Latvia’s double standards

RIGA - Given the significant uncertainties currently related to being a minority shareholder in Latvia - as illustrated in the Parex case - foreign equity investors will be more inclined to direct their funds to the other Baltic States, Estonia and Lithuania, currently perceived to be more investor-friendly, or expand investment focus beyond the Baltics, Antti Partanen, representative of Parex Bank minority shareholder Amber Trust, said in a statement, reports Nozare.lv.
If Latvia wishes to prove its commitment to building a competitive economic structure, as well as a better environment for attracting foreign equity capital, it should take serious action to make amends for its past conduct, by first resolving the dispute with the minority shareholders of Parex, believes Partanen.

The publicly available information released by President Andris Berzins’ office regarding the creation of a high level group aimed at attracting foreign investments into Latvia is welcome and interesting news, Partanen says in the statement. At the same time, it is contrasted by the hostile way the government has chosen to treat minority shareholders in Parex Bank up until now. “Large institutional investors have been ‘legally’ prevented from participating in capital increases in the bank in 2009-2010, and have also been excluded from Citadele Bank, which was split off from Parex in the summer of 2010. Furthermore, the improving operating results from Citadele Bank and the indications of its potential value range, made by both the head of the bank itself, as well as the central bank, further underline that minority investors have been mistreated,” says the statement.

Amber Trust warns that the absence of a mutual resolution for the aforementioned is a potential detractor for future buyers of Citadele Bank. Any uncertainties about the outcome of unresolved legal proceedings will naturally be reflected in the final price that the present shareholders - the Latvian tax payers via the Latvian State, as well as the EBRD - can expect to receive.
Partanen goes on to say that, at the moment, the investors who are involved in the Parex case are far from being interested in investing any more capital into Latvia. These institutions have combined assets under management in the Baltic region of well over 500 million euros and plan to raise more capital in the near future and form the largest group of equity investors dedicated to the area.

This consortium formed the largest part of the original 15.2 percent minority shareholding in Parex Bank (including Amber Trust, Firebird, KJK Capital and East Capital) and are today engaged in several litigations related to the bank.
They filed an application with the Constitutional Court last year alleging constitutional violations in the dilutive capital injections to the bank carried out between 2009 and 2010. The Constitutional Court was expected to issue its ruling on Oct. 19.
These investors are currently also preparing for international arbitration to challenge the wrongful treatment in the split of the bank in the summer of 2010. The investors will emphasize that these actions disregarded the most basic principle of a developed nation: the right to private property.