CZECH REPUBLIC 2009 REPORT ON INVESTMENT DISPUTES

UNCLAS PRAGUE 000334

SENSITIVE
SIPDIS

STATE FOR EB/IFD/OIA HGOETHERT, KBUTLER AND L/CID PPEARSALL

E.O. 12958: N/A
TAGS: CASC EINV KIDE OPIC PGOV EZ
SUBJECT: CZECH REPUBLIC 2009 REPORT ON INVESTMENT DISPUTES
AND EXPROPRIATION CLAIMS

REF: SECSTATE 49477


1. (U) The United States Government is generally aware of
many United States citizens of Czech descent who have
outstanding claims against the Czech Government, but who were
not U.S. citizens at the time their claims arose. As noted
in the introduction, the Act does not require a report on
their claims. The Department of State, however, provides
appropriate assistance to all U.S. persons with claims
against the Czech Republic.


2. (U) In August 1999, the Czech President signed a law that
permits Czech Americans who lost their Czech citizenship
between February 1948 and March 1990 to reapply to become
citizens without losing U.S. citizenship. Additional
legislation would be required for these people to obtain
restitution of their former properties. The government
maintains that it has already returned most such properties
to other Claimants, primarily relatives of those who
emigrated. The Department of State will continue to press
the government to change this policy and provide for some
form of equitable compensation.


3. (U) In July 2000, the Czech President signed a law that
will benefit some U.S. citizens of Czech-Jewish descent whose
property was confiscated between September 1938 and May 1945
in the Holocaust during German occupation. Several thousand
objects of art in the possession of the state are to be
returned to their owners who, in most cases, still have to be
identified. A list of unclaimed items is maintained by the
Ministry of Culture; the list is available on the Internet at
www.restitution-art.cz. The government initially set a
December 2006 deadline for filing claims but Parliament has
abolished the deadline. The Czech government, however,
reserves the right to prevent the exportation of restituted
art works that it deems to constitute a part of the national
heritage. In 2000, a foundation was also established to
provide partial compensation for real estate confiscated
during the Holocaust to Holocaust victims (and their heirs)
who filed timely claims, and whose property the state needed
to retain or whose property was not in the state's
possession. This compensation mechanism, however, was
concluded in 2005.


4. (SBU) The United States Government is aware of one (1)
claim of United States persons that may be outstanding
against the GCR and one (1) claim that was resolved in the
past year:

a) Claimant A

b) 2001

c) Claimant A alleges that the GCR's Radio and Television
Council arbitrarily and unlawfully refused to approve the
transfer of a television license to its Luxembourg subsidiary
as agreed with the license holder. The Council's refusal
allegedly unlawfully deprived the investor of its contractual
rights, and devalued its investment in the television station
operating company, estimated at USD 15 million. In June
2002, Claimant A ceased operations and filed for bankruptcy
in the Czech Republic. In February 2003, Claimant A filed a
notice of arbitration under the Luxembourg-Czech Republic
Bilateral Investment Treaty (BIT). In the Notice of Dispute,
Claimant A urged the GCR to discuss with Claimant A whether
an amicable resolution to the dispute could be reached within
six months following the date of the Notice of Dispute, as
required by the BIT. Settlement discussions between Claimant
A and the GCR Ministry of Finance occurred throughout 2003
and 2004, but the parties could not reach an amicable
resolution. In August 2005, Claimant A submitted its dispute
to ad hoc arbitration in accordance with the BIT by filing a
Notice of Arbitration. In May 2006, Claimant A filed a
Statement of Claim. The GCR filed its Statement of Defense
in September 2006. In February 2007, the Tribunal rejected
the GCR's request to dismiss the case based on lack of
jurisdiction. The GCR appealed the decision to the English
courts. In November 2007, the English High Court rejected
the GCR,s challenge to jurisdiction and its request to
appeal. In December 2007, the GCR filed an arbitration
rejoinder, followed by a round of rebuttals from each party
and a hearing on the merits. The Tribunal's final decision
is anticipated during the next few months.

a) Claimant B

b) 2005

c) Claimant B alleges that the majority stockholders in
Kotva, a.s., a corporation for which the main asset was real
estate where the Prague department store Kotva is located,
sold the real estate with the intention of fraudulently
transferring the proceeds out of Kotva, a.s. and depriving
him, as minority stockholder, of the benefits. During
settlement negotiations, Claimant B demanded the majority
stockholders purchase his shares, failing which, he would
file civil lawsuits in the Czech Republic to prevent the
transfer of the real estate. Based on a complaint by the
majority shareholders, prosecutors employed by the Czech
government initiated a prosecution of Claimant B for
extortion, expressly based on Claimant B's threat to file
civil lawsuits to protect his rights. Claimant B states that
his ability to defend his property interests in the Czech
Republic was compromised by the pending criminal charges
brought against him by the Czech government. In 2007, the
jury in a civil suit in the United States found that Claimant
B's primary motivation had not been to delay or disrupt the
transaction. Subsequently, Claimant B and the majority
shareholders reached an amicable settlement and all claims
and counter claims were dropped. The majority shareholders
also notified the Czech authorities that new information had
arisen during the civil trial to convince them that Claimant
B had not acted improperly and that they were withdrawing
their complaint. In 2008, the Czech prosecutor terminated
the criminal investigation against claimant B.


5. (SBU) Claimant A: European Media Ventures, S.A.; EMV was
established in 2000 by Argus Capital, sponsored by the
Prudential Insurance Company of America, whose major
investors include Prudential and the state of Michigan; no
privacy act waiver.


6. (SBU) Claimant B: Professor Andrew Weiss; U.S. citizen; no
privacy act waiver.
Thompson-Jones