The CME v. Czech Republic and Lauder v. Czech Republic were parallel cases decided by two different arbitral tribunals in 2001. The difference in the two cases' outcomes is a prime example of conflicting decisions in international arbitration and is the subject of many treatises, with some authors going as far as calling it "the ultimate fiasco in investment arbitration".[1]
In 1993, US national Ronald Steven Lauder invested in Czech private television broadcaster TV Nova through his German company (which was later succeeded by the Dutch company Central European Media (CME)). Some 20 suits started in front of the Czech courts and international tribunals, including UNCITRAL arbitrations CME v. Czech Republic and Lauder v. Czech Republic, after his business partner, Czech citizen Vladimír Železný, effectively deprived CME of its investment by breaking off the deal between Lauder's and Železný's companies. CME and Lauder respectively sought damages for the alleged interference of the Czech Media Council, a government entity granting broadcasting licences, into the business arrangements between Lauder's and Železný's companies, which supposedly eventually contributed to losses experienced by Lauder. Effectively dealing with the same facts[2], the tribunals handed down two contradictory arbitral awards: one dismissed the claim by Lauder, while the other awarded CME damages of $270 million and 10% interest. Finally, Czech Republic paid $355 million.[3]
Following the Velvet Revolution in 1989, the once again democratic Czechoslovakia ratified a number of bilateral investment treaties in order to attract foreign investments. In 1991, Czechoslovakia concluded one bilateral investment treaty with the United States ("USA-CZ treaty")[4] and another with the Netherlands ("NL-CZ treaty").[5] During the same year a new Media law was passed, under which the Media Council was created in order to grant broadcasting licences. The Czech Republic became a successor to these treaties following the dissolution of Czechoslovakia.
In 1992 a small group of Czech citizens founded a company called Central European Television 21 (CET 21) in order to acquire a licence for television broadcasting. CET 21 was cooperating with Central European Development Corporation (CEDC) effectively owned through another company by Ronald Lauder. Together they formed a new joint company named Česká nezávislá televizní společnost (ČNTS) with the participation of CET21, a Czech bank and, as a majority shareholder, a company representing the foreign investor. The key person Vladimír Železný became head of both CET21 and ČNTS. The newly established TV station TV Nova immediately became popular and very profitable. However, in 1999 Železný was fired from ČNTS. Subsequently, CET21 terminated its contract with ČNTS, after the latter failed to submit the Daily Log regarding the broadcasting for the next day.
The Media Council attempted to influence the relationship between the CET21 and ČNTS: firstly when the council granted a licence in 1992 and 1993, then after a new Media Law became effective around 1996, and finally in 1999 when the breach between the two companies happened.
On 19 August 1999, Ronald Lauder, majority owner of CME, which was in turn the majority owner of ČNTS, started UNCITRAL arbitration against the Czech Republic under the USA-CZ treaty ("London arbitration"). Meanwhile, on 22 February 2000, CME initiated parallel UNCITRAL arbitration proceedings against the Czech Republic under the NL-CZ treaty ("Stockholm arbitration").