Eureko Starts Arbitration with Polish Gov’t. Over PZU

October 24, 2002

The ongoing dispute between Eureko, the Pan-European insurance consortium, and Poland’s Treasury Minister Wieslaw Kaczmarek over the control of Powszechny Zaklad Ubezpieczen (PZU) has been submitted to formal arbitration proceedings before an international tribunal in Stockholm.

The conflict, which has been going on for over a year, involves Eureko’s original agreement with Poland’s former center-right government that it would purchase an additional 21 percent of PZU’s shares, giving it majority control of Poland’s largest insurer.

The left of center government, installed last year, has repeatedly delayed the implementation of the agreement, and has also refused to allow a public offering of PZU shares, 55 percent of which are still owned by the state.

Kaczmarek is on record as opposing privatizations in general and this one in particular. Last February he fired Zygmunt Kostkiewicz as head of PZU, and replaced him with Zdzislaw Montkiewicz, a political ally. In April Kaczmarek announced that he was scrapping the agreement reached in October, but would still allow Eureko to buy the 21 percent it wants at a public offering. However, he gave no indication as to when that might take place.

Eureko took the position that it had a valid agreement, and said at the time that, if no compromise could be worked out within six months, it would bring the matter before the arbitration panel under the terms of a bilateral agreement between Poland and the Netherlands to settle commercial disputes. This is what it did yesterday.

The dispute has larger repercussions, as Poland nears entry into the European Union. It has raised the question of the role of private enterprise versus the continued state control of large sectors of the Polish economy. One of the EU’s fundamental principals is the primacy of private capital as opposed to state run enterprises, which are seen as anti-competitive and inefficient.

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