Slovenia: The EBRD freezes loan disbursements in Alstom's coal project over corruption allegations. NGOs call on the EIB to follow suit

Paris, 18 April 2012 -- The European Bank for Reconstruction and Development (EBRD) announced that it is freezing the disbursement of the promised EUR 100 million loan for the construction of a new lignite block at thermal power plant TES 6 in Šoštanj, Slovenia. The decision by the EBRD comes after a group of Slovenian and international NGOs approached the EBRD asking for the bank to halt the loan until corruption allegations are investigated.(1)

In June 2008, Alstom "won" a public contract for the construction of a new power plant in Šoštanj, Slovenia (TEŠ 6 Project), within the framework of a project funded by the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD).(2) In a report issued on February 17 this year, the Slovenian Commission for the Prevention of Corruption suspects that acts of corruption may have interfered with the tender process, to the benefit of Alstom. In addition to the close ties between Alstom and several actors in the procurement process, the Commission clearly states that "the project [TES 6] is designed and implemented in a non-transparent manner, lacks supervision and is burdened with political and lobbying influences, and as a result there has been [and still is] a high risk of corruption and conflict of interest".

This is not the only case where Alstom has been implicated in corrupt practices. In Switzerland, one of Alstom’s subsidiaries was convicted at the end of last year in relation to corruption of foreign public officials in Latvia, Tunisia and Malaysia, and in February this year the World Bank (WB) debarred two Alstom subsidiaries and their affiliates for having bribed a Zambian official in order to win a contract funded by the WB. (See overview of the cases below).

Corruption impedes free competition, undermines institutions' credibility and legitimacy, and ultimately leads to poorer quality implementation of projects, usually at higher than necessary costs to public budgets. Such consequences contrast with the very mission of Multilateral Development Banks such as the EIB and EBRD.(3)

In this context, SHERPA, Focus and Bankwatch call the EIB to follow in the wake of the EBRD and to freeze financing for the TES 6 Project until all the investigations are concluded and light is shed on the conditions of the contract awarded to Alstom, in strictest accordance with the Multilateral Development Banks’ joint Anti-corruption commitments.

Furthermore, SHERPA, Focus, and Bankwatch call on the EIB to ratify the Agreement for Mutual Enforcement of Debarment Decisions (4) as soon as possible and to temporarily ban Alstom Hydro France and Alstom Network Schweiz AG (Switzerland), the two subsidiaries involved in the public officials corruption scandal in Zambia, from bidding for any new call for tenders linked with projects funded by the bank.

Finally, given the multiple corruption scandals around Alstom, SHERPA, Focus and Bankwatch call on the banks to be particularly cautious with respect to any on-going or planned projects in which Alstom is involved. This appears all the more necessary considering recent comments made by Patrick Bessy, Alstom’s Vice President in charge of communication, who did not seem worried about the World Bank’s debarment decision: "We [the Alstom Group] can still participate [in WB’s calls for tenders] through other subsidiaries".(5) SHERPA, Focus and Bankwatch expect the company to tackle corruption issues more seriously and to perform an in-depth review of its anti-corruption policy.

For more information contact:

Association SHERPA (France)
Maud Perdriel-Vaissière
maud.perdriel-vaissiere AT asso-sherpa.org
+ 33 1 42 21 33 25

Rachel Leenhardt
communication AT asso-sherpa.org
+ 33 1 42 21 33 25

Focus Association for Sustainable Development, (Slovenia)
Lidija Živčič
lidija AT focus.si
+38615154080
 
CEE Bankwatch Network
Piotr Trzaskowski
piotr.trzaskowski AT bankwatch.org
+48509162988

 
SHERPA is a Paris-based non-profit organization dedicated to protecting and defending victims of economic crimes. The association brings together international jurists and lawyers and works in close collaboration with civil society organizations from all over the world.
www.asso-sherpa.org

Focus Association for Sustainable Development is an independent, non-governmental, apolitical and non-profit environmental organisation based in Ljubljana, Slovenia. The mission of Focus is to stimulate solutions for environmentally and socially responsible life through education, awareness raising and co-shaping policies in the field of climate change. www.focus.si

CEE Bankwatch Network is an international non-governmental organisation with member organisations from countries across central and eastern Europe (CEE). We monitor the activities of international financial institutions which operate in the region and promote environmentally, socially and economically sustainable alternatives to their policies and projects. www.bankwatch.org

OVERVIEW OF THE RECENT CORRUPTION CASES INVOLVING ALSTOM

 
November 22, 2011 - Alstom Network Schweiz AG was found guilty by the Office of the Attorney General (OAG) of Switzerland and ordered to pay a 36.4 million Swiss francs compensation (42 million euros), for having bribed officials in three different countries. The OAG concluded that Alstom Network Schweiz AG was guilty for “not having taken all necessary and reasonable organizational precautions to prevent bribery of foreign public officials in Latvia, Tunisia and Malaysia". Although the conviction does not directly target the parent company Alstom SA, the OAG considered that "Alstom SA, as the senior holding company, is responsible in part for the organizational deficiencies identified”. In addition, Alstom SA supported all financial costs related to the case.
For more details, see the press release.

February 17, 2012 - The Commission for the Prevention of Corruption in Slovenia is an independent state institution in the Republic of Slovenia. In February it published its interim report about irregularities in the construction of a new power plant in Šoštanj, Slovenia. Among numerous alleged breaches of policies and laws in the project, the Commission notes that both the technical commission implementing the public procurement for TES 6 and the group negotiating the contract included employees of CEE Inženiring za energetiko in ekologijo d.o.o., which has close business links with Alstom. As a consequence, “conditions for corruption” were created, as Alstom “could have had access to complete information about the offer of the competing supplier”.

The Commission is continuing its investigation, while separate investigations into the possible unlawful acts at TEŠ 6 have already been opened by other Slovene institutions: the National Investigations Office and the police in the town of Celje. This week the Slovene parliament is expected to hold a first discussion on the law granting a state guarantee for the remaining tranche of the EIB loan worth EUR 440 million. The final decision is expected to take place only in a few months. In this context, Alstom's reported threat to charge the Slovene government for delaying the construction of TES 6 while facing suspicions of fraud is particularly shocking.(6)

See the unofficial English translation of the report.

More information about the project can be obtained on Bankwatch's website.
 
February 22, 2012 - Alstom Hydro France and Alstom Network Schweiz AG, as well as their affiliates, were debarred from the bidding of the World Bank for a period of three years, after paying a 110,000 Euros kickback to Zambian officials to ensure they would obtain a public contract within the context of a project funded by the World Bank in 2002. The two companies have agreed to pay $9.5 million in compensation to the Bank, which represents 40% of the amount foreseen under the electricity network rehabilitation contract in Zambia. Alstom SA and its direct subsidiaries will be conditionally non-debarred during the same period: they will retain the right to participate in World Bank’s projects, but they will have to strictly observe the terms agreed with the World Bank; should they fail to do so, they will be similarly debarred.

Since then, the EBRD, the Asian Development Bank and the Inter-American Development Bank have implemented cross-debarment in the wake of the World Bank’s decision.

See the World Bank’s press release and SHERPA’s press release for more information.

Notes for the editors:

(1)  Referring to the preliminary assessment of the corruption allegations undertaken by the anti-corruption body of the EBRD the President of the bank wrote on April 16th "Disbursements are suspended until the Bank is satisfied that all conditions for such disbursement are met, which include conclusions from this investigation satisfactory to the bank." In the second statement made by the EBRD just a day later it was specified that the suspension does not have a formal character.

Letter from the president of the EBRD Tomas Mirow to Focus Association for Sustainable Development, Greenpeace and CEE Bankwatch Network, April 16, 2012:

Letter from the Managing Director of the EBRD Riccardo Puliti to Focus Association for Sustainable Development, Greenpeace and CEE Bankwatch Network, April 17, 2012:

(2)  The EIB has approved a contribution of 550 million euros, of which 110 million euros have been already paid out while the EBRD loan amounts to 200 million euros, out of which 100 million euros is being syndicated to a consortium of private banks.

(3)  « Dealing resolutely with corruption is key to the development of sustainable economies that will attract investment and engender confidence», Thomas Mirow, President of the EBRD, in the press release of the signatories of the April 9, 2010.

(4) Agreement signed on April 9th, 2010 by the main MDBs (World Bank, European Bank for the Reconstruction and Development, the Asian Development Bank, the African Development Bank and the Inter-American Development Bank), except the European Investment Bank.

(5) Article from Wall Street Journal, February 22, 2012 and from La Tribune, February 23, 2012 (French)

(6) These threats appeared in Slovene and international media: Bloomberg dispatch, March 28, 2012