TALLINN - The Finance Ministry has demanded nearly 8 million kroons from Germany's DZ Bank after mechanical flaws were discovered in an animal waste disposal plant at Vaike-Maarja that the bank guaranteed.
Two years ago the ministry helped forge an agreement for the supply of equipment between the German company UMAG Technologie GmbH and the plant at Vaike-Maarja, in the northeastern part of the country. But once the plant began operations, defects were discovered in the equipment.
The ministry commissioned an expert from Tallinn Technical University to investigate the problem. Once the exact flaws were identified, the Finance Ministry informed its contractual partner.
Olavi Petron, acting head of the Agriculture Ministry's foreign relations and EU coordination department, was reluctant to reveal the investigation's results, though he stressed that the problems were critical.
However, the supplier disagreed with the results and refused to extend the financial-guarantee deadline.
The Finance Ministry demanded that the German bank pay a financial guarantee in the sum of 7.95 million kroons (510,000 euros) on the grounds that the contractual partner had failed to meet its warranty period commitments.
The bank rejected the demand, referring to document shortcomings as defense.
Petron said the 7.95 million kroons was only a part of the guarantee.
A representative of the Finance Ministry said it would not yet consider taking legal action, as negotiations are still in progress.
Peeter Maspanov, manager of the animal waste disposal plant, said the state had the right to demand the money because the supplier did not provide what the customer had ordered.
The state received 3.6 million euros in funding from the PHARE program for the project.