Croatia to pay $235 million in damages to Hungarian oil giant MOL

February 02. 2023. – 09:49 AM


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Croatia will pay Hungarian oil giant MOL the $235 million stipulated by the international arbitration court, Croatian Minister of Economy and Sustainable Development Davor Filipović told Croatian public television on Wednesday evening. He added that the Croatian government has already allocated the amount in the budget, MTI reports.

Filipović said that Croatia gave up on having the Croatian courts decide on the agreement between MOL and the Croatian government back in 2003, saying that only international arbitration courts could decide on the matter.

In 2003, MOL acquired a 25 percent plus one share stake in the Croatian oil company INA, during its privatization. In 2009, the Hungarian oil company signed an agreement with the Croatian government, giving MOL control rights in INA and taking over the Croatian company's gas branch.

At the end of 2013, MOL initiated international arbitration proceedings against the Croatian government at the International Centre for Settlement of Investment Disputes (ICSID) in Washington DC to protect its investments in Croatia, claiming that the Croatian government had failed to fulfill certain contractual obligations and commitments.

In response, in early 2014 the Croatian government turned to UNCITRAL, which operates under the auspices of the United Nations. According to the Croatian position, Mol gained control of INA through corruption and MOL failed to follow through with its commitment (stated in the shareholders’ agreement) to invest in Croatian oil refineries. The Croatian side also believed that Mol violated Croatian laws on commercial companies. The Geneva arbitration court rejected all of Croatia's claims concerning bribery, corporate governance and alleged breaches of the 2003 shareholders' agreement.

Following the arbitration tribunal's decision, on 24 December 2016 Croatian Prime Minister Andrej Plenković announced at an extraordinary press conference that the Croatian state would buy out MOL's stake in INA. In February 2022, the Croatian government filed an initiative with the Swiss Federal Supreme Court to request a review of the 2016 UNCITRAL ruling in the MOL-Croatia case. Croatia based its request for review on the 2021 conviction of the Croatian Supreme Court.

In July 2022, ICSID came to the same conclusion as the UNCITRAL ruling: Croatia failed to prove corruption allegations in these proceedings, and the case's key witness was found to be completely unreliable by the arbitration tribunal. ICSID heard dozens of witnesses and examined tens of thousands of pages of documents over the nine-year duration of the proceedings, resulting in a unanimous judgment. In addition to finding no corruption, the ICSID also awarded MOL USD 235 million in damages (including default interest) in relation to the Croatian government's 2014 gas market measures.

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