Gov't to appeal arbitration court's decision on Liburnia Riviera Hotels

ZAGREB, 11.4.2007.

The Croatian Privatisation Fund (HFP) is going to lodge an appeal with the High Commercial Court insisting that the verdict made by the arbitration court of the Croatian Chamber of the Economy (HGK) in the case of the Dom and SN holding funds and the Liburnia Riviera Hotels (LRH) be quashed.

Deputy Prime Minister Damir Polancec said on Wednesday that the Office of the Chief State Prosecutor would appeal on behalf of the privatisation fund against the verdict of the HGK court of arbitration that the agreement between the two holding funds and the Croatian Privatisation Fund regarding the Liburnia Riviera Hotels was valid.

Under the 23 March verdict, shares of the Liburnia Riviera Hotels can be used to cover the claims of the holding funds towards the government, incurred during the voucher privatisation. This means that the majority package of shares in the Opatija-based hotel chain belongs to the two holding funds.

Polancec insisted today that the agreement was not valid. The Dom and SN holding funds are not holders of LRH shares, the real owner is the Croatian Privatisation Fund, that is, the government, Polancec told a news conference.

He added that the government would see that the conclusion on transferring the controlling block of shares, namely 25 percent of shares plus one share, to the city of Opatija, was carried out.

Under the arbitration court's decision, the HFP is ordered to transfer 1,570 shares of the hotel company to the SN holding fund, as a difference between 255,980 shares determined by the agreement on the transfer of shares and 254,410 shares that have been already transferred.

Polancec said the government would use all legal means to prove that the 2005 agreement between the HFP and the two holding funds was invalid.

In the summer of 2005, the HFP concluded an agreement with the two holding funds on the transfer of 255,980 shares from the LRH hotel company (which was then over 80 percent of the company's stock). In return, the two holding funds undertook to pay back 162 million kuna that had previously been taken in accordance with a court order from the HFP account. The purpose of the deal was to settle the state's debts towards the two holding funds incurred during the voucher privatisation.

However, the government then withdrew its consent in principle regarding the agreement, namely it did not officially approve the deal within a 20 day term envisaged for such a procedure.

As a result, the Securities Commission decided that the agreement was invalid and that the Central Depository Agency had to transfer the shares back to the ownership of the Croatian Privatisation Fund.

After that, the two holding funds initiated procedures before the HGK arbitration court and the Administrative Court. The latter has not yet made a decision on the matter. (Hina)