Keppel begins arbitration against partners in Vietnam JV hit by 6.9 trillion dong bill

[SINGAPORE] Keppel has commenced arbitration proceedings against three entities it entered into an investment with in 2016, concerning a residential and mixed-use development project in Vietnam.

Its wholly owned subsidiary Corredance is seeking declarations that the three entities are fully liable for some 6.9 trillion dong (S$330 million) of additional land use fees that the authorities have imposed on Empire City, a joint venture (JV) established for the project that is 40 per cent owned by Corredance.

The subsidiary is also seeking an indemnity for any losses that it may incur with respect to the fees, Keppel said on Monday (Apr 27).

The unit has filed a notice of arbitration with the Singapore International Arbitration Centre against Denver Power, Tien Phuoc Real Estate Joint Stock Company and Tran Thai Lands Company.

Keppel said the unit “has commenced the arbitration against the respondents to protect its interests, and will pursue its claims vigorously”.

“Corredance maintains the view that (it) is not responsible for the (additional land use fees), and such costs should be borne by the respondents.”

The investment in Empire City is “currently expected to remain profitable for Corredance”, based on the current carrying cost of the land plots used in the project, added Keppel.

However, the investment’s overall profitability would be reduced if the additional land use fees were not fully borne by the respondents, it said.

In March 2016, Corredance entered the investment agreement with the three entities and Empire City. The JV was established for the construction, development and operation of residential and mixed-use developments in the south of the core of Thu Thiem New Area in Ho Chi Minh City, Vietnam.

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Around end-2025, Empire City was informed that the relevant authorities had imposed around 6.9 trillion dong worth of additional land use fees on it for the use of the land plots in the area, Keppel said.

Empire City has lodged formal requests with the relevant authorities to amend the decisions and quantum of the additional land use fees, which remain pending.

Under the arbitration, Corredance’s claims relate to the three parties’ liability in connection with warranties and representations they had provided to the unit in the investment agreement, said Keppel.

These warranties and representations concern approvals received by Empire City for the use of the land plots and associated fees.

The company said it will provide further updates on material developments.

Keppel shares closed on Friday at S$11.55, 0.6 per cent or S$0.07 lower.