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Ruling on SPP notes stuns company

The government says the biggest privatisation in Slovak history is on track despite a crucial court ruling against state gas giant SPP.
The Supreme Court ruled November 29 that Slovenský plynárenský priemysel (SPP), the world's second largest gas distributor, must honour 350 million Czech crowns ($9.5 million) in promissory notes held by the Czech Union Banka.
Economy Minister Ľubomír Harach, Deputy Prime Minister for the Economy Ivan Mikloš and sale advisors Credit Suisse First Boston (CSFB) said immediately after the ruling there was no threat to the sell-off.


"Despite the ruling of the court we still regard the notes as fraudulent."

SPP spokeswoman Dana Kršáková on her company's stance towards the promissory notes and the court ruling.



SPP's lawyer Ernest Valko said the ruling on the promissory notes was delivered in a way that violated his and his client's rights.
photo: TASR

The government says the biggest privatisation in Slovak history is on track despite a crucial court ruling against state gas giant SPP.

The Supreme Court ruled November 29 that Slovenský plynárenský priemysel (SPP), the world's second largest gas distributor, must honour 350 million Czech crowns ($9.5 million) in promissory notes held by the Czech Union Banka.

Economy Minister Ľubomír Harach, Deputy Prime Minister for the Economy Ivan Mikloš and sale advisors Credit Suisse First Boston (CSFB) said immediately after the ruling there was no threat to the sell-off.

"This will not mean the privatisation will be affected or delayed," said Harach. But he added: "It will certainly have an effect on the price level. There is no doubt of that."

However, Michal Šušak of CSFB denied the price would be affected. "I am certain this will not have any fundamental affect on the price of the stake," he said.

As much as $3 billion could be fetched for the 49% stake which the government hopes to have sold to a foreign investor by January or February next year. Slovakia drew a total of $2 billion in foreign investment, including privatisations, in 2000.

The court ruling shocked the government and SPP managers. Ernest Valko, the lawyer acting on behalf of SPP, said he would appeal the verdict to the Constitutional Court on the grounds that the ruling was handed down while he was not present. Valko said this was a violation of his and his client's legal and constitutional rights.

The lawyer had been ill the day the verdict was delivered.

He has also claimed the three judges who adjudicated the case were biased. The trial had been adjourned four times previously after objections from both SPP and Union Banka that judges were biased.

The Supreme Court ruled the promissory notes, signed by former SPP chief Jan Ducký in 1998, were valid. The notes emerged in late 1998, and since then SPP has claimed they are a fraud.

Mikloš said the gas firm and the government would "be using all legal means possible to ensure that this decision will not be a final one".

"This is a very dangerous precedent," he said.

Through its lawyer Anton Blaha, Union Banka said in a statement after the verdict it hoped the ruling would be respected.

"If it is the case that SPP's commitments regarding the ruling are not fulfilled it will not be possible to talk about the credibility of this country," the bank said.

SPP spokeswoman Dana Kršáková said: "Despite the ruling of the court we still regard the notes as fraudulent."

Former Economy Minister for part of Vladimír Mečiar's 1994 to 1998 government, Ducký headed SPP until late 1998 when the Mikuláš Dzurinda administration removed him from his post.

Ducký was gunned down in front of his home in January 1999 by unknown assassins.

Since his death a number of firms have come forward claiming to hold notes signed by him, some even with amounts left blank. SPP says some promissory notes have been recovered, including 21 seized by Czech police on November 30. Their total value was Sk7.5 billion.

The Supreme Court's ruling could pave the way for more cases, potentially threatening investor confidence in the company and the price of the stake.

"There is now a risk that more people will come forward with promissory notes. A precedent for them has now been set," said Boris Kostík, analyst at brokerage Slávia Capital.

However Deputy PM Mikloš said after the ruling the state had already guaranteed that investors would not have to pay debts arising from the company's past management.

"In connection with the privatisation we had to clearly declare that every commitment related to the promissory notes would be borne by the state itself.

"No one would ever buy a share in SPP unless that was clear. Any promissory notes due before privatisation will of course lower the value of the company.

"As for commitments after the privatisation they will have to be taken over by the state. They will not lower the value of the stake, but obviously part of the proceeds from the SPP privatisation would have to be set aside for meeting these commitments.

"This is a standard procedure. Even when we sell banks or other enterprises a reserve fund is set aside to meet possible future commitments which were not known at the time of the sale."

SPP's current management said the Supreme Court's ruling does not necessarily mean future cases brought over promissory notes signed by Ducký will go against them.

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