YEREVAN (RFE/RL)–A Yerevan court resumed proceedings on Monday into the Armenian government’s lawsuit against the Greek owner of the ArmenTel telecommunication monopoly and its former US shareholder–rebuffing the Americans’ claim that Armenian courts are not eligible to consider the case. An American lawyer representing the US Trans-World Telecom warned that the court’s stance calls into question key terms of ArmenTel’s takeover by Greece’s state-controlled firm OTE.
The government last month sued TWT and OTE for some $17 million in what it claims is unpaid corporate tax.
In March 1998–OTE paid $142,5 million to buy a 90 percent stake in ArmenTel–which was then a joint venture between the government and TWT ( it had earlier acquired 49 percent of the Armenian phone company for a few million dollars.) The sale of the TWT stake and shares held by the government to OTE marked the biggest yet sell-off of an Armenian company.
TWT counsel Van Krikorian argued that under the terms of the 1998 agreement only an international arbitration court in London can consider disputes related to the deal and that only OTE is now responsible for paying ArmenTel’s taxes. Krikorian pointed to a provision in the agreement whereby: "The Parties irrevocably agree as follows: they submit to the exclusive jurisdiction of the Arbitration Court of the International Chamber of Commerce in London for the resolution of any claim dispute or difference." Another provision reads that "Buyer (OTE) shall pay any Tax–stamp duties–registration duties and/or any further transfer taxes or other costs–related to the transfer of the Stake in this Agreement."
"OTE alone is responsible for any tax liabilities arising from the ArmenTel transaction," the TWT lawyer said. He added that the district court in central Yerevan "would first have to declare the agreement on the sale of ArmenTel shares to be invalid" and only then take up the matter. However–the judge presiding over the proceedings turned down Krikorian’s petition–backing a government representative’s claim that "tax relationships" in Armenia are regulated by Armenian law. He said tax collection is a matter of Armenia’s "state sovereignty" and is not subject to international arbitration.
It emerged on Monday that the money claimed by Yerevan is the income tax which the authorities say TWT was supposed to pay from the sale of its ArmenTel shares. Government officials and lawyers said OTE froze its paymen’s to the American company last year under pressure from Yerevan. TWT then filed lawsuit to the international court in London–which has since been examining it since last February.
OTE lawyers present at the court session said the Armenian government was due to submit a written testimony to London by the end of the month. The judge rejected their petition to suspend the proceedings until the ongoing international litigation is over. Still–he ruled to postpone them for two weeks to give the Americans time for deciding on their further action and a list of witnesses they would like to bring to the court. TWT’s Krikorian said he would like to invite those present and former Armenian officials who signed the ArmenTel deal.
Among the officials that presided over its signing in 1998 were then prime minister and currently President Robert Kocharian–Economics Minister Armen Darbinian and former communications minister Grigor Poghpatian. ArmenTel was set up in the early 1990s to handle international phone calls and was later given full control over Armenia’s entire telecom network. Opposition politicians and some former ArmenTel executives have alleged that TWT had lavishly bribed former government officials to ensure its lucrative business. President Kocharian ordered an official inquiry into the allegations earlier this year. No findings have been made public yet. An offshore company controlled by American entrepreneur Barry Hon–TWT is seen as a big beneficiary of ArmenTel’s takeover by the Greeks.