More solar investors to sue Czech state

Law firm Smed Jorgensen and arbitrator Ondřej Sekanina set to announce launch of arbitration over last year’s solar tax

HOT TOP|Companies|Energy & Green Biz
Eva Jarešová | 13.04.2011

Domestic law firm Glatzová & Co. and Anglo-German firm Freshfields Bruckhaus Deringer (FBD) were the first to have formally informed Czech authorities of their respective clients intention to launch arbitration against the Czech state over the “solar tax.” Now the lesser-known firm Smed Jorgensen, which in the Czech Republic mainly represents foreign clients, is set to follow suit and is joining forces with high-profile arbitrator Ondřej Sekanina.

According to Czech Position’s information, a group of clients of Smed Jorgensen and Ondřej Sekanina manage solar power stations with a total output of 50–80 MW; these dozen or so investors hail from the Netherlands, Cyprus, Switzerland and Belgium, and perhaps will expand to include some from Germany, the US and the UK.

Unlike clients of FBD, however, Smed Jorgensen and Ondřej Sekanina plan to send word to the Czech state of their plans to launch collective arbitration. This means that the notification will relate to all clients and no one will have “ownership.” In the Czech Republic, it concerns an atypical procedural step, and for this reason the lawyers are painstakingly preparing the decision, so as not to impugn themselves. Once it is sent off to the Czech state, it won’t be possible to alter the composition of the investors within the group.

Furthermore, once it is sent off to the Czech state, it won’t be possible to alter the composition of the investors within the group. In other words, additional concerned parties can no longer be added. The arbitration announcement will be based on an international treaty, the Agreement to the Energy Charter, to which the Czech Republic is a signatory along with dozens of other states, which aims to protect investors who put money into energy sector projects in the member states.

Within the “network” of investors, according to Michaela Jorgensen, founding partner of Smed Jorgensen, it is also possible to act on the grounds of bilateral investment treaties. Collective arbitration is beneficial for investors in terms of keeping costs down. The question, however, is how to resolve possible disagreements among the “team” — for example, regarding the choice of arbitrators, tactics in litigation or willingness to negotiate a settlement with the Czech state.

These things may be resolved by a vote in which the economic, or strictly speaking “megawatt” power of the investors, may be weighted, according to Czech Position’s information.“Our steps aren’t aimed at the Czech state but against its behavior,” said Michaela Jorgensen, who knows Ondřej Sekanina from their joint activities in the Czech branch of US law firm Squire, Sanders & Dempsey.

The government and Parliament originally sought to attract investors into the solar energy sector with generous grants in line with European legislation. Later, when the policy attracted too many investors, both big and small, politicians move to stop the solar boom and succeeded through the changes to the tax laws and the imposition of a 26 percent “solar tax” (in fact a levy) and via amendments to the law on the promotion of renewable energy.

All previous articles on the solar arbitration issue are archived here  

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