Poland prevails in investment dispute with Nordzucker AG

On 23 November 2009 an arbitral tribunal issued the final award in a case brought against Poland by Nordzucker AG. Nordzucker requested compensation for Poland withdrawing from the sale of several Polish sugar plants during the privatisation of the Polish sugar sector in 2000-2001.

Although Nordzucker had acquired sugar plants giving it an 8% share in the Polish sugar market, the investor stated that it had had legitimate expectations of acquiring further sugar plants comprising the so-called Gdansk Group and the Szczecin Group, which would have given it a total of 20% of the Polish sugar market.

Nordzucker AG had originally demanded EUR 185 million in compensation, though it later reduced its claim to EUR 154 million and approx. EUR 3 million in arbitration costs. The investor was represented in the dispute by attorneys from White & Case, Paris and Warsaw offices. Poland was represented by attorneys from the Polish law firm Domański Zakrzewski Palinka, Professor Grzegorz Domański, Julita Zimoch-Tuchołka and Krzysztof Zakrzewski, supported by a team of lawyers at the Polish law firm.

In a partial award issued in February 2009, the tribunal dismissed the majority of the claims raised by Nordzucker and, in particular, decided that Nordzucker had not had any legitimate expectations of acquiring the Gdansk and the Szczecin Groups of sugar plants. The tribunal also found that the Polish authorities had negotiated with Nordzucker in good faith and that, contrary to the investor’s assertions, Poland's decisions had been neither arbitrary nor based on political or nationalistic reasons. The tribunal did, however, find that Poland had breached its treaty obligations by failing to finalise the sale process within a reasonable time and by failing to communicate transparently with Nordzucker during the last period of the sales process.

In the final award the tribunal not only dismissed all Nordzucker AG’s claims for damages but also ordered the investor to pay part of Poland’s arbitration costs, as the Tribunal found that there was no causal link between Poland’s breach of the treaty and the damages claimed by Nordzucker.