Zenith Energy Ltd. (“Zenith” or the “Company”) announced on Wednesday, July 16th 2025, the decision of the Arbitral Tribunal regarding the claims submitted by Zenith’s fully owned Canadian subsidiary, Canadian North African Oil & Gas (“CNAOG”), in relation to the Sidi El Kilani concession (“SLK Concession”), against the Tunisian national oil company, Entreprise Tunisienne d’Activités Pétrolières (“ETAP”), under the International Chamber of Commerce in Paris (“ICC-2 Arbitration”).

The Arbitral Tribunal has issued a decision rejecting the entirety of the claims presented by CNAOG. Zenith states that its legal counsel identified and documented several serious procedural irregularities during ICC-2 why the Company now will proceed with an application for annulment of the ICC-2 award before the Swiss Federal Supreme Court in Lausanne, Switzerland. The Swiss Federal Supreme Court typically renders decisions on annulment applications within 6 to 9 months from submission.

Analyst Group’s View on the Result of the ICC-2 Arbitration

The ruling in ICC-2 represents a significant legal and financial disappointment for Zenith. The complete dismissal of the USD 130 million claim, despite the Company’s stated confidence in the merits of its case, highlights the complexity and unpredictability of international arbitration processes involving sovereign counterparties. The ruling eliminates any short-term monetary recovery from ICC-2.

Previously, Analyst Group had modeled an expected haircut-adjusted award of USD 66.9 million based on legal precedent and comparative outcomes. The decision therefore represents a result beneath even low-probability downside assumptions. However, similar full dismissals have occurred historically, especially in cases where procedural dynamics or tribunal composition have played a material role.

The Company has asserted that serious procedural irregularities has been identified and formally recorded during ICC-2, which will now form the basis for its annulment application. These were documented and will now serve as the legal foundation for the Company’s annulment application to the Swiss Federal Supreme Court. The swift and public announcement of this legal course of action underscores a proactive litigation strategy, aimed not only at contesting the outcome but also at challenging the fundamental legitimacy of the arbitral process itself, an assertion that, if substantiated, could carry significant legal weight. Should the annulment be granted, it could pave the way for the case to be re-heard before a newly constituted and impartial tribunal, which may restore part, or all, of the lost claim value. As such, the ICC-2 result, while negative in its current form, may not represent a final resolution to the dispute.

Despite this legal disappointment, Zenith’s underlying operations remain operationally resilient. High electricity prices in Italy continue to support strong revenue generation from the Company’s Italian power assets. Looking ahead, Zenith is expected to intensify legal and strategic focus on the ICSID proceedings, where Zenith currently is preparing its final written submission, scheduled for delivery in September 2025, ahead of the final hearing set for Q2 2026. A hearing is anticipated during the first or second quarter of 2026. With claims amounting to USD 503 million under the UK–Tunisia Bilateral Investment Treaty, a favorable decision under ICSID will be critical to restoring long-term shareholder value and reinforcing Zenith’s broader claims of unlawful and discriminatory treatment by Tunisian authorities.

Summary

The Arbitral Tribunal has rejected all claims in the ICC-2 arbitration related to the Sidi El Kilani concession, representing a significant legal and financial setback for the Company. In response, Zenith intends to file an annulment application before the Swiss Federal Supreme Court, citing documented procedural irregularities during the arbitration process. If granted, this decision could permit a retrial before a new tribunal. Despite the adverse outcome, the ICSID arbitration, where Zenith is pursuing USD 503 million under the UK–Tunisia investment treaty, remains fully intact and now Zenith is expected to intensify legal and strategic focus on the ICSID proceedings. Final submissions are due in September 2025, with hearings scheduled for the second quarter of 2026. Zenith’s operational performance remains stable, supported by strong cash flows from its Italian power assets, which continue to sustain the Company’s legal strategy as it seeks material recovery through ICSID.

Andrea Cattaneo, Chief Executive of Zenith, commented:

“We are outraged by the decision rendered by the Arbitral Tribunal in ICC-2.

Our position has always been – and remains – that CNAOG is entitled to substantial compensation with respect to the SLK concession. The failure to recognize the illegitimate conduct of the Tunisian authorities, following the favourable precedent set in ICC-1, is nothing short of a travesty.

Acting on the advice of Professor Thomas Clay, a globally recognized authority in international arbitration, CNAOG had already expressed serious concerns regarding the management of ICC-2. We identified and promptly documented serious and repeated procedural irregularities during ICC-2. However, due to the confidentiality provisions governing ICC-2, we were unable to disclose these irregularities publicly until now.

The Company is now considering all legal avenues. CNAOG will, without delay, file an application for annulment of the ICC-2 award before the Swiss Federal Supreme Court. Should the annulment succeed, a new arbitration will be initiated under a properly constituted and impartial tribunal.

CNAOG remains fully confident in the strength of its case and will continue to fight vigorously to achieve justice. Our immediate focus now shifts to the ICSID arbitration, where we are pursuing a US$503 million claim. The final submission is scheduled for September 2025, ahead of the final hearing in Q2 2026. At the same time, we are taking all necessary measures to enforce the ICC-1 award of approximately US$10 million.

This injustice only serves to strengthen our resolve. The Company will not hesitate to explore every legal and procedural mechanism available to ensure accountability and to vindicate its rights.”

Background to the arbitration proceedings

Zenith’s entry into Tunisia, executed in year 2020 and year 2021 during the COVID-19 pandemic, coincided with a low point in the oil price cycle. This timing initially appeared advantageous, as many competitors either went bankrupt or scaled down operations. However, following the invasion of Ukraine by Russia in February year 2022, the price of oil reversed and reached levels above USD 110, highlighting the well-timed execution. The investments in Tunisia have since been characterized by a series of arbitrary and obstructive actions by the Tunisian Government and the national oil enterprise, Enterprise Tunisienne d’Activités Pétrolières (“ETAP”), ultimately resulting in the initiation of multiple international legal disputes.

To date, three separate arbitration proceedings have been launched. Two arbitrations relate to contractual disputes arising from commercial obligations under relevant agreements and are conducted under the International Chamber of Commerce (“ICC”), referred to as “ICC-1” and “ICC-2.” The third arbitration is conducted under the International Centre for Settlement of Investment Disputes (“ICSID”) and addresses broader claims of treaty violations by the Tunisian state against the Company under applicable bilateral investment treaties. This includes the Bilateral Investment Treaty (“BIT”) between the United Kingdom and Tunisia, under which all relevant subsidiaries of Zenith were originally incorporated, having British jurisdiction. The first arbitration, ICC-1, resulted in a favorable award of USD 9.7 million. The ICC-2 arbitration involved a total claim value of USD 130 million and pertains to a contractual dispute regarding the purchase of all shares in the company CNPCIT, which holds a 22.5 % interest in the Sidi El Kilani (SLK) oil concession. The arbitration under ICSID involves claims from Zenith Group totaling USD 503 million and stems from violations of the BIT between the United Kingdom and Tunisia. The dispute concerns all of the Company’s British subsidiaries and operations in Tunisia. The combined total value of claims in the two ongoing proceedings amounts to approximately USD 633 million.

ICC-2 Arbitration: Broader Claims Arising From Contractual Breaches in the SLK Concession

Under the International Chamber of Commerce (ICC), a second arbitration proceeding was initiated to assess Zenith’s second claim within this framework, designated as ICC-2, with a total claim value of USD 130 million. The arbitration was initiated by Canadian North African Oil & Gas (“CNAOG”), announced in December year 2023 by Zenith. CNAOG, then a wholly owned subsidiary of Zenith Energy, represents the renamed entity of CNPC Tunisia and holds a 22.5 % stake in the Sidi El Kilani (SLK) oil concession.

This arbitration outlines CNAOG’s broader allegation that Tunisian authorities engaged in arbitrary and obstructive conduct, thereby preventing lawful operation and the realization of value from SLK.

The claim includes:

• Loss of production revenues and profits: CNAOG seeks compensation for foregone revenue from the SLK field between the acquisition date and concession expiry in December 2022, during a period of elevated oil prices.
• Crude allocations denied: Oil volumes owned by CNPCIT (now renamed CNAOG post-acquisition), were allegedly sequestrated, and hence never delivered or monetized.
• Unpaid oil invoices (SLK-specific): As per the crude oil in the port tanks, invoices for oil sold domestically (called DMO) were never paid.
• Loss of right to renew SLK: CNAOG also asserts that it was unlawfully denied the right to renew the SLK concession after 2022. This claim includes the projected future value of a 45% interest (combining the CNPC and KUFPEC stakes) in a renewed SLK license.