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Investors prepare to take Hungary to international court

The owners of Danubius and Sláger are in the last stages of preparing to file their case against the Republic of Hungary at the World Bank’s International Center for Settlement of Investment Disputes (ICSID) in March, an advisor to owners Mezzanine and Emmis told the Budapest Business Journal.

The media companies are turning to ICSID to get legal remedy because the licenses of their commercial radios in Hungary were not renewed in a tender that was declared unlawful at the second instance court. The Supreme Court upheld this previous ruling in the case of Danubius versus Class FM, but rejected it in the case of Sláger Rádió's lawsuits against FM1 Konzorcium, which owns Neo FM, and the media authority. In its ruling a week ago, the Supreme Court made it clear that under effective laws, primarily the media law, the watchdog should make this step, and repeat the bid procedure as if the two winners had been disqualified, MTI reported.

However, it seems that the two firms are not expecting this to happen. “Even with all these rulings, and most importantly, the final and binding decision by the second instance court there is still no legal remedy – no license, no financial award,” a source at one of the companies told the BBJ. In a previous interview, the two firms said that if they got no legal remedy in Hungary, they would be filing at ICSID for damages of $50 million each or a rerun of the tender based on the already submitted bids.

In 2009, Sláger Rádió Műsorszolgáltató Zrt had revenues of HUF 2.6 billion with a profit of HUF 167 million, a sharp fall from its 2008 profit of HUF 1.2 billion after revenues of HUF 4.2 billion. Danubius Rádió Műsorszolgáltató Zrt had revenues of HUF 1.9 billion with a HUF 293 million profit.

If filed, the radios’ case will be Hungary’s sixth at ICSID. AES Summit Generation Limited has taken the Republic of Hungary to the court twice, and ADC Affiliate Limited and ADC & ADMC Management Limited, Telenor Mobile Communications AS and Electrabel S.A. have also done so.



What happened at the radio tender?

The then incumbent radio networks, Danubius and Sláger, lost their bid to renew frequencies for a further seven-year period in late 2009, triggering sharp criticism of the media authority ORTT -- the predecessor to the current media authority (NMHH) - both in Hungary and abroad. Danubius's frequency was awarded to Class FM, controlled by Advenio, while the Sláger band went to Neo FM, owned by FM1 Konzorcium.

The radios’ owners argued that the competition issued by ORTT had been unlawful and therefore the contract with the new broadcasters should be annulled and the original state of affairs restored. At the heart of the matter was a conflict of interest issue.

According to the media law, only players without a conflict of interest were allowed to bid for the tenders. However, ORTT allowed bids by media companies with conflicts of interest if they declared their intention to resolve these conflicts if they won.



Previous articles on the topic

Erase and rewind: Q&A with the CEOs of Danubius and Sláger