The Budapest local council on Wednesday mandated mayor István Tarlós to cancel the city's waterworks' contract with foreign investors, signed in the spring of 1997.
One-fourth of the shares of the capital's waterworks is held by the Hungarian units of France's Suez and Germany's RWE.
Tarlós said in an interview on public television early Thursday that there had been a serious breach of contract by the foreign investors, and this established the possibility, in principle, of cancelling the contract.
He added that the talks with the investors were underway and that no decision would be taken without first consulting with the government. "We don't want to cause any foreign affairs complication," Tarlós said. He added that the most desirable solution would be to successfully reach an agreement on the matter.
Suez and RWE said in a joint statement sent to MTI on Thursday that they were prepared to reach an agreement with the local council but expected their legal rights and investments to be respected. The companies said they had delivered a high level of service while fulfilling the conditions of the contract "to the smallest detail".
Suez and RWE said they had proposed negotiations earlier on the amendment or the cancellation of the contract.