Mol won its arbitration case launched against Croatia in the Washington-based International Court for Settlement of Investment Disputes (ICSID), reported the Croatian paper, Vecernji list. The story was confirmed by multiple sources. Reports from Vg.hu, Hungarian economic portal, showed that the verdict granted the Hungarian oil company an expected amount of compensation worth 250 - 300 million USD (100 - 120 billion HUF at the current exchange rate) including interest.
This is significantly less than the $1 billion that Mol originally claimed from the Croatian government.
According to Vecernji list’s information, the ICSID also rejected Croatia’s corruption accusations that claimed Mol obtained management rights over the Croatian oil company, INA, with a bribe. In connection with the affair, former Croatian Prime Minister Ivo Sanader was sentenced to six years in prison in Croatia, and Zsolt Hernádi, the head of Mol, was sentenced to two years by the Croatian judiciary. Last October, the first-degree conviction of the Zagreb County Court was upheld by the local highest courts and thus Hernádi appealed to the Croatian Constitutional Courts. As of Wednesday morning, on the ICSID website, only the date of the verdict was announced (July 5), but no mention of the verdict decision or justification.
On the Budapest Stock Exchange (BÉT) website, Mol stated:
“Croatia’s allegations of bribery are unfounded, the verdict awarded Mol around 236 million USD in damages including interest payments.”
They wrote that in the July 5th judgment, the three-person panel unanimously rejected Croatia’s claims that the 2009 contracts were the result of bribery. Mol launched the arbitration case in 2013 as Croatia had violated their 2009 contract in multiple ways which primarily dealt with regulating gas trade.
“As in the 2016 proceedings, this international judicial forum also described the key Croatian witness’ story as weak and fraught with contradictions. Furthermore, the court expressed its strong doubts regarding the truthfulness and reliability of the witness in both the arbitral proceedings and in the criminal proceedings in Zagreb,”
– wrote the statement.
According to the verdict,
Croatia caused sizable damage to INA, and indirectly to Mol, as it did not take on INA’s gas business despite its contractual obligations.
Moreover, the regulation of the natural gas price and the increase of the mining royalties were not done in accordance with the contract; this caused a 167.8-million-dollar loss for Mol. The Hungarian oil company said that the arbitration court awarded an additional 16.1 million dollars in compensation due to the forced sale of natural gas stored in a gas reservoir by an INA subsidiary (Prirodni Plin) at lower prices.
A ten-year-long case
The article mentioned that Mol initiated the international arbitration proceedings against the Croatian government in late 2013 to protect its investments in the country, claiming that the Zagreb government had failed to fulfill certain contractual obligations and commitments.
This is the second arbitration case that Croatia has lost against Mol. The first was in Switzerland in the United Nations Commission on International Trade Law (UNCITRAL) courts; here, Zoran Milanovic’s government launched a case against Mol in 2014 to counter the Mol lawsuit filed in Washington. This case was closed in 2016 and resulted in a 14.5-million-euro award for the Hungarian party.
Mol acquired its first 25 percent of INA in 2003; in 2008 it acquired another 22.15 percent and came to an agreement with the Croatian government on taking over control of the company. Following this, Mol continued to buy additional shares from the market and currently holds a 49.08 percent stake in the company.
The Croatian finance minister resigns
The Vg.hu report pointed out that soon after the leaked news, Croatian Finance Minister Zdravko Maric handed in his resignation. It is unclear whether this had anything to do with the court’s verdict. He himself explained his resignation as “due to personal reasons,” his decision however was certainly unexpected.
According to press information, members of government were also unaware that Maric intended to leave his post. The 45-year-old minister apparently only informed Prime Minister Andrej Plenkovic. His position may be filled by Marko Primorac who was an economic adviser to former President Kolinda Grabar-Kitarovic. He is currently a professor at the Zagreb Economic University.
