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Supreme Court orders new arbitration court proceedings on termination of Suez water contract

Citing procedural mistakes, Hungary's Supreme Court on Monday ordered new arbitration court proceedings regarding the Pécs (S Hungary) city council's termination in late 2009 of its contract with waterworks company Pécsi Vízmű (PV), 48.05% owned by the French company Suez Environment.

The Supreme Court thereby upheld a February lower-court ruling, which said new proceedings are necessary due to procedural mistakes made by the arbitration court of the Hungarian Chamber of Commerce and Industry.

In February 2010, the arbitration court ruled that the decision of the Pécs (S Hungary) city council to terminate the contract was legal, a decision that Suez, that initiated the process, appealed.

The local council of Pécs, controlled by the then-opposition party Fidesz, annulled Suez's contract to operate its waterworks in September 2009 after it failed to reach an agreement with the company regarding repurchase of its stake in the utility. In early October of the same year, the local council set up a company to take over operation of the waterworks.

Suez disputed the legality of the city council's steps and turned to the courts.

On Monday, the Pécs city council welcomed the Supreme Court ruling, stressing that it did not question the legality of the council's decision to terminate the contract.