The March 17 ruling concluded that the government failed to adequately support IPB Bank from 1998 to 2000, forcing it to the brink of bankruptcy before wresting it from its Japanese owner, the investment bank Nomura, and handing it over ČSOB days later.

Nomura sued the Czech government in 2001, and is asking for as much as 70 billion Kč ($2.9 billion) in compensation. Arbitrators said they would set the amount Nomura is to be paid before the end of the year, but already analysts are fretting about the effect the lawsuit could have on the economy.

"There are no reserves in the state budget, and so a payment to Nomura worth tens of billions of crowns would torpedo public finances," Next Finance Director Markéta Šichtařová said.

Nomura's victory is a blow to the ruling Social Democrats (ČSSD), who are facing criticism for not finding a way to settle with the company during years of arbitration. The party came into power in 1998 and oversaw the privatization of all Czech banks — one of the first being IPB.

Soon after the court's ruling, the senior opposition Civic Democrats (ODS) called for the resignation of Finance Minister Bohuslav Sobotka.

Prime Minister Jiří Paroubek is downplaying the ruling, saying it is unknown how much the government will have to pay Nomura and that in the end it could be "merely a token."

Nomura bought IPB in 1998, but focused mainly on selling attractive assets from the bank. By 2000, IPB was near financial collapse when the Czech government took control of it and transferred it to ČSOB.

Arbitrators ruled that the move was legitimate. But they said the government discriminated against IPB by shutting it out of 400 billion Kč worth of bailouts it was offering Czech banks in the 1990s to help them clear up debt before being privatized. That hastened IPB's ruin, they said, and made the government's takeover necessary.