Latvian government to wait for Swedes

RIGA - The Latvian government has decided to accept the proposal of Minister of Justice Ingrida Labucka to postpone taking action in the case of a Swedish ship left in Latvian waters which was cut into scrap metal.

At the cabinet of ministers meeting on Dec. 12. Labucka suggested that the Latvian government should wait until the Swedish party files a claim for payment of the court of arbitration award with the Latvian court, and only then try to contest the award.

Ministry of Foreign Affairs as well as Ministry of Justice officials consider that Latvia can still push for the courts' decision to be changed.

Latvia lost in the international court of arbitration in Stockholm against Swedish company SwemBalt AB in November. The Swedish company demanded compensation for the Feederichif vessel brought to Riga in 1993 for the purpose of setting up an on-board trade center in Riga port, but which was ultimately converted into scrap metal.

The international court of arbitration ruled that Latvia must repay the Swedish company $2.5 million in damages and $600, 000 in fines for dismantling and selling the ship.

The Latvian parliament's budget and finance committee backed the government's proposal to allocate 2 million lats to compensation payments on Nov. 21, but a week later reversed its previous decision and decided not to support the fund allocation.

"After meeting Labucka the committee decided not to support the fund allocation until all possibilities in the legal proceeding have been exhausted" said Janis Gaigalis, secretary of the budget and finance committee.

Latvia could still resort to norms established by the New York Convention by which approval and implementation of verdicts made by the international court of arbitration can be appealed in the courts of the state in which the case has been reviewed, provided it is proved that judgment has been passed in a dispute that is not in the competence of the arbitration court, said Kristine Malinovska, director of the legal department at the Ministry of Foreign Affairs.

Labucka explained that there are sufficient grounds to believe that Latvia could dispute the unfavorable resolution by the court of arbitration.

From the arbitrator's explanations it could be concluded that the agreement on the ship's lease between Latvian and Swedish companies was proof of the deal, but nobody in Latvia had seen the document, she said.

A couple of weeks ago a task force was assigned by the minister of justice to analyze all possible options and available materials in the case.

Latvia sent letters to the Swedish company Swem-Balt, which was the owner of the vessel, and the international court of arbitration requesting explanations about the court ruling and noting that Latvia disagrees with the description of the vessel as an investment.

Last week Labucka mentioned that turning to the Danish court would be one option to avoid paying the huge damages. Alternatively, seeking a compromise with the Swedish party would be another option, she said.

On a trip to Denmark for a seminar about accession to the EU and public integration in Latvia, Labucka also took the opportunity to examine Danish laws in relation to the Swedish ship case.

Danish lawyers who were asked to give their opinion of the case said that the Danish arbitration court had no grounds to hear the Swedish ship case.

The task force headed by Labucka will continue to work until the government decides which of the ministries will undertake the supervision of the case.

The Latvian Prosecutor's Office has launched a probe to determine whether any Latvian officials are to blame, but so far no accusations have been made.

If the court, however, resolves that Latvia's arguments are not strong enough, Latvia will definitely pay the damages specified under the arbitration court award, but it must exercise its rights first, said Labucka.