The Permanent Court of Arbitration has ruled in favour of Ethiopia (defendant) in an Investment Treaty Claim lawsuit brought against the country  by Israel Chemical Limited (ICL) (plaintiff). 

The lawsuit, filed by ICL Europe (registered in the Netherlands), alleged that Ethiopia had imposed an illegal tax assessment on when the (at the time) Ethiopian Revenue and Customs Authority claimed ETB 50 million in tax payments from one of ICL’s subsidiaries, Allana Potash Afar, working on a potash mine development project in Afar. 

The claim was based upon the Netherlands-Ethiopia Bilateral Investment Treaty which stipulates, among many other things, that both countries won’t impose taxes on offshore transactions.

Allana Potash acquired the Dallol potash reserves in 2013. Potash deposits at the reserves are estimated at 3.2 billion tons. However, Allana Potash was unable to continue operating due to the market crash during the same year, and was acquired by ICL in 2015.

When ICL submitted a request for the transfer of the Dallol license in 2016, the ERCA requested USD 10 million in value added and withholding tax and USD 40 million in capital gains tax for property acquisition. 

Looking back now, it seems ICL would have been better off accepting negotiation offers from the Ethiopian government. At the time, officials from the Ministry did not approve of the appeal to the international court and had repeatedly requested for negotiations.

The lawsuit filed by ICL asked for USD 178 million in compensation from Ethiopia for failing to implement the proper investment infrastructure as well as costs incurred by ICL (which amounted to USD 170 million). The arbitration court found the case against Ethiopia lacking and ruled in the country’s favour.

Tesfa News, The Reporter

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