This article was first published by capacitymedia.com.
Caucasus Online has called on the International Centre for Settlement of Investment Disputes (ICSID) to assist after Georgia’s regulator appointed a special manager to the company’s board.
The development followed a public hearing on 1 October, during which the Georgian National Communication Commission (GNCC) leveraged controversial new powers it received in July.
A statement from the firm’s parent company, NEQSOL Holding, said the appointment “effectively amounts to a hostile take-over”, as the special manager, Mariam Sulaberidze (pictured), has the power to dismiss directors as well as members of the supervisory board and employees of the company. The manager further has the power to suspend or restrict a firm’s right to distribute.
Noting “deep regret” over the latest developments Teymur Taghiyev, head of strategy at NEQSOL Holding, said: “We are confident that the change in beneficial ownership of Caucasus Online complied with all legal and procedural obligations under applicable Georgian law, and have made every effort to explore all possible resolutions to this dispute.
“However, the Government of Georgia has inexplicably remained determined to undermine the development of Caucasus Online and of NEQSOL’s wider digital infrastructure project, in which it planned to integrate the Georgian provider,” he added.
“The Government of Georgia has for months been breaching its obligation to treat NEQSOL’s investment fairly and equitably, and has now expropriated it, despite our commitment to Caucasus Online, and to the development of Georgia as a digital hub in the Caucasus.”
Sulaberidze holds 14 years of experience in telecommunications, having worked for SilkNet Ltd, OpenNet and the GNCC itself.
GNCC said that from the moment of her appointment “any decision of the governing bodies of the Caucasus Online, including the director, the supervisory board, the board of partners, taken without the prior consent of the special manager, will be deemed invalid”. Her role will continue “until 49% of the illegally alienated shares of the company will be returned to their original state and the requirement of the law will be complied with”.
The dispute of the €51 million deal dates back to 2019 when GNCC said NEQSOL had breached Articles 26 and 27 of the Communications Law by failing to seek approval on the changes to shareholders.
GNCC issued a series of historic fines over 11 months applying “both warnings and financial sanctions against the company”. These actions comprised penalties of 30,000 GEL (US$9,700) and 90,000 GEL ($29,000), and three fines of 270,000 GEL ($87,000).
In July of this year the regulator received new powers under a controversial amendment to Georgia’s electronics communication law. Many criticised the move, among them Reporters without Borders (RSF), which in a statement dated 20 July called the new powers “oppressive”.
At that point, GNCC had focused on independent news websites Netgazeti and Batumelebi, and TV channels Mtavari Arkhi and Adjara TV. It had attempted to discredit all with public claims of fake news, sabotage or mistranslated interviews.
In August, GNCC effectively issued an ultimatum to NEQSOL Holding giving the firm a September deadline to reverse its acquisition or face the appointment of a “special manager” to run the company.
It was reported in local media that ahead of the next hearing NEQSOL was attempting to negotiate with GNCC and had submitted a new offer to as it worked to settle the ongoing dispute.
Forbes Georgia quoted Tagiev as saying: “We have submitted some ideas to the Communications Commission and we are waiting for their response. I hope we find a solution that works for both parties.”
Tagiev declined to go into details due to the legal situation but maintained that an offer had been prepared that will “meet our requirements to protect our investments”. He added: “We believe that this offer will meet the requirements of the Communications Commission as well.”
Speaking since the latest decision was handed down, Tagiev has added: “We hoped to resolve this issue through negotiations, but our efforts have been in vain. We always remain open to a mutually agreeable solution to this dispute, not only for the benefit of our investment, but for the benefit of the Georgian people. However, we cannot stand idly by whilst the Government of Georgia undermines and disregards international standards and the rule of law in its dealings with investors.”
