Croatia under Threat of Billions in Lawsuits

Foreign investors may open ten new arbitration procedures against the Republic of Croatia, said Chief State Attorney Dinko Cvitan

In his report on the performance of the State Attorney’s Office (DORH) for 2016, Cvitan said that this is a heavy load for DORH and a serious threat for Croatia, Večernji List reported on May 20, 2017.

“In case another 10 arbitration procedures are initiated, which is possible since the deadlines for the amicable resolution of disputes have passed, the quality and promptness of the representation of the Republic of Croatia could be in question, both in arbitration procedures and other cases,” he pointed out to in his report to MPs.

According to DORH data and published assessments, the total value of arbitration proceedings already underway at the International Centre for Settlement of Investment Disputes in Washington (ICSID), looming at at least 10.5 billion kuna. And the success of arbitration demands, partial or full with the ICSID, is 46 percent.

Arbitration cases worth around 4 billion kuna have already been filed. In comparison, the value of the cases in lawsuits run by the Republic of Croatia is 2.9 billion kuna, out of which 408 million are being sought and 2.5 billion kuna are being demanded. “Exceptionally high” proceedings costs need to be added on to this value.

“The costs of arbitration are made up of fees of foreign law firms, fees and expenses of experts as according to ICSID rules domestic law is a fact that needs to be proven, the costs of translations of very extensive documentation, the fees and costs of court experts, costs of arbitrators and courts, costs of witnesses, travel and accommodation during hearings etc.,” Cvitan explained. The total costs of the representation of Croatia abroad, including arbitration and other international disputes, amounted to 39.2 million kuna (in 2015, 30 million, in 2014, 24.4 million), which makes up 70 percent of the total budget of DORH.

The amount does not include the costs of two arbitrations with MOL (the lost one in UNCITRAL in Geneva and the other in process in Washington), being covered by the Economy Ministry, higher than all the costs of arbitrations and legal disputes under the jurisdiction of DORH. In the state budget for 2017, the Economy Ministry cites “representation services in the dispute of the Republic of Croatia and MOL Company,” with 44.9 million kuna spent in 2015, 43.7 million planned in 2016 and nothing cited for 2017. In 2014 the amount was 15.5 million kuna, meaning the cost of arbitration over MOL has now exceeded one hundred million kuna.

 

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