Skoda Transportation

William Malcolm

Czech Railways Loses Appeal In Lawsuit Against Skoda Transporation

Czech Railways will not receive back 1.2 billion crowns, which it paid the engineering company Škoda Transportation for the supply of locomotives. The High Court in Prague today upheld the decision of the court of the first instance, which recognized the earlier verdict of the arbitration, in resolving the appeal of the state carrier. In the past, it awarded money to Škoda Transportation in the dispute, and the railways wanted to reverse this decision. Today’s court decision is final, the railways can only file an appeal against it. The tracks will decide on the next step after analyzing today’s decision.

The railways ordered 20 locomotives from Škoda for about 2.5 billion. The carrier was to take over the locomotives in 2009 but did not receive the first machines until 2013. Škoda defended the late delivery by changing regulations during the development of the locomotives and turned to the arbitral tribunal for additional payment of the purchase price, which the railways did not pay. The railways, on the other hand, demanded billions in fines for late delivery. The arbitration eventually granted Škoda Transportation a surcharge of 1.2 billion for the locomotives. The courts did not recognize the arbitration decision and demanded its annulment in court.

The carrier argued in court, for example, the bias of one of the arbitrators. However, two years ago, the Prague Municipal Court recognized the arbitration award as valid, stating that it was not possible to review the arbitration award itself. The court, therefore, dealt mainly with the procedural aspect of the conduct of the arbitration, which, however, according to him was in order. The railways appealed against the court’s decision and continued to demand the annulment of the arbitration verdict.

In today’s trial at the High Court, Czech Railways argued, for example, with the insufficient settlement of its evidence by the court of the first instance. In addition, according to them, the court ruled only on the basis of a copy of the arbitration award, which, moreover, had non-public parts to which the participants did not have access.

However, the Court of Appeal did not today acknowledge the carrier’s allegations as well-founded and upheld the original decision. He referred, among other things, to the arbitration clause, which was part of the contract between the two companies and which did not allow the dispute to be resolved by the court of fact.

Czech Railways has not yet decided on further progress in the case. “We will wait for a written copy of the decision, we will analyze it and then we will decide on the next step,” the spokesperson of the state carrier Vanda Rajnochová told ČTK today.

“We know about the decision of the High Court, but we do not have a written copy of the judgment. We do not comment on internal matters,” Škoda Transport spokesman Jan Švehla answered ČTK’s question.

Last year, the Czech Railways Group made a loss of 4.1 billion crowns. This was mainly due to the coronavirus crisis. In the previous five years, the railways had a profit of 201 billion crowns in 2019. The biggest drop in sales last year affected passenger transport, where the number of passengers fell by a third to about 118 million. The Škoda Transportation engineering group had an EBITDA profit of 380 million crowns last year, which is 18.6 percent higher year-on-year due to a higher-order backlog. Revenues of the company increased by 11.3 percent to CZK 11.03 billion.