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CEZ vs. SAPE: The state gets under 8% of the claimed damages

10 April 2015
Bogdan Tudorache


The decision of the International Court of Arbitration in the suit of Electrical and Romanian State against the Czech group CEZ, which was demanded 81 million euro in damages for unfulfilled obligations related to the privatization of the former company Electrica Oltenia, is final, legal sources told

Following the decision, the state gets under 8% of the requested damages, according to an estimate. “However, some procedures could be opened locally”, the sources said. Contacted by, CEZ officials declined to make any comment.

What damages does the state receive

The Arbitration Court of the International Court of Arbitration at the International Chamber of Commerce in Paris confirmed the failure of fulfillment of CEZ in two of the most important duties of its privatization contract obligations, base of the closing of the privatization of Electrica Oltenia with CEZ, said officials at SAPE, the company that now manages the holdings of the former state companies spun-off from Electrica.

Thus, “SAPE action was upheld in part, CEZ is obliged to pay SAPE about 5.7 million in damages, plus an interest of 3.116% to annual contract (calculated from 8 October 2012 to the date of actual payment of damages) and to pay 50% of the arbitration costs (217,500 dollars)”, said a SAPE statement.

The total amount that the state should receive, if the payment would be made now, would therefore be of about 7.6% of the amount originally claimed of 81 million euro, meaning a total of about 6.14 million euro, including an interest of 2.5 years and arbitration costs.

“The obligations that the Arbitral Tribunal has indicated to be unfulfilled by the investor CEZ are essential to the privatization contract obligations. The first concerns the use of the Subscription Price for financing investments. The Court ordered CEZ to pay damages for failing to prove the usage of the amount of 103.6 million euro to finance modernization, refurbishment and development of the activities of Electrica Oltenia, as engaged in the privatization contract.

The second violation relates to the failure of accomplishing the initial business plan indicators of Electrica Oltenia. The document relating to the initial business plan was the basis for selection of CEZ as as a strategic investor of Electrica Oltenia, a plan CEZ as proposed for the privatized company to bring out within 5 years after privatization, but which it did not fulfill, claiming that its enforcement would have not been mandatory”, reads the SAPE release.

CEZ says it fulfilled majority obligations

CEZ officials say this “is already the third winning arbitration in which CEZ managed to protect its interests abroad”. “In the arbitration, the Electrica and then Energie (SAPE) companies sought payment of over 81 million euro for the alleged failure of CEZ to honor obligations arising from the privatization agreements from 2005 and 2009, under which CEZ took over the Romanian electricity distribution company Electrica Oltenia.

In the proceedings CEZ objected and properly demonstrated that its obligations and commitments from the privatization agreements were vastly fulfilled, a fact that was confirmed by the arbitration court. The court acknowledged only very minimal claims to the plaintiff, which are not of a material nature”, a CEZ release stated.

Autor: Bogdan Tudorache

Active in the economic and business press for the past 26 years, Bogdan graduated Law and then attended intensive courses in Economics and Business English. He went up to the position of editor-in-chief since 2006 and has provided management and editorial policy for numerous economic publications dedicated especially to the community of foreign investors in Romania. From 2003 to 2013 he was active mainly in the financial-banking sector. He started freelancing for Energynomics in 2013, notable for his advanced knowledge of markets, business communities and a mature editorial style, both in Romanian and English.

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