A Swiss court has dismissed Croatia's request for a review of a 2016 arbitration award on the INA energy company, N1 television said on Wednesday.

On 30 December 2021, the Croatian government tasked the Economy Ministry with asking the Swiss Supreme Court to review an award delivered by the UN Commission for International Trade Law (UNCITRAL) so that amendments to the INA shareholders’ agreement and a gas business agreement, both from January 2009, be declared null and void.

The government also tasked the ministry with continuing activities concerning Croatia’s participation in arbitration proceedings launched by Hungary’s MOL energy group before the International Court for Settlement of Investment Disputes (ICSID).

The government opted for a review of the arbitration award, the then economy minister Tomislav Ćorić said, based on a final verdict by the Croatian Supreme Court against former prime minister Ivo Sanader for taking a bribe from MOL CEO Zsolt Hernadi as well as based on other analyses and legal opinions.

N1 said today the Swiss court found clear disagreements which essentially refer to different assessments of a number of testimonies in this case, notably those by Robert Ježić.

According to the reasons for the court’s decision, it seems that Croatian courts, unlike the arbitration tribunal, considered Ježić a credible witness.

The arbitration tribunal delivered its award fully aware of the existence of criminal proceedings against Sanader, but noted that it would assess the evidence collected during those proceedings with the utmost caution, and based its decision on the evidence it collected itself, according to the reasons.

They also state that the charge of corruption was wholly based on Ježić’s testimony, which was full of inconsistencies and contradictions.

Spokesman: Government takes note of court’s decision

Government spokesman Marko Milić told Hina the government took note of the Swiss Supreme Court’s decision and was continuing with activities aimed at changing the management model in INA.

The government was informed by its legal representatives today about the court’s decision of 23 September which dismissed Croatia’s request for reviewing UNCITRAL’s 23 December 2016 arbitration award, he added.

Timeline

In late 2016, UNCITRAL found that evidence submitted by Croatia was not sufficient to prove that the agreements signed in 2009 were the result of corruption activities. Prime Minister Andrej Plenković said on 24 December that his government had decided to regain ownership of INA by buying the entire stake held by MOL.

MOL is the single largest shareholder in INA, holding 49.1% (4,908,207 shares), while the Croatian state holds 4,483,552 shares (44.8%). Private and institutional shareholders hold 608,241 shares (6.1%).

Representatives of the Croatian government and MOL signed the first amendments to the INA shareholders’ agreement and the gas business agreement on 30 January 2009.

Under the amendments, the number of INA supervisory board members was raised from seven to nine, with MOL getting five seats, the government three and workers’ representatives one, and the supervisory board president is chosen by the government.

Under those amendments, INA’s management board has six members, three representing the government and three MOL, and the president is nominated by MOL, which also has the decisive vote.

The government and MOL also signed a gas business master agreement, which defined the sale of the Okoli storage facility to the state and envisaged divesting INA’s gas business company and selling it to the government later on.

In December 2009, the government and MOL signed the first annex to the master agreement, postponing until 1 December 2010 the government’s obligation to buy INA’s gas business.

In December 2010, MOL published a public offering to buy small shareholders’ stock in INA at HRK 2,800 per share, saying it was giving those who did not sell them in 2008 another chance to do so.

The following spring, Croatia’s HANFA regulator suspended trading in INA shares on the Zagreb Stock Exchange after noticing considerable trading by foreign investors. Suspecting that contentious shares were acquired with laundered money, HANFA filed a report with the State Attorney’s Office.

The USKOK anti-corruption office then launched an investigation into Sanader on suspicion that he took a €10 million bribe from Hernadi in exchange for management rights in INA.

Both Croatia and MOL launched arbitration proceedings regarding INA. MOL launched them against the Croatian government before the ICSID in November 2013 for breach of obligations and procedures related to MOL’s investments in Croatia.

In early 2014, Croatia launched an arbitration suit against MOL before UNCITRAL, requesting that the amendments to the two agreements from 2009 be declared null and void.