Enviro contests bid to end restructuring as dispute with Infiniteria escalates

Gothenburg, Sweden — Scandinavian Enviro Systems has rejected a request by Infiniteria to terminate its ongoing company reorganisation, telling the Gothenburg District Court there is “no reason” to halt the process.

In a statement submitted to the court 22 April, the Swedish waste tire pyrolysis company said it “disputes the request” filed by Infiniteria Sweden and Infiniteria Europe on 15 April (ERJ report).

The reorganisation was approved by the district court on 27 Feb, which at the time found that “the prerequisites for reorganisation were met” and that there were “reasonable grounds” to secure the company’s viability.

As part of the reorganisation, Enviro announced in March a decision to terminate agreements governing a joint venture with Infiniteria under the Swedish Company Reorganisation Act (ERJ report).

At the time, the end-of-life tire (ELT) pyrolysis company said the move would release it from “burdensome and loss-making commitments that made a long-term sustainable business impossible”.

This, however, was disputed by Infiniteria on 15 April, with the company taking legal action and demanding that Enviro's ongoing company reorganisation “be terminated with immediate effect.”

Infiniteria also presented what it describes as a “preliminary claim for damages amounting to approximately €84 million.”

In its latest statement, Enviro defended its decision to cancel the JV agreements, saying they were a “decisive cause” of its financial difficulties as negotiations to revise the terms failed "over an extended period."

The recycler told the court that it had “demonstrated that there are potential and concrete opportunities to independently create a profitable and long-term sustainable business”.

Furthermore, Enviro said the claimed amounts “partially overlap with claims that are subject to the ongoing arbitration” announced earlier this year (ERJ report).

“Since Infiniteria has not disclosed how the amounts have been calculated, how large a portion of the claim overlaps with the ongoing arbitration or which agreements the claim is based on, Enviro is unable to respond to the claims at a detailed level,” it added.

Enviro also pointed to liability caps in the terminated agreements, stating that these “set a cap on any claims for compensation” unless there has been 'gross negligence or intentional breach.'

According to Enviro, the agreements include limits of €3 million for marketing and agency services, €2 million for the licence, and €3 million for services.

“These limitations of liability… constitute a key factor in the assessment of potential claims,” the company said.

Enviro went on to claim that Infiniteria had not presented “any circumstances suggesting that the limitations… should not apply”.

A central point-of-contention is the terminated 'licence agreement' covering Enviro’s patented technology.

Infiniteria has argued that the licence is protected as “as a right in rem and that the exclusivity forms part of the license.”

Refuting the argument, Enviro said, according to its assessment of English law, which it said is applicable to the license agreement, "licenses do not benefit from any general protection against the licensor's creditors."

Enviro further argued that the licence agreement contains “ongoing obligations… which constitute continuing contractual obligations” and can therefore be terminated under the law.

It added that the contract “expressly provides that, if the agreement is terminated, the exclusivity shall cease.”

Enviro, therefore, said it considered that it had the right to terminate the license agreement, “with the consequence that Infiniteria loses its exclusive right to use Enviro's patented technology.”

Despite the legal dispute, Enviro said it is continuing business development activities, citing “very strong” market interest and ongoing discussions with potential partners.

The company also pointed to a letter of intent signed in March for a feasibility study into facilities in North America, which it said is progressing “at a faster pace than expected”.