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Decade Long Legal Struggle Could Derail Congo’s Oil Development

Congo

A construction company is once again seeking charges against the Congo Republic—weary and battered from years of low oil prices—over unpaid oil taxes and royalties, according to a Reuters report.

The decades-long scandal has been in courts around the world, and relates to public works projects completed by Commisimpex. The ordeal has weighed heavily on the Congo’s financial ratings, and caused a temporary default on a Eurobond earlier this year.

Although a Congolese court ordered Commisimpex to liquidate its assets back in 2012, the firm argues that French oil major Total and its Italian counterpart Eni should pay taxes and royalties directly to Commisimpex, instead of to the state.

Previous endeavors to seek repayment for previous work took the company to venues in Europe and the United States. This latest suit was filed back in October 2016 at a commercial tribunal in a Parisian suburb, the Reuters report said.

Commisimpex has won cases against the Congo in the past, but the government has not paid out the settlements due to lack of funds. The Congolese government ordered the 2012 liquidation because it claimed the construction company owed $1.54 billion in social security payments that had accumulated over 30 years.

Unpaid bills on Brazzaville’s end total $1.25 billion, according to a Commisimpex spokesperson.

The company said Congo used “as security all revenues, and notably all moneys owed, royalties, taxes rights, etc. whether present, future or eventual originating directly or indirectly from...hydrocarbon deposits.” This is the backbone of the firm’s argument for the redirection of Eni and Total’s royalty payments to Commisimpex coffers.

Related: As OPEC Compliance Peaks, Can The Drawdowns Continue?

A summons sent to Total shows that Commisimpex is seeking to call in a guarantee on oilfield revenues that it allegedly secured back in the ‘80s as collateral against debt.

Representing the government, Thierry Moungalla said: “The Congolese state will, of course, defend its position which is that these taxes cannot be subject to seizure.”

By 2018, oil projects in the Congo will boost output by 25 percent to 350,000 barrels per day according to a June report by Reuters. Corruption could still derail any hopes of infrastructural development using the new funds, analysts say.

By Zainab Calcuttawala for Oilprice.com

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