London Court Dismisses Bulk of Turkish Contractor’s Claims Against Ethiopia
The London Court of International Arbitration has dismissed the bulk of a USD 979.9 million claim filed by Turkish company Yapi Merkezi Insaat against the Ethiopian Railway Corporation (ERC), according to sources familiar with the case. The company had sought compensation for damages and losses incurred during the construction of the Awash–Kombolcha–Woldia–Hara Gebeya railway infrastructure […]
Black News 
The London Court of International Arbitration has dismissed the bulk of a USD 979.9 million claim filed by Turkish company Yapi Merkezi Insaat against the Ethiopian Railway Corporation (ERC), according to sources familiar with the case.
The company had sought compensation for damages and losses incurred during the construction of the Awash–Kombolcha–Woldia–Hara Gebeya railway infrastructure project, demanding USD 979.9 million plus nine percent legal interest.
Yapi Merkezi argued the Corporation’s failures to secure financing for the railway and settle right-of-way compensation claims on time, combined with the lack of sufficient electric power supply and the subsequent outbreak of war in the country’s north delayed its work by nearly nine years and exposed it to losses.
However, a tribunal has rejected the bulk of the claim (USD 750 million) and ruled that the company must return a USD 29.1 million advance payment it had received from ERC.
Sources also indicated that the tribunal ordered all machinery, vehicles, and materials temporarily imported by the Turkish contractor for the project to be either handed over fully to the Corporation or formally transferred.
The Turkish firm had primarily filed the claim against the Ethiopian Railway Corporation, while also naming the Ministry of Transport and Logistics and the Ministry of Finance as co-defendants. However, the tribunal removed both ministries from the case, accepting the Corporation’s legal arguments.
“This decision eliminates the risk of joint liability for the government,” a source closely following the proceedings said.
Despite the major dismissal, some of the contractor’s compensation claims were upheld. The tribunal appointed an independent consultant to assess the admissible claims and determine appropriate compensation.
Following consultations with both parties, the tribunal selected PricewaterhouseCoopers (PwC) to conduct the assessment.
The firm submitted its final report in January, outlining two possible compensation scenarios: USD 278.9 million plus nine percent interest from the date the claim was filed, or USD 233.1 million plus the same rate of interest.
Both parties later presented oral arguments on the report and submitted post-hearing briefs to the tribunal in March.
“The arbitration process is now fully concluded, and all that remains is the tribunal’s final ruling,” a source said.
Ethiopia’s legal team in the case was led by prominent legal scholar Tilahun Teshome (Prof.), with Kassahun Mulatu, head of legal services at ERC, playing a key role as a member of the team. The legal team was also supported by international consultants, engineering teams involved in the project, and a financial advisory group.
The Ethiopian Railway Corporation signed the contract with Yapi Merkezi Insaat in June 2012, with implementation commencing on August 7, 2014, following the fulfillment of preconditions.
The contract was structured as an EPC turnkey agreement, under which the contractor was responsible for design, procurement, construction, and testing before handing over the completed project. The total contract value was set at USD 1.7 billion.
To finance the project, the Corporation secured loans totaling USD 1.24 billion from Credit Suisse in two tranches and an additional USD 300 million from the Turkish Exim Bank.
The railway project spans 392 kilometers and is divided into two phases: the first covers 272 kilometers from Awash to Kombolcha, while the second extends 120 kilometers from Kombolcha to Woldia/Hara Gebeya. The project was designed to link with the main Addis Ababa–Djibouti railway and connect with the partially completed Woldia–Mekelle line.
Construction progress had reached 99.96 percent on the Awash–Kombolcha section and 82.7 percent on the Kombolcha–Woldia/Hara Gebeya segment before work was halted due to conflict in northern Ethiopia. Overall completion stood at 92 percent.
The Corporation had already paid approximately USD 1.6 billion to the contractor for the work completed prior to the suspension.
