Investment dispute court ICSID dismisses courier company's claim against Croatia


International investor arbitration court ICSID rejected the claim against Croatia filed by the owners of the defunct CityEX courier company which sought €53 million in damages as it laid the blame for the company's bankruptcy on predatory pricing used by the national post HP and the inaction of Croatia's competition agency AZTN which allowed it.

The Washington-based International Centre for Settlement of Investment Disputes (ICSID), which is part of the World Bank, took on the case in 2015, and moved to dismiss the claim earlier this month, Croatia’s state attorney’s office DORH said on Thursday.

Established in 1996, CityEX was a courier company which competed with the state-owned Hrvatska Posta (HP) mail service throughout its existence. In 2011, a UK-based equity management firm Bancroft Private Equity bought the company from what was then a powerful marketing company Digitel Komunikacije and nine other shareholders for an undisclosed sum, with local media speculating that the acquisition was worth some €30 million.

At the time of Bancroft’s buy-out, the company had grown to become a major player in courier services in Croatia, operating in 30 cities and towns across the country, and employing around a thousand employees.

Bancroft’s B3 fund bought CityEX expecting that business would grow after the country liberalises its postal services market in 2013 due to its accession to the European Union in July that year. However, the company posted losses and eventually closed down by early 2016.

CityEX management blamed HP’s business practices in the 2013-15 for its collapse, and filed a complaint with Croatia’s competition agency AZTN in which it accused HP of predatory pricing through its contracts with large clients such as telecoms, banks, and public businesses, which gave those clients bulk discounts for postal services, effectively introducing prices below market levels. AZTN dismissed the complaint in December 2015.

The legal entity formally owning the defunct CitxEX – B3 Croatian Courier Cooperatief U.A. based in the Netherlands – also filed a lawsuit against Croatia at the ICSID tribunal, repeating its accusations of HP’s predatory pricing and AZTN’s inaction, claiming these were in violation of the bilateral investment treaty signed by Croatia and the Netherlands in 1998, and seeking €53 million in damages for CityEX’s bankruptcy.

ICSID court dismissed most of B3’s claims earlier this month, and ruled that although some provisions of the treaty had been violated, these were not the cause of CityEX’s bankruptcy.

However, Croatia was ordered to cover the plaintiff’s cost of the arbitration procedure, which total $554,000 and some €3.65 million, the state attorney’s office DORH said.

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