Russian company seeks millions in compensation from PetroVietnam: report

The Vietnamese oil and gas company had to suspend the project after Power Machines was hit with U.S. sanctions.
By RFA Vietnamese
2024.02.14
Russian company seeks millions in compensation from PetroVietnam: report PetroVietnam’s headquarters in Hanoi on July 22, 2015.
Reuters

A Russian electrical equipment manufacturer, owned by billionaire Alexey Mordashov, is asking for US$500 million in compensation after a successful lawsuit against Vietnam National Oil and Gas Group (PetroVietnam), according to Russian news site RBC.

The claim, made by an anonymous source, comes after Power Machines said Monday it won the suit last November after submitting it to the Singapore International Arbitration Centre.

Russian court records show that Power Machines also filed a lawsuit against PetroVietnam and its representative in Russia in a Moscow court on Feb. 2, 2024. No details about that lawsuit were released.

Reuters news agency said the Singapore suit was intended to reclaim money invested in building a power plant in Vietnam. The project was suspended in 2018 after the Russian contractor was sanctioned by the U.S.

Although the RBC article does not specify which project was being disputed, Vietnamese state media said that in 2019, the Russian company, submitted a lawsuit against PetroVietnam regarding the temporary suspension of the Long Phu 1 Thermal Power project in Soc Trang province.

The project began in early 2011, and is expected to provide about 7.8 billion kWh of electricity per year when put into operation.

However, the project had to be suspended due to the U.S. Treasury Department's sanctions, imposed on Jan. 26, 2018.

In Jan. 2019, Power Machines’ contractor submitted an official document announcing the termination of the contract for design, supply of technological equipment and construction, because it considered the sanctions to be force majeure.

A lawyer who co-founded a non-governmental commercial arbitration center in Vietnam told Radio Free Asia Power Machines believed PetroVietnam (PVN) to be at fault because it failed to meet its obligations.

“However, according to reliable sources, Power Machines started the lawsuit with a weak position,” said the lawyer, speaking on condition of anonymity for security reasons.

“PVN did not seem to take advantage of it to make strong arguments against Power Machines, so it was unsuccessful. 

“During the trial, PVN appointed a very good lawyer, but it was too late to change the situation."

The lawyer said if PetroVietnam does not pay the money, "the possibility of having assets confiscated abroad will be very high."

RFA Vietnamese called PVN, but the person on the phone said the company was on holiday and there were no senior representatives in the office.

The reporter sent emails to Vietnam’s Ministry of Foreign Affairs, Ministry of Industry and Trade, and Ministry of Planning & Investment with a request for comment on the lawsuit but did not immediately receive a response.

The reporter also sent an email to the U.S. State Department and the U.S. Embassy in Vietnam with a request to comment. The embassy said it would respond after the Lunar New Year holiday.

Nguyen Quang A, who was director of the now-dissolved Institute for Development Studies said Vietnamese companies often cut corners on contracts with foreign partners.

“Investors in Vietnam must be very careful in choosing contractors, not only clearly researching partners but also taking into account risks,” he said. 

“When negotiating a contract, you must hire good lawyers to make the contract tight."

A former lecturer at Hanoi’s National Economics University, who did not want to be identified in order to speak more freely, said that when doing business internationally, Vietnamese officials do not have a long-term vision but put personal interests above national interests.

He said they look at their potential commission without thinking about the possible consequences.

Power Machines has been involved in many industrial projects in Vietnam such as the Thac Ba Hydropower Plant, Pha Lai Thermal Power Plant, Tri An Hydropower Plant and Tri An Hydropower Plant.

After 2000, the company took part in building three hydroelectric projects: Yaly, Can Don, and Se San 3, and Uong Bi Thermal Power Plant.

Translated by RFA Vietnamese. Edited by Mike Firn and Elaine Chan.

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