TGS Baltic has won a case in Stockholm arbitration: we represented the Vilnius CHP in a dispute with a biomass unit contractor

10.08.2022 TGS Baltic has won a case in Stockholm arbitration: we represented the Vilnius CHP in a dispute with a biomass unit contractor

TGS Baltic has successfully defended interests of its client Vilnius CHP and has won in the arbitration case against Polish boiler maker Rafako – the contractor was admitted to be at fault for delay in the biomass unit construction.

The Stockholm Chamber of Commerce arbitral tribunal examined the dispute between the Vilnius CHP and Polish boiler maker Rafako and held that the Vilnius CHP lawfully terminated its contract with Rafako and is entitled to claim compensation for all the damages suffered. The specific size of the damages will be decided in another phase of the arbitration case.

Rafako, as one of two contractors taking part in the CHP construction project, was responsible for the design and construction of the biomass unit. From the start of the project, however, Rafako struggled to meet its commitments and ultimately, in October 2020, withdrew from the project without completing its work. In its decision, the arbitral tribunal held that Rafako’s actions, which not only delayed the completion of the project but also made further construction more difficult, were unlawful.

Total granting of one party’s claims is rare in arbitration

“Total granting of claims of one party is a rare case in arbitration, meaning that it is a great victory for TGS Baltic and the Vilnius CHP. This winning is also significant in that according to the arbitration award the contractor will not be entitled to contractual limitation of its liability. It means that the arbitral tribunal is going to award the Vilnius CHP all damages it deems proven,” Vilius Bernatonis, Managing Partner at TGS Baltic, explains why this victory is significant.

The award is significant both for contractors and for clients

Though arbitration does not form precedents, this decision not to apply limitation of liability is significant both for contractors and for clients: contractual limitation of liability is not absolute, therefore, it is important to carefully assess one’s actions in contract performance. “In the context of the Russian aggression against Ukraine and rising gas prices, the Vilnius CHP project is a strategic one. The award will enable faster completion of the project and will help in achieving that Vilnius city citizens get heat from biomass,” V. Bernatonis points out.

Among the most modern power plants in Europe

The Vilnius CHP is responsible for the construction of the new combined heat and power plant in Vilnius – the Lithuanian government has declared this construction to be a project of national economic importance. The project is co-financed from the Cohesion Fund of the European Union.

At completion, the Vilnius CHP will be among the most modern power plants of its type in Europe. When the Vilnius CHP project is fully implemented, the plant is planned to have total electric capacity of just over 90 MW (including about 70 MW from biomass) and thermal capacity of approximately 230 MW (including about 170 MW from biomass).

While the contractor kept hiring different law firms, TGS Baltic demonstrated its ability to represent clients in most significant international disputes

In the process, Rafako cooperated with a number of law firms. At first, the company was represented by international law firm Squire Patton Boggs, which was later replaced by Polish law firm Wardynski. Meanwhile, the Vilnius CHP worked only with TGS Baltic experts throughout the entire preparation and litigation process. Our lawyers made diligent preparations for the proceedings, studied the subtleties of the dispute, consistently worked with the client and successfully represented its interests in the international forum.

The Vilnius CHP was represented by TGS Baltic partners Vilius Bernatonis and Dainius Stasiulis, senior associates Tadas Varapnickas, Patricija Rukštelytė, Simas Paukštys and Rugilė Šiaulytė, associates Eglė Masytė, Beatričė Stiopinaitė and Berta Kašėtaitė, and junior associate Emilija Valentinaitė.

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In the last year Prospera Law Firm Review 2021 by Kantar, TGS Baltic was rated as the best and most recommended law firm in the Baltic States.