WASHINGTON, Aug. 4, 2015 /PRNewswire/ -- The
Washington-based International Centre for Settlement of
Investment Disputes (ICSID), an arm of the World Bank, has
agreed to arbitrate a long-running dispute between the Austrian
government and a banking and investment advisory business run by
one of Austria's most prominent
families.
BakerHostetler international arbitration partners
Kenneth Reisenfeld and
Mark Bailen represent B.V.
Belegging-Maatschappij "Far East" in its claim against the
Republic of Austria. Far East, a
Malta-registered corporation, is
controlling shareholder and principal owner of Meinl Bank,
whose chairman of its Supervisory Board, Julius Meinl V, has
been the target over the past eight years of a series of public,
highly personal and increasingly feckless investigations by
Austrian authorities, including the Vienna State Prosecutor's
Office. The extended, overreaching nature of the probe is
especially painful given that the Meinl family had to flee
Austria in the 1930s under a
hostile Nazi regime purportedly operating under the "rule of
law."
Far East contends that the baseless targeting by Austrian
authorities has grievously harmed the value of its investment in
Meinl Bank. Its formal Request for Arbitration states,
"Austria's unrestrained campaign
against Meinl Bank … and its repeated failures to protect Far
East's interest in Meinl Bank have been unfair, inequitable and
arbitrary abuses of power. These actions and failures to act have
directly and indirectly effected an expropriation of Far East's
investment in Meinl Bank."
The only charges brought against the bank or its officials –
seven years into the investigation – were summarily rejected this
past April by the Austrian courts because they did not set forth a
criminal cause of action. But even this has not stopped the
government's harassment and unending pursuit of the bank. In
July, Austrian authorities sought to dismantle the bank's
leadership, another attempt at expropriating Far East's
investment.
Far East seeks redress through international arbitration under
the terms of Malta's Bilateral
Investment Treaty with Austria.
The case marks the first time the Austrian government has been
accused in an investment treaty dispute. Far East is asking a
three-arbitrator ICSID panel to order Austria immediately to cease its futile and
destructive investigations of Meinl Bank and its officials –
carried out in contravention of its own laws, customary
international law, and the bilateral investment treaty – and to
compensate Meinl Bank shareholders in the amount of at least €200
million.
"Meinl Bank and Mr. Meinl have been subject to massive
violations of due process and international law by the Austrian
government," said BakerHostetler's Mr. Reisenfeld. "They are
victims of a public smear campaign that has had the effect of
running a historically successful bank into the ground."
He continued: "Austrian courts repeatedly have condemned
prosecutors and regulators' relentless pursuit of Meinl Bank
officials, including characterizing the prosecutor's misconduct as
'grotesque' and 'massive violations.' Yet the government has
continued and even expanded its investigations despite numerous
court rulings supporting Meinl Bank's due process and fairness
objections.
"The only attempt by the prosecutor to issue indictments was
swiftly rejected as specious," Mr. Reisenfeld added. "For the
Meinl family this entire chapter is an uncomfortable reminder of
previous injustices they endured during Austria's darkest time nearly 70 years ago.
Quite simply, the Austrian government's arbitrary targeting of
Meinl Bank officials should cease. We are confident that an
ICSID panel of independent arbitrators will render a just decision
enjoining the government from further harassment of Meinl Bank
officials and compensating in full Far East's investors."
Background
Julius Meinl V is the fifth generation of the family to run the
Meinl business, originally established in 1862 as a coffee and
grocery emporium, kicking off what grew into the global taste for
"Viennese coffee." The company expanded to become the largest
coffee supplier in the Austro-Hungarian Empire—it was the main
provider to the Austro-Hungarian army during the First World
War.
The Meinl business diversified into banking in the 1920s. By the
eve of the Second World War, the company was the largest grocery
concern in Central and Eastern
Europe. But Mr. Meinl's paternal grandparents were forced to
flee the persecution of Jews in Austria after the Anschluss, settling in
Britain; the family was stripped
of its Austrian citizenship and remain British citizens today. Mr.
Meinl's maternal grandparents also fled Austria after a forced sale of their
department store business in Vienna.
Taking the reins of Meinl Bank in the 1980s, Mr. Meinl turned it
into a leading regional investment bank, capitalizing on the Meinl
Group of companies' long experience in Central and Eastern Europe. The bank expanded into
institutional asset management, M&A, advisory services, and
financing and managing commercial real estate.
In 1997 the bank helped found Meinl European Land Ltd. (MEL), a
real estate company registered in the Isle of Jersey. Within a
decade MEL operated more than 160 properties in the CEE with a
market value of €1.9 billion, and owned an additional portfolio of
development projects worth €3.3 billion. MEL went public in 2002
and although Meinl Bank no longer owned MEL, it contracted with MEL
to provide financial advisory services, including the issuance of
securities.
In 2007 MEL initiated a stock buy-back program as part of a
corporate strategy to sell a stake in the company to a larger
international real estate concern. But the global recession
intervened and in 2007 greatly reduced the share prices of European
real estate investment companies, leading some investors to
question the stock repurchase program and to file shareholder
lawsuits against Meinl Bank—although neither the bank nor Mr. Meinl
were responsible for the buy-back decision.
Investigations Began in 2007
Austrian government investigations of the bank launched in 2007
focused on MEL's securities offerings and stock repurchase
program. Despite a constant stream of public
accusations by Austrian prosecutors, these investigations have not
born fruit after eight years. None have pursued lawful
grounds for civil or criminal liability and there have been no
findings of criminal wrongdoing against Meinl Bank or Julius Meinl. But they have been grist for
a steady drumbeat of official grandstanding and leaks casting
aspersions on the bank and Mr. Meinl.
According to Far East's filing with ICSID, Austrian officials
repeatedly have breached Meinl Bank's rights to due process of law,
through violations including (a) appointment of biased experts; (b)
attempts to manipulate experts' findings; (c) repeated, illegal
house searches, even of Meinl Bank outside counsel; (d) improper
surveillance of Meinl Bank officers; (e) repeated refusal to share
critical investigation files; (f) denial of the right to a fair and
speedy trial; (g) denial of the right to be informed of the
government's charges and to confront its accusers; and (h) massive
and unreasonable delays in concluding their
investigation.
The investigations included Mr. Meinl's humiliating public
handcuffing and arrest in 2009. After serving two days in jail, he
was released after posting bail in an amount 100 times higher than
any ever before levied in Austria.
Austrian courts have condemned prosecutors and market
authorities more than three dozen times for infringing Meinl Bank's
basic legal rights. But that has not stopped prosecutors and
other officials from commencing new, unjustified investigations or
Austria's serial abuse of Meinl
Bank's rights to due process, or fair and equitable treatment.
In 2008 MEL was acquired by an international joint venture and
renamed Atrium European Real Estate. Atrium's acquisition canceled
MEL's service contract with Meinl Bank. Atrium paid a
negotiated termination fee, which resulted in Meinl Bank earning a
significant profit during 2008. Unexceptionally, the bank's
board decided to return a portion of its profits to its
shareholders in the form of an in-kind dividend. Six years later,
on New Year's Eve 2014, the
Vienna State Prosecutor decided to bring indictments against five
Meinl Bank board members, including Mr. Meinl on allegations
completely unrelated to the Austrian authorities' public
accusations that stigmatized the Meinl name for many years, i.e,
MEL's securities offerings and buy-back program.
Instead, the indictment alleged that the dividend issued to
shareholders for 2008 amounted to a breach of trust and attempted
defrauding of investors who had filed civil cases against Meinl
Bank. For the first time during the entire government
investigations, it identified Far East in the indictment, demanding
payment of a penalty in the amount of EUR
212 million.
Coming two weeks after Far East announced in December 2014 that it would exercise its
bilateral treaty rights and seek consultations with Austria to negotiate resolution of the dispute
or pursue its rights to international arbitration, the indictment
appears to be an act of retaliation. Consistent with the
arbitrariness of the government's targeting of Julius Meinl and Meinl Bank, a court dismissed
this indictment within four months for failing to raise justified
grounds for criminal liability. Austria appears to have retaliated further
when, just days after receiving a copy of this arbitration request
from ICSID, it has now ordered the removal of Meinl Bank's
leadership.
Austria summarily rejected Far
East's request for consultations in December 2014. In keeping
with its recurring efforts to sidestep international obligations,
Austria tried to deny
applicability of the Austria-Malta BIT to the Meinl Bank
investigation. The government's conduct smacks of
prosecutorial abuse and discriminatory targeting. Indeed, the head
of the Criminal Section of the Austrian Ministry of Justice
recently conceded that the duration of the proceedings against the
bank "is no longer justified on objective grounds." He had
previously acknowledged the "burden" of a lengthy state
investigation on its subjects, and noted that "it would be fair to
grant adequate compensation in such a case."
Far East's Request for Arbitration
According to the request for arbitration, Austria has breached international law and its
investment treaty obligations, through (a) failure to provide fair
and equitable treatment to Far East's investment; (b) impairment of
Far East's investment by arbitrary and discriminatory means,
including harassment and retaliation; (c) failure to provide full
and constant protection to Far East's investment through lawful and
proportionate treatment; (d) direct and indirect expropriation of
Far East's investment in Meinl Bank, via the progressive
dismantling of Meinl Bank's operations and its recent demand for
payment from Far East; and (e) failure to consult or attempt to
reach a settlement of this case in good faith, as prescribed in the
Bilateral Investment Treaty.
"After failed attempts to negotiate with the government in good
faith, Far East had no choice but to commence this ICSID
arbitration to stop Austria's
constantly morphing and destructive investigations," Mr. Reisenfeld
said.
"Far East seeks nothing more than a level playing field
protecting its legitimate expectations of a transparent,
even-handed and fair legal system. This arbitration
seeks justice for one of Austria's
most esteemed family businesses that has been dragged through the
mud in public fashion," he continued.
"The government's eight-year campaign of stigmatization and its
repeated breaches of the bank's procedural safeguards amount to a
denial of justice and actionable government misconduct.
Our hope is that a neutral ICSID panel will right this historic
wrong, order Austria to cease and
desist its illegal investigations of Meinl Bank and its officials,
and compensate our clients, who have watched the Austrian state
effectively dismantle their investment."
About BakerHostetler
One of the nation's leading law firms, BakerHostetler helps clients
around the world to address their most complex and critical
business and regulatory issues. With five core national practice
groups – business, employment, intellectual property, litigation,
and tax – the firm has more than 900 lawyers located in 14 offices
coast to coast. Recognized for its role as court-appointed counsel
to the Securities Investor Protection Act (SIPA) Trustee in the
recovery of billions of dollars in principal lost in the Ponzi
scheme perpetrated by Bernard L.
Madoff, For more information, visit www.bakerlaw.com.
About BakerHostetler's International Dispute Practice
Through a cohesive team of international advocates working across
the firm, BakerHostetler provides international arbitration,
litigation, and alternative dispute resolution representation for
multinationals, foreign states, international organizations and
private investors. Our lawyers have served as advocates and
counsel in complex investor-state, public international, human
rights, civil and criminal disputes in virtually every country and
before major international arbitration institutions
world-wide.
Contact:
|
Allan Ripp
212-262-7477 aripp@rippmedia.com
|
|
Tracy Hager
303-764-4090 thager@bakerlaw.com
|
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