Who cares that Agrofert has just lost its ten year legal battle against the state-owned Polish petrochemicals giant? Not the Czech media, which ignored the news.



Polish Hen: not all poultry from Poland is inferior.

On 29 January 2014, Andrej Babis was sworn in as the new Czech finance minister. Five days earlier, the state-owned Polish petrochemicals company PKN Orlen, which acquired Unipetrol in 2004, issued the following press release:

“A court in Prague has dismissed a petition by Agrofert Holding for the reversal of the Arbitration Court's decision of October 21st 2010 on the payment of CZK 19,464,473,000 in damages for losses incurred as a result of unfair competition, unlawful injury of the Czech company's reputation, and default on the contracts executed by the companies in 2003–2004.

In 2010, the Arbitration Court dismissed Agrofert's claim in full and ruled that the company pay the court fees incurred by PKN Orlen. Agrofert then lodged a petition with a court of general jurisdiction in Prague, moving for the reversal of this decision. In today's ruling, the court in Prague concurred with PKN Orlen's position, upholding the judgement issued by the Arbitration Court on October 21st 2010 and dismissing the petition as groundless.”

The ruling, ignored by the Czech media (not just the Babis media, but all the local media), brings to an end a legal action that began almost ten years ago after PKN Orlen failed to honour its agreement to sell on to Agrofert the chemical assets of Unipetrol in the event that PKN Orlen were to acquire a majority stake in the Czech petrochemicals giant. In 2009, the Czech courts imposed a penalty of some Kc 2 billion on the Poles for breach of contract. But Babis had been pursuing the Poles for ten times that amount.

The court decision six weeks ago is newsworthy for at least four reasons.

Firstly, it is worth noting that no Czech media thought the decision worth noting. Kc 20 billion is not a small sum of money, even for Agrofert. Nor are the legal expenses incurred by both sides over many years, which Agrofert alone must now meet, insignificant. What does this silence tell us about the condition of Czech media?

Secondly, it is worth noting that Agrofert’s lawyer in this long-running and ultimately unsuccessful case has been the politically well-connected competition lawyer, Radek Pokorny. What are the implications of this decision for the relationship between the finance minister and Pokorny? And what does it tell us about Babis that his potentially most profitable legal action ever was entrusted to a lawyer who maintains close relations with the Czech prime minister and Martin Roman?

Thirdly, it is newsworthy because the decision might help us to understand better the finance minister’s position on policy matters that relate to Poland, for example on the issue of Polish food imports and on the quality of Polish poultry in particular, a subject about which Andrej Babis has been known to express some trenchant views. Will the finance minister allow this decision to influence his position in other areas of policy related to Poland?

And fourthly, it might be relevant to your choice of candidates to the European parliament in elections this May. Do you want your MEP to be beholden to a political patron whose private commercial interests are threatened by your Polish neighbour? Do you want the Czech Republic’s possible next European Commissioner to be in the pocket of a billionaire with such an unhappy experience of cooperation with one of the more powerful members of the European Union?

According to the chairman of the Alliance of Liberals & Democrats for Europe, the parliamentary group that ANO 2011 will join if elected to the European Parliament this May, Andrej Babis is no oligarch: unlike oligarchs, who owe their economic empires to their political ties, Babis has built his position from the ground up.

Really? The Unipetrol saga suggests otherwise. Babis made two attempts to gain control of Unipetrol, first in 2001 under prime minister Milos Zeman, and then in 2004 under prime minister Stanislav Gross. Both failed but not because his ties to Czech politicians were not strong enough. In the first attempt, Agrofert was awarded Unipetrol in spite of the fact that it offered substantially less than the British-US bidder. The sale had to be aborted because Babis failed to persuade banks to lend him the money. And in the second attempt, as we have seen, Babis was thwarted by his Polish partner.

In both cases, local politicians did exactly what Andrej Babis asked: it was his bankers and his business partners that let him down.