The case of ČEZ against Bulgaria is underway due to the deteriorating business environment in our country

The International Center for Settlement of Investment Disputes in Washington (ICSID) has launched the arbitration claim of the Czech company ČEZ against Bulgaria. This became clear from information published on the website of the Arbitration Court in Washington. Confirmation of the development of the arbitration case was given to the Czech media ČTK by the company's spokesman Roman Gazdik. The energy company is suing the Bulgarian state for non-compliance with the conditions under which it committed itself during the privatization of electricity distribution in Bulgaria and the obligations it set for the energy market upon its accession to the EU in 2007. ČEZ Group spokesman Ladislav Kriz however, he declined to comment on the issue to the Czech media.

The tribunal is composed of Pierre Tersier, who is president, along with Julian DM Liu and Donald McRae. The applicant, the Czech ČEZ, is represented by four law firms - two in Sofia and one each in Prague and London. Defenders of the Bulgarian side are the Ministry of Finance and two law firms from Sofia and London. 3eNews requested additional information from the Ministry of Finance on the subject of the arbitration case.

According to unofficial information, the Czech company has claims for 600 million euros to Bulgaria due to unreimbursed costs in the purchase of energy from renewable sources. According to other sources, the claim of the Czech company even exceeds 1 billion euros. The official motive for the lawsuit is non-compliance with the conditions under which our country committed itself during the privatization and the obligations that the state has set regarding the energy market upon its accession to the European Union in 2007.

Thus, an international dispute will continue in Washington, the admissibility of which was confirmed by the arbitration center in March this year.

According to the Czech energy company, Bulgaria has not fulfilled its commitments regarding the purchase prices of electricity, the export of electricity abroad and the overall liberalization of the market. This also prevented the company from making green investments in the thermal power plant near Varna, which was subsequently closed by ČEZ.

The tribunal of the International Arbitration Center ICSID confirmed that the claims of the Czech ČEZ are in accordance with the Energy Charter Agreement and stated that the conduct of arbitration proceedings and the exercise of the claims of ČEZ are not contrary to European Union law. Other European energy companies are also conducting arbitration proceedings with Bulgaria, the Czech media remind.

The Czech ČEZ entered the Bulgarian market in 2004, along with the Austrian EVN, the German E.ON and other European energy companies, which began investing in the country with the expectation that the energy market would be liberalized.

Although the Bulgarian legislation allows liberalization of the market, in fact the state determines the prices of electricity and the specific conditions of business. In this way, foreign energy companies are gradually reducing or terminating their activities in the country, the Czech media recall.

The problem came after the green energy boom and high purchase prices, which NEK refused to recognize as a cost for electricity distribution companies. That was one of the reasons for the arbitration in Washington.

The Czech ČEZ bought part of the Bulgarian distribution system - the subject of the deal were the electricity distribution companies in Sofia, Sofia region and Pleven. And in 2006 the company bought the power plant in Varna with the idea to turn it into gas power.

In 2013, however, after disputes with the Bulgarian authorities, the company still decided to leave our country. Thus, the plant in Varna was sold in 2017, and in April this year ČEZ received permission from the Bulgarian energy regulator to sell its distribution company to the financial group Eurohold and to leave our country forever.

ČEZ's expansion in the Balkans has been repeatedly described as unsuccessful by Prime Minister Andrej Babiš. The majority owner of ČEZ is the Czech state, which owns 70 percent of the company's shares through the Ministry of Finance. At the end of March this year, ČEZ also completed the sale of its assets in Romania. The company did not specify the price, and before that analysts estimated that ČEZ received 25 to 30 billion kroner for the sale.

The asset disposal is in line with ČEZ's new strategy, approved a year earlier. It provides for the gradual sale of assets in Bulgaria, Romania, Turkey and Poland. Exceptions are companies focused on modern energy services (ESCOs), which CEZ wants to develop.

Recall that a similar arbitration case in Washington was led against our country and the Austrian energy company EVN. However, it reached an agreement with NEK and the state.