Estonia's defense agency takes Datasel contract dispute to arbitration in Switzerland

Estonia's Center for Defense Investments (RKIK) has referred several contract disputes to international arbitration, including a case against Italian company Datasel over a canceled deal to supply artillery shells for Ukraine. The proceedings follow International Chamber of Commerce (ICC) rules and are being held in Switzerland.

Lawyer Paul Keres, one of the arbitrators representing Estonia at the ICC, said arbitration fees alone — paid to the arbitrators and the institution administering the process — run into hundreds of thousands of euros, with expert and legal fees adding considerably more. He said the tradeoff is a faster, more specialized ruling, and praised Swiss arbitration as efficient and well organized.

One related contract dispute is also before Harju County Court, with the combined value of the disputed contracts reported at €59.8 million. Keres explained that disputes can reach arbitration either through a clause agreed in the original contract or through a later agreement between parties once a dispute arises, and that an arbitration award carries the same binding legal force as a court judgment. He noted arbitration remains less common in Estonia than in longer-established democracies but is growing in scale and complexity.

Background

Datasel, an Italian company acquired in 2024 by Indian-owned Neco Defense Munitions, had signed four contracts with RKIK to supply artillery shells for Ukraine, with roughly €70 million paid upfront. Delayed and substandard deliveries led RKIK to terminate the contracts and pursue legal action — none of the ammunition ever reached Ukraine.

RKIK has rejected Datasel's proposal to form a joint working group, saying funding under the European Peace Facility has expired and no budget remains to accept further ammunition. Datasel's lawyer maintains the company has the resources and supply chain to fulfill its obligations, and the two sides still disagree over whether the contract terminations were valid.

The dispute contributed to the resignation of Defense Minister Hanno Pevkur on September 2, amid broader accounting and oversight problems within Estonia's Defense Forces.