Earlier this month Luxembourg-based investment company EMV filed a request for international arbitration, demanding the government reimburse it for $45 million (1 billion Kč) it invested in a now-defunct regional television station, TV3.

The company claims that the TV market's watchdog, the Council for Radio and Television Broadcasting (RRTV), which prevented EMV from receiving TV3's broadcasting license from the channel's founder, Martin Kindernay, contributed to the loss of investment.

"EMV's investment failed due to unlawful steps taken by the RRTV, which represents the state," said EMV spokesman Jan Chudomel.

The current dispute comes just two years after the Stockholm Arbitration Court ordered the government to pay over 10 billion Kč to U.S. company CME for failing to protect its investment in TV Nova, the largest private Czech TV station.

Arbitration was granted to EMV based on international agreements to protect investments between the Czech Republic and the Belgium-Luxembourg economic union, Chudomel said.

Though Finance Ministry spokesman Marek Zeman admitted that the government engaged in talks with EMV to negotiate a settlement, he insisted the company cannot justify its claims.

Ladislav Štorek, an attorney with Salans, the law firm representing EMV, indicated the arbitration court could hear the case as early as this fall.

Arbitration rules require EMV and the government to appoint a single arbiter to represent them. They are also required to agree on a third arbiter to act as chairman of the arbitration panel. The government hired the law firm Linklaters to act on its behalf.

Bouncing license

The EMV dispute contains many of the same elements as CME's claims. U.S. mogul Ronald Lauder, the owner of CME, filed an arbitration request charging that the government failed to protect its investment in the country's television market. Like EMV, the company provided financial backing to the Czech broadcasting license holder. Both CME and EMV claim they were pushed out of the market without being compensated for the money they invested.

"It's apparent that EMV was inspired by CME in launching the international arbitration case against the Czech Republic," said Petr Štěpánek, who was until last year the RRTV's vice chairman.

Anatomy of the dispute

In 2000, EMV put up the money to back Czech entrepreneur Martin Kindernay, who wanted to launch a regional channel, TV3, in Prague and the east Bohemian town of Hradec Králové. After investing in TV3, EMV called on Kindernay to transfer the broadcasting license to Luxembourg-based KTV, which it controlled.

However, the RRTV banned the transfer in September 2001, claiming it would be illegal to transfer a broadcasting license to foreign hands. At that point, Kindernay asked the RRTV to transfer the license to his firm, RTV Galaxie. EMV argues that Kindernay had no authority to do so and was obliged to set up a new company for the purpose of transferring the license.

Later, EMV discontinued broadcasting on TV3 and turned to the court to settle the issue. Last December the court ruled the license transfer was illegal and returned it to Kindernay who, by that time, had left the business.

RTV Galaxie closed its regional channels in Prague and Hradec Králové in July and Kindernay returned the license to the RRTV.