Eureko wins key court battle in PZU dispute

In a case that has hampered Poland's attempt to project a business-friendly image, a court ruled that the Polish government broke an international investment treaty it signed in 1999 with Dutch insurance company Eureko.

According to the agreement, Poland was to allow Eureko to buy a majority stake in Central Europe's largest insurer, PZU, when it was floated on the Warsaw Stock Exchange. PZU's IPO was originally planned for the end of 2001, but never took place due to political wrangling. In 2002 Eureko took the case to an international court of arbitration, which at the end of last month ruled against the Polish government. The hearing was seen as the first round of the case, and could be moot if the government manages to negotiate a compromise settlement.

"I believe there is still the possibility of negotiating with Eureko. I assume that Eureko will not want to talk with the present government but wait for the next one," Treasury Minister Jacek Socha told the Rzeczpospolita daily.

The court still has to rule on how much compensation the government owes Eureko, though it is thought the award could be as high as EUR 1 (zł.4.05) billion.

Eureko currently holds a 31-percent stake in the insurer, and has sued Poland for refusing to sell it a further 21 percent, as stipulated in an earlier agreement.

Late last year the two sides agreed on a deal that envisioned floating a 20 percent stake of PZU on the bourse by the end of June. Because of a continuing parliamentary investigation into the 1999 deal, and the resulting controversy, the flotation never came to pass.