RIGA - A court of appeals in Sweden has upheld an arbitration court decision of two years ago requiring that the Latvian government compensate Latvijas Gaze, a gas company, to the tune of 8.3 million lats (11.8 million euros).
The decision irked Prime Minister Aigars Kalvitis, who said he would demand an explanation from his predecessors as to why the government bothered pursuing the case two years after an arbitration court ruled in favor of Latvijas Gaze.
Vinsents Makaris, a spokesman for Latvijas Gaze, said the government would have to pay some 8.3 million lats to the company, including 6.9 million lats as established by arbitration plus fines and litigation expenses. He said the court of appeal judgment is final and cannot be appealed.
Latvijas Gaze brought the matter to court in September 2001, claiming that the contract for the purchase of company shares provided that the state undertook to regulate only tariffs for households. At the time Latvijas Gaze shareholders had proposed amendments to the energy law that would have cancelled tariff regulation for industrial consumers. The government, however, refused to pass them.
In May 2003 the Stockholm International Court of Arbitration ruled in favor of Latvijas Gaze shareholders, saying that the state did have the right to regulate tariffs for industrial consumers but by doing so had caused losses to Latvijas Gaze and that those should be compensated.
However, in the second half of 2004 the government filed an appeal on the basis that the case did not fall under the jurisdiction of the arbitration court, but this was thrown out by the Swedish Court of Appeals last week.
Latvijas Gaze, whose largest shareholders are Russia's Gazprom, Germany's Ruhrgas and E.ON Energie as well as Itera Latvija, originally demanded over 10 million lats in damages from the state.
The government is bristling at the development, and Kalvitis' spokesman has said that the prime minister intends to ask previous ministers for explanations as to why they continued litigating when it was clear the state had little chance of winning. Arno Pjatkins, the spokesman, said the decision to continue the legal dispute with Latvijas Gaze was made in haste and that the state has suffered 1.4 million lats of additional losses.
Kalvitis, he added, believes someone should bear responsibility for the fiasco. He said he wants to find out what kind of information was available to those ministers who decided to continue the litigation.
The prime minister added that the Swedish ruling was no big surprise since, according to information at his disposal, government ministers in Einars Repse's Cabinet who had decided to appeal were not informed about the possible outcome of the litigation.
Repse, a member of the New Era party who is presently defense minister, hotly denied any culpability.
"The decision to file the appeal was necessary and founded. We even had a strategy how to implement the appeal." In his opinion, the subsequent Cabinet led by Indulis Emsis of the Greens and Farmers party was too inefficient to carry the matter through.
"If Kalvitis wants to find the guilty party, then the justice minister will have to provide many explanations," said Repse.
The government intends to declassify documents surrounding the case this week, and Repse said that as soon as they are both present and past justice ministers would be able to provide more detailed explanations.