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Insurer takes steps to get €29.5m

WHEN, last December, the International Court of Arbitration ruled that Slovakia must pay €22 million to Achmea, the Dutch owner of the health insurer Union, for what it called a violation of the provisions of the investment treaty between Slovakia and the Netherlands, Slovak Prime Minister Robert Fico responded that nobody would pay anything to anybody, and the state proceeded accordingly. Six months later, a Luxembourg court has sided with Achmea and ordered the sequestration of €29.5 million in assets owned by Slovakia as part of a legal action brought against the country by the private insurer over controversial legislation which prevented privately-owned public health insurers from retaining profits or distributing them to shareholders.

WHEN, last December, the International Court of Arbitration ruled that Slovakia must pay €22 million to Achmea, the Dutch owner of the health insurer Union, for what it called a violation of the provisions of the investment treaty between Slovakia and the Netherlands, Slovak Prime Minister Robert Fico responded that nobody would pay anything to anybody, and the state proceeded accordingly. Six months later, a Luxembourg court has sided with Achmea and ordered the sequestration of €29.5 million in assets owned by Slovakia as part of a legal action brought against the country by the private insurer over controversial legislation which prevented privately-owned public health insurers from retaining profits or distributing them to shareholders.

The Slovak Ministry of Finance called the steps taken by Achmea “inappropriate” and has assured the public that no money has left Slovakia yet, with the government saying that it will continue to fight the ruling. The opposition parties have showered the government of Robert Fico with blame, suggesting that the nearly €30 million could have been used to raise the salaries of health-care staff.

Meanwhile, the Health Ministry is seeking an advisor for the ruling Smer party’s pet project to create a unitary health insurance system, which might even involve the expropriation of private insurers if a deal to purchase their assets falls through. Critics of the plan say it might mire the state in additional lawsuits, with Achmea already serving notice of arbitration to Slovakia on February 6 over what it views as the threat of expropriation of private health insurers.

The accounts

“The money - now lodged in various bank accounts in Luxembourg – is to be deposited in a special bank account where it remains outside the reach of Slovakia,” Achmea said in a press release posted on its website on May 23, adding that after what it called “the successful completion of the relevant legal procedures in Luxembourg”, the money will be transferred to Achmea.

According to the release, the court’s order takes into account “the magnitude of the sums Achmea is entitled to receive from Slovakia”.

“By seizing these funds we exercise our right to enforce the claim as it was granted in the award by the International Tribunal,” Achmea’s chairman Willem van Duin said, according to a company statement. “We asked the Slovak Republic several times to take its responsibility as an EU-member and live up to its obligations. Until today, they refrained from doing so.”

The trial with Union’s owner continues and the funds deposited in Luxembourg are the property of Slovakia, the Slovak Finance Ministry said in response to Achmea’s claims and the court’s decision, in an official release.

“Despite the fact that Achmea is aware that the trial is not completed, it has taken considerably inappropriate steps and has initiated an execution against Slovakia,” the ministry said.
According to the ministry, the German courts will decide on Slovakia’s request to cancel the decision of the arbitration court, issued in the Achmea arbitration, while the Luxembourg courts will decide on a request to cancel the execution.

Six weeks ago, Slovakia took the necessary steps to protect its interest in a possible execution, the ministry said, adding that the state is sticking to its argument that “hundreds of millions of euros, which were transferred from public health insurance and paid to the owners of health insurers, should stay in the Slovak health-care system”.

The international arbitration court last year ordered Slovakia to pay Achmea compensation for losses the insurer suffered as a result of the legislation that had restricted Achmea’s rights as the owner of Union, as well as to cover Achmea’s legal fees.

The ban on health insurer profits, which was passed in 2007 and came into effect in 2008, was one of the most criticised laws produced by the first government of Robert Fico. In January 2011, the Constitutional Court ruled that the legislation restricted the property rights of the health insurers’ shareholders and interfered in the insurers’ right to do business by preventing them from making autonomous decisions over how to use their profits, and was thus unconstitutional.

The blame

The Slovak Democratic and Christian Union (SDKÚ) instantly responded that the nearly €30 million blocked by the Luxembourg court in the accounts of local banks could have gone to cover an almost 7-percent wage hike for nurses, or to cover the third wave of salary increases for physicians, the SITA newswire reported.

“Thirty million, which if we had it in the health-care [sector] and not blocked somewhere in Luxembourg, would mean that the four most frequently prescribed heart, blood pressure and vein medications with the highest fees could be, for one year, without any such fees,” SDKÚ deputy chairman Viliam Novotný said, adding that this is the price Slovakia will have to pay for what he called a “populist political experiment” conducted by the government of Robert Fico.

No money has left Slovakia; the court trial has not been concluded, Erik Tomáš, the director of the Slovak government’s press department responded in an official release.

“The SDKÚ, with this incorrect approach, only proves that, more than people’s health care, it cares about the fat profits of private insurers,” Tomáš responded to the party’s claims, adding that the government will continue to fight for all the money that people have to transfer to the health insurers, which, based on the law, should actually go to health care and for the salaries of physicians and nurses, and not into the pockets of private insurers.

Single insurer plan progresses

Last year Fico said that the arbitration tribunal decision did not weaken his determination to pursue a single state insurer; quite the contrary, “it actually strengthened [it]”. He claimed that privately-owned public health insurers “sucked” tens of millions of euros from public funds. Nevertheless, the project has fallen behind schedule.

Meanwhile, Slovak Health Minister Zuzana Zvolenská submitted on May 27 a tender proposal to the government to pick an advisor to oversee the creation of the single insurer. The costs of the consultancy services are estimated to be €3.4 million, SITA reported.

Along with legal and economic consultancy, the advisor will also be expected to assess the value of private health insurers for eventual expropriation if the state fails to purchase the shares of the private insurers in an agreed deal. The firm will also represent Slovakia in the eventual expropriation proceeding, SITA wrote.

Former health minister and deputy for the Christian Democratic Movement (KDH) Ivan Uhliarik has warned about what he called the costs of introducing the unitary system of public health insurance, and said that the minister could save many lives in hospitals with the €3 million that will be allotted for the advisor.

“I hope that Smer will pay for the advisor and not the citizens through their taxes,” Uhliarik said as quoted by SITA, adding that it is enough that they have to pay lawyers €14 million, who were not able to defend in the arbitration what he called Fico’s anti-constitutional and senseless ban on profits.

On October 31, 2012, the Fico cabinet gave the unitary health insurer project tailored by the Health Ministry its blessing. The ministry listed three ways in which it can create a single health insurance company: acquiring the shares of the private health insurance companies, taking over the management of the private insurers’ client portfolios, and expropriating the private health insurers for an appropriate sum, with the first option cited as the best alternative. If the government reaches an agreement with the private insurers about the sale of their shares, the single health insurer could be launched as of January 1, 2014. In the event of expropriation, the single insurer will not emerge until July 2014, the Health Ministry wrote in its plan.

The private health insurers have said they do not intend to leave the market.

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