Applying for ISDS
It was confirmed that Samsung Engineering applied for an investor state dispute settlement (ISDS) against the Saudi Arabian government.
According to Samsung Engineering and the International Center for Settlement of Investment Disputes (ICSID) of the World Bank on November 19, Samsung Engineering applied for dispute arbitration at the ICSID over the Yanbu 3 Power and Seawater Desalination Plant project of Saudi Arabia on November 10. The legal action targets the Saudi government.
The ISDS is a system to apply for arbitration with an international civil arbitration body against a country invested in by the company when a company’s profits were infringed upon or the company suffered loss due to an abrupt policy change in the country.
Samsung Engineering landed the Yanbu 3 Power and Seawater Desalination Plant project which was ordered by Saudi Arabia’s Saline Water and Conversion Corp. in 2012. The project is to build a 3100-MW thermal power plant in Yanbu, the largest industrial complex in southern Saudi Arabia with a down payment of 1.651 trillion won (US$1.486 billion). The plant was built through the EPC System through which Samsung Engineering carried out all processes of designing, procuring, constructing, and test operation. Its progress rose above 50%.
"We were informed of the termination of the construction contract while negotiating changes in contract conditions, such as an increase in the construction cost and the extension of the contract due to a request to change the technical specifications from the orderer," a Samsung engineering official said. “We applied for an ISDS as we failed to have negotiation about additional calculation part even though we received payments for the most of our construction work already completed."
This is the fifth time that a Korean company filed an ISDS against a foreign government. ISDS cases are not disclosed because of the system’s uncertainties so the actual number may rise.
Earlier, in July 2015, Samsung Engineering filed an ISDS suit against the Oman government, claiming that Samsung Engineering suffered losses in connection with a refinery plant project. The case is still under international arbitration, but will soon be finalized by means of mutual consultation.