Iconia Capital LLC CEO interview in Tbilisi's CHRONICA PLUS newspaper: corruption, investing in Georgia, crooked judges, and more
1. Please tell us about your arrival in Georgia and the establishment of the development company "Iconia Capitals"?
I first visited Georgia in 2013, and immediately fell in love with the country, people, and culture. I was also encouraged to invest in the country via presentations and information provided by the Georgian National Investment Agency, which promised a free investment climate, open business environment, and a fair court system.
I therefore started my first investment in Georgia, Iconia Capital LLC, in April 2014. After months of searching, we identified a fantastic territory in the heart of Tbilisi for real estate development. We purchased the property in December 2014 and were very excited to start the construction of a premium, American-style office and apartment complex.
However, several months later, after applying for our construction permit with the Tbilisi City Hall, our lawyers notified us that the application had been stopped due to an appeal by several individuals living near our territory.
This appeal transformed into several lawsuits and a multi-year conflict with several powerful individuals in Georgia, who have successfully stopped our business for the past five years, even though we have broken no laws and have construction permission to build on our own land. We have been fighting to defend our business and our rights until the current day.
2. This should have been the first construction project of the skyscraper in Georgia, which failed due to completely absurd reasons. Did the Tbilisi City Hall give you permission to build almost without any problems, until several neighbors from the next building complained and demanded to build a garden on your land ?
The factual reasons that stopped our construction for five years, terminated the jobs of several of our Georgian employees, and caused our initial business plan to fail were indeed absurd: perhaps the word “absurd” is an understatement. The reasons for attacking our company, as presented by our opponents (and later accepted by the courts) included frivolous claims, such as: our American inspired building design was too ugly for the tastes of our neighbors, and that our construction activities would be blocking their parking areas. In actuality, our opponents have expropriated our construction site for their own use and have been using it for illegal parking and private business since 2015. As for their first claim, their design opinions about having an American style premium skyscraper nearby is not a legal argument to stop an American investor for five years; at least, it’s not a valid argument under international and Western standards.
The Tbilisi City Hall, under David Narmania, gave us construction permission not once, but twice, to construct our project. On top of that, today’s City Hall under the leadership of Mayor Kakha Kaladze reviewed our construction permit and reaffirmed its legality and validity in the Tbilisi City Courts.
Since 2015, through the process of receiving our first construction permit, our neighbors and opponents attempted to cancel the construction permit by applying political pressure on the City Hall. Throughout this process, they also demanded that I abandon my business in Georgia and allow them to build a private garden and swimming pool instead (on my privately owned land). Naturally, such a proposition was unacceptable, so my staff and I attempted to negotiate an amicable compromise with them, to no avail.
3. Why there was no reconciliation between you and your neighbors when Tbilisi Mayor was the initiator of resolving the conflict in 2015 and both sides invited you to join?
In the summer of 2015, Mayor David Narmania called our team and our opponents to the City Hall for a negotiation, in an attempt to resolve our differences. My lawyers, architectural team, and myself came totally prepared to this meeting with technical and legal documents. Our intention was to introduce ourselves to our opponents face to face and present our exact community plans, and the benefits that would be offered from our plans.
The first benefit that we presented to our opponents at the City Hall was the securing and cleaning of the entire territory: which for years acted as an open air garbage landfill, attracted wild animals and vermin, and was a dangerous site at night being frequented by drug users and prostitutes.
We secondly offered to help renovate their own building and homes, which is currently still under the legal status of “arashenda” with the City Hall. We also offered to repair their elevator systems, which at the time was in dire need of repairs.
We additionally offered to build major infrastructure in the area, which by special agreement with our company, would be available and free for them and the entire community to use. This infrastructure included converting large parts of the territory from barren, dirt areas to green zones containing fruit trees and pine trees.
Lastly, we tried to convince them that our construction process would be swift, and we would take special care not to interrupt their daily lives. We also explained that we would be building special roads and access ways to the territory that they could use to easily and conveniently access their homes and parking areas.
Unfortunately, upon starting the meeting, it was clear that our opponents had no interest in hearing anything we had to say. They also verbally insulted and threatened us. Among the group of neighbors were in attendance businessman Leri Shaftal and Supreme Court Judge Giorgi Shavliashvili. During this meeting, and in front of my entire staff, Shavliashvili verbally threatened the Deputy Chief Architect of the City Hall, and also myself. He identified himself as a judge, and informed the City Hall that “there would be a price to pay” if they would allow “the Americans” to continue our business plans. He also threatened me personally and promised that he would never “allow” us to build on our own territory.
Needless to say, the meeting was non-productive and overall was a failure. After the meeting, our opponents decided to escalate their attacks, which ended up in two lawsuits against us in the years to come.
4. The agreement did not take place even though you not only agreed to build the square, but also to repair and paint the facade of their building and make the swimming pool?
During the 2015 meeting, our opponents stated that they wanted our land to be used as a green square and a swimming area for their private use. We agreed to provide this infrastructure, and in fact, such amenities were already promised within our construction documents and business plan.
In addition to the green area and swimming pool, we promised to build a hypermarket, kindergarten, and fitness gym within our project. In the spirit of compromise, we also offered to provide lifetime access to these amenities to our neighbors, for free.
We also offered to pay for the repainting of their unfinished building and to repair their elevators, which at the time were in dire need of repair and were dangerous for them and their children to use. The approximate costs of such services were more than 100,000 GEL.
Our opponents refused all such offers and continued to insist that we abandon our business in Georgia and leave immediately. Some of them also asked us to surrender our territory to them as a gift, without financial compensation.
5. When and i under what circumstances you had been asked to give money as a cash, in exchange of no longer having a problem building a building?
During the previously mentioned summer 2015 meeting at the City Hall, which was arranged by former Mayor David Narmania, several of our opponents attending the meeting demanded that we surrender our territory to them and cancel our business plans. One of the English speakers present, Leri Shaftal, stated that he and his colleagues would abandon their attacks on our company if we would agree to purchase all of the flats that they owned in the neighboring building. The approximate cost of making such a purchase was over 1,000,000 GEL.
Naturally, this was unacceptable to us, so we refused this gesture in totality, then the attacks from the neighbors continued to intensify.
6. In 2016, by the mediation of the Ministry of Foreign Affairs and the US Embassy, the City Hall still gave you construction permit , but the dispute continued in court. Who appealed the court for the first time?
The Ministry of Economy, U.S. Embassy, and City Hall reviewed our situation and worked together to issue us our construction permit, over the objections and complaints from our opponents. However, as we started our construction process, the neighbors sued us for the first time in June 2016. The Tbilisi City Courts immediately issued an order to freeze our business indefinitely, while we were given no opportunity to fight the freeze in court or defend ourselves.
We have been fighting the court ordered construction freeze, and the attempt to cancel our construction permit, for the past four years until now. Throughout the court process, every instance of court agreed to continue the construction freeze indefinitely, though they refused to inform us of what we did wrong: or if we broke any laws or regulations. We spent countless time and funds to provide hard evidence, reports, and documentation to defend our business and to refute the false claims made against us by our opponents in court. In fact, a large amount of our documentation were conclusions from the semi-governmental Levan Samkharauli Forensics Bureau. However, the courts refused to review or comment on our evidence and continued the construction freeze again and again.
In February 2018, Judge Levan Murusidze of the Tbilisi Appeals Court also upheld the construction freeze against us, while also noting that he felt our business should continue to be stopped due to his “personal feelings.” Other than stating his personal feelings, Murusidze wrote no other reasons or precedents rooted in Georgian law. Additionally, Murusidze violated our investor’s rights by blocking our request to counter-sue our opponents and ask for financial damages.
Since originally suing us in June 2016, our opponents have kept attacking us in court until now, and in the meantime, our business has continued to be stopped due to the original 2016 freeze order from the Tbilisi City Court.
7. What was going in the first and second instance?
From June 2016 to April 2019, the Tbilisi City Courts never rendered a decision against us, but also refused to consider our arguments defending the company. Therefore, through some sort of mechanism, our opponents were able to terminate our business activities in Georgia with no evidence that we broke the law.
After coming public with our story in March 2019 on the Rustavi Ori channel, and after starting international arbitration proceedings against the government of Georgia in November 2018, the Tbilisi City Courts rendered a decision in our favor in April of 2019. However, our victory was short lived, as our opponents appealed the decision twice: to the second instance (the Appeals Court), and now to the Supreme Court of Georgia. Our opponents lost the appeal in the second instance court and we are currently waiting for a major decision from the Supreme Court in or around June 14th of this year.
8. As we know, have your foreign lawyers appealed to the UN International Arbitration Court?
In 1994, the U.S. and Georgia signed a bi-lateral investment treaty. A primary aspect of this treaty includes certain guarantees for American investors operating in Georgia, as well as reciprocal protections for Georgians investing in the U.S. Such guarantees, which we believe that the government has violated, includes protections against expropriation of businesses and their assets, security guarantees, protection against discrimination, and also guarantees of fair treatment by the local justice system.
Due to the ongoing attacks against our company (and even against myself personally), and with little to no results appealing to the local authorities and courts, we were forced to take this drastic action in 2018 in order to protect ourselves and our American investors back home.
We have retained an American law firm out of Switzerland who specializes in international arbitration cases and investment treaty violations. Our U.S. lawyers filed a Notice of Arbitration against the government of Georgia in November 2018, and in early 2019, they retained a U.K. based law firm to respond to our complaint. This arbitration claim was to begin legal proceedings in an international arbitration court (to be chosen at a later date) under “UNCITRAL” rules (United Nations Commission on International Trade Law).
Out of professional courtesy to our colleagues in the Georgian government, we have temporarily halted these legal proceedings while waiting for the final court decision from the Supreme Court of Georgia. The decision to accept or reject our opponents’ false and frivolous appeal is on or around June 14th, 2020, and we expect such a decision to be made with transparency, fairness, and under the standards of Georgian and international law.
9. At what stage is the case now?
Our case is currently being considered by the Supreme Court of Georgia, where Judge Giorgi Shavliashvili and his wife, Iako Goletiani, still work. This is the final instance of court where our neighbors can continue their complaint. On our around June 14th, we are expecting a major decision from this court regarding the status of our opponents’ appeal and therefore the fate of our business in Georgia. I have been advised by multiple legal experts that the Supreme Court would likely view this administrative lawsuit as what it actually is: a frivolous attempt by self-interested individuals to destroy a legitimate American investor in Georgia. Therefore, we are expecting and hoping that the Court decides to refuse to hear this case and instead accept the decision of the Tbilisi Appeals Court, which was made in our favor in November 2019.
Upon the resolution of this five year dispute with our neighbors, we intend to start construction of our project immediately and re-hire all of our Georgian staff at full salary levels, plus back pay. We also intend to drop our international arbitration complaint against the government of Georgia and request that they protect our business and staff as we move to complete our original business plans: to beautify our community, provide affordable housing built under American construction standards, and to create high paying jobs for Georgian citizens.
ICONIA Capital LLC
79 Sulkhan Tsintsadze Street
79 Sulkhan Tsintsadze Street