September 19, 2017 / 2:26 PM / 3 years ago

Czech company threatens Kyrgyzstan with arbitration over hydro deal

PRAGUE, Sept 19 (Reuters) - The Czech company Liglass Trading CZ threatened Kyrgyzstan with arbitration if its government pulls out of contracts for 12 hydroelectric power plants without seeking a solution to a pay dispute.

The central Asian nation annulled the contracts late on Monday, saying the Czech contractor failed to make a $37 million payment on time, part of a deal struck in June and July .

One of the deals included a provision that Liglass would pay Kyrgyzstan the amount it needs to pay Russia – its previous partner in the project - for work already carried out on the plants. The $37 million was that payment.

Liglass said on Tuesday its agreement with Kyrgyzstan included clauses requiring a three-month period to settle contract disputes, as well as other procedures to handle disagreements.

“If the government of Kyrgyzstan, in violation of article 7 of the investment agreement, sends a notice of withdrawal ... Liglass Trading CZ will be forced to turn to international arbitration,” Liglass said in a statement.

The Bishkek government said in a statement late on Monday it was terminating the deal unilaterally, having denied Liglass’s request to delay the $37 million payment.

The contracts have come under scrutiny in both countries because Liglass - a little-known privately held firm whose bid had been backed by the Czech president - had no experience in the energy sector.

Some Kyrgyz government critics have cried foul over the deals with Liglass and called for senior officials behind it to resign. The cabinet has insisted it had observed all rules and regulations.

A Kyrgyz government spokesman could not immediately comment on Tuesday.

Reporting by Jason Hovet in Prague and Olga Dzyubenko in Bishkek, editing by Larry King

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