PRAGUE — U.S. cosmetics heir Ronald Lauder’s Central European Media Enterprises has won its $355 million compensation claim against the Czech Republic for failing to protect its investment in commercial station Nova TV.
The country lost its final appeal in a Swedish court Thursday in a wrangle that has been going on four years.
“This is a ground breaking event,” said Fred Klinkhammer, CME vice-chairman and CEO. “It is the largest award against a sovereign state and will form an important body of common law. It is a huge precedent from a legal point of view.”
CME lost its exclusive service agreement with Nova in 1999 when its controversial director Vladimir Zelezny relaunched the station with Czech backers and with the help of the Czech Broadcasting Council.
The fallout within the Czech Republic has been extensive. Parliament is due to vote on a budget amendment to cover the loss, which amounts to $250 for each Czech citizen.
The country has seen foreign investor confidence and ratings fall as a direct result of the Nova situation.
CME still has a major case pending in the Czech Republic to restore its exclusive service agreement with Nova.
The result, which was expected, has strengthened CME’s position internally and externally. Its stock, which was selling at $4 a year ago, has since split twice and closed at $16 on Wednesday.
The court win is equivalent to $26 per share according to CME, which also runs the leading commercial broadcasters in Romania, Slovakia, Slovenia and the Ukraine.
The sum is being held in an escrow account and will be transferred to CME by Monday.
It is still uncertain whether CME must pay taxes on the award so it is holding $77 million as restricted cash. The balance will be used first to retire its debt.
“That still leaves us with around $200 million, which is a substantial amount,” Klinkhammer said.
CME will pursue new media opportunities in Central Europe, is filing an application for a license in Croatia and is interested in re-entering Poland and Hungary. But Klinkhammer said the company would take its time before making decisions. “We will wait to deliver the next quarter results,” he said.