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Banning airport sale can result in arbitration

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At an extraordinary lower house meeting on Tuesday, the Social Democrats pushed through in the first reading a bill that would ban the privatisation of the Prague Airport. The sale was one of the reasons behind the fall of Mirek Topolánek’s cabinet, and among those who supported the bill on Tuesday are the same MPs who helped topple the government a week ago. If the bill is approved, however, the state would face the threat of international arbitrations.

Who will buy it?
The tender is at its very beginning – the Transport Ministry wants to choose a privatisation advisor roughly in the second half of April. Among the bidders are Credit Suisse, JPMorgan, Merrill Lynch, Morgan Stanley and Rothschild.

“Discontinuing the already-launched process would not be good. When we declare the sale of the Prague Airport and then ban it in the lower house, the bidders can turn to a court because of the discrepancy,” Deputy Finance Minister Ivan Fuksa said.

Prime Minister Mirek Topolánek warned MPs even more strongly. “Halting the processes implies arbitrations,” he said on Czech Television.

Moreover, the state has spent several million crowns on studies of whether the transaction is advantageous and for so-called “advisors”, that is, companies that helped declare the international tender.

The Czech state could face two kinds of disputes. The bidders would claim the money they spent on analyses and documents for the tender, and could also want compensation for a lost deal.

“However, then they would have to prove that it was their company that would win the tender, which would be very difficult,” said lawyer Vladimír Balaš, an expert in international law and arbitrations. Adopting a law on the airport is not systematic, he added.

But the Social Democrats are defending their intentions. The model they promote – an airport exclusively owned by the state – is applied in Germany, Portugal and other European countries, they claim.

The ČSSD wants to refer to the Charter of Fundamental Rights, according to which a law is to determine what property is essential for securing the society’s needs and economic development.

Who will help the ČSSD
Apart from its own deputies and the Communists, the ČSSD’s plan was also backed by MPs who brought the government down – Vlastimil Tlustý, Olga Zubová and Věra Jakubková said they do not want the airport to be sold. “I fear security risks,” Jakubková said.

Part of the Christian Democrats, including chairman Jiří Čunek, are against the privatisation too. KDU-ČSL minister Cyril Svoboda even said that selling the airport means selling access to the world. On the other hand, Finance Minister Miroslav Kalousek defends the tender.

The Social Democrats, however, would not be against a sale of a minority stake in the airport, said Roman Onderka, the shadow transport minister.

The privatisation is delayed. Former transport minister Aleš Řebíček said in the summer of 2007 that the transaction should be carried out by the end of 2008. At that time, the government expected the sale proceeds to total CZK 100 billion.

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