Polančec: Decision on Possible Settlement with Hypo Bank in a Week or Two

The government has taken a “time out” in the case of a lost arbitration and a possible settlement with Hypo Bank, which will last at most another week or two, during which time the State Attorney’s Office and legal teams will review all documentation once again and conclude what our chances are to fight in regular courts for the annulment of the arbitration ruling in London, said Deputy Prime Minister Damir Polančec today.

The State Attorney’s Office and legal teams will also assess what the chances are of potentially winning the arbitration proceedings initiated by the State Agency for the Protection of Deposits and Bank Rehabilitation (DAB) in London for so-called recourse claims. Namely, DAB initiated arbitration to have the right to recourse claims from Slavonska Bank in case of losing the arbitration initiated by Hypo, given that its management prepared the bank’s balance sheet. “All of this was analyzed earlier and concluded that we would go for a settlement, but we took another time out to analyze everything once more, and the final decision will be joint, and we will seek it within the circle of DAB, the Ministry of Economy, the State Attorney’s Office, and all legal teams that have worked on this,” Polančec stated at today’s public procurement consultation.

The government accepted the settlement agreement with the Italian Astaldi at last week’s session, and for Hypo Bank, it was decided that legal experts, in cooperation with the new Minister of Justice, will assess whether to reach a settlement or attempt to legally challenge the arbitration decision from London. Hypo Bank won the arbitration in London at the end of last year, which it initiated due to irregularities in the privatization of Slavonska Bank in 1998, namely subsequently identified greater risks than those presented in the bank’s balance sheet, which was prepared by the management of Slavonska Bank and confirmed by DAB.

The arbitration determined that Hypo Bank should be paid the principal and interest amounting to approximately 44.5 million euros, and in addition, from the date of the decision (December 27, 2007) until the obligation is fulfilled, interest of 4,901 euros per day. In the settlement negotiations, a discount of 20 percent on the total awarded amount was agreed upon, meaning a total payment of 34.58 million euros and the waiver of daily interest. However, whether this settlement will be reached or whether a legal procedure will be initiated to challenge it will be known after the opinions of the DORH and legal teams are provided. (H)