origin of the vessels and in alleged infringements in the employment of fishermen. In mid-October, the company's tax debt to State Revenue Service was more than 163 thousand. The latest report shows that North star has no employees.
A letter was sent to the Foreign Affairs Commission by Pildegovičs' lawyers, and the businessman himself sought to make his way to individual deputies, including by calling the head of the commission Rihards Kols (National Alliance), who has recommended that he seek the official path to the Saeima commission.
“I replied to Mr Pildegovičs' question [..] that it was not a practice for the commission to work with individual companies in any context. I said, however, to invite the industry representatives, if any. Mr Pildegovičs mentioned that an industry organization hasn't existed for some time. Well, then I said that the only way is a public sitting, you can turn to the Members individually, send some information to the Commission if any,” said Kols to LTV.
The involvement of the Ministry of Agriculture had unexpected as when the matter was on the government's agenda, it did not raise objections. Asked to clarify why the Ministry of Agriculture now spoke in defense of the industry, Deputy State Secretary of the Ministry of Agriculture Kaspars Cirsis could not answer exactly what had happened.
The Ministry of Foreign Affairs has calculated that the law should be adopted and entered into force by February 10. If it is impossible, the contract will expire in mid-March without an agreement, but this will mean that the courts will be able to submit claims against the involved states for a further ten years.