Tlusty - dispute with Nomura over IPB settled

The highly-publicised dispute between the Czech Repubic and the Japanese investment group Nomura appears close to resolution. The Czech Finance Minister Vlastimil Tlusty told reporters on Thursday the matter was now settled. However a key role will be played by the president, who has been asked to pardon two Nomura employees as part of the deal.

Vlastimil Tlusty et Mirek Topolanek (right) with the representatives of Nomura investment group, photo: CTK

Nomura and the Czech state have been suing and counter-suing each other since 2000, when the Czech bank IPB - part owned by Nomura - was placed under forced administration and later sold off. Mr Tlusty said that under a deal signed on Thursday, all disputes and arbitration cases will be shelved. The two sides also agreed that neither would seek any further legal action or any financial compensation.

The fall of IPB and the dispute with Nomura is an extremely complex story. Stripped to its bare details, it goes as follows: IPB or Investicni a Postovni Banka, was the first Czech bank to be privatised after the fall of communism in 1989. In 2000, it was still the country's third largest bank, but also one of the country's sickest.

In June of that year, the Social Democrat government placed IPB under forced administration, amid rumours of pending collapse over what it said was mismanagement and suspicious loans. The forced administration was nothing short of spectacular: images of policemen storming the bank with full body armour and sub-machine guns were flashed around the world.

But what happened next proved to be even more controversial still. The Czech authorities sold IPB to another Czech bank, Ceskoslovenska obchodni banka or CSOB, for the symbolic price of one crown. The state then gave CSOB money to cover the bad loans inherited from IPB.

Nomura, which held a 46.15 percent stake in IPB, accused the Czech Republic of failing to protect its investment and giving CSOB what it claimed was "discriminatory state aid" which it hadn't given to IPB. Nomura demanded up to 70 billion crowns, or 3.3 billion dollars, in compensation. There followed years of arbitration. The settlement - under which the Czechs will now pay Nomura a maximum of seven billion crowns - is being seen as a major breakthrough.

President Vaclav Klaus, photo: CTK

But one aspect of this settlement is highly controversial. As part of the deal, the Finance Ministry has asked the Czech president to pardon two senior Nomura managers accused of breaking business confidentiality laws over the sale of IPB's shares in the brewery Plzensky prazdroje.

President Vaclav Klaus must now decide whether to pardon the two men. There is no legal impediment to him doing so - the Czech president can essentially pardon anyone he likes - but the leader writers in Friday's newspapers are already decrying what they see as presidential pardons being put up for sale. Mr Klaus is usually highly sensitive to public opinion. He must now decide how ordinary Czechs will react to such a controversial amnesty.