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Second suit considered by ČSOB

Bank says cancellation of anti-flood tender 'illegal'

By Victor Velek
Staff Writer, The Prague Post
August 29th, 2007 issue

Relations between the Finance Ministry and ČSOB, one of the country’s largest banks, are growing increasingly testy.
Most recently, the ministry stripped ČSOB of a contract it won earlier this year to manage 16 billion Kč ($778 million) reserved for anti-flood projects. A major part of this sum — some 9 billion Kč — comes as a loan from the European Investment Bank.
ČSOB says the ministry had no right to cancel its fairly won commission. The bank is now considering options to revert the cancellation, including legal action, said Ondřej Vychodil, head of ČSOB’s investor relations.
“We see this as an illegal act,” he said.
The ministry says the tender’s annulment, which it announced Aug. 9, is permissible because of a section of the public procurement law that allows contracts to be canceled if “reasons of special concern” occur. A pair of dueling lawsuits between ČSOB and the state is such a reason, said Zuzana Chocholová, the ministry’s spokeswoman.
“The Finance Ministry won’t sign any contract with a partner launching a lawsuit against it,” she said.
The two launched multibillion-crown lawsuits against each other this summer at the International Arbitration Court in Paris, both stemming from ČSOB’s government-sponsored takeover, in 2000, of the failed bank Investiční a poštovní banka (IPB).
ČSOB filed its suit in June, seeking 1.7 billion Kč from the state for J. Ring, one of IPB’s former assets. The government countered with a 26.7 billion Kč suit at the end of July, saying that the bank unfairly enriched itself to the detriment of taxpayers during the IPB takeover, when the government covered IPB’s debts.
The ministry’s most recent volley against ČSOB is perfectly legal, since the tender was canceled before ČSOB signed the contract, Chocholová said. Without a signed contract, ČSOB cannot seek compensation, she said.
To prevent similar complications in the future, the ministry has decided to close its doors to offering any commissions to companies in disputes with the state.
“New tenders will say that applicants must not be in a dispute with the state,” Chocholová said.
According to Tomáš Machurek, a lawyer specializing in public procurements, such prerequisites are becoming more common.
“It’s not fair,” he said. “A general condition stipulating that applicants must not be in a dispute with the state or other contracting entity seems to me inappropriate and legally problematic. A narrower formulation — ruling out debtors, for example — would be more proper.”
Construction of flood barriers along potentially dangerous rivers should not be delayed, as the ministry will manage the funds through its accounts at the Czech National Bank until a new manager is selected, Chocholová said.
The new tender will be announced soon. The ministry will ask five selected banks to apply for the contract, she said.

Victor Velek can be reached at vvelek@praguepost.com


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