Monday, 18 February 2019

Sanader’s INA-MOL Corruption Trial Resumes

ZAGREB, February 18, 2019 - A Zagreb County Court panel on Monday dismissed a motion for their recusal filed by the defence of former prime minister Ivo Sanader in the INA-MOL corruption trial, in which the other defendant is Zsolt Hernadi, CEO of the Hungarian energy company MOL, who is beyond the reach of the Croatian authorities.

Panel president Maja Štampar Stipić also dismissed a motion to postpone today's hearing, filed by Sanader's new court-appointed attorney Nikola Drobac. Instead of three months he had requested to familiarise himself with the case, he was given one month.

The panel found that with their motions, the defence was trying to stall the trial.

Judge Stampar Stipic adjourned the previous hearing on February 8 because Sanader's counsel had not shown up and chose a lawyer for him, which Sanader called a gross violation of his constitutional rights and fundamental freedoms. Today he again claimed that the court's choosing a lawyer for him violated his minimum rights to a defence.

In the INA-MOL case, Sanader was already convicted to 10 years in prison for taking a bribe from Hernadi, but the Supreme Court reduced the sentence to 8.5 years. The ruling was eventually quashed by the Constitutional Court.

The USKOK anti-corruption office accused Sanader of giving controlling rights in Croatian energy company INA to MOL for EUR 10 million and of arranging with Hernadi the divesting of INA's unprofitable gas business.

Former INA supervisory board chair Davor Štern testified in court on Monday that the energy company's management was "only formal" and that its Hungarian peer MOL made all the decisions without seeing to INA's interests.

"INA's management was only formal because all decisions were made by the board of executive directors, and one could also hear that closing down the Sisak refinery was widely discussed already in the 2009 contract amendments. MOL had 44% ownership and practically made every decision, without seeing to INA's interests," said Stern.

More news on the INA-MOL case can be found in the Business section.

Wednesday, 13 February 2019

Do Proposed Amendments to INA Law Favour MOL?

ZAGREB, February 13 2019 - The chairman of the ruling Croatian Democratic Union's (HDZ) parliamentary group, Branko Bačić, on Wednesday dismissed the opposition's claims that the proposed amendments to the INA Privatisation Act favoured the Hungarian energy group MOL to facilitate INA's privatisation, stressing that the purpose of the proposed amendments was to further protect national interests in the Croatian oil and gas company.

"There is not a single provision in this bill that reduces the influence and importance of government representatives and members of INA's bodies. On the contrary, their influence and importance is strengthened. This position has been brought into accord with the EU's acquis communautaire, which means that after the adoption of the bill there will be no reason any more for the European Commission to ask Croatia to change its actions in INA's bodies," Bačić said in response to questions from the press after a meeting of the HDZ group.

Bačić said that the proposed bill of amendments would ensure full protection of Croatia's interests in INA with regard to oil supply and its relationship with the strategic partner. He noted that the proposed amendments did not give MOL any new position that could lead to changes in the relationship between the government and the strategic partner.

Asked why this bill was being considered under fast-track procedure, Bačić said that the bill had been talked about in public for years, that countless debates had been held in parliament and government meetings, and that all issues in that regard had been discussed.

Asked if the HDZ had the support of all coalition partners for amending the INA Privatisation Act, Bačić replied in the affirmative.

More news on the INA-MOL situation can be found in the Business section.

Wednesday, 6 February 2019

Croatia Waiting for ICSID Ruling in Case Brought by Hungary's MOL

ZAGREB, February 6, 2019 - Arbitration proceedings which the Hungarian energy group MOL has launched against Croatia before the International Centre for Settlement of Investment Disputes (ICSID) in Washington are still ongoing and a ruling is pending, and Croatia has contested the jurisdiction of the arbitration tribunal in Washington in all arbitration proceedings initiated against it based on investment protection agreements with EU member states or the Energy Charter Treaty, the government said in response to a query from Hina on Wednesday.

MOL launched arbitration proceedings before the ICSID in late 2013, arguing that Croatia had failed to honour its commitments from the main agreement on gas business and its annexes. The Hungarian company is demanding about US$1 billion in damages.

At the four hearings that were held, Croatia presented its arguments denying that with its discriminatory, arbitrary and non-transparent actions it had caused damage to MOL's investment in the Croatian oil and gas company INA, and expressed expectations that its arguments would be taken into account, the government said.

The government stressed that MOL did not suffer any damage and that it was in fact the Croatian state that was adversely affected by agreements that were the result of corruption. "The hearings before the arbitration tribunal were completed in July 2018 and now we are awaiting a ruling. This process can take a year or more, given its complexity. At this stage of the process, we cannot divulge any more details," the government said.

The government recalled that Croatia had adopted the EU declaration on the legal consequences of the judgement of the Court of Justice in the Achmea case and on investment protection in the European Union, under which courts outside the EU cannot have jurisdiction over investment disputes between member states. "Consequently, in all arbitration proceedings that have been launched against Croatia based on investment protection agreements with EU member states or the Energy Charter Treaty objections were raised to the jurisdiction of the arbitration tribunal in Washington," the government said.

Last month, all EU member states undertook to terminate bilateral investment protection agreements signed between them, and 22 of them committed to ensure that the Energy Charter Treaty could not be used as a basis for arbitration following the Court of Justice judgment of March 2018. The judgment concerned a lawsuit brought by the Dutch insurance company Achmea against Slovakia.

The European Commission said at the time that "the dispute settlement mechanisms provided in these treaties as well as their intra-EU application of the Energy Charter Treaty are incompatible with EU law and discriminate between EU investors."

The Commission welcomed the fact that "the majority of member states committed to undertake action to ensure that the Energy Charter Treaty cannot be used as a basis for arbitration between investors and EU member states."

However, Hungary is not among the majority of member states that took on these commitments. Its permanent representative to the EU signed a separate statement saying that the Hungarian government will terminate all bilateral investment protection agreements with other member states either through a multilateral agreement or bilaterally. Hungary maintains that the Achmea judgment concerns only bilateral investment protection agreements and not the arbitration clause in the Energy Charter Treaty.

In addition to MOL's action, Croatia is faced with another seven ongoing arbitration cases that have been brought against it before the UCSID, including lawsuits brought by four banks over the conversion of loans denominated in Swiss francs into euros.

More news on the INA-MOL case can be found in the Business section.

Wednesday, 30 January 2019

“Amendments to INA Privatisation Law Protect Croatia's Interests”

ZAGREB, January 30, 2019 - Energy and Environment Protection Minister Tomislav Ćorić said on Wednesday that a bill of amendments to the law on the privatisation of the INA oil company, which the government recently sent to parliament, safeguarded Croatia's interests to the maximum amount.

On 23 January, the government tabled the bill which aligns the INA law with European Union legislation and protects Croatia's energy interests as well as the state's interests in INA, as stated by the government on that occasion.

However, the opposition has criticised the Andrej Plenković cabinet about the detrimental effects of the latest proposal, and in his response to the press Minister Ćorić today dismissed the criticism.

Ćorić said that during a parliamentary debate on the proposed bill, he would explain how the bill protected Croatian state interests.

As for a report by the weekly newspaper Nacional that the Office of for the Suppression of Organised Crime and Corruption was analysing some segments of the bill, the minister said on Tuesday that the ministry was open to all who wanted to get information about the bill, and that he had not heard before that USKOK was interested in the matter.

Today, Ćorić told the press that it was in the government's interest to have a strong and efficient INA, and that by entering the EU Croatia took over certain responsibilities, one of them being the adjustment of the domestic legislation with the EU acquis.

The INA Privatisation Act went into force in April 2002, stipulating that the state retained certain special rights in the company - the exclusive right to control changes in ownership, the right to veto certain management decisions, and the right to pre-emption of all or part of the company's property at market value in case of liquidation. Since those provisions are not in line with the EU acquis, the European Commission launched an EU law violation procedure and decided to file a suit at the EU Court of Justice in July 2017.

That's why the Environment Protection and Energy Ministry proposed amendments to the INA Privatisation Act, stipulating the obligation of a stock buyer to submit a long-term management and business plan, withdrawing the government's consent for stock acquisition and the right to buy shares and pay compensation in the event of a serious threat to safe, reliable and regular energy supply and to the protection of the energy supply infrastructure.

The amendments also propose that, as long as the state has one or more shares in INA, the government can appoint two representatives who will attend management meetings without the right to vote. Also proposed are penalties and protection in case management adopts a decision seriously bringing into question the safety of energy supply and its infrastructure.

As for the opposition's criticism about the previous procedure of INA's privatisation, Ćorić said today that one of the lawmakers "has clearly stated that HDZ-led (Croatian Democratic Union) governments have not sold any share of INA to Hungary's MOL." He recalled that under the 2002 law on privatisation, the first package of 25% of the stock was sold to MOL in 2003. At the time, the SDP-led government was in power.

More news on the INA-MOL situation can be found in the Business section.

Tuesday, 15 January 2019

INA Restructuring and LNG Terminal Remain a Priority

ZAGREB, January 15, 2019 - Environment and Energy Minister Tomislav Coric said on Tuesday that the government wanted a successful and profitable INA, adding that this required restructuring of this oil company's refineries. He also spoke about the LNG terminal.

"The aim of the government is to ensure a successful, profitable and vertically integrated INA. A successful and efficient INA has no alternative," Ćorić told a press conference dedicated to energy issues.

He, however, added that this wish does not correspond with the present state of INA's oil refineries, as the one at Rijeka operates at 70 to 80 percent capacity and the one at Sisak at 30 percent.

Ćorić said that the planned transformation of the Sisak plant would ensure the largest possible employment and that it was tied to investment in the Rijeka refinery and other business segments. He noted that the conversion of the Sisak refinery into an industrial centre has been decided by INA's management and supervisory boards and it "has no alternative, regardless of the size of the government stake in INA."

Asked if he had any message for the workers at Sisak, he said that their future would not be uncertain and that under the business plan 40 to 50 percent of them would be retained at the Sisak complex.

Ćorić said that the government had not abandoned its idea to buy back the Hungarian energy group MOL's stake in INA, noting that this was a very complex process.

Asked if the proposed legislative changes could make it possible for MOL to acquire a majority stake in INA, Ćorić said that if MOL or any other company had such an intention it would first have to present its long-term plan for INA to the government to see that this would not have an adverse effect on the country's energy stability.

The proposed amendments to the INA Privatisation Act are under public consultation until January 22. Their purpose is to align this law with EU legislation.

When explicitly asked if there was a deal with the Hungarians to leave INA to them, Ćorić replied in the negative.

Speaking of Croatia's plan to build an LNG terminal on the northern Adriatic island of Krk, Ćorić recalled that the state-owned power company HEP had booked 520 million cubic metres of the terminal's capacity, while the booking of 1.5 billion cubic metres was required to make the terminal profitable, and that two letters of intent had come from Hungary inquiring about the possibility of entering the ownership structure of the future terminal.

Despite the modest interest in the booking, Ćorić said that "as long as this government is in office, the LNG will be without an alternative the dominant energy project."

He announced further talks with the Hungarians, saying that this was a strategic project, not only for Croatia, which could become increasingly dependent on gas imports, but also for Europe, especially for countries such as Hungary and Ukraine.

Asked about the possibility of renewing oil and gas exploration and exploitation in the Adriatic, Ćorić said that there were indeed indications of considerable quantities of gas existing in the Adriatic, that he was "neither in favour nor against" and that a consensual decision should be taken on this issue.

More news on the LNG terminal project can be found in the Business section.

Thursday, 3 January 2019

Minister Hopeful about Future for Sisak Oil Refinery Workers

ZAGREB, January 3, 2019 - Environment and Energy Minister Tomislav Ćorić said on Thursday, while commenting on the business transformation of the INA oil company, that the government was insisting that as many Sisak oil refinery workers as possible should be retained.

He dismissed claims that he and State Assets Minister Goran Maric disagreed on the issue of the Sisak refinery.

"What Minister Marić said in 2016 and what we have been saying all long is that INA should be a vertically integrated company. We believe that modernisation of INA's refining business has no alternative and an investment of between 3.5 and 4 billion kuna that will be made in that regard is necessary," Ćorić told the press outside the government headquarters.

"There are no differences of opinion between us. It was necessary to insist on maintaining employment in Sisak-Moslavina County. Marić's statement should be viewed in a wider context. The question of the refining business in 2016 and in 2018 is not the same," he added.

Marić said in 2016 that he would not allow the closure of the Sisak oil refinery because of its importance for the local economy. "I would sooner leave politics than allow its closure," he said then.

Under its business plan for 2019, INA will concentrate its oil refining business at the Rijeka refinery, while the Sisak refinery will be converted into an industrial centre focusing on other activities.

Ćorić said that the Sisak plant was currently operating at about 30 percent of its capacity, while the Rijeka refinery was operating at 70 percent. "Croatia needs INA as a strong energy company. It needs an efficient and successful INA that will be competitive and profitable," he added.

Asked what would happen with workers at Sisak as part of INA's business transformation, Ćorić recalled the conclusions of the business plan adopted at the end of last year, under which between 40 and 50 percent of workers at Sisak would remain in the plants that would continue operating.

As for the rest of the workers, a comprehensive redundancy programme has been prepared by the management and they will also have an option of working in other business areas of INA, the minister said.

More news on the INA oil company can be found in our Business section.

Wednesday, 2 January 2019

State Assets Minister “Forgets” His Election Promise

ZAGREB, January 2, 2019 - State Assets Minister Goran Marić said on Wednesday that neither the government nor he could do anything about the closing of the refinery in Sisak because that was the decision of the INA oil company's management, adding that he was still advocating for not closing the plant.

"The state assets minister and the government can't make business decisions for any company," he told reporters when asked if the government had done enough to prevent the closure of the Sisak refinery.

Asked if he would keep his promise from the 2016 election campaign that he would leave politics if the refinery was closed, Marić said he was still advocating for not closing the plant.

He said he was politically advocating that contractual obligations be met, that management consider whether the closure was justified, but added that business decisions in any company were made by management and the supervisory board. "As a minister, I can't exert pressure on anyone," he stressed.

Asked if INA was a state asset in any way, he said it was not and that the government only had shares in it, reiterating that business decisions concerning INA were made by the management and the supervisory board.

Marić said he would continue to insist on the adoption of decisions in Croatia's interests, and that not closing the Sisak refinery was in Croatia's interest.

Asked if the government and Prime Minister Andrej Plenković were pushing hard enough for what he was pushing for, he said that as an economist he mostly supported production and that during the election campaign they pushed for salvaging the Petrokemija fertiliser manufacturer and against closing the Sisak refinery.

He said Petrokemija was salvaged and that "the State Assets Ministry had a crucial role in its recapitalisation, but it certainly can't have decisive influence on the closure of the refinery."

More news on the Sisak refinery can be found in our Business section.

Saturday, 22 December 2018

Sisak Refinery Closure Criticised by Opposition

ZAGREB, December 22, 2018 - The MOST party said on Friday that by "stalling and abandoning plans for INA's buyout, the Plenković cabinet is making it possible for Hungarian oil and gas group MOL to blackmail Croatia into the announced closing of the Sisak refinery."

Asking Prime Minister Andrej Plenković what his Hungarian counterpart Viktor Orban had blackmailed him with, MOST wonders in a statement what "Croatia will get if Plenković has allowed Hungarians to close the refinery in Sisak and let them enter Petrokemija's management. They will soon start exporting INA's gas to themselves and who knows what else is in the offing? Isn't the price of Hungary's merciful blackmailer involvement in the LNG terminal, whereby Plenković is showing his commitment to the EU by seeking a future office in the Commission, too high?"

MOST further says that Prime Minister Plenković has personally appointed the Croatian members of the management of the INA oil company (jointly owned by Croatia and MOL) but that they are not representing INA's interests.

In the shareholders agreement on INA, MOL has undertaken to be a strategic partner but it has taken over INA's market and turned the company into an oil retailer, MOST says, claiming that Hungary is protecting its interests in a sovereign way while the Croatian government is incapable of organising a tender to buy back MOL's stake in INA.

SDP president Davor Bernardić visited Sisak to meet with Predrag Sekulić, unionist and spokesman for Sisak refinery workers, for talks on the current situation in the refinery following a decision by the INA oil company to stop refining oil in Sisak.

INA, which is owned jointly by Croatia and the Hungarian oil and gas group MOL, announced on Wednesday that it would concentrate its refining business in Rijeka, while the Sisak refinery would be converted into an industrial centre focusing on other activities.

"Had Plenković stuck to his pre-election promise of two years ago and restored Croatian ownership of INA, the Sisak refinery would not be facing closure. This government has not done anything in that regard and will be remembered for making the workers of Uljanik, 3. Maj and the Sisak refinery jobless," Bernardić said.

The SDP leader also wondered if the closure of the Sisak refinery and possible dropping of an indictment proposal against MOL executive Zsolt Hernadi had been agreed at recent talks between Plenković and Hungarian Prime Minister Viktor Orban in exchange for Hungary's withdrawal of an arbitration lawsuit against Croatia in the INA case.

More news on the INA-MOL case can be found in our Business section.

Friday, 21 December 2018

Sisak Oil Refinery Workers Confused by Reports about Closure

ZAGREB, December 21, 2018 - The news that production at the Sisak oil refinery will be closed, although expected, disquieted workers on Thursday, and their spokesman Predrag Sekulić said they were "confused by the absence of a clear reaction from the government."

The arguments given by the INA oil company in favour of discontinuing production at Sisak are unconvincing and unilateral, he said, adding that workers are not surprised by the news.

"This is just a confirmation of our claim that the acquisition of INA by the Hungarian energy group MOL was a hostile takeover. We, however, are confused by the absence of a clear reaction from the government, whose representatives have said several times that they will push for the continuation of production and survival of the Sisak refinery," Sekulić told Hina.

He said that the union and workers were meeting on Friday to discuss their further steps.

INA announced on Wednesday that it would concentrate its refining business in Rijeka, while the Sisak refinery would be converted into an industrial centre focusing on other activities.

If the Sisak refinery is shut down, it will lead to further emigration and dying out of the local economy and other sectors, President Kolinda Grabar-Kitarović said in Varaždin on Thursday.

Asked if she could join in efforts to deal with the planned closure of the Sisak oil refinery, which could also be seen as a matter of national security, Grabar-Kitarović said that she would become involved, in line with her constitutional powers, because she was not authorised to make any decisions in that regard.

"I will definitely be in talks with both the Croatian and the Hungarian side with a view of keeping the refinery running because those jobs really need to be saved. Otherwise we will face further emigration and dying out of the local economy and other sectors," she said.

Varaždin County Prefect Radimir Čačić, who met with the president, said that the MOL oil and gas company had been planning for a long time to close down the Sisak oil refinery and that there was a conflict of legitimate Croatian and Hungarian interests in that case.

The Sisak refinery is part of INA, which is owned jointly by the Croatian state and the Hungarian oil and gas group.

"Under the initial agreement, Hungarians could in no way close down the refinery. Moreover, they undertook to upgrade and develop it further. The terms of those initial agreements have evidently been changed and the incumbent government lacks the strength to prevent the closing down of the plants," Čačić said, adding that the closure of the refinery was more a matter of the loss of a vital type of production than a matter of job loss.

"Most of the workers will probably get decent severance packages, retire or... there will be a switch to alternative production – the processing of the already processed oil products and their storage. The number of workers will not be reduced significantly. This is first and foremost about the loss of strategic production, that's the problem," said Čačić.

More news on the INA-MOL case can be found in our Business section.

Thursday, 20 December 2018

INA to Close Down Sisak Refinery

ZAGREB, December 20, 2018 - Energy Minister Tomislav Ćorić commented on Thursday on oil company INA's business plan for 2019, saying it was about an investment cycle that would lead to the necessary modernisation of the refining business and that the transformation of the business in Sisak was the path INA should take. The plans call for the closure of Sisak refinery.

Responding to questions from the press ahead of a cabinet meeting, Ćorić said the company's management and supervisory boards had supported a plan to transform the business in Sisak. "I think INA should first and foremost become a business case and less a subject of politicisation."

Asked if that meant the end of refining in Sisak, Ćorić said the transformation of the business there had been analysed by management and that it was "simply the path INA should take."

INA plans to concentrate its refining business in Rijeka, while the Sisak refinery would focus on other activities, the company said on Wednesday.

Asked about Hungarian energy group MOL's withdrawal of a suit it brought against Croatia before a Washington district court, Ćorić said the suit was groundless as all of MOL's receivables from Croatia were paid over a year ago.

More news on the future of INA can be found in our Business section.

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