Croatia has finally thrown in the towel in its long-running dispute with Hungarian oil and gas company over Croatian petrochemicals group INA.
Croatia will pay MOL $235mn after losing a series of arbitration and legal hearings over the 2009 deal that allowed MOL to obtain a dominant position in INA.
The Hungarian oil giant acquired a 25% plus one share stake in INA in 2003, which grew to 49% in 2009 when MOL gained control of management rights in the company under an agreement with the Croatian state, which owns close to 45% of INA.
Croatia turned to the Arbitral Tribunal of the United Nations Commission on International Trade Law (UNCITRAL) in Geneva in 2014 with the aim of cancelling the 2009 deal.
The Croatian government claimed MOL gained control of INA through corruption and failed to follow through with its commitment stated in the shareholders’ agreement to invest in Croatian oil refineries. The Croatian side also argued that MOL violated Croatian laws on commercial companies.
MOL won the arbitration case in December 2016 but Croatia then turned to the Swiss Federal Supreme Court to review the ruling. In October 2022 the Swiss Federal Supreme Court turned down the request.
For its part, MOL launched an action in early 2014 before the International Centre for Settlement of Investment Disputes (ICSID) in Geneva claiming that the Croatian government had failed to fulfill certain contractual obligations and commitments in the 2009 agreement.
The ICSID tribunal ruled last July that Croatia caused "substantial damages" to MOL’s Croatian subsidiary INA for failing to take over the energy company's gas trading business as well as for breaching contractual obligations concerning gas pricing and royalties, and awarded $236mn, including interests. The Geneva arbitration court rejected all of Croatia's claims concerning bribery, corporate governance and alleged breaches of the 2003 shareholders' agreement.
Minister for Economy and Sustainable Development Davor Filipovic said on Croatian public television that the government would pay the award. Filipovic said a final decision on the matter was taken by the advisory council on INA on Wednesday, after a discussion of reports by Croatian legal experts prepared at the government's request.
The Croatian government will work on changing the corporate governance model in INA and still plans to buy back MOL’s stake in the company, Filipovic said, and underlined that the sale of the company was a grave mistake.
Economy Minister Davor Bozinovic said in an interview for the public broadcaster HRT that $235mn will be paid this year and that spending has been included in the 2023 budget plan.
The Croatian supreme court upheld in October the guilty verdicts against former Croatian prime minister Ivo Sanader for allegedly taking a bribe from MOL head Zsolt Hernadi. At the end of 2019, Sanader was sentenced to six months in jail, while Hernadi got a two-year jail sentence. Hernadi did not present himself for the trial. The verdicts were appealed against by both USKOK, part of the state attorney office, and the defendants.