CME Czech Republic B.V. (The Netherlands) v The Czech Republic

Year of the award: 2001 - 2003
Forum/Rules: Ad Hoc Tribunal (UNCITRAL arbitration rules)
Applicable investment treaty: Netherlands - Czech Republic BIT (1991)

Arbitrators:
Dr Wolfgang Kühn - Chairman
Mr Steven M. Schwebel
Mr Jaroslav Hándl (in the damages phase substituted by Mr Ian Brownlie)

Executive summary

CME, a Dutch corporation with a Czech subsidiary CNTS (investment) engaged in media business, brought a dispute against the Czech Republic under the Netherlands-Czech BIT, alleging several violations of the BIT by the Media Council (Czech media regulatory body) and claiming damages of over US$ 500 million.

In accordance with the license granted to a Czech company CET 21 in 1993, CNTS had become an exclusive provider of broadcasting services for the first private Czech TV channel TV Nova, which turned out to be extremely popular and profitable. Following the Media Council's actions and omissions and the conflict with the head of CET 21 Dr. Zelezny, the exclusive position of the CNTS as a services provider for TV Nova was first undermined in 1996 and then fully destroyed in 1999. As a result, CNTS effectively went out of business, with its place being taken by other service providers.

The Tribunal found that Media Council's actions and omissions constituted expropriation of CME's investment and violated other four provisions of the BIT. The Tribunal held that the fair market value of CME's investment should be compensated. In its very detailed award on damages, the Tribunal reviewed several valuation methods suggested by the Claimant. As a primary method to determine the value of CNTS as a going concern, the Tribunal used valuation done by a Swedish media company that had intended to buy CNTS from CME not long before the 1999 events. On this basis, with some adjustments, the Tribunal determined the market price a willing buyer wished to pay for the investment. The Tribunal also accepted the parties' DCF analyses as proper method for CNTS valuation. The Tribunal made its own assessment of the parties' DCF estimates and used the resultant figure to support its findings under the primary valuation method. Remaining valuation methods were declined as unnecessary or otherwise unhelpful.

After making all the adjustments, the Tribunal awarded CME the damages of US$ 270 million plus simple interest of 10% per annum from the date of the arbitration request and up to the date of payment.

The Czech Republic applied to a Swedish domestic court for the judicial review of the arbitral award. The Swedish court upheld the award.