The Iraqi government and its ports operator have been ordered to pay $120 million to a construction company in a dispute over the breakwater at Al Faw port.
A court in the US has awarded the sum to Archirodon after it incurred significant additional costs in building the 14km breakwater, which is recognised as the longest in the world.
Archirodon, a Cypriot company, was awarded the $265 million contract to build the breakwater at Al Faw Grand Port by the General Company for Ports of Iraq (GCPI) in 2012.
The port is due to be completed next year and will be the largest in the Middle East, and one of the world’s biggest.
“But its ambitions have come at a cost,” said US judge James Boasberg, who in his ruling in favour of Archirodon, described how during the construction of the breakwater a “number of unforeseen obstacles” emerged.
The company was unable to recruit enough workers as a result of ISIS launching a major offensive against the Iraqi government. Foreign countries from which Archirodon recruited its workforce discouraged or even prohibited their citizens from travelling to Iraq, said Mr Boasberg.
Fears that the local population’s objection to trucks and heavy vehicles using the Basra-Al Faw road would lead to protests and the use of alternative routes, causing “significant delays”.
The soil conditions stated in the tender by the GCPI were also incorrect and led to “significant bulging” during the construction of the embankment. After the construction was not completed in time, the GCPI imposed a penalty of Archirodon of about $24 million.
The company responded in 2016 by seeking arbitration at the International Chamber of Commerce to recoup the extra costs incurred by the delays to construction.
In 2019, the ICC found in favour of Archirodon and the company then went to court in the US to enforce the award against the GCPI.
The action was taken under the New York Convention, an international treaty signed by more than 150 countries, which allows the enforcement of decisions made under arbitration.
Initially, three Iraqi parties did not appear in any of the actions heard in the Washington court and earlier this year Mr Boasberg awarded $120 million.
But, the parties filed a motion seeking to overturn the decision based on sovereign immunity, a legal principle under which states cannot be sued. An exception to this is when a state has agreed to arbitration.
The Iraqis argued the GCPI acted as a separate entity in arbitration and not as part of the Iraqi state, which meant the government should not be accountable for the sum awarded to Archirodon.
In his ruling, Mr Boasberg dismissed the claim and said the GCPI signed the arbitration agreement as an agent of the Ministry of Transport, which is an inseparable part of Iraq, so the three parties were liable.
He also dismissed other claims including that Archirodon’s lawyers used courier company DHL instead of the US Postal Service, which they tried to argue was in breach of regulations.
Throwing out the Iraqi's motion Mr Boasberg said they “presented no other argument to explain the four-month – now eight-month – delay in paying up”.
The GCPI, the Ministry of Transport, the Ministry of Foreign Affairs and Archirodon have been approached for comment.
