Settlement with Astaldi, for Hypo legal expertise

  The Croatian Government today accepted to conclude a settlement agreement with the Italian Astaldi, while legal experts for Hypo bank, in cooperation with the new Minister of Justice, will assess whether to conclude a settlement or attempt to legally challenge the arbitration decision from London.

The settlement agreed that Astaldi, regarding the concession agreement for the construction of 97 kilometers of the Zagreb-Goričan highway, will be paid a total of 44.35 million euros in three installments instead of 64.9 million euros. Šas for a potential settlement with Hypo bank, given the amount involved, legal experts will once again assess in cooperation with the new Minister of Justice whether to enter into a settlement or continue to fight for our position through other legal means, Deputy Prime Minister and Minister of Economy Damir Polančec briefly stated to reporters after the closed part of today’s Government session. Unofficially, it is learned from the Banski Dvori that a clear statement will be requested from all financial and legal advisors and the State Attorney’s Office involved so far, and how long this will take cannot be estimated. The dispute with Hypo bank is related to the privatization of Slavonska banka conducted in 1998, in which it was subsequently determined that the risks in the bank’s balance sheet, prepared by the management of Slavonska banka and confirmed by the State Agency for the Protection of Deposits and Bank Rehabilitation (DAB), were not accurately stated.

As a result, Hypo initiated arbitration in London in 2003, which Croatia ultimately lost, and Hypo bank was to be paid approximately 44.5 million euros in principal and interest, along with a daily interest of 4,901 euros from the date of the decision (December 27, 2007) until the obligation was fulfilled. DAB also initiated arbitration in London for so-called recourse claims, meaning that in the event of losing the arbitration initiated by Hypo, it has the right to a reversible claim against Slavonska banka since its management prepared the bank’s balance sheet. After the arbitration ruling in favor of Hypo bank arrived at the end of last year, it was possible to challenge the arbitration decision before judicial bodies in London, for which, according to estimates from legal experts and the State Attorney’s Office, there were only theoretical chances, or to go for a settlement.

A settlement was initiated, and among other things, a 20 percent discount on the total awarded amount was agreed, meaning a total payment of 34.58 million euros that DAB would pay in 12 monthly installments and the waiver of daily interest. However, today it was decided that all involved in the process should give a clear stance on whether to settle or attempt to legally challenge the arbitration. Hypo is aware of this, there is their resignation, but that bank needs to operate in Croatia in the future, government sources note, emphasizing that Hypo has been very businesslike throughout the ongoing discussions. Hypo bank also has the option to collect the awarded amount in arbitration, or to initiate enforcement proceedings against DAB’s account at the Zagreb Commercial Court, but if a further legal battle is initiated and DAB eventually wins the arbitration for recourse claims, or if the arbitration is challenged in judicial proceedings, that amount will have to be returned. (H)