ECE has already delivered the notice of the planned filing of the arbitration petition to theMinistry of Finance of the Czech Republic (MF). The government now has six months to come to an agreement with ECE. “TheMinistry of Finance is reviewing the petition,making use of the halfyear statutory period,” Jakub Haas, deputy spokesman for theMF, told CBW, adding that he could not provide any further information. ECE claims nearly Kč 1 billion (€39.8 million) fromthe Czech Republic as compensation for delays during the building permit procedure relating to the development of their shopping center in Liberec. The company particularly objected to theMinistry for Regional Development annulling the planning permission for the construction of shopping center in August after it had accepted the objections of the Netherlands-based Multi Development Czech Republic that it could not participate in the building permit procedure. ECE’s competitorMulti Development is developing their own shopping center Forum located only several hundred meters away from ECE’s Galerie in downtown Liberec.
All the parties involved call for their rights. “The interests of the company as the investor have been impaired to amajor extent as a result of [the government authorities’] actions, and the company incurred substantial losses. Damage compensation claims by ECE and its investment companies are based on the Agreement between the Czech and Slovak Federative Republic and the Federal Republic of Germany on Support and Mutual Protection of Investment dated Oct. 2, 1990,” ECE said in the press release.
However, according to a legal expert, the dispute does not necessarily have to end up in arbitration. “The investment protection agreement [with Germany] indeed provides the parties in such case with a sixmonth period to settle the dispute between the investor from one country and the other country,” Martin Bohuslav, a junior lawyer at law firm Ambruz & Dark, told ČTK. “It may be assumed that the parties will attempt to make use of this period to find a solution. Yet, unless it is solved by an agreement, the investormay succeed in the dispute to be filed to the court of arbitration,” he added.
However, Josef Tobek, the legal executive of ECE Projektmanagement Praha, told CBW that the case is much more complicated. “It was not only the Building Office thatmademistakes but also theminister [of regional development]. He appointed an eight-member remonstrance committee only to ignore its conclusions in the end,” Tobek said. “Damage suffered by the company has been quantified as roughly Kč 1 billion, which amount we are now claiming as compensation,” he added.
The ECE group manages about a hundred shopping centers in 14 countries. In the Czech Republic, the company has invested over €200 million. ECE has built, for instance, Galerie Vaňkovka shopping center in Brno, and opened Arkády Pankrác shopping center in Prague this year. Besides Galerie Liberec, the ECE Group is also planning to develop a leisure center with the sports stadium and shopping center in Hradec Králové, East Bohemia.
Multi Development engages in the construction of city, commercial and administrative centers across Europe. In the Czech Republic, it has finished the commercial and leisure centers Olympia in Plzeň,West Bohemia; and Olomouc, Central Bohemia; and Centrum Chodov in Prague.
It has also launched the construction of Nová Karolina in Ostrava, one of the largest developer projects in the country. The company, however, had to slow down the project significantly because of the financial crisis, continuing the first phase only with the construction of the office building.