The Czech Republic and Poland are among the worst offenders of investor-state disputes worldwide
used to gush about the economic potential of the Czech Republic and the wealth of Czech culture. The Swiss investor with Polish roots arrived in Prague in the early 1990s and became one of the top property developers in the Czech capital, then full of promise and excitement. He founded a popular private museum dedicated to Alphonse Mucha, a local art-nouveau master, and one to Franz Kafka, a Prague-born writer.
These days Mr Pawlowski is still a supporter of Czech arts, but would not invest another koruna in the country. He blames a kerfuffle over an investment in Benice, a Prague district where he bought land for residential development in 2007. This, Mr Pawlowski claims, was scuppered by local authorities, which in 2012 reversed zoning rules by court order.Even now Mr Pawlowski still lacks permission to build the planned 800 flats.
Mr Pawlowski is not the only investor who says he was stiffed by local or national governments in central and eastern Europe. Some of these legal tussles are part of the transition to a modern market economy. A lack of co-ordination between local and national authorities that make different promises is partly to blame. Increasingly, however, the region’s governments seem wilfully to ignore international rules.
Investors’ biggest concern is the subjugation of local courts by populist rulers. Andrej Babis, the Czech prime minister who is facing criminal charges over the misuse offunds, recently replaced his justice minister with a loyalist. Last week his Hungarian counterpart, Victor Orban, shelved a plan to create a parallel court system that would handle cases involving the state. But his earlier overhaul of the justice system has fuelled concerns about judicial independence.
Tales similar to Mr Pawlowski’s abound in the region. Invenergy, an American firm which invested 2.2bn zloty in 11 wind farms in Poland in 2005, last year sued the Polish government for $700m in acourt over cancelled power-purchase agreements. Poland’s courts sided with Invenergy but were ignored by state-controlled bodies.
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