The defeat in the first INA-MOL arbitration was expensive, but the second could be catastrophic.
The recent defeat in the arbitration proceeding in Switzerland between the Croatian government and MOL regarding INA will cost Croatia a total of 2.8 million kuna, which is the cost of the proceedings. Much worse, this ruling has substantially weakened Croatia's position in the second arbitration proceedings which are still ongoing in Washington. A defeat there would be much more expensive; it is estimated that several billion kunas would have to be paid from the state budget to the Hungarian MOL, reports tportal.hr on October 31, 2017.
The arbitration in Switzerland was initiated by Zoran Milanović’s government in January 2014, with the request to the tribunal to annul the INA management contract which allegedly gives too many powers in INA to the Hungarian oil company MOL. In December 2016, the arbitration tribunal in Geneva rejected the Croatian request, after which the government led by Andrej Plenković filed an appeal to the Swiss Federal Court, which a few days ago also ruled in favour of the Hungarian company. Croatia has thus exhausted all legal possibilities and will have to pay a total of 2.8 million kuna in costs.
A member of the Croatian Chamber of Commerce’s (HGK) arbitration tribunal Miljenko Giunio said that the defeat in the dispute in Switzerland would have a negative impact on the proceedings in Washington. “For Croatia, it would be better if the dispute in Switzerland ended up in our favour. Unfortunately, this has not happened, and now we have to try to use different arguments in Washington to prove that the Croatian state has not made any moved which have damaged MOL,” said Giunio.
The arbitration proceedings in Washington were initiated by MOL in November 2013, and the reason for this was “a breach of obligations and procedures related to MOL's investments in Croatia.” More specifically, the Hungarians argue that the Croatian government has failed to fulfil its obligations under the Contract on Gas Business, which was signed in early 2009. The Hungarians say that they have suffered at least two billion kunas in damages.
The media reported that, according to calculations, Croatian government's regulatory decisions have caused the company and its gas business sector to lose more than three billion kunas in the period from 2011 to 2016.
In January 2009, Ivo Sanader’s government said it would buy from INA its company Prirodni Plin (Natural Gas), at the time the only natural gas supplier for the Croatian market. Due to regulated prices, the company was operating at a loss, and MOL wanted to get rid of it. However, in the first half of 2009, Croatia was hit by the global financial crisis, and the state did not have enough money to buy the company; it needed about two billion kunas to buy the gas business.
The same promise was given to Hungarians by the next government led by Jadranka Kosor, but she did not do fulfil the obligation either. Because of this, MOL launched the arbitration proceedings in Washington in November 2013. Then Economy Minister Ivan Vrdoljak responded by initiating the second proceedings in Geneva, which Croatia has now lost.
Translated from tportal.hr.
