EU – Baltic States, Latvia, Legislation, Railways, Transport

As reported, the total cost of new 34 electric trains and seven diesel trains that Paszieru vilciens wishes to buy is LVL 144 million, of which LVL 100 million will be covered with funds from the European Union's Cohesion Fund, whereas Paszieru vilciens co-financing will be LVL 44 million. Together with the train maintenance cost, the contract amount may reach EUR 610.76 million (LVL 429.24 million), and the new trains must be manufactured until August 2015, writes LETA.

Although CAF submitted the winning bid, talks on amending the contract with the Spanish company continue still. Agreement is to be reached by October 2.

Paszieru vilciens board member Artis Birkmanis said in a roundtable discussion organized by Dienas Bizness that the amendments proposed by Paszieru vilciens would ensure that Latvia did not lose EU co-financing of LVL 100 million. If CAF does not accept the amendments, a new tender will be announced.

Dienas Bizness writes that, while CAF is not commenting its plans in case the parties fail to reach agreement, if the contract is denounced or otherwise not implemented, CAF may file a lawsuit.

Lawyers believe CAF has two options – demand that the losses be compensated by Paszieru vilciens, a company that fully belongs to the State of Latvia, or by the State of Latvia itself. Since the contract has not been made public, it is unknown which could would review such a lawsuit, whether it will be a court of Latvia or Spain, or an arbitration court.

Since the contract is confidential, the amount of the possible lawsuit is hard to foresee, but it will clearly not be a few million euros.

Dienas Bizness comments that the Spanish company's lawsuit may claim up to EUR 200 million – 30% of the contract amount.

Law offices Sorainen partner Agris Repss emphasizes that, if a court rules in favor of CAF, it will be taxpayers who will pay the compensation in the end, because Paszieru vilciens is a company that entirely belongs to the state.

Lawyers also note that if the case is reviewed by a court of arbitration, the litigation may take three to five years.