KN wins arbitration case against LNG terminal construction contractor

The Arbitration Institute of Stockholm has resolved a dispute between the operator of oil and liquefied natural gas (LNG) terminals KN (AB Klaipėdos Nafta) and the Latvian company AS BMGS in a case involving the construction of the KN LNG terminal. KN says the arbitration court has rejected a claim of the Latvian company against KN, amounting to over €2.3 million for additional contracting works.

BMGS carried out the construction works of a jetty of the LNG terminal. BMGS claimed that it incurred more €2.3 million in additional costs (including interests) for works which were necessitated by unforeseen geological conditions of soil. As a result, BMGS asked KN to cover the cost of additional works, despite the fact that BMGS agreed to carry out the whole project for a fixed price of €27.19 million. BMGS was awarded the contract of KN after bidding the lowest price in the public procurement procedure.

At the arbitration hearing, KN denied the claim insisting that BMGS took the risk of the occurrence of additional costs.

“In its activity, KN adheres to its contractual obligations and expects the same from all of its contractors. However, still there are cases when contractors, seeking to win the contract, do not assess their ability to meet their obligations, by offering the lowest price. It is very important to us that the arbitration court ruled in favour of KN, having decided that BMGS failed to comply with the terms of the contract and KN was not liable for the incurred costs,” said CEO of KN Mindaugas Jusius.

The arbitration court rejected the claim of BMGS and ordered it to pay over € 200,000 in court fees. KN was represented in the court by the lawyers of the law firm TGS Baltic and the representatives of KN.