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Slovak Republic facing trade lawsuit over health care reform

published 28 January 2010 updated 28 January 2010

A Dutch company is suing the Slovak Republic for allegedly breaching the terms of a bilateral investment treaty following passage of a law requiring that health insurance be provided on a not-for-profit basis.

HICEE, which has holdings in two Slovak insurance companies, claims the legislation is tantamount to expropriation and violates the Netherlands-Slovak Republic bilateral investment treaty.

The company is seeking nearly $US 1 billion for losses allegedly arising out of the Slovak Republic’s reversal of a brief experiment with for-profit health insurance.

Following the 2006 election of Robert Fico who had campaigned on a promise to reverse the reforms, legislation was passed that required health insurance to be provided on a not-for-profit basis with companies required to re-invest surplus revenues rather than distribute them as dividends to shareholders.

Observers say the case highlights the dangers that trade and investment agreements pose to public services like health care and education by potentially placing onerous costs on governments when they attempt to roll back privatization or to expand public provision.

Meanwhile, in Germany, the Swiss-owned Vattenfall energy company is using an energy trade agreement to sue the government over a dispute concerning the construction of a coal-fired power plant in Hamburg.

In 2007, Vattenfall received permission to build the plant from the city council, ruled at the time by the Christian Democratic Union. Following elections in 2008, the CDU was forced into a coalition with the Green Party who made the imposition of tough environmental standards on the plant project a condition of their joining the government.

Vattenfall alleges the environmental standards being demanded will make the power plant unprofitable and that this constitutes a violation of the protection of foreign investment contained in the 1994 Energy Charter Treaty.

Cesare Romano, professor of law at Loyola Law School in Los Angeles, warns the case may indicate an emerging trend.

“As concerns about environmental degradation, and in particular climate change, grow amongst public opinion, it is possible that an increasing number of governments…might question the terms of contracts and treaties entered into and try to impose greater and more stringent regulations on projects,” he stated. “The jury is out, so to speak.”