Czech state tops European arbitration rankings

The Czech Republic leads Europe in another dubious area: most pending and completed arbitration procedures between international investors and the state. The record is based on UN statistics for 1987 to 2010, as compiled by international law firm White & Case. The Czech Republic has 18 disputes, which is also enough to put the country in third place worldwide, following Argentina, with a whopping 51 and Mexico with 19 disputes.

The second highest country in Europe is Ukraine, with 14 cases, while the next highest EU member is Poland, with 10 cases. Slovakia and Hungary each have six, and Germany, the Czech Republic’s biggest trading partner, has just one.

“It appears that the country’s exposure to disputes with foreign investors is disproportionately large despite the Czech Republic being a fairly small Central European nation. Of course, this may have to do with the fact that the state lost a number of arbitration disputes in the past,” Luděk Chvosta, partner of the Prague Office of White & Case and a litigation expert, said in a press release. ‘We have recently noted a reversal of the trend, with the scales now being tipped in favor of the state.’

He pointed out the Czech state’s loss against media company Central European Media Enterprises (CME) in 2003, which cost the country Kč 10 billion for failing to respect bilateral investment interests protected by an international treaty. This case had fatal consequences, he added. “Even so, we have recently noted a reversal of the trend, with the scales now being tipped in favor of the state, which has at long last begun to take a more responsible stance in this particular area,” Chvosta said.

In global perspective, 390 disputes between investors and state have been brought before the arbitration courts in the past, including those still pending. Some 25 arbitration procedures were initiated in 2010 alone. Most disputes of this kind worldwide concern crude oil, gas, shaft mining, and large-scale infrastructure projects.