Croatia says it won in property dispute

Croatia says it has rejected a €230m claim by a Canadian property investor who sought to invoke a treaty over state succession issues – as the state prepares for further arbitration with the oil and gas group Hungarian gas company MOL.

An UNCITRAL tribunal dismissed Haakon Korsgaard’s claim in a November 7 award and ordered him to pay €126,000 for state costs, according at the Croatian State Prosecutor’s Office.

The case was heard by the Permanent Court of Arbitration in The Hague. The referees have not yet been identified.

GAR understands that Korsgaard was represented by Wolf Theiss in Zagreb and Dan Sarooshi K.C. of Essex Court Chambers, while Croatia relied on the public international law boutique Fietta in London.

A Norwegian-born Canadian, Korsgaard filed his application in 2018 under the bilateral investment treaty between Canada and Croatia. He accused the State of having prevented him from acquiring ownership rights to several properties in Croatian territory, mainly on the Adriatic coast.

According to media reports, Korsgaard companies purchased the real estate around 2007 from Serbian companies who considered themselves its owners.

According to Croatia, however, the land was social property and became the property of the Croatian state or Croatian business entities under laws passed following the country’s independence from Yugoslavia. in 1991.

Korsgaard was thus prevented from being entered in the land register as the owner of the properties, which he claimed amounted to an expropriation under the BIT.

It appears that Korsgaard sought to rely on the 2001 agreement on succession issues concluded by the former Yugoslav states, and in particular its annex G relating to “private property and acquired rights”.

Croatia says the court accepted its argument that Annex G could not be directly applied to establish Korsgaard’s property rights and that the state should enter into a bilateral agreement with Serbia to resolve property relations.

According to a 2020 disclosure by the Attorney General’s Office, Croatia also argued that the BIT’s arbitration clause does not cover succession issues.

Croatia seeks counsel to defend new MOL claim

The Attorney General’s Office also announcement last week that he was seeking counsel to defend Croatia in a new contractual arbitration initiated by the Hungarian group MOL.

He says he received a notice of arbitration under the UNCITRAL rules regarding a dispute over compensation for the exploitation of hydrocarbons.

MOL and Croatia have already conducted two arbitrations concerning the country’s largest oil company, INA Industrija Nafte, in which they both hold shares. Croatia has accused MOL of acquiring management rights over INA through a bribe paid to a former prime minister.

Last month, the Swiss Federal Court rejected Croatia’s attempt to reopen an UNCITRAL award in favor of MOL, which had dismissed corruption allegations.

In July, an ICSID tribunal ordered Croatia to pay US$184 million to the MOL after dismissing corruption allegations, although the bulk of the MOL’s billion-dollar claim was denied.

Croatia was represented in previous ICSID and UNCITRAL arbitrations by Squire Patton Boggs. MOL used Dechert in both cases, with Queritius and Wolf Theiss also joining the team for the ICSID case.

Deadlines for lawyers and law firms to submit expressions of interest to represent the state in the new case expired yesterday.

Haakon Korsgaard v. Croatia (CPA case no. 2019-02)

UNCITRAL Tribunal

Not identified

Council of Haakon Korsgaard

Partner Dalibor Valincic in Zagreb

  • Dan Sarooshi K.C. of Essex Court Chambers in London

Council for Croatia

The partners Stephen Fietta KC and Jiries Saade in London

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