Serbia's Srbijagas launches international arbitration against Lithuania over fertilizer plant dispute

Serbia's state-owned gas company, Srbijagas, has launched international investment arbitration proceedings against Lithuania. The company alleges that the Lithuanian judiciary's prolonged court delays have devalued multi-million euro arbitration awards previously secured by Srbijagas. These awards are reportedly linked to the "Azotara Pancevo" mineral fertilizer and nitrogen compounds company.

“

Through this proceeding, Srbijagas is apparently trying to compensate for claims that, according to estimates, with default interest and the costs of several years of litigation, could reach multi-million euro amounts and up to 20 million euro.

Srbijagas aims to recover multi-million euro claims, potentially reaching up to 20 million euros with default interest and litigation costs. The Serbian firm was initially represented in the Azotara Pancevo privatization dispute by the Lithuanian law firm Motieka & Audzevicius. Following the bankruptcy of the Lithuanian businessmen involved, Srbijagas is now seeking compensation directly from the Lithuanian state, citing a bilateral investment protection agreement from 2005.

“

Since the Lithuanian businessmen have since gone bankrupt, the Serbian company is now claiming compensation directly from the Lithuanian state, and the legal basis is a bilateral investment protection agreement from 2005.

The complex legal dispute traces back to 2006 when a consortium of Lithuanian companies, led by UAB ARVI ir ko group, acquired Azotara Pancevo. However, cooperation soon dissolved. Serbian government reports indicated that investors alienated a key production facility, selling it to Russian buyers and burdening the company financially through offshore affiliates. Serbia terminated the privatization in 2009, with Srbijagas taking over management and a majority stake.

“

The Serbian state terminated the privatization in 2009 due to non-fulfillment of contractual obligations, and Srbijagas took over the management and majority stake.

This termination triggered the first major international arbitration, where Serbia was ordered to pay Lithuanian investors approximately one million euros after they claimed the factory seizure was illegal. The sale and subsequent issues with Azotara also led to criminal investigations in Serbia, as the privatization was part of a report on disputed deals.

“

Namely, Lithuanian investors filed a lawsuit against the Serbian state, claiming that the privatization was terminated illegally and demanding compensation of over 50 million euro.