Business dispute could affect direct foreign investment

A dispute between a Czech company and its British partner looks set to go to a court of arbitration in the next few weeks. At the base of the dispute is a contract signed between the two companies, which the Czech partner wants annulled. The British partner has cried foul, and has publicly voiced concerns over investing in the Czech Republic. Nick Carey has this report.

Ramco, a British oil and gas company with operations throughout Asia and Central Eastern Europe, founded a joint venture in 1996 with a Czech oil mining company, Moravske Naftove Doly, or MND. The partnership ran smoothly until last summer, until a dispute over the contract for the joint venture strained relations between the two companies. The Czech partner, MND, has filed a request with the Czech Chamber of Commerce to annul the contract, citing legal problems. According to MND's strategic director, Miroslav Jestrabik, the contract is in direct breach of Czech law.

The shared ownership of a license for mining activities, says Mr Jestrabik, is invalid, because according to Czech law, only one party can hold a license. This is MND's reason for breaking off the contract and the partnership.

Ramco has responded to MND's move by declaring that there are no legal problems with the contract, that MND has acted unethically, and that it intends to resolve the issue in a court of arbitration. With the two sides claiming the other is in the wrong, Jan Sykora, an economic analyst from Wood & Company, says the truth is probably somewhere in the middle: Ramco has also publicly expressed concerns over investing in the Czech Republic, saying that Western companies should think carefully before doing business with a Czech company. But according to Jan Sykora, until the matter is decided in court, foreign investment will probably not be affected: