LONDON, Oct. 2, 2020 /PRNewswire/ -- Following the effective expropriation of a legally obtained asset by the Georgian National Communication Commission (GNCC), NEQSOL Holding have today announced that their dispute with the Government of Georgia - over the ultimate beneficial ownership of Georgian internet provider Caucasus Online - will be referred to the International Centre for Settlement of Investment Disputes (ICSID).
The decision comes after the GNCC announced the appointment of a special manager to the board of Caucasus Online, who has been given the authority, amongst other things, to dismiss directors, members of the supervisory board and employees of the company, and suspend or restrict its right to distribute.
This appointment effectively amounts to a hostile take-over of the Georgian internet provider by the government, to reverse the deal that had seen the former receive substantial foreign investment by Azerbaijani holding NEQSOL.
This is not the first instance of discriminatory and punitive actions by the Georgian government towards foreign investors. Their repeated breaches of international obligations protecting foreign investment and private enterprise prompt serious concerns about the business environment in Georgia; and about the transparency of the government led by Georgian Dream Prime Minister Giorgi Gakharia on the eve of parliamentary elections.
There is no doubt that these recurring disputes have deterred foreign investment in Georgia, and will continue to do so, threatening both the country's and the region's economic prospects.
In the face of such hostile actions by the Government of Georgia - in its efforts to takeover Caucasus Online and in its refusal to engage with foreign investors - NEQSOL Holding was left with no choice but to refer the case to an international arbitration tribunal.
Head of Strategy at NEQSOL Holding Teymur Taghiyev said:
"It is with deep regret that we have been left with no choice but to refer our dispute with the Government of Georgia to international arbitration.
We are confident that the change in beneficial ownership of Caucasus Online complied with all legal and procedural obligations under applicable Georgian law, and have made every effort to explore all possible resolutions to this dispute.
However, the Government of Georgia has inexplicably remained determined to undermine the development of Caucasus Online and of NEQSOL's wider digital infrastructure project, in which it planned to integrate the Georgian provider.
The Government of Georgia has for months been breaching its obligation to treat NEQSOL's investment fairly and equitably, and has now expropriated it, despite our commitment to Caucasus Online, and to the development of Georgia as a digital hub in the Caucasus.
We hoped to resolve this issue through negotiations, but our efforts have been in vain. We always remain open to a mutually agreeable solution to this dispute, not only for the benefit of our investment, but for the benefit of the Georgian people.
However, we cannot stand idly by whilst the Government of Georgia undermines and disregards international standards and the rule of law in its dealings with investors."
NOTES TO EDITORS
- In 2019, NEQSOL Holding acquired beneficial ownership of shares in Nelgado Ltd., the parent company of Caucasus Online.
- With the purchase, NEQSOL Holding planned to integrate Caucasus Online's existing assets - a 1,200 km submarine fibre optic cable - into an international fibre optic transit infrastructure system it is developing, connecting Central Asia to Europe, thereby positioning Georgia as a regional digital hub with tremendous benefits to the Georgian economy.
- The acquisition was cleared with the full knowledge of the Government of Georgia. Throughout acquisition proceedings, both the Government and the Prime Minister were kept informed of the intended change in beneficial ownership, both by NEQSOL Holding and by the seller, Mr. Khvicha Makatsaria.
- Despite this, on 17 October 2019, the Georgian National Communication Commission (GNCC) stated that Caucasus Online had breached Articles 26 and 27 of the Communications Law for failing to seek the GNCC's prior approval on the change in its shareholders.
- This was the first step in what has widely been perceived as the expropriation and forced re-nationalisation of Caucasus Online by the Georgian Government.
- In July 2020, the GNCC informed all Georgian telecoms operators that they would be amending the Communications Law, in what is believed to be an effort to facilitate the hostile takeover of Caucasus Online.
- The amendments, passed unconstitutionally, introduced additional regulations for the telecoms sector and gave unprecedented powers to the regulatory body – including the authority, amongst other things, to dismiss directors, members of the supervisory board and employees of a telecoms company and suspend or restrict the latter's right to distribute.
- In a public hearing held on 1 October 2020, the GNCC decided to appoint such a manager to Caucasus Online.
SOURCE NEQSOL Holding