The solar boom came to an abrupt halt following the withdrawal of subsidies and tax breaks
The Czech state should brace itself for a new form of arbitration. If foreign investors in the country’s photovoltaic sector stick to their threat, within two months Finance Ministry officials who represent the state in arbitration cases can expect unpleasant notification in the post. According to Czech Position’s sources, foreign “solar” investors are planning to file a joint legal complaint against the Czech Republic.
“I’m sorry for the country’s citizens, but the state can’t escape the arbitration,” Vít Horáček, a partner of the law firm Glatzová & Co. and a specialist in arbitration cases, says with confidence. His firm is representing “subjects from Western Europe,” meaning aChinese general and strategist Sun Tzu recommended tactics that apply to the solar investors’ planned legal battle today. number of leading players in the photovoltaic business. According to Czech Position’s information, at least one is already active on the Czech solar power market.
Mounting a joint legal challenge makes perfect sense. The cost of hiring a team of legal referees and experts is usually very high — enough so to dissuade a medium-sized investor from mounting a challenge independently. However, if a joint challenge is mounted, the main investors will cover the vast majority of costs (running into tens of millions of crowns) and the smaller investors can ride on their coat tails and — if successful — the smaller parties can take an advantageous share of damages awarded.
It appears the plaintiffs’ chances of success are high. The law firms working for the large solar firms sense big business, and have therefore assigned their best and brightest and a large share of capacity to the case. The state certainly won’t face an easy opponent.
Some 2,500 years ago the Chinese general and strategist Sun Tzu recommended tactics which apply to the solar investors’ planned legal battle today: The Art of War author warned warriors to only go into battles which they know can win.
“These steps can only be taken those who have enough financial power and have capital amounting to at least hundreds of millions of euros, but preferably billions,” an experienced judge who preferred to remain anonymous told Czech Position. “What’s more, there must be a really good strategist and lawyer. Even better is if he has signals from the state that the Czech Republic won’t win the arbitration, or will not want to win it.”
Attack on several fronts
Glatzová & Co. is not the only law firm now earning a handsome income from the solar business and has at least four serious competitors: NH Partners, which was founded by lawyers who until recently worked for Vladimíra Glatzová; the Czech branch of US firm White & Case; the firm of Ondřej Sekanina, who previously worked for Squire, Sanders & Dempsey; and Luďek Šikola’s firm in Brno.
The solar eruption will of course also benefit a series of other firms. However, there is now some confusion on the legal market because it’s practically impossible to predict how many legal challenges the Finance Ministry will receive and from whom. Nevertheless, sources in the legal profession say that Glatzová & Co., Ondřej Sekanina and Luděk Šikola look set to lead the legal siege on the Czech state. It’s almost certain that they will collaborate in launching the joint challenge. Šikola’s firm did not respond to Czech Position’s enquiries.
Now with the new tax they face large financial problems and want compensation from the Czech state. The first step, which will probably be taken within a month, is to formally notify the Finance Ministry about the complaint. This will open a six-month period during which the sides should attempt to reach a settlement. This will very probably not happen, and thus we can expect the first arbitration summons to be delivered at the beginning of the autumn.
Several lawyers claim that they’ve already attempted to negotiate with the Finance Ministry on behalf of their clients, despite official denials. “We have not registered any official attempt to negotiate,” Radek Ležatka from the ministry’s communications department told Czech Position.
The sloar investors intend to launch the arbitration case against the Czech state in response to measures introduced at the end of 2010 to slow the boom in the solar power sector, which hitherto had grown unabated. The biggest impact on the sector has been the tax of 26 percent on income received by operators of photovoltaic farms.
Prior to the changes, photovoltaic farms were subject to generous tax breaks and subsidies which attracted many players, large and small, to invest into the sector. Some investors borrowed large amounts to set up solar farms and now with the new tax they face large financial problems and want compensation from the Czech state.