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Olive Group FZ-LLC v. Afghanistan Civil Aviation Authority (ACAA) (PCA)

Why it matters

This award is a rare public commercial arbitration involving a state entity under the PCA, addressing key issues such as wrongful withholding of penalties and retention, and the effect of a change in government on contractual obligations. It illustrates the application of UNCITRAL Rules in a dispute with a sovereign respondent and the allocation of costs based on conduct.

Summary

Olive Group FZ-LLC, a UAE security company, contracted with the Afghanistan Civil Aviation Authority (ACAA) to provide security services at four international airports under the ANAP Contract. The contract was governed by Afghan law and provided for arbitration under UNCITRAL Rules with seat in Dubai. Disputes arose over ACAA's withholding of 'penalties' (liquidated damages) for alleged delays, a 10% retention sum, delayed payments, and early termination. Olive Group terminated the contract in June 2020 after ACAA failed to pay invoices for nine months; ACAA later issued its own termination. Olive Group claimed over USD 24 million. The sole arbitrator, Victor P. Leginsky, found that ACAA wrongfully withheld penalties (USD 1,280,967.55) and retention (USD 2,755,635.74), and failed to pay for the final nine months (USD 9,185,452.47). The arbitrator also awarded interest and costs, rejecting claims for manning cap fees and lost Canadian Embassy contract. The award ordered ACAA to pay a total of USD 14,363,306.83 plus post-award interest at 3% per annum. The respondent's limited participation and delays led to an adverse costs order.

The detail

Parties: Olive Group FZ-LLC v. Afghanistan Civil Aviation Authority (ACAA)

Case number: PCA Case No. 2021-34

Outcome: Claimant largely succeeded; Respondent ordered to pay USD 14,363,306.83 plus interest and costs.

Quantum: USD 14,363,306.83 (including penalties, retention, unpaid contract sum, interest, and costs)

Applicable law: ANAP Contract (FIDIC-based); UNCITRAL Arbitration Rules 2010; UAE Arbitration Law (seat); Afghan law as governing law of contract.

Issues in play: Contract interpretation regarding penalties, retention, and termination; Afghan law on penalties and interest; UNCITRAL Rules on costs.

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