Fox Marble Holdings PLC (LON:FOX) Chief Executive Officer Chris Gilbert caught up with DirectorsTalk for an exclusive interview to discuss the €195 million arbitration claim against the Republic of Kosovo.
Q1: You recently announced that you’re making an arbitration claim against the Republic of Kosovo, how did this action in Kosovo come about?
A1: We are. The situation in Kosovo is that we, as significant foreign investors in Kosovo, are entitled to a lot of protection under some very very clear and well drafted laws that speak to foreign investors in how they should be treated in country and what should take place.
As a result of that, we believe that the failure to adhere and conform to those laws, and indeed specific regulations and administrative procedures that apply to the various government agencies that we talk to all the time, has resulted in a big failure by the government of Kosovo to do what they’re supposed to do under their legislative framework.
This has allowed us to examine the possibility of a claim and when we went into it in a lot more detail with all of our legal representatives, we understood that actually we had a very strong basis in which to mount this action.
So, we have served notice of arbitration, round to 137 pages, so you can see it’s not insubstantial in terms of the legislation that we refer to with the State Advocacy Office in Kosovo and various other government agencies from which this applies.
Q2: Can you explain to us the basis for the claim and why is it as much as €195 million?
A2: Fundamentally, as we’ve disclosed to the market, one of our quarries is in suspension at the moment with the government agencies as a result of some local activity which has no basis in fact, or foundation, in law.
We then made representations to these various government agencies, crying foul, saying put this right and because they didn’t, that led to what I just said which is this failure under their own laws and the lack of interpretation of what this really means and the lack of support for us to be able to do this.
The quantum of €195 million looks enormous relative to the size of our company, and it is, but we’re allowed to say, these are the losses that we are going to experience potentially over the life of the licence of this quarry and that’s significant as it’s over 25 years or something like that.
In addition to that, the investment case for our Stone Alliance project has of course weakened significantly to the point where investors that we were in negotiation with, to get this on the road, have basically said for us country risk is too great an issue for us to proceed. So, we have potentially lost that as well.
If you add all of that up, and we’re using very conservative methodology, it comes to that amount of money so that’s where we are with the number.
Q3: Has this ever happen in Kosovo before and if it has, what kind of outcome did you have?
A3: Yes, it has. We didn’t invent this particular process, far from it, it’s very very clearly defined in the legislation in Kosovo that anybody that feels this has been the case can allow an investor to take action either in Kosovo itself or in an International Court of Arbitration which is what we’ve chosen to do.
There are five instances of companies in exactly our position who have pursued this and have won settlements from the government of Kosovo since 2015, as low as €5 or €10 million and as high as €30-€36 million. There is currently a case in process where a German investment fund, hedge fund I think, have mounted a case for €130 million against the government of Kosovo for this kind of reason, basically.
So, there have been successful claims which have been settled, there’s one in train at the moment that has been settled yet but is in train, as I say from this German hedge fund and we are amongst that group of people now.
The outcome has been successful for the complainants precisely because of these failures under the laws that exist in Kosovo and that they’re very properly and smartly devised and set into the legislation as a way of encouraging foreign investors like ourselves to come to Kosovo and create industry, jobs and commerce and do what we’ve been doing for the last 7 years.
Q4: So, what kind of timeframe are we looking for this kind of action?
A4: Well, it’s a little bit of ‘how long is a piece of strong’ but broadly speaking, we would say 8-12 months, stretching out to 15 months, maybe 18 months, that’s the usual timeframe as we’ve understood it to be. It’s a real process and it’s a 3-man arbitration tribunal here in London and obviously there’s a lot to do before we get the case heard and there’s a lot the other side have to do so it can take that long.
Q5: Are Fox Marble still operating in Kosovo?
A5: Yes, we see a lot of activity on the various bulletin boards, most of it factually inaccurate. Our factory is operating as it has been this year, it’s fully functioning, fully operational and we’re operating very well in that factory.
Our other quarries where we diverted attention away from them to the quarry in Malesheva, that is in suspension, they’re open, we’ve got some equipment redeployed into the Cervenillë quarry now which is the one that contains the Grigio Argento, the Flora and the Rosso marble.
Both other quarries in Kosovo are capable of being operated and we expect to see them functioning on the basis of the redeployment of the equipment back into those two quarries so we’re still very much in operation in Kosovo.
Q6: Is the operation in Macedonia affected in any way?
A6: Not at all, no. Our wonderful Alexandrian White and Alexandrian Blue quarry in Prilep is continuing to increase production as we said it would because of the additional investment that we made into it, very successfully so it’s not part of this at all, different country.
Q7: Finally, what will Fox Marble do if you win the money?
A7: That’s nothing I’ve thought about in any detail whatsoever. Well, it would be for the Board to decide whether or not to make a special dividend payment to shareholders which would be something that I would support but like I say, that would be a Board matter.
It’s clear that obviously we would continue to invest in Kosovo and in the region and as with our Stone Alliance project, we’ve identified and surveyed a lot of other potential quarry sites and I would imagine that we would focus on that quite well.
You’ve caught me unprepared for this question so that’s an ‘off the cuff’ answer but |I think broadly speaking, it would reflect company policy when the Board get around to thinking about it. We shouldn’t count our chickens too early but I do believe we have a very strong case and our legal advisors, lawyers and consultants that we’ve assembled to do this are all very sure that we have a very strong case.