Ethiopia, Yapi Merkezi Arbitration Hearing Begins In London

Turkish contractor seeks compensation for conflict-struck railway project

Proceedings over a legal wrangling between the Ethiopian government and a Turkish contractor over an ill-fated railway project have begun in the London Court of Arbitration, sources disclosed to The Reporter.

The first hearing in the case involving the state-owned Ethiopian Railway Corporation and Yapi Merkezi, a Turkish contractor, took place earlier this month, according to reliable sources.

It centers around the 392-kilometer Awash-Woldiya-Hara Gebeya railway project kicked off in 2015 with USD 1.7 billion in financing from the state-owned Turk Exim Bank. Systra MD, a French firm, was awarded the contract for consulting on the project, while Yapi Merkezi was in charge of the construction work.

The railway project, which would connect central and northern Ethiopia, features 10 substations, a dozen 10-kilometer long tunnels, more than 50 bridges, eight power stations, a dozen radio stations, and one primary workshop center, according to the website of the state-owned Ethiopian Railway Corporation (ERC).

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The project was making progress until war broke out in northern Ethiopia in November 2020, stalling construction work. Sources say a substantial portion of the infrastructure had already been installed at that point.

However, during and following the war, the contractor was unable to continue its work as major battles took place near the sites. The contractor disclosed that part of the infrastructure was damaged by the conflict, and some of the equipment had been looted.

Yapi Merkezi reportedly attempted to take the case to court, claiming half a billion dollars in damages and compensation incurred as a result of the fighting and subsequent delays. However, the Ethiopian government persuaded its executives to resolve the case through arbitration instead.

Last July, Abebech Diriba, communications head at ERC, told The Reporter that Ethiopia is well represented by capable lawyers.

“We’ve started negotiations. A technical team from both ERC and Yapi was established. After deciding it would cost Ethiopia hugely, we shifted to negotiations,” she said at the time.

An executive at ERC, who spoke on condition of anonymity, told The Reporter that the first hearing in the London Court of Arbitration was conducted on May 13, 2024. Attorneys representing the Corporation and the government traveled to London days before the hearing and have since returned to Ethiopia.

However, the hearing did not see a decision and the case has been adjourned, according to the executive.

“The first hearing was only about presenting the evidence collected so far. The decision process is to begin in the next session. It’s too early to talk about winning or losing at this stage. The content of the arbitration is classified for now. Only the arbitration judges and representatives of Ethiopia and the contractor know,” said the executive.

However, the ERC exec expects the arbitration process will not take up as much time to wrap up as it did to begin.

“The hearing was delayed because evidence collection and correspondence work took a long time. It won’t take longer to make a final decision,” said the executive.