Legal costs of arbitrations lowest in 12 yrs in 2012

Prague, Feb 17 (CTK) - The Czech Finance Ministry's costs of legal services related to international arbitration disputes dropped to Kc20.6m last year, the lowest level in the past 12 years, the Finance Ministry said in an answer to a CTK question.

The number of arbitrations, among others, is behind the low costs, the ministry said.

The Czech Republic is currently in one arbitration dispute, with German firm ECE Group. Agreements on investment protection are at the core of the dispute. ECE Group wants around Kc1.8bn in damages from the Czech Republic over a decision of the Local Development Ministry on the planned construction of the trading and entertainment centre Galerie in Liberec. The ministry cancelled a zoning and planning decision having complied with objections of the Dutch firm Multi Development. The firm complained that it had not been a party to the zoning and planning process.

The country is potentially faced with nine arbitrations with damages up to Kc20bn, the ministry said. Lawsuits, however, had not been filed in these cases within the set period.

The Czech Republic may possibly pay the biggest damages of over Kc12bn in an arbitration with Washington Investment Company LLC (WIC) over a failed investment into IT projects for the state-run forest management company Lesy CR.

There have also been 22 complaints over investment into photovoltaic power plants but no suits have been filed so far.

Total legal costs of the ministry related to arbitrations amounted to almost Kc2bn at the end of last year.

The state has paid so far more than Kc15bn in damages in arbitration proceedings which it lost or which ended with a settlement agreement. A total of Kc10.6bn, the highest amount, went to media company CME for its failed investment into private TV Nova.

Arbitration proceedings are largely commenced on the basis of investment protection agreements of the early 1990s. The agreements were mostly disadvantageous for the Czech Republic.

The Finance Ministry has long been trying to put an end to the agreements. In 2009, the state started terminating bilateral agreements with the EU countries.

Finance Ministry's costs of legal advice on international arbitrations (in Kc thousands):
year legal costs
2012 20,586
2011 236,719
2010 144,776
2009 109,820
2008 228,448
2007 150,200
2006 212,410
2005 151,600
2004 73,804
2003 200,541
2002 316,179
2001 149,779
2000 13,819
1999 1,260

Source: Finance Ministry