SNC-Lavalin Facing Lawsuit for Alleged Non-payment to Supplier

lawsuit

CBJ — CIFAL, a French services firm that has been supporting large Western industrial companies for several decades in the markets of Central Asia and Russia, announced it intends to sue Montreal-based SNC-Lavalin for non-compliance with its commitments due under a project to modernize a thermal power plant in Uzbekistan, completed in 2016.

The project – worth more than $500 million – was launched by Uzbekistan in 2006.

Jürgen Krahn, General Director of CIFAL, feels he was manipulated: “We were involved in this important energy project right from the start. When we had to look for international expertise, we went to SNC-Lavalin in Canada because it had interesting references in engineering projects of this type, even if its weakness was to have never worked in Uzbekistan.”

In 2008 SNC-Lavalin signed a service contract with CIFAL to represent it in the country and assist it in order to win the engineering contract with the consortium which had been designated by the Uzbek government to carry out this project. Driven by CIFAL, SNC-Lavalin signed the first agreement (“Engineering and consulting services agreement”) with the leader of the consortium, the Slovak company SYNECTA, in April 2009.

Moving forward, it took a lot of technical and commercial work in order to accommodate the modifications made to the project by the client, in which CIFAL took its active part, bringing in its country as well as energy sector expertise. However, the economic downturn in Asia began to impact Uzbekistan’s economy which, in turn caused the project to slow down and eventually be frozen after failing to attract sufficient international funding.

Subsequently, the Polish subsidiary of SNC-Lavalin, which had been entrusted with the follow-up of this project, announced that it no longer intended to go forward with its involvement in the project. Given this decision by SNCLavalin, CIFAL had no choice but to also reduce its personnel and financial commitment in the country.

However, it appears that, without informing CIFAL, SNC-Lavalin kept in close contact with the partners who they had initially been introduced to by CIFAL. CIFAL later discovered, when the project restarted in 2012, SNC Lavalin had resumed their full involvement, which continued until completion in 2015. Despite it being the same project, with the same consortium, the same scope of work, and the same client, SNC Lavalin cut out CIFAL, who had secured them the contract in the first place.

Today CIFAL is convinced that it has been manipulated by the Polish subsidiary with the support of the Quebec headquarters. CIFAL claims the compensation they consider to be due to them under the contract signed in 2008.

“We have invested in the project for five years, we took our own risk and spent more than half a million euros in personnel, office and travel costs to assist SNC-Lavalin,” explains Jürgen Krahn. “Our company is 70 years old and we have never faced such bad faith. We were not suspicious because we did not know at the time that SNC-Lavalin was accustomed to such business practices. Since their management changed and the main project executives have left the company, nobody answers our mail. The only people we are in contact with are lawyers who seem to be just playing for time,” Mr. Krahn added.

Despite repeated attempts at dialogue with SNC Lavalin to resolve the dispute, CIFAL is now left with no choice but to take legal action against SNC Lavalin. It has chosen the Quebec law firm LCM Avocats to represent it.

This additional litigation for SNC-Lavalin comes at a time when Uzbekistan, a key country in Central Asia, is of particular interest to the international community since the death of its first and only president Islam Karimov and, the election of his prime minister as successor.

@CanBizJournal

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CBJ January 2017