Zenith Energy Ltd (LSE:ZEN, TSX-V:ZEE) shares shot 11% higher and then sank 6% into red at 0.4p after the energy said it had launched legal proceedings against the Republic of Tunisia to claim "at least US$48mln".
The company said it submitted an arbitration request with the International Centre for Settlement of Investment Disputes in the US, in accordance with an agreement signed between the governments of the UK and Tunisia in 1989.
Zenith said it launched the proceedings following "a series of actions undertaken by the Tunisian government to the material detriment of the commercial interests of the investors," Zenith said in a statement, including "unreasonable and arbitrary obstructions" in relation to the development of the Sidi El Kilani and Ezzaouia concessions.
The actions contravene the terms of the licenses and "unjustified obstructions" for processing the sale of produced oil, it added.
Efforts at engaging with the relevant government bodies in Tunisia had been made but these have been unsuccessful, the company said, and so the arbitration has been launched "to safeguard their commercial interests and legal rights".
Law firm Gide Loyrette Nouel, which specialises in dispute resolution, has been hired as counsel and negotiations with a specialist litigation funder about a 'no win-no fee' financing arrangement were said to be "advanced", with the aim of covering all the costs in connection with the arbitration.
Based on legal advice, the directors believe there will either be a successful outcome from the arbitration or there will be an amicable settlement.
Production and development elsewhere in Tunisia are ongoing, Zenith added, with a total of around 8,000 barrels of oil in stock "ready for sale subject to local export permissions being granted".