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Hydro S.R.L. (Italy) v. Republic of Albania (II) (ICC)

Why it matters

This final award in a long-running hydropower concession dispute illustrates how tribunals calculate delay penalties and lost profits under a BOT agreement. It shows the use of a two-phase procedure (liability then quantum) and the application of a cap on penalties. The case also addresses interest rates and cost allocation in ICC arbitration.

Summary

Hydro S.R.L., an Italian company, entered into a 30-year BOT concession agreement with Albania in 1997 to build and operate the Kalivac hydropower plant. The project faced delays, and in a Partial Award dated 8 January 2018, the ICC tribunal found Hydro liable for delay penalties and damages. This Final Award determines the quantum. The Tribunal calculated delay penalties under Article 14 of the agreement: EUR 5,000 per day for the first 90 days, then 1% of daily energy generation value thereafter, capped at EUR 12.9 million. The actual penalty was EUR 1,693,157. For damages, the Tribunal awarded lost concession fees (10.5% of energy production for first three years, then 10%) from the termination date (8 January 2018) until 31 December 2020, based on 380,000 MWh annual generation and electricity prices from the Hungarian Power Exchange and EU Commission data. Damages totaled EUR 5,182,535. Interest was set at 12-month Euro LIBOR + 2%, compounded. Costs were split: Albania reimbursed Hydro's legal costs for the quantum phase (EUR 142,975.78), but Hydro bore 80% of the arbitration costs (USD 880,000), resulting in a net payment of USD 325,000 to Albania.

The detail

Parties: Hydro S.R.L. (Italy) v. Republic of Albania (II)

Case number: ICC Case No. 20654/EMT/GR

Outcome: The Tribunal ordered Hydro to pay Albania EUR 1,693,157 in delay penalties and EUR 5,182,535 in damages, plus interest, and ordered Albania to reimburse Hydro's legal costs for the second phase.

Quantum: EUR 6,875,692 (total of penalties and damages)

Applicable law: Concession Agreement governed by Albanian law; ICC Arbitration Rules (2012); seat in Paris.

Issues in play: The dispute involved the interpretation of the Concession Agreement's delay penalty clause (Article 14) and the calculation of damages for lost concession fees after termination.

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