Example of international arbitration

1
Example of international arbitration

• Bill Wigglesworth
• Interconnection, costs and pricing workshop,
  Abuja, Nigeria

2
Government of Latvia versus Tilts Consortium

• Exclusive franchise for fixed voice telephony and
  rebuilding Latvian telecommunications
• Awarded to Tilts Consortium (Cable Wireless and
  Telecom Finland) 1993
• Lattelekom umbrella agreement signed 1994
• Included
• 20 years exclusivity network and services
  development programme price change formula
  disputes subject to international arbitration

3
Unravelling of agreement

• Price change formula (first 3 years) falsified by
  events strong Lat stable inflation
• Regulated by Telecommunications Tariff Council
  (TTC) under terms of Act, not agreement
  justification and effects on users
• Slippage on Lattelekom investment plans
• 1998 Announcement of ending of exclusivity from
  January 2003, under WTO commitments
• Network competition an EU requirement

4
Further developments

• Departure of Cable Wireless 1998
• Telecom Finland became Sonera
• Sonera decision to go to international
  arbitration
• Sonera merged with Telia of Sweden 2002
• Telia/Sonera controlled LMT largest mobile
  operator in Latvia
• Telia/Sonera offer to abandon claim in return for
  LMT shares so far ignored

5
Arbitration process

• International Chamber of Commerce (ICC) court of
  international arbitration in Stockholm
• Initial submission of Tilts (including CW)
  seeking compensation for loss of exclusivity
• Latvia Government rebuttal, on grounds of failure
  to carry out full improvement programme
• Resubmission by Tilts response by Latvia

6
Current position

• Both sides supported by experts, giving
  independent views to arbitration panel
• Total sums claimed in order of US500m
• Loss of exclusivity and loss of revenue from
  price change delays versus economic effects of
  late network development
• Value of on-going monopoly versus commercial
  prospects in competitive sector
• Costly process
• Hearing due April 2004