Spanish consortium demands over €14 million from Latvia for Rail Baltic contract

A consortium of two Spanish companies has filed a claim with international arbitration, demanding over €14 million from Latvia for terminating the design contract for the main route of Rail Baltic through Riga. Latvia's transport ministry has filed a counterclaim seeking to recover a contractual penalty of approximately €3.4 million. The dispute will be resolved at the International Chamber of Commerce (ICC) arbitration court in Stockholm.

A consortium comprising Spanish companies IDOM, Consulting, Engineering, Architecture and Ingenieria y Economia del Transporte (INECO) has turned to the International Chamber of Commerce (ICC) arbitration court, demanding that Latvia pay them over €14 million in compensation. The dispute stems from the early termination of the design and supervision services contract for the main route of Rail Baltic through Riga. RB Rail, the joint venture of the Baltic states, announced this.

Background of contract termination

The contract with the consortium was terminated in October 2023. RB Rail explained that the consortium sent notice of unilateral contract termination on 26 September 2023. RB Rail cited prolonged and significant delays as reasons for termination, systematic failure to remedy deficiencies in the project work, and failure to fulfil other contractual obligations. The consortium's accumulated contractual penalties had reached the maximum limit stipulated in the contract, and the duration of delays exceeded the permitted threshold, giving both parties the right to terminate the contract.

To protect the interests of Latvia and the EU, RB Rail decided in consultation with the transport ministry to exercise its contractual right and immediately terminate the contract. In February 2024, RB Rail and the transport ministry were notified of the initiation of arbitration proceedings.

Counterclaim and new tender

Latvia's transport ministry is not taking a passive stance. The ministry has filed a counterclaim against the consultants, demanding a contractual penalty of €3.37 million. According to the contract terms, the dispute will be resolved at ICC international arbitration, based in Stockholm.

After the contract was terminated, a new tender was announced to continue design work on the Riga section. The tender failed: no bids matching the planned budget were received. The contract's estimated cost was eight million euros, but the only bid received was €39 million, exceeding the available funding by nearly five times.

Future of the Riga section

On 10 December 2024, the Latvian government approved a new solution: construction will begin on the section between the Lithuanian border and Misa, and work on the Rail Baltic passenger terminal at Riga airport and at the southern end of Riga Central Station will be completed. The Riga section was relegated to the second phase of the project, and alternatively, a new connection from Imanta to Riga airport was approved.

RB Rail noted that costs associated with the arbitration proceedings are not eligible for EU support, and due to confidentiality obligations, the details of the proceedings will not be disclosed.

Project scale

INECO won the 2019 tender for the design of the Riga section of Rail Baltic with a bid of €12.989 million. Rail Baltic is an 870-kilometre electrified standard-gauge (1,435 mm) railway to be built from Tallinn to the Lithuania-Poland border. According to RB Rail, the total cost of the project's first phase in the Baltic states could reach €14.3 billion, with Latvia's share being €5.5 billion.