Femern A/S, the state company behind the Femern connection, is now legally reinforcing its position in the dispute with the contractors behind the tunnel construction under the Fehmarn Belt. The American law firm Jones Day, one of the world's largest with offices in more than 40 cities, has been hired to assist the company in a comprehensive arbitration case against the contractor consortium Femern Link Contractors (FLC).
The case is being handled at the International Chamber of Commerce (ICC), where Jones Day works alongside Poul Schmith / Kammeradvokaten, who traditionally represents the Danish state in major legal cases.
In the tax authority's spotlight
For the Danish state, Jones Day is not an unknown entity. The law firm is still involved in the dividend tax case, where the Danish treasury was drained of 12.7 billion kroner through the refund of false dividend tax claims. Jones Day's Frankfurt office advised the German North Channel Bank in 2014, which played a central role in some of the transactions that led to the billion-kroner loss.
In 2022, Berlingske revealed that the Danish Tax Agency had issued a process notification to Jones Day in connection with the state's case against the law firm Bech-Bruun, which had advised the same bank.
A process notification is a formalised way to notify a claim against a party that is not initially a direct party in a legal case but may become one later. The Danish Tax Agency confirms to FemernBusiness that the notification is still valid, and thus it is still possible that the American firm could be involved in the case.
North Channel Bank has previously acknowledged its role in the case and received a fine in Denmark. The case against Bech-Bruun, which Kammeradvokaten conducted on behalf of the state, ended in November 2023 with Bech-Bruun being ordered to pay 400 million kroner in compensation to the Tax Administration.
Thus, Jones Day today sits on the same side of the table as Kammeradvokaten. This time as the state's partner in an international arbitration case.
The case about corona delays
The arbitration case stems from the coronavirus pandemic, which in 2020 and 2021 affected work on the enormous tunnel construction under the Fehmarn Belt. The main contractor, Fehmarn Link Contractors (FLC), which is a consortium of international companies, is claiming 77 million euros, equivalent to 570 million kroner, in compensation for delays and additional expenses.
FLC believes that the pandemic's travel restrictions, quarantine requirements, and supply issues set the work back several months and forced the contractors to have extra personnel, equipment, and safety measures. Fehmarn A/S rejects the claim and maintains that the contract does not entitle the contractors to compensation, as such risks fall within their area of responsibility.
From mediation panel to international arbitration
The dispute was first handled by the Dispute Resolution Board (DRB), which is an independent panel, established as part of the contract system to resolve conflicts on an ongoing basis. In March 2024, the DRB partially ruled in favour of the contractors and awarded them 56 million euros, but the decision was not binding. Therefore, Femern A/S chose to proceed to arbitration at the International Chamber of Commerce (ICC), where the case is now being handled.
Framework agreement with the Attorney General
In the summer, Femern A/S upgraded its framework agreement with the Attorney General, so it now has a value of between 75 and 100 million kroner over the next four years. The previous agreement was worth 30 million kroner.
The framework agreement covers ongoing legal assistance across legal areas from contract and procurement law to arbitration, litigation, and so-called claims management, and is intended to ensure that the company has the capacity to handle the many legal issues that come with a multi-billion project.
The agreement with Jones Day, however, is not part of the framework agreement but a separate agreement aimed at the ongoing international arbitration case.
The arbitration regarding corona delays is only one of several disputes between Femern A/S and the contractors. In addition to FLC's claim of around 570 million kroner, the contractors have made a larger claim of 14.5 billion kroner, which concerns delays and changes in the execution of the project. This claim could also end in arbitration if the parties do not reach a settlement.
