Croatia: Nervous game MOL-Croatia gov, INA as stake

Published on 4. December 2013., SEE Energy News

After the MOL submitted a request for arbitration against the Government of the Republic of Croatia, the Croatian Minister of Economy, said that this shows the nervousness of the Hungarians. Croatian Economy Minister and head of the government’s negotiating team with MOL, Ivan Vrdoljak, said that the move of MOL, which has requested by the International Centre for Settlement of Investment Disputes (ICSID) to begin arbitration against the Croatian government for violations of certain obligations and procedures related to investments of MOL in Croatia, indicates nervousness of Hungarians.

Proof of this, considers Vrdoljak, is that the Hungarians accepted the framework for negotiations, which they have tried to change in the second round of negotiations. Then they said that they will sell stake in INA, and then that they will not.

‘That anxiety is not good‘

“Now they run an arbitration procedure with some half-truths. That anxiety is not good, especially for the shareholders of MOL and they will pay the highest price for such nervousness and inconsistent behavior,” said Vrdoljak.

He added that the Croatian government has the means to protect strategic national interests and will certainly do so.

Hungarian oil company MOL on the website of the Budapest Stock Exchange announced yesterday that it has requested from the International Centre for Settlement of Investment Disputes (ICSID) to begin arbitration against the Croatian government for violations of certain obligations and procedures relating to investments MOL in Croatia.

The request for arbitration was filed against the Croatian government through legal assistance, the international law firm Weil, Gotshal & Manges, in accordance with the Energy Charter Treaty, the statement said, adding that MOL, a ” long time strategic partner of the Croatian government,” and a big investor in Croatia, does it “to initiate legal procedures for the exercise of their rights”, although it remains “open to negotiations on the dispute” with the Croatian side, according to the Hina.

‘MOL seeks an amicable solution’

“MOL has long been considered a strategic partner of the Croatian government as one of the largest foreign investors in the Croatian economy. In that spirit, MOL always seeks an amicable solution to any dispute between MOL and the Croatian government”, the statement said.

“MOL has certain legal obligations with respect to its shareholders, to pursue negotiations in good faith, but it also has a legal obligation to begin legal proceedings for its rights,” the statement of MOL said, adding that the Hungarian oil company “remains open for further negotiations, seeking to resolve the dispute.”

Hungarian MOL has authorized his Board of Executive Directors in early November to begin preparations for Sale of Shares of MOL in INA.

“MOL Management authorized the Executive Board to conclude such an agreement with the Government of Croatia, which would lead to the creation of value implementation of INA’s development strategy. Meanwhile, the Executive Board is also authorized to begin preparations for the sale of MOL’s share in INA, to maximize the value of these investments,” MOL capital market participants reported at the time about their attitude related to investment in INA.

With this decision of MOL, the change of negotiating framework became clear, which the Croatian government adopted at the session of 1 August this year, the Government of Croatia  announced after that.

The Croatian Government then announced that they have received report of MOL on their views regarding the investment in INA with interest, and that this decision made certain changes in the negotiating framework adopted by the Government at the session 1 August this year.

The government will not buy the shares of INA

A day later, Croatian Prime Minister Zoran Milanovic has confirmed that Croatia has the right of first purchase of shares of MOL in INA, which the Hungarian company has announced to sell, but also pointed out that in this kind of business adventure, the government has no right to enter, due to the fact that it comes to few billion EUR.

“I proceed from the fact that Croatia has the right of first purchase and this is our interpretation, but the question is, in fact, in theory – It is about a few billion EUR, which, if the shares are sold, should be collected, and this kind of business adventure, the government has no right to enter”, Milanovic said.

For some time, tension is lasting between MOL, which holds a 49.1 percent stake in INA and the Croatian government, which has a share of 44.84 percent and wants greater influence in the management of INA.

The government, in turn, was questioning the contracts and it accused MOL of not investing enough in the INA.

From MOL, however, they answered that Croatia did not hold the promise of taking the gas business, which caused losses to INA, and they were warned that they could sue Croatia and ask for close to 280 MEUR in damages, because Croatia was not assumed or imposed market price of gas, which was agreed in 2009.

The Hungarian government requested revision of portfolio of the company from MOL and announced the possibility of the sale of INA shares in early October, after the Hungarian police received a request for the arrest of MOL director Zsolt Hernádi, which Croatia suspected of bribing former Croatian Prime Minister Ivo Sanader, to give over the management rights in INA to the Hungarian company.

Source; Serbia Energy See desk/Agencies