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Ethiopia, Turkish contractor in UK arbitration over half a billion USD claim

The Ethiopian Railway Corporation (ERC) and Yapi Merkezi are in arbitration in the UK over compensation claims. The Turkish contractor, Yapi Merkezi, is seeking over half a billion dollars for damages incurred during the conflict in northern Ethiopia, sources say.

Yapi Merkezi won the contract to build the Awash-Woldia/Hara Gebeya Railway in 2015 for $1.7 billion. The railway was meant to link northern Ethiopia’s import-export corridors with the central and eastern parts of the country by connecting to the Ethio-Djibouti trade route. It was one of Ethiopia’s five national railway projects at the time.

However, the project ground to a halt following the two-year conflict that ravaged Tigray, Amhara and Afar regions through which the railway passes. Construction of infrastructure was complete and installation of electric lines was underway when the war broke out in November 2020.

After the war ended in November 2022, the project has yet to resume.

Yapi Merkezi has requested compensation for damages and costs incurred due to project delays, stating that properties were looted and damaged during the conflict, sources familiar with the matter say.

Abebech Diriba, communications head of ERC, says Ethiopia is well represented by capable lawyers. “We started negotiations. A technical team from both ERC and Yapi was established. After deciding it would cost Ethiopia hugely, we shifted to negotiations.”

High-profile lawyers are representing Ethiopia in the case, according to her. “We decided to resolve the issue smoothly. If the case goes to international court, it will affect Ethiopia. We are trying to resolve the case through negotiation, not court. Our legal department is working with the contractor,” she said.

Another ERC official said “We are arguing with the contractor. We are also trying to solve the issue through negotiations instead of court. So we are pursuing both court and negotiations. Both have their own processes.”

After the contractor decided to take the case to court, ERC convinced them to resolve it through arbitration instead. The arbitration process started six months ago in the UK but has been delayed as Ethiopian officials have repeatedly requested rescheduling, sources said.

“There has been negotiation several times but Ethiopia lacks an authoritative person to make the final decision,” an official told The Reporter anonymously.

“The Ministry of Finance was also involved in the negotiations. So finally Yapi took the case to arbitration court, claiming over half a billion dollars in compensation for damage during the war,” the source added.

The case shifted from court to arbitration, involving around USD 150 million, according to the source.

However, Abebech denied the compensation figures. “The contractor presented claims on certain items. But your information regarding a half billion dollar claim is incorrect,” she told The Reporter. “The compensation Yapi asked for is not half a billion dollars. We cannot disclose details now. Both we and the contractor agreed to keep the case confidential until it’s finalized.”

The Reporter’s efforts to include comments from Yapi Merkezi were unsuccessful.

Source: Ethiopian Reporter