Arbitrator in Czech TV Nova Saga rules in favor of CME

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PRAGUE--The International Chamber of Commerce Arbitration Court in Amsterdam has ordered the head of Czech TV Nova Vladimir Zelezny to restore CNTS, a subsidiary of the U.S. company Central European Media Enterprises (CME) to its prior position as an exclusive services provider for the country's leading broadcaster.

CME's arbitration claims against Mr. Zelezny follows his decision earlier this year to engage other entities to provide program acquisition, programming and advertising services, thereby breaching an exclusive contract with CME.

In the case filed in April, CME seeks the return of a $23 million loan it made to its former partner. CME claims it has been blocked from ad revenues from the highly profitable TV Nova since August, when Mr. Zelezny took over Nova's broadcast signal, placing his own makeshift programming over CNTS.

The preliminary judgment now calls for Mr. Zelezny to divest from the company CET-21, the company that holds the Nova license in which he holds a 60% controlling interest.

A spokesperson for Mr. Zelezny called the court's decision "only a recommendation," pointing out that Mr. Zelezny would not abide by it. "It's a legal order, but it doesn't mean that he has to follow it," says the spokesperson. "Dr. Zelezny disagrees with this judgment and says it goes against the Czech law. How can he follow it if he would be breaking the law? He will appeal this with a court in Switzerland."

But Mr. Zelezny's office also conceded that the Czech regional courts will be under considerable pressure to enforce the ruling, since the case has taken on international proportions. "There is a big risk that he could lose the whole issue by not following the decision," says Mr. Zelezny's representative.

In Nov. 8, CME bought full-page advertisements in the New York Times and the Washington Post warning investors to "think twice" about investing in the Czech Republic. "Czech business, regulatory and legal practices fall woefully short of international standards," read part of the ad.

CME representatives in Prague said that in entering the suit, both Mr. Zelezny and CME agreed in writing to abide by any judgment given by the court and is thus legally binding. They also said there is no formal appeals process for a preliminary judgment, and that CNTS employees recently laid off could be at work "within days" if Zelezny agrees to reinstate CNTS as TV Nova service provider.

Agency media directors say they have not been contacted about any changes as of yet.

Copyright November 1999, Crain Communications Inc.

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