On 30 December this year, Grupa Azoty Polyolefins filed a statement of claim in arbitration proceedings against Hyundai Engineering Co., Ltd with the Vienna International Arbitral Centre (VIAC) at the Austrian Federal Economic Chamber in Vienna. The case concerns the implementation of a contract dated 11 May 2019 for the comprehensive execution of the Polimery Police project. The claim covers demands with a total value of up to EUR 2.98 billion, arising, according to the company, from the contractor's failure to fulfil its contractual obligations, which allegedly resulted in the project not being completed.
The arbitration proceedings were initiated following earlier contractual actions taken by Grupa Azoty Polyolefins against the general contractor of the investment. The Polimery Police project involves the construction of a complex of installations for polymer production, including polypropylene, and associated infrastructure. According to the company's statement, in the client's assessment, key obligations of the contractor were not performed within the required scope and time, which became the basis for charging contractual penalties and for terminating the contract.
The claim filed with VIAC includes several categories of demands. Grupa Azoty Polyolefins is seeking from Hyundai Engineering the payment of contractual penalties for delays in the execution of the project and for termination of the contract for reasons which, in the company's view, lie with the contractor. In addition, the company is claiming compensation for losses incurred as a result of improper performance of the contract. In the arbitration proceedings, quality issues have also been raised regarding the supplied materials, equipment and project and execution documentation.
The statement of claim also contains a request that the VIAC Arbitral Tribunal obliges the contractor to remedy defects in the works and defects in the supplied materials, equipment and documentation, or to supply items free from defects. Thus, in addition to financial claims, the company is also demanding the performance of specific non-monetary obligations related to restoring the required technical and quality parameters of elements of the Polimery Police project.
Position of Grupa Azoty Polyolefins
In its published statement, the Management Board of Grupa Azoty emphasises that the reason for referring the case to arbitration is Hyundai Engineering's failure to perform the contract in accordance with the agreement of 11 May 2019. The company's assessment is accompanied by allegations concerning both failure to meet deadlines and improper execution of part of the works covered by the project.
The President of the Management Board of Grupa Azoty, Andrzej Skolmowski, said:
"We consistently maintain the position that the Polimery Police project was not completed within the specified time and for reasons attributable to the contractor, i.e. Hyundai Engineering. As a result, the company incurred significant financial losses. Filing a claim in arbitration proceedings became a necessity in view of the contractor's failure to perform the contract."
In his statement, the President also recalled earlier steps taken by Grupa Azoty Polyolefins. As indicated by Andrzej Skolmowski, in August the company reported that it had rejected the contractor's claims, as well as that Grupa Azoty Polyolefins had terminated the contract for the comprehensive execution of the project for reasons attributable to the contractor and had charged contractual penalties. At the same time, Grupa Azoty Polyolefins challenged the effectiveness of Hyundai Engineering's subsequent notice of termination of the same contract.
"In August, we reported the rejection of the contractor's claims, as well as the termination by Grupa Azoty Polyolefins of the contract for the comprehensive execution of the project for reasons attributable to the contractor and the charging of contractual penalties. At the same time, we challenge the effectiveness of the contractor's subsequent notice of termination of this contract. In our opinion, there were no legal or factual grounds for submitting such a notice, particularly as at the time it was submitted the contract was no longer in force," explains President Skolmowski.
Hyundai Engineering's claim and further course of the dispute
On 29 December this year, that is one day before Grupa Azoty Polyolefins filed its claim, the company received a statement of claim submitted by Hyundai Engineering Co., Ltd to VIAC. In this claim, the contractor is pursuing demands against Grupa Azoty Polyolefins in connection with the implementation of the Polimery Police project and its own notice of termination of the contract of 11 May 2019 concerning the comprehensive execution of the project.
According to the statement by Grupa Azoty Polyolefins, the company does not recognise the claims included in Hyundai Engineering's statement of claim, either as to their basis or their amount. The client announces that it will submit a response to the claim within the time limit set by VIAC and declares that it will participate actively in the arbitration proceedings.
The company states that it intends to consistently pursue its rights and protect its economic interests within the arbitration procedure conducted before the Vienna International Arbitral Centre. The final resolution of the dispute will rest with the Arbitral Tribunal, which will examine both the claims submitted by Grupa Azoty Polyolefins and the claims brought by Hyundai Engineering in connection with the implementation of the Polimery Police project.
