By Margit Feher
BUDAPEST--Hungarian oil and gas company MOL Nyrt. (MOL.BU) said
Tuesday that it has filed a request for arbitration with an
international arbitration institution to settle a dispute over its
Croatian unit and peer INA d.d. (INA.ZG) with the Croatian firm's
fellow owner, the Croatian government.
MOL filed the request with the International Center for
Settlement of Investment Disputes to commence arbitration
proceedings under the Energy Charter Treaty against Croatia for
"breaching certain of its obligations and undertakings in relation
to MOL's investments in Croatia," MOL said in a filing with the
Budapest Stock Exchange without providing details.
The Energy Charter Treaty aims to promote and protect foreign
investment in member countries. It grants foreign investors in the
energy sector the right to sue the host country in the case of an
alleged breach of an obligation of the host state relating to
investment promotion and protection.
MOL is one of the largest foreign investors in the Croatian
economy.
"MOL has certain legal obligations vis-à-vis its shareholders
and stakeholders to pursue good-faith negotiations. However, it is
also under legal obligations to commence legal action to enforce
its rights," MOL said. The company wasn't immediately available for
further comment.
Under a privatization agreement, Croatia should have taken over
INA's loss-making natural-gas business in 2009, but the government
in power then asked for a two-year delay. To date, the takeover
hasn't happened.
The Hungarian energy utility, in the meantime, has fulfilled its
obligations toward INA under its management agreement and invested
nearly 3 billion euros ($4.06 billion) in INA over the past few
years, MOL claimed.
Tuesday's arbitration request is the latest development in the
Hungarian firm's several-month-long legal and diplomatic dispute
with Croatia over the management rights of INA, which currently
belong to MOL.
The Croatian government wants to regain control over INA, in
which it holds a 44.8% stake following its privatization in 2003.
MOL owns a controlling 49.1% and the firm's management rights.
Talks earlier this month between INA and representatives of the
Croatian government over the management rights ended without
agreement. MOL, in which the Hungarian government is the single
largest shareholder with a 24.6% stake, said at the time that it is
convinced INA's management model is in line with international
practice as well as with Croatian and European regulations.
MOL also said earlier this month that its board had given the
green light for preparations to sell its INA holding. The Croatian
government, which is under pressure from the European Union to keep
its bulging budget deficit in check, likely couldn't afford the
deal.
MOL said Tuesday that it remains open to further explore a
negotiated resolution to the dispute.
The spat comes amid an ensuing legal battle between the two
parties. Croatia issued an Interpol and an European arrest warrant
for MOL Chairman and Chief Executive Zsolt Hernadi in October,
related to a bribery case in which former Croatian Prime Minister
Ivo Sanader was convicted in 2012.
MOL has denied all the Croatian allegations. A Budapest court
has declined the extradition of Mr. Hernadi on the grounds that a
Hungarian criminal investigation has found Mr. Hernadi
innocent.
Write to Margit Feher at margit.feher@wsj.com