Foreign Businesses Under Attack

Foreign Businesses Under Attack

Foreign Businesses Under Attack

The FINANCIAL -- The Ministry of Environment and Natural Resources Protection of Georgia obtained a court order that removed Georgian Manganese’s Director and appointed a government-chosen Director as a special manager.

GM is the largest private employer in Georgia owned by Georgian American Alloys, a US company, with production plants in West Virginia and Kentucky. GM, which invested hundreds of millions of dollars in Georgia, is now going to sue the Government of Georgia. The GM case was publicized soon after allegations against Georgia’s court system were voiced.

“The Georgian Government - via a variety of different mechanisms - has taken unlawful measures against GAA that hinder GM in the production of manganese ore and alloys to supply its US operations and US steel producers,” Georgian American Alloys claimed. “On 11 May, 2017, seven days after GM notified the Government it would be pursuing international legal remedies, the Government seized total control over all GM operations.”

Georgia’s Ministry of Environment obtained an ex parte court order that removed GM’s Director and appointed a government-chosen Director. In breach of Georgia’s international legal obligations, the court order purports to replace GM’s Director and grant unilateral powers including acting in place of GM’s Board of Directors, GM representative Zakaria Zalikashvili told The FINANCIAL.

According to Zalikashvili, the Government’s appointed Director is a close business associate of a politically-connected Georgian national who holds a small minority interest in GAA (4%).

He also said that GM has experienced numerous improper procedural and substantive rulings that call into question the judiciary’s independence.

“The Georgian Government has violated numerous bilateral and multilateral investment treaties and the European Convention on Human Rights,” Zalikashvili told The FINANCIAL.

“The declared reason for this action was the eradication of ecological problems which, as the Government argues, were overridden by GM. The special manager seized total control over all GM operations, so GM, its shareholders, or its owner Georgian American Alloys, have lost the right to any kind of decision-making or running of the company. GM considers the decision lawless and talks about the activities which were oriented at the eradication of ecological problems.”

“GM had a big desire and some kind of view on how to resolve the problems related to the environment and ecology by constructing a new factory, but during the processes we were constantly being assessed for tax purposes and penalties. All the penalties have since been audited by PwC and E&Y and they have found no basis for the alleged tax liability,” said GAA’s PR Representative in Georgia, Zakaria Zilikashvili.

GM has been assessed as liable for over USD 82 million in taxes, penalties and interest.

According to Zalikashvili, GM, on its own initiative, had approached the Government of Georgia for permission to invest USD 25m in modernization - by building a new benefication plant - to mitigate environmental impacts.

“The Georgian Government repeatedly blocked the investment for several years, preferring instead to use the alleged violations as the basis for unjustified penalties,” he said. He also said that GM in Georgia has faced repeated harassment and threats of criminal prosecution in an effort to intimidate GM and prevent it from highlighting the Georgian Government’s wrongful actions.

“A state inspection at GA in 2017 found that the situation in terms of pollution and ecology protection had noticeably worsened,” Maia Bitadze, Deputy Minister at the Ministry of Environment and Natural Resources Protection, told The FINANCIAL.

“GM is the only company which has never observed our entrusted directions. We had an opportunity to cancel the company’s license, but we decided to send in a special manager because of its important role in the Georgian economy and in terms of employment. Now we have an expectation and a responsibility too that all licensing and permit agreements will be fulfilled by the new manager and the catastrophic environmental impacts will be mitigated,” Bitadze told The FINANCIAL.

“We are Georgia’s largest private sector employer and have had a positive relationship with the Georgian Government until very recently. GM has invested hundreds of millions of dollars and created thousands of jobs for Georgians. Unfortunately, this spirit of collaboration has faltered and we are being subjected to measures that have no place in Georgian law, international law, or the international business community. Thousands of jobs in Georgia are at risk, as is the rule of law in Georgia, Georgia’s international reputation, and the supply of raw materials to the US steel industry - a matter of US national security. We look forward to working with the Government of Georgia to resolve this impasse and hopefully normalize GM’s operations quickly and efficiently,” a GM representative told The FINANCIAL.

A Kazakh state-owned gas transportation company and two Dutch energy companies have just filed claims against Georgia for other violations of international laws and treaties.

The International Chamber of Commerce-Georgia filed an official claim at the High Council of Justice against Tbilisi City Court Judge Vladimir Kakabadze on 24 March, 2017. In its claim ICC-Georgia details all the irregularities committed by Judge Kakabadze against three ICC members - Terabank, Phillip Morris International and British American Tobacco. Those irregularities have caused the three foreign companies a cumulative prejudice of about USD 150 million, ICC Georgia reported.

ICC Georgia is the largest and most vocal global business association in the country; it includes over 350 corporate and youth members and 28 business associations. The International Chamber of Commerce is the largest business organization in the world that includes over 6.5 million businesses and chambers of commerce.



“Foreign businesses operating in Georgia are being attacked and destroyed like never before in the history of the country,” Fady Asly, ICC Georgia Chairman, wrote on his Facebook page. He also provided the quotes of billionaire Bidzina Ivanishvili, former Prime Minister of Georgia, who once urged businesses to report any corruption and pressure from the Government:

“I vow that my government would provide equal conditions for all the businesses and would eradicate the practice of pressuring businesses by the state.”

“You should immediately set off alarm bells if a government official exerts pressure on you.”

“I guarantee that no one will dare to exert pressure on businesses and the very first case of such pressure will be strictly punished. But you too should not yield to pressure and you should speak out in order to make it easier for us to find out circumstances… Speak out and let us know if there is a problem so that we can react instantly.”

“As soon as someone from the government starts trying to befriend you, you should start shouting out loud: ‘I’m raped’… and you should start ringing alarm bells as soon as someone from the government starts offering ‘help’.” - Bidzina Ivanishvili, 5 October, 2012