Finance Minister Zdravko Maric said on Tuesday an agreement has been reached with six banks on arbitration proceedings regarding the conversion of loans indexed to the Swiss franc, as a result of which the potential payment of at least 2.5 billion kuna (€330 million) from the government budget would be avoided.

“I am glad to be able to confirm that an agreement has been reached with the six banks that have launched proceedings before the International Centre for Settlement of Investment Disputes (ICSID) in Washington and before domestic courts, as well as with those that at this point have not yet launched such proceedings,” Maric told a press conference.

He recalled that Zagrebacka Banka, Raiffeisen Bank, Erste Bank, OTP Bank, Addiko Bank and Société Générale had initiated legal proceedings against Croatia before the ICSID and the Commercial Court in Zagreb seeking compensation for the costs arising from the conversion of CHF-indexed loans.

Based on the agreement reached, the proceedings initiated by Zagrebacka Banka, Raiffeisen, Erste and OTP would be suspended with immediate effect. The agreement also applies to Privredna Banka Zagreb and Sberbank, although they did not take legal action against Croatia.

No agreement has been reached with Addiko  and Société Générale, which is no longer present on the Croatian market, but dialogue will continue in efforts to reach a solution with them as well, Maric said.

Citing procedures before the ICSID, he said that there were certain steps that needed to be fulfilled within six months, after which the arbitration proceedings would be suspended for good.

Maric said that thanks to the agreement, the potential payment of at least 2.5 billion kuna from the state budget was avoided, including 482 million kuna related to the lawsuits before the Commercial Court in Zagreb and about 2 billion kuna to the lawsuits before the ICSID.

Maric said that Croatia had so far paid 127 million kuna for court costs, the costs of lawyers and expert witnesses and similar costs for the cases before the ICSID. He noted that the agreement reached did not imply any further costs to the government.

Asked about the government’s commitments under the agreement, Maric said that the banks had recognised the government’s efforts to improve the business environment and further align national legislation with EU standards and directives, as well as the steps taken towards adopting the euro. He thanked the banks for the constructive dialogue and for acknowledging the government efforts.

In 2015, Croatia amended the Consumer Credit Act and the Credit Institutions Act allowing for the conversion of CHF loans into euro-indexed loans, which prompted legal action from the banks.

Currently, there are 13 cases against Croatia before the ICSID and four of them will now be dropped, which is certainly important for Croatia’s international reputation, Marić said.

Today the Constitutional Court is due to rule on the lawsuits brought by banks against the Supreme Court ruling that upheld the invalidity of the CHF currency clause for loan agreements concluded between 2004 and 2008, and this ruling is important for 125,000 families that concluded loan agreements with the CHF currency clause. Marić said that this case was not related to the subject matter of this press conference.

(€1 = 7.56 kuna)