Ivanishvili vs. administration
23 August, 2012
Ivanishvili vs. administration

Georgian financial tycoon Bidzina Ivanishvili sues Georgia at the International Centre for Settlement of Investment Disputes for the illegal activities committed against Ivanishvilis’s business on political ground that inflicted millions of losses to Ivanishvili. Experts expect the state to lose the case for it has obviously violated the law.

Georgian billionaire Ivanishvili, with around USD 6 billion of estimated fortune, filed  a lawsuit against  Georgian government at the International Centre for Settlement of Investment Disputes (ICSID), a member of the World

Bank Group, on August 15, 2012 to dispute tentatively GEL 164 million [around USD 100 million] loss taken by allegedly illegal machination schemes undertaken by the state against Ivanishvili as soon as the latter came with political ambitions past fall and founded an oppositionist political coalition Georgian Dream. If Ivanishvili wins, Georgian state will have to pay perhaps twice more in reimbursement than the disputed millions seized from Ivanishvili.

“If we win the case the state will have to pay much more than it took from Ivanishvili. It has to pay the major disputed sum plus the yield charging each day until the litigation process is over as well as the entire lawyers’ related expenses extended by both Ivanishvili and the state,” Archil Kbilashvili, a lawyer of Ivanishvili, explained to Georgian Journal in the telephone interview.

Generally the yield makes twice as much as the questioned major sum for the litigation process at ICSID takes about 2 years and the interest rate will be defined based on London Interbank Offered Rate (LIBOR). The yield figure is under calculation at the moment, but based on the past experience it may reach several hundred millions, experts presume. When Georgian state lost the case with Israeli businessmen in 2011 it paid about USD 100 million out of which USD 30 million was the major disputed sum and USD 70 million was the yield.

According to Kbilashvili, the claim includes all the investment rights infringement cases committed by the authority since October of 2011: cash seizure accident on October 18, 2011 when Georgian law enforcers caught encashment group of Cartu Bank [owned by Ivanishvili by that time] under  alleged money-laundering attempt when the group executed two standard banknote deals with the Bank of Georgia (BOG), and transferred USD 2 million and EUR 1 million through their partner banks of Deutsche Bank Trust Company Americas, Citibank International and Commerzbank in the US and Germany respectively; withdrawal of deposits from Cartu under pressure of law-enforcers that resulted in GEL 45 million of cash outflow; short-term change in the law on tax and bank lien made by end-December of 2011 and giving priority to tax lien that led Cartu to GEL 119 million of loss [the law was restored by spring of 2012 under pressure of local offices of international business associations]; illegal penalties imposed on Cartu for alleged politically-motivated disbursements of bonuses on bank employees; the illegal seizure of Ivanishvili’s 21% at Progress Bank in this past June to compel Ivanishvili pay GEL 75 million worth penalty imposed for alleged breakage of law on Party Financing that he defied to pay as hr found it unfair. He paid GEL 80 million [including execution charges of GEL 75 million] eventually to assist the natural-disaster affected regions. Therefore the GEL 80 million paid in penalty is not added in Ivanishvili’s affliction-list against government.

However, more seems in store. Government fined Ivanishvili on August 11 by more than GEL 20 million for taking GEL 6 million from his private bank account during 8 months as the Audit Service of the state has a grounded suspect that the money was misused for illegal party financing again. As a consequence, movable and immovable properties as well as intangible assets of Ivanishvili are seized for Ivanishvili disagrees with the accusation. Legal experts say the questioned claim [as well as previous claim] was settled in favor of the state through violation of legal procedures; besides court could not provide with due evidences of the crime. On the other hand, it ignored all grounded arguments proving innocence of Ivanishvili who still keeps the questioned money at home.  Kbilashvili does not rule out that if the state undertakes execution of the arrested property this case will also be added to the rap sheet.

Legal experts think authorities have no chance to win Ivanishvili’s case that is full of glaring legal contradictions and millions of Georgian tax-payers money will be paid from the state coffer once more.

Prior to Ivanishvili, Georgian state lost cases at ICSID to Italian and Israeli investors paying USD 5 million and about 100 million respectively. The arbitration with Russian gas company Itera was settled by a deal. But Ditrikh Muller, a legal and economic analyst with Georgian Investment Group, remembers about 15 more lost investment cases disputed at other international courts that cost multi-millions to the state. However something much more precious than money is put on the stake due to scandalous investment disputes – the investment image of the country.

“It does not matter whether or not the state wins such investment disputes. The fact itself that such cases reach international arbitration bespeaks the country has serious problems in property rights and no reasonable and reputable western investor is supposed to come to Georgia except the ones that come from offshore companies imputed probably to Russian and local governmental officials,” Muller said.

Zaza Khatiashvili, President of Georgian Bar Association, thinks Ivanishvili belated with the dispute as he had to sue authority past fall as soon as it committed the first crime and raided its encashment group.

“The wrong thing with investors who won cases against the Georgian state was that  they used to make deals and hushed down the state-lost-cases while each case should be trumpeted as much as possible to catch the attention of international community in order to prevent further misdeeds,” He said in the interview to Georgian Journal. “Ivanishvili is belated with his case; he should also appeal to the EU to achieve the strongest reaction against the tyrannical regime.”

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