In late 1992 and early 1993, CEDC, on the invitation of CET 21, which was owned by five Czech nationals and advised by Dr. Vladimir Železný, a Czech national, participated in negotiations with the Czech Media Council (hereinafter: "the Council") with the goal of the issuance of the Broadcasting license to CET 21 with a participation therein, either directly or indirectly, by CEDC.

Instead of CEDC taking a direct share in CET 21 (as initially contemplated), and instead of a license being issued jointly to CET 21 and CEDC (also so contemplated), the partners of CET 21 and Dr. Železný agreed with CEDC and the Media Council to establish CEDC's participation in the form of a joint venture, CNTS. The Media Council quickly came to the view that such an arrangement would be more acceptable to Czech Parliamentary and public opinion than one that accorded foreign capital a direct ownership or licensee interest.

A Memorandum of Association was made part of the license conditions, defining the co-operation between CET 21 as the license holder and CNTS as the operator of the broadcasting station. CET 21 contributed to CNTS the right to use the license "unconditionally, unequivocally and on an exclusive basis" and obtained its 12 % ownership interest in CNTS in return for this contribution in kind. Dr. Železný served as the general director and chief executive of CNTS and as a general director of CET 21. CNTS' Memorandum of Association ("MoA") was, after close consideration by the Media Council, approved by the Council on April 20, 1993 and, in February 1994, CNTS and CET 21 began broadcasting under the license through their newly-created medium, the broadcasting station TV NOVA.

CNTS provided all broadcasting services, including the acquisition and production of programs and the sale of advertising time to CET 21, which acted only as the license holder. In that capacity, CET 21 maintained liaison with the Media Council. It was CET 21 that appeared before the Media Council, not CME, though Dr. Železný's dual directorships of CET 21 and CNTS did not lend themselves to clear lines of authority.

In 1999, after exchanges between the Media Council and Dr. Železný, the character and the legal impact of these exchanges being in dispute between the parties, CET 21 terminated the Service Agreement on August 5, 1999 for what it maintains was good cause.

CME claims that the Media Council, in breach of the Treaty, in 1996 coerced CME into amending the MoA thereby forcing CNTS to give up the exclusive right of the "use" of the broadcasting license and that the Media Council in 1999 in collusion with Dr. Ze-lezny lent its support to the destruction of CNTS' business.

The Czech Republic strongly disputes this contention and the purported underlying facts, maintaining that, inter alia, the loss of investment (if any) is the consequence of commercial failures and misjudgments of CME and, in any event, that CME's claim is part of a commercial dispute between CNTS and Dr. Železný, for which the protection of the Treaty is not available.

On April 26, 1999 CME Media Enterprises B.V. Amsterdam (CME Media), a corporation affiliated to the Claimant, filed a request for ICC arbitration against Dr. Železný, alleging that Dr. Železný had breached a non-competition clause and other provisions of the share purchase agreement with CME Media, under which CME Media had acquired from Dr. Železný the Czech corporation Nova Consulting a.s. (Nova Consulting), which in turn held 5.8% equity interest in CNTS.

On November 9, 2001 the ICC Tribunal rendered a Final Award ordering Dr. Železný to pay to CME Media USD 23,350,000 plus 5% p.a. interest on certain amounts, CME Media being ordered to return the Nova Consulting shares to Dr. Železný upon receipt of full payment of principal and interest.

At its closing submissions on November 12, 2002 the Claimant stated that CME eventually had received the full amount awarded in the ICC arbitration. It earlier had claimed that Dr. Železný had fraudulently eluded payment with assistance from Czech authorities.

(a) "Each Contracting Party shall ensure fair and equitable treatment to the investments of investors of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those investors" (Art. 3 (1));

(b) "... each Contracting Party shall accord to [the investments of investors of the other Contracting Party] full security and protection which in any case shall not be less than that accorded either to investments of its own investors or to investments of investors of any third State, whichever is more favourable to the investor concerned" (Art. 3 (2)); and

(c) "...Neither Contracting Party shall take any measures depriving, directly or indirectly, investors of the other Contracting Party of their investments unless the following conditions are complied with:
a) the measures are taken in the public interest and under due process of law;
b) the measures are not discriminatory;
c) the measures are accompanied by provision for the payment of just compensation" (Art. 5).

1. Deciding Respondent has violated the following provisions of the Treaty:

a) The obligation of fair and equitable treatment (Art. 3 (1));

b) The obligation not to impair the operation, management, maintenance, use, en joyment or disposal of investments by unreasonable or discriminatory measures (Article 3 (1));

c) The obligation of full security and protection (Art. 3 (2)); and

d) The obligation to treat investments at least in conformity with the rules of international law (Art. 3 (5)); and

e) The obligation not to deprive Claimant of its investment by direct or indirect measures (Art. 5); and

2. Declaring that Respondent is obliged to remedy the injury that Claimant suffered as a result of Respondent's violations of the Treaty by payment of the fair market value of Claimant's investment in an amount to be determined at a second phase of this arbitration;

3. Declaring the Respondent is liable for the costs that Claimant has incurred in these proceedings to date, including the costs of legal representation and assistance.

In its Skeleton Quantum Arguments dated November 4, 2002, the Claimant requested the following relief:

A. Claimant requests a Final Award in the principal amount of $495.2 million, a reduced figure that treats Claimant as having constructively owned only 93.2% of CNTS on August 5, 1999.

1. Claimant's Statement of Claim Respecting Quantum requested an award in the principal amount of $526.9 million, based on a $560 million valuation of CNTS, adjusted downward to take into account Claimant's 99% ownership interest and the residual value of the company after its business was destroyed.

2. Claimant reaffirmed this request for relief in the Reply Respecting Quantum, despite the $6.9 million increase in Claimant's residual value calculation between December 2001 and July 2002, because that $6.9 million decrease was offset by the addition of approximately $7 million in net cash that was on CNTS's balance sheet as of July 31, 1999, and that should have been added to the valuation in the first place.

3. As previously reported, CME has received from CET21 and MEF Holding payments corresponding in total with the full amount awarded to it in the ICC arbitration against Dr. Železný.

(a) Once CME obtains confirmation from the payers and Dr. Železný that these payments were made on Dr. Železný's behalf (without which, as matter of Czech law, CME would face vulnerabilities in treating Dr. Železný's obligation as definitively discharged), CME will return to Dr. Železný the Nova Consulting shares that CME acquired from him under that agreement and (along with these shares) the 5.8% interest in CNTS that those shares represent.

(b) Claimant is uncertain whether, as a consequence of the undoing of the Nova Consulting transaction, Claimant's recovery should be reduced by only $23.35 million, the principal amount of the obligation owed, or by a measure corresponding with treating Claimant as having constructively owned only 93.2% of CNTS on August 5, 1999 (i.e., the 99% that Claimant actually did own, less the 5.8% which is expected to be returned to Dr. Železný), but believes that the latter form of reduction is probably more appropriate.

(c) CME's right to retain these funds has not been finally determined, in that Dr. Železný has not exhausted all available appeals in his collateral challenge to the ICC Award in the Dutch courts. If CME were ultimately required to return these funds, and consequently entitled to receive back the 5.8% interest, the amount Claimant would be entitled to recover from Respondent would be correspondingly increased.

4. Accordingly, Claimant is reducing its request for relief to an award in the principal amount of $495.2 million, to take into account its receipt of this payment (subject to possible reversal if for any reason this payment must be returned in the future), derived as follows:

(a) the $560 fair market value of CNTS times 93.2% (or $521.9 million);

(b) plus 93.2% of the additional $7 million in net cash, which is cancelled out by the additional $6.9 million in Claimant's revised residual value calculation (again at an attributable rate of 93.2%);

(c) minus the unadjusted $27.5 million residual value of CNTS, which is attributable to Claimant as follows:

(i) 99% of the $18.8 million in dividends paid by CNTS since August 1999, based on CME's actual ownership interest at the time of the pay-outs, which comes to $18.6 million, and

(ii) 93.2% of the remaining $8.7 million in residual value (or $8.1 million).

B. In addition to this principal amount, Claimant requests an award of interest at the Czech statutory rate of 12.0% per year, running from August 5, 1999 until the date of payment, or, if the Tribunal rejects this request, annual compounding of any other award of interest the Tribunal grants.

C. Claimant further requests an award of all costs and legal fees associated with this quantum proceeding, in a measure to be fixed by the Tribunal.

(1) CME's claim be dismissed as an abuse of process.

(2) And/or CME's claim be dismissed on grounds that the Czech Republic did not violate the provisions of the Treaty as alleged by the Claimant.

(3) And/or CME's claim be dismissed and/or CME is not entitled to damages, on grounds that alleged injury to CME's investment was not the direct and foreseeable result of any violation of the Treaty.

(4) And CME pay the costs of the proceedings and reimburse the reasonable legal and other costs of the Czech Republic.

(a) CME's claim for compensation is dismissed as inadmissible and/or assessed at nil;

(b) Alternatively, this arbitration shall be stayed pending the outcome of the Czech legal proceedings between CNTS and CET 21 concerning the termination of the Service Agreement;

(c) And/or, this arbitration shall be stayed pending the outcome of the proceedings in Sweden challenging the Partial Award;

(d) In the event that CME is awarded monetary compensation, such compensation shall be payable within 12 months and no enforcement proceedings shall be brought within that period;

(e) And, in the event that CME is awarded monetary compensation, such compensation shall incur simple interest at US-$ LIBOR to the date of payment;

(g) All issues respecting costs shall be reserved until after publication of the further partial award respecting quantum.

On March 3, 2001 the Arbitral Tribunal by Order Q 8 decided not to take a decision on Interim Remedies. The Tribunal stated inter alia:

In respect to the Respondent's request regarding the disclosure by the Claimant of all pleadings, submissions and evidence submitted by CME Media Enterprises B.V. in the ICC Arbitration Proceedings between CME Media Enterprises B.V. and Dr. Železný, the Tribunal is not in a position to order the requested discovery, as the Parties of the ICC Arbitration Proceedings are different from the Parties to these proceedings. The Tribunal understands, however, that the ICC Award of the afore-mentioned proceedings was published on the internet on the CME pages. The Arbitral Tribunal, therefore, instructs the Claimant to submit as soon as possible to the Arbitral Tribunal and to the Respondent the ICC Award to the extent available to the public on the internet. The Tribunal assumes that the Respondent's demand for disclosure of the ICC proceeding will be sufficiently met by the disclosure of the ICC Award. (PA para. 64)

"The Czech Republic continues to participate in this Arbitration under protest and reserves all its rights, in particular its rights under Swedish Arbitration Act, Art. V (2) (b) of the New York Convention 1958 and principles of public policy generally ."

1. The Respondent has violated the following provisions of the Treaty:

a. The obligation of fair and equitable treatment (Article 3 (1));

b. the obligation not to impair investments by unreasonable or discriminatory measures (Article 3 (1));

c. the obligation of full security and protection (Article 3 (2));

d. the obligation to treat foreign investments in conformity with principles of international law (Article 3 (5) and Article 8 (6), and

e. the obligation not to deprive Claimant of its investment (Article 5); and

2. The Respondent is obligated to remedy the injury that Claimant suffered as a result of Respondent's violations of the Treaty by payment of the fair market value of Claimant's investment as it was before consummation of the Respondent's breach of Treaty in 1999 in an amount to be determined at a second phase of this arbitration;

This Partial Award is final and binding in respect to the issues decided herein. The legal seat of the proceedings is Stockholm, Sweden.

The Tribunal will continue the arbitration proceedings in order to decide on the quantum of the Claimant's claim upon request of one of the Parties.

1. The arbitration proceedings related to the quantum shall continue. The Respondent is invited to present arguments for an adjournment sine die of the proceedings within two weeks after having received this Order. The Claimant is invited to respond within two weeks.

2. The Claimant shall submit a Statement of Claim Related to the Quantum, in accordance with Article 18 of the UNCITRAL Arbitration Rules. The Claimant shall annex to this Statement of Claim all documents it deems relevant or may add a reference to the documents or other evidence it will submit. The Claimant shall submit its Statement of Claim Related to the Quantum not later than January 15, 2002.

3. The Respondent shall submit a Statement of Defence Related to the Quantum in accordance with Article 19 of the UNCITRAL Arbitration Rules. The Statement of Defence shall reply to the particulars (b), (c) and (d) of the Statement of Claim (Article 18 § (2) UNCITRAL Arbitration Rules). The Respondent shall annex to its Statement of Defence the documents on which it relies for its defence or may add a reference to the documents or other evidence it will submit. The Respondent shall submit its Statement of Defence not later than March 28, 2002.

4. Each Party shall submit written witness statements, experts' opinions and authorities in support of its respective pleadings within the respective deadline for the submission of its written Statement as stipulated above.

5. Both Parties shall finally comment, if they wish so, on their respective opponent's submission, the Claimant by April 19, 2002 and the Respondent by May 10, 2002.

6. The Tribunal sets the dates for a hearing on the merits of the quantum claim on June 10 through June 21, 2002 in Stockholm. At this hearing, witnesses and/or experts proposed by the Parties shall be heard.

7. Without changing the legal seat of the arbitration, the place of the hearings may be changed to another place upon agreement between the arbitrators and the Parties.

1. The Respondent will present arguments for an adjournment sine die of the proceedings until November 27, 2001.

2. The Tribunal sets a hearing on this issue and other procedural matters which may arise with the Parties' legal representatives in London on January 22nd, 2002 - 9,00 a.m. The location will be communicated to the Parties' representatives in due course.

3. Unless amended herein Order No. Q 1 remains unchanged.

A. The Respondent requested the Tribunal to adjourn the quantum phase of these proceedings (these proceedings hereafter also "the Stockholm proceedings") sine die and until the Respondent's annulment application at the Svea Court of Appeal in Stockholm and CNTS' claims against CET 21 at the Prague Court of first instance have been determined.

I. The Respondent based its request on the ground that the Respondent on December 12, 2001 filed an application with the Svea Court of Appeal in Stockholm requesting that the Partial Award be annulled. The grounds for annulment were that one arbitrator in the view of the Respondent was effectively excluded from essential parts of the deliberations of the Tribunal; that the Tribunal failed to apply the law that it was required to apply by the Treaty, namely, Czech Law; that the Tribunal lacked competence to rule on the merits of the case because (i) the London Proceedings were commenced before the Stockholm Proceedings; (ii) the Stockholm Proceedings concerned the same investment, the same alleged actions and omissions in breach of substantially the same treaty obligations as those before the London Proceedings; (iii) the parties to the Stockholm Proceedings and the London Proceedings were identical on the Respondent`s side and for all practical purposes the same on the Claimant's side; (iv) the possibility of a contradictory outcome of the two proceedings was legally impermissible under the Dutch Treaty; (v) the "London Award", was rendered before the Partial Award; and (vi) the actual contradictory outcome of the Partial Award leads to legally unacceptable results, further that the Tribunal decided upon issues determining quantum, contrary to the instruction of the parties, thus acting beyond the scope of its mandate. The Tribunal also analysed and decided upon other legal grounds not invoked by the parties.

Further the Respondent argued that the outcome of Czech Civil Proceedings will have an effect on Quantum.

II. The Claimant opposed the Respondent's request for adjournment. The Claimant was of the view that it would be seriously prejudiced by an adjournment. It had been suffering enormous prejudice since it lost its most central asset, which CNTS was, in Central Europe. Its profits were a source of capital to fund development and expansion of Claimant's business elsewhere and the loss of CNTS brought Claimant to the brink of financial failure.

The Claimants' view was that an adjournment of an arbitration is an extraordinary matter, neither supported by the principles of international law, nor UNCITRAL Arbitration Rules nor the Swedish Arbitration Act. To the contrary, the Dutch Treaty entitles Claimant to "compensation without delay". The Claimant rejected the Respondent's grounds for annulment of the Award. The Czech litigation between CNTS and CET 21 has no effect on the Tribunal's determination of the quantum of damages.

III. The Tribunal's Analysis [of the request for adjournment]

The parties are in agreement that the law applicable to these proceedings does not provide a provision related to the request for a stay of the arbitration proceedings. The Dutch Treaty which governs this arbitration says nothing on this point. The UNCITRAL Arbitration Rules equally leave it to the Tribunal to decide such issues. The Swedish Arbitration Act, which governs the conduct of these proceedings (to the extent not provided for by the UNCITRAL Arbitration Rules and the specific rules agreed upon between the parties) is equally silent. Therefore it is a matter for the Tribunal to decide, in its discretion, which is in compliance with Article 15.1, UNCITRAL Arbitration Rules.

The Claimant's interest in arbitration proceedings at normal speed must be balanced against the Respondent's view that it would be inappropriate to deal with quantum before the status of the Partial Award has been established by the Swedish Courts. Further the Claimant's desire for an arbitration without delay also must be weighed against the relevance of the Czech proceedings for the Respondent's request for a stay.

The Tribunal considered the time schedule for the Swedish proceedings and that Section 43 of the Swedish Arbitration Act of 1999 provides the possibility for an appeal be considered by the Swedish Supreme Court as a matter of precedent. The Tribunal concluded that a stay of these arbitration proceedings until the final and binding judgment of the Swedish Courts is rendered therefore is uncertain in time.

The Respondent's grounds for the annulment of the Partial Award had already been to a large extent dealt with (and rejected) by the Tribunal in the Partial Award. There was no need for the Tribunal to revisit these arguments again. A stay would have been in conflict with Article 5 (c) of the Treaty's requirement for "compensation without delay".

The Tribunal's view was that also a decision of the Czech Court of first instance was uncertain in time and in respect to its content. It is subject to appeal. The Tribunal at that point of time had no basis for considering the outcome of the Czech civil proceeding. This uncertainty did not allow a stay.

The Tribunal, therefore, decided that the arbitration proceedings shall continue at a normal pace, as it is the duty of this Tribunal to both of the Disputing Parties to determine the disputes between them as expeditiously and efficiently as practicable. (see S.D. Myers, Inc. vs. Government of Canada, NAFTA Arbitration under the UNCITRAL Arbitration Rules Procedural Order No. 18 dated February 26, 2001).For these reasons the Respondent's Request for Adjournment of Quantum Phase was denied.

B. The Claimant's request for a (limited) written Statement by the Tribunal related to the post-hearing exchanges within the Arbitral Tribunal (not to address the substance of the deliberations) was rejected by the Tribunal.

The Tribunal decided not to release the internal process of its deliberations to the parties unless instructed to do so by the competent Swedish courts or upon instruction by both parties, which was not the case.

C. The Respondent's Document Request dated January 22, 2002, comprising a 30 page list of 15 categories of documents, was decided by the Tribunal as follows:

(a) The Tribunal decided to agree to this Request. The Claimant is ordered to submit the requested documents to the Respondent by February 20, 2002.

(b) The Claimant is requested to submit argument in support of its position that unqualified compliance with the Respondent's document request will be pointless and unduly burdensome. In this respect, the Claimant shall specify the difficulties in complying with the Request in respect to each document or category of documents which are not obtainable or in respect to which there are obstacles to produce these documents factually, practically or, as the case may be, legally.

(c) The Tribunal will decide on the Claimant's request to exclude certain documents from disclosure after receipt of the Respondent's comments on this request.

(d) The documents to be disclosed under this Order shall be submitted by the Claimant to the Respondent in a documented and orderly form. The parties shall ensure that the Tribunal or the Tribunal's expert, as the case may be, can have access to the documents, should the Tribunal decide to review or have reviewed certain documents in dispute.

Further the Tribunal issued the agreed timetable for the parties' submissions.

By submission dated February 1, 2001, the Claimant requested the Tribunal to limit the production of documents by ordering that the Claimant is not obligated to produce (i) documents concerning CME and the subsidiaries for years after 1999, and (ii) documents concerning CNTS, and other CME affiliates' internal thinking about how to handle matters with Dr. Vladimir Železný. The Respondent opposed the Claimant's request. The Tribunal decided as follows:

The Claimant was instructed to disclose the Post-1999 CME and subsidiary information to the Respondent. This disclosure is limited to that information that has been disclosed or should have been disclosed in an ordinary conduct of business to CME Limited auditors and should include in particular the information that has already been disclosed and is generally disclosed to the SEC and financial analysts. The Respondent was instructed to confirm that it will not disclose the received information and the documentation from the Claimant to any Third Party including Dr. Železný and that the Respondent’s advisors shall enter into a suitable Confidentiality Agreement. The Claimant should provide such level of information as is generally provided in the normal conduct of business to the company’s auditors.

The Claimant was instructed to submit all documents related to facts and findings concerning their relations with Dr. Vladimir Železný, except internal strategy papers for dealing with Dr. Vladimir Železný.

1. The Respondent is instructed to identify the precise areas where the Claimant’s disclosure in the Respondent’s view has failed to comply with the Tribunal’s Orders Nos. Q 3 and Q 4 and to specify the missing documents without delay, at the latest by April 30, 2002.

2. The Claimant is instructed to provide the requested documents in compliance with the rules set out under the Tribunal's Orders Nos. Q 3 and Q 4 or to declare that certain documents are not available for disclosure and give reasons for that without delay, at the latest by May 15, 2002.

Further the Tribunal gave instructions for the time schedule of the parties' submissions, which time schedule was amended by the Tribunal Order No. Q 7.

1. No. 1 and No. 2 of the Order dated April 16, 2002 remain unchanged.

2. The Respondent shall submit its Response to the Claimant's Statement of Claim respecting the Quantum dated December 17, 2001 by Friday, June 28, 2002.

3. The Claimant's final submission and reply to the Respondent's Response shall be made by July 25, 2002.

4. The Respondent's final submission shall be made by August 16, 2002.

5. The hearing shall start on September 2, 2002 and shall run until September 13, 2002.

The Tribunal clarified the scope of disclosure concerning the Respondent's Document Request dated February 20, 2002. The Claimant was not obligated to submit privileged documents such as documents originated by its in-house or external legal advisors to the extent that such legal advice is related to legal proceedings or disputes between the Claimant and the Respondent and/or its agencies including the Media Council. Legal opinions related to other disputes shall be disclosed, unless restricted by the Tribunal (as for example in respect to disputes with Dr. Železný) or privilege for other reasons is granted.

The redaction of documents shall be limited to privileged subjects as identified in order No. Q 4 related to Dr. Železný or as otherwise specified. The Claimant was not obligated to disclose its internal strategizing or advice received about the Claimant's and/or its affiliated companies' legal disputes and proceedings versus the Respondent and/or its agencies.

1. The Tribunal recalls that under Article 24.1 UNCITRAL Arbitration Rules, each party shall have the burden of proving the facts relied on to support its claim or defence. This includes the burden of providing evidence by documents or witnesses.

2. According to Article 4.2 of the IBA Rules of Evidence any person may present evidence as witness, including a Party or Party’s officer, employee or other representative. According to Article 4.3 of the IBA Rules of Evidence it shall not be improper for a Party, its officers, employees, legal advisors or other representatives to interview its witnesses or potential witnesses.

3. CME’s two former CEO’s, rendered extensive written and oral witness statements in the first stage of the proceedings and were cross-examined at length at the hearing in Stockholm. The Claimant waived the confidentiality undertakings for the purpose of these witness statements and the testimony given at the Stockholm hearing and the Claimant further announced in its letter dated June 12, 2002 that it will not seek to preclude any testimony by the witnesses on the basis of Claimant’s confidentiality rights.

4. The Tribunal is of the view that the Claimant is not entitled to waive its confidentiality rights in respect to the two witnesses only for certain selected parts of the proceedings. The Respondent is free to interview the two witnesses on the basis of Article 4.2 and Article 4.3 of the IBA Rules of Evidence. The Claimant is ordered to instruct the two witnesses that the Claimant’s confidentiality rights are waived except to the extent that the witnesses are not obligated to disclose Claimant’s and/or CME’s information which might be privileged in accordance with the Tribunal’s Order No. Q 8.

5. The Parties were advised that taking evidence in this stage of the proceedings is restricted to the issue of Quantum. The Tribunal will decide at the Evidentiary Hearing whether and to what extent the testimony of experts and witnesses would be relevant, material and admitted for this purpose. The Parties are further advised, that the Tribunal may apply Article 9.4 and 9.5 of the IBA Rules of Evidence.

the issue to be resolved in this quantum phase of the arbitration is limited to the determination of the fair market value of 99 % of CNTS as of 1995, as set forth in para. 624 (2) of the Partial Award, along with the ancillary matters such as the determination of interest and any offsetting recoveries obtained through Czech civil and administrative proceedings; and

the Tribunal will neither take evidence or testimony on, nor will otherwise address, arguments by Respondent seeking further adjudication of issues resolved in the Partial Award, including the preclusive effect of the Lauder arbitration, causation, and Claimant's standing to assert a claim for the 1996 breach.

1. The Tribunal is of the view that the objects of the quantum phase are sufficiently described in the Partial Award and the Tribunal's consequential Orders for the quantum phase.

2. The parties may decide in their own discretion what arguments to be submitted and what means of proof to be presented within the given scope of the quantum phase taking into account the time frame for the hearing September 2 - 13, 2002.

3. The Tribunal requests the parties' representatives to make a joint proposal and time table comprising the following elements for the hearing.

(1) Oral presentation of the respective position by both parties being a Summary of the written pleadings.

(2) Experts and witness hearings.

(3) Concluding oral submissions.

The time used shall be shared equally and the Tribunal shall have sufficient time for questioning the experts and witnesses.

The Tribunal orders the Claimant in accordance with Article 4.11 of the IBA Rules of Evidence to use its best efforts to provide for the appearance of the following individuals for testimony at the forthcoming evidentiary hearing beginning on September 2, 2002 in London: Mr. Ronald Lauder, Mr. Len Fertig, Mr. Michel Delloye, Ms. Laura DeBruce, Dr. Martin Radvan or alternatively Mr. Jan Vavra, Mr. Harry Sloan or alternatively Mr. Woody Knight.

The Respondent shall at the latest by August 16, 2002 identify with greater specificity the subjects relevant to quantum on which they propose to examine these witnesses, preferably also by listing the key questions relevant to quantum for the witnesses (Art. 25.2 UNCITRAL Arbitration Rules).

The Parties are in particular referred to the Tribunal’s Order No. Q 9 para. 8 dated June 14, 2002 and Order No. Q 10 last sentence, dated July 9, 2002, which the Parties also shall take into account when agreeing on a time table for the forthcoming hearing.

The Tribunal established the time schedule for the parties for the evidentiary hearing in London scheduled from September 2 to September 13, 2002.

The Tribunal informed the parties that the Tribunal is prepared to resume its sittings on November 11, 2002 through November 16, 2002 for such elements of the hearing which remain uncompleted namely any examination of factual witnesses and closing arguments.

The Respondent's request for a postponement of the final hearing is denied, as it has been scheduled for several months and the parties, in the view of the Tribunal, have had and have sufficient time to prepare their final pleadings. No new facts may be submitted since the evidentiary hearing was closed on September 13, 2002.

The Tribunal will deal with any payments received by the Claimant, to the extent appropriate, in the final hearing and the Final Award. The Tribunal cannot defer the final hearing on the grounds that the Czech State Prosecutor's investigations or that the proceedings in the Svea Court of Appeal are pending, as both proceedings are legally unrelated to this arbitration. The Tribunal has the duty towards both parties to conduct these proceedings at a normal pace and in accordance with the agreed time table.

- Statement of Claim Respecting Quantum dated December 17, 2001

- Respondent's Statement of Defence Respecting Quantum dated July 2, 2002

- Claimant's Reply Respecting Quantum dated July 29, 2002

- Respondent's Sur-Reply Respecting Quantum dated August 19, 2002

- Claimant's Skeleton Argument Respecting Quantum dated November 4, 2002

- Respondent's Skeleton Closing Submissions dated November 4, 2002

(a) The Claimant's expert reports:

- Monitor CNTS Valuation Report (Thomas Copeland) December 14, 2001

- Monitor Supplemental Report July 28, 2002

- Monitor Valuation of CNTS dated September 9, 2002

Claimant's witness / expert declarations:

- Milan Cimirot

- Thomas Copeland

- Michael Finkelstein

- David Jelinek

- Fred Klinkhammer (two declarations)

- Petr Kotrlik

- John A. Schwallie (two declarations)

- David Stogel (two declarations)

(b) The Respondent's expert reports and opinions

- Rothschild CNTS Valuation Report July 1, 2002

- Spectrum "Opinion Paper" dated August 19, 2002 and Issues affecting TV Nova / CNTS valuation dated September 11, 2002

- Rothschild Supplemental Report dated August 19, 2002

- Legal Opinion Prof. Schreuer / Prof. Reinisch dated June 20, 2002

- Opinion on Czech law by Prof. Dedic

(a) Affidavits/witness statements rendered in the ICC Arbitration of

- Fred Klinkhammer August 16, 1999
September 28, 1999
April 7, 2000
April 26, 2000

- Laura DeBruce April 26, 2000

- Howard Knight June 27, 1999

- Petr Kotrlik April 26, 2000

- Petr Sladecek April 26, 2000

(b) Daily Transcripts of the ICC Proceedings of the hearings on April 29, 2000 till May 5, 2000 pages 1 - 850.

(c) CME Media's exhibits (selected) of ICC Arbitration Dr. Zelezny's exhibits (selected) of ICC Arbitration

(d) The London Arbitration Final Award

(e) Agreed Minutes on the Consultation on the Interpretation of the Treaty dated June 17, 2002.

(1) The correct interpretation of Article 8.6 of the Treaty, which specifies the law to be applied by a tribunal resolving an investment dispute.

(2) The manner in which the Treaty should be applied to claims of predecessors of an investment bringing claims in an investment dispute; and

(3) The manner in which the Treaty should be applied to investment disputes which had previously been raised by an indirect holder of the same investment of different nationality under a comparable BIT.

TV Nova net ad revenues in billions of Czech crowns 1999 2000

CME Projection 3.4 3.8

Actual Results 3.5 3.9

Even the most favorable possible outcome of this proceeding would not result in recovery of relief by CNTS at any time soon after a final decision on the merits. As this Tribunal has previously noted, a favorable final award in CNTS' action "will not remedy the Claimant's investment situation. CET 21 may well, at any time, terminate again the Service Agreement for good cause, whether given or not, thereby recurrently jeopardizing the Claimant's investment" (Partial Award Art. 414). Public comments by Dr. Ze-lezny strongly support this finding, indicating that this is precisely what CET 21 has planned. Following the High Court's ruling in favor of CET 21 last December, Dr. Zelezny stated at a press conference that CET 21 had planned for a possible negative ruling by preparing to force an immediate new "breach" of the Cooperation Agreement that would allegedly serve as grounds for CET 21 to once again terminate relations.

The Respondent's view is that the Tribunal first is obliged to reconsider the Partial Award due to the rendering of the Final Award of the London Tribunal and due the Common Position" of the Czech Republic and the Netherlands on the interpretation of the Treaty.

In traditional theory, the principal of res judicata presupposes the identity of subject matter, cause of action and parties. The nature of international arbitration, however, where parallel arbitrations and the risk of conflicting awards arise out of bilateral investment treaties ("BIT's"), produces factors that differ from those found in national court or arbitration proceedings.

(a) Sweden is the seat of the arbitration. Swedish law applies the principle of res judicata by way of analogy with chapter 17, section II of the Swedish Code of Judicial Procedure.

(b) Czech law applies the principle of res judicata in the same way as Swedish law. Both Czech law and international law are also relevant in respect to res judicata, depending whether res judicata is a procedure or an issue of substantive law.

(c) res judicata is (also) a general principle of international law and has been applied by international courts and tribunals.

On January 8, 1997, Nova Consulting acquired a 5.8% interest in CNTS after an increase in CNTS' share capital. On May 21, 1997, the Claimant purchased CME Media's by then 93.2% shareholding in CNTS. The Claimant consented, in Article 4 of the agreement on the transfer of participation interest in CNTS, to the MoA "without any reservation". That day, Nova Consulting offered to sell its 5.8% interest in CNTS to CME Media for USD 5.5 million per point or USD 32,190,000 for the entire 5.8% holding. This purchase price was internally criticized by the CME Management. Mr. Cox was of the view that such a valuation of CNTS of USD 5.5 million was extraordinarily high and significantly above the market value (which was in his view between USD 3.25 and 4.25 million). On August 11, 1997, CME Media purchased 100% of Nova Consulting thereby acquiring indirectly a further 5.8% interest in CNTS for USD 28,537,500 (corresponding to USD 492 million for 100%). An important element of this Share Purchase Agreement was the "non-compete" clause preventing Dr. Zelezny from carrying out any activity that would be in competition with CNTS. On December 9, 1997, the Claimant acquired the 5.8% interest in CNTS.

"The Council repeatedly raises its concerns about the fact that the situation is not progressing towards an early resolution which could lead to harming interests of viewers".

(a) Minimising the financial incentive of Dr. Zelezny in the successful operation of TV Nova;

(b) Encouraging Dr. Zelezny to set up AQS as a means of diverting programming revenue from CNTS;

(c) Proceeding and concluding the merger negotiations with SBS (and others) without securing Dr. Zelezny's support;

(d) The dismissal of Dr. Zelezny which precipitated the inevitable battle for control of TV Nova;

(e) The intensification of legal disputes with Dr. Zelezny, for example, by the commencement of ICC arbitration proceedings in the Czech courts raising legal issues on the conditions on which the two companies participated in TV Nova;

(f) The deliberate withholding of the daily broadcasting schedule in the knowledge that CET 21 was looking for an excuse in the legal battle to terminate the Service Agreement.

"...the sole purpose of the 15 March 1999 letter was to support Dr. Zelezny in putting pressure on the foreign investor CME in order to achieve a rearrangement of the contractual relations between CET 21 and CNTS as desired by Dr. Zelezny, an arrangement that would destroy the legal basis (the safety net) of the foreign investor's investment. There was no other purpose."

"On the face of it and quite obviously, the Media Council did not pursue any regulatory purpose with the letter".

The Respondent's view is that the March 15, 1999 letter had no effect whatsoever on the exclusivity of the relationship between CET 21 and CNTS. For the March 15, 1999 to constitute a "taking" for the purpose of Article 5 of the Treaty, it would have to be a "measure", which was not the case. The harm to CME was caused by CET 21/Dr. Zelezny. The Media Council had no legal power to intervene in the dispute between Dr. Zelezny and CME. There was no Treaty violation by the Media Council, no losses flowed from any alleged violation and it is therefore not a basis for awarding compensation.

(a) That the valuations take into account future cash flows to perpetuity. The future cash flows of CNTS were contingent on the use of the license through the Service Agreement with CET 21. There was no guarantee of renewal of the license. The proper valuation of CNTS must exclude the cash flows generated after the expiry of the license on January 30, 2005.

(b) That the valuations assuming an unchanging relationship in the economic relationship between CNTS and CET 21 in perpetuity. This is contrary to the factual events in late 1998 and 1999, which would result in redistribution of the total profits between CET 21 and CNTS. Further, the Media Council would not have permitted exclusivity after the end of the license period at January 30, 2005, which would have diminished CNTS' profits thereafter.

(c) That the valuations ignore the fact that a significant part of the "value" of CNTS' business was dependent on the skills and know-how of Dr. Zelezny. The valuations of CNTS relied upon by CME all have the implicit assumption that Dr. Ze-lezny would continue to be a pivotal factor in the business for the foreseeable future. The "genuine" value of CNTS at August 5, 1999, must be decreased by the "Zelezny Factor".

"willing buyer", SBS, "thinks it was worth." There is no basis for this view. The SBS offer in February 1999 of 0,725 SBS shares for each CME Ltd share is not an appropriate basis for determining the value of CNTS at August 5, 1999.

(a) The CNTS projections assume that the Czech gross TV advertising market will grow by 12% in 2003, reducing to 10% in 2004 and 8% in 2005. Dr. Copeland, however, increases the growth rate to 8.7% in each of 2006, 2007 and 2008.

(b) The CNTS projections assume that CNTS' share of advertising revenue will fall by 2% per annum between 2000 and 2005. Dr. Copeland, however, assumes that there is no further fall between 2006 and 2008.

(c) Whilst the CNTS projections show an increase in the growth of net advertising expenditure (after discounts) in 2005 of 4.5%, Dr. Copeland assumes growth thereafter of 8.7% between 2006 and 2008.

(a) CME refers to the dividend payments of USD 19,127,000 made by CNTS after August 5, 1999. The accounts at September 30, 2001 refer to a General Meeting of February 29, 2000 deciding to distribute dividends totalling USD 12.9 million and an additional declaration of dividends amounting to USD 12 million at the General Meeting on April 17, 2000. The total dividends declared after August 5, 1999, therefore, appear to amount to USD 24.9 million. This appears to USD 5.8 million higher than the figure referred to by CME. In addition, CME has received cash from the repayment of shareholder loans, which amounted to USD 2,758,000 in 2001.

(b) CME refers to the value of a building on Vladislavova Street having an appraised value of USD 9,481,000. This is inconsistent with a value of CZK 500 million (USD 13.3 million) referred to in the CNTS accounts at September 30, 2001 described as the value determined by " an independent expert ". This would suggest that there may be a shortfall in CME's valuation of up to USD4 million. CME states that the value of used broadcasting equipment at September 30, 2001 is USD 1,084,000. In fact, the CNTS accounts at December 31, 2001 indicate that the value is substantially more and is around USD 2,500,000 (excluding mobile equipment, in respect of which there is no evidence as to its valuation). Again, this suggest a minimum shortfall in CME's valuation of some USD 1.4 million.

(c) CME estimates that the total liquidation and maintenance costs will total USD 5,152,000, comprising USD 2,166,000 of the costs of operations from September 30, 2001 to December 31, 2002 and USD 2,896,000 in relation to the costs of selling the building and the remaining assets. No detailed breakdown of these costs has been provided by CME. The Respondent contends, however, that these costs are grossly exaggerated. For example, if as CME submits, the realisable assets comprise a building and broadcasting equipment with a value of USD10.6 million only, then the estimated selling costs amount to 27% of the value of those assets. It is inconceivable that the selling costs could be of this order. Similarly, it is difficult to imagine why the costs of operation during a 15 month period from October 1, 2001 to December 31, 2002 should amount to USD 2,166,000. A budget prepared for 2002 included salary and overhead costs totalling USD 736,000 only for 2002. If these annual costs were extrapolated for a 15 month period, the total cost would be USD 920,000.

(d) In assessing the residual value of CNTS, CME has failed to include the realisation of value obtained by CME in relation to the termination of the Reorganisation Agreement dated March 29, 1999 between CME Ltd and SBS. A termination fee of USD 8.25 million was received by CME Ltd from SBS on September 28, 1999. CNTS formed the major element of the value of CME Ltd, a significant proportion of the fee (60%) must relate to the value of CNTS and, therefore, falls to be included within an assessment of residual value at August 5, 1999. On that basis, the element of the termination fee referable to CNTS amounts is approximately USD 5 million.

CME claims that its "own borrowing rates in the Czech Republic... support application of the 12.0% statutory rate." In support of this claim, CME asserts that it borrowed CZK 850 million from Czech Savings Bank (CSB) on August 1, 1996 to fund CME's purchase of the Czech Savings Bank's shares in CNTS at a fixed rate of 12.9%, which arrangements were in place until October 2001, when the loan was re-negotiated. It was CME Media, and not CME, that borrowed that money. The loan was far from normal, as it was part of the share purchase transaction.

"The arbitral tribunal shall decide on the basis of the law, taking into account in particular though not exclusively :

- the law in force of the Contracting Party concerned:

- the provisions of this Agreement, and other relevant Agreements between the Contracting Parties:

- the general principles of international law. (Emphasis supplied.)

"If the provisions of law of either Contracting Party or obligations under international law existing at present or established hereafter between the Contracting Parties in addition to the present Agreement contain rules, whether general or specific, entitling investments by investors of the other Contracting Party to a treatment more favourable than is provided for by the present Agreement, such rules shall to the extent that they are more favourable prevail over the present agreement ". (Emphasis supplied.)

In contrast to precedents cited by Prof. Schreuer, the choice-of- law clause in the (Dutch) Treaty is broad and grants to the Tribunal a discretion, without giving precedence to the systems of law referred to. Art. 8 (6) of the Treaty says:

"The Arbitral Tribunal shall decide on the basis of the law , taking into account in particular though not exclusively:..." (Emphasis supplied.)

There is no ranking in the application of the national law of the host state, the Treaty provisions or the general principles of international law. Further there is no exclusivity in the application of these laws. Most of the precedents cited by Prof. Schreuer do not apply here, as in those cases the parties mostly did not agree on a choice- of- law clause. None of the precedents contained a choice of law clause similar to the clause in the Treaty, which instructs the Arbitral Tribunal to take into account (not: to apply) the above mentioned sources of law, in particular though not exclusively. None of the treaty clauses cited by Prof. Schreuer mirror this broad choice of law clause. Most of them therefore are not relevant to this arbitration.

The basic mandate of the Treaty obligates the Tribunal to "decide on the basis of law", which is a self-explanatory confirmation of the basic principle of law to be applied in international arbitration according to which the arbitral tribunal is not allowed to decide ex aequo et bono without authorization by the parties (see Art. 33 (2) UNCITRAL Arbitration Rules and Art. 17 (3) ICC Arbitration Rules).

Prof. Schreuer confuses the application of the principles of international law with ex aequo et bono decisions. When read in their full context, the precedents cited by Prof. Schreuer do not sustain his contentions. In particular in the Klockner v. Cameroon Case (decision on annulment, May 3, 1985, 2 ICSID Reports (1994)95), the ad hoc Committee deplored the absence of any authority for general principles of law and concluded that the award's reasoning was more like a simple reference to equity. The ad hoc Committee in particular criticized the absence of specific legal authority, which made it impossible to determine whether the proper law had been applied. By not demonstrating the existence of concrete rules, the Tribunal had not applied the proper law.

Most of the cases referred to by Prof. Schreuer are cases where the agreements between the parties did not contain any provision regarding the applicable law (Benvenuti & Bonfant v. Congo; SOABI v. Senegal, LETCO v. Liberia; CDSE (Santa Elena) v. Costa Rica).

Prof. Schreuer's reference to choice-of-law clauses in Bilateral Investment Treaties concern clauses significantly differently to the (Dutch) Treaty clause as explained above. The cases cited by Prof. Schreuer in his chapter dealing with consequences of the non-application of the proper law refer to cases where, under the ICSID Convention, the respective tribunals either applied a different law from that agreed by the parties (AMCO v. Indonesia; MINE v. Guinea) or the tribunals, in the absence of a choice-of-law clause, applied general principles of law without reference to specific case law, which was qualified by the ad hoc Committee as ex aequo et bono decision (Klockner v. Cameroon as cited above). A main shortcoming of the Tribunal's reasoning in the Klockner case was its laxity in citing sources and its failure to rely on specific legal authority (Schreuer citing Schreuer, C. The ICSID Convention: A Commentary 950-954 (2001)).

"Where the determination of a question of municipal law is essential to the Court's decision in a case, the Court will have to weigh the jurisprudence of the municipal courts...". (Case concerning Elettronica Sicula (ELSi) ICJ Reports 1989, page 47).

The Tribunal questions whether this holding of the International Court of Justice applies to the choice-of-law clause of the (Dutch) Treaty, taking into consideration the broad wording of that clause. Even if the principle established by the International Court of Justice should apply, the Court made clear that that law should be weighed by the Court (or the tribunal) "where the determination of a question of municipal law is essential to the Court's decision". This does not mean that a tribunal is bound to research, find and apply national law which has not been argued or referred to by the parties and has not been identified by the parties or the Tribunal to be essential to the Tribunal's decision.

The Tribunal takes note of the Tribunal's explicit decision in para. 624 (4) of the Partial Award. This "Partial Award is final and binding in respect to the issues decided herein". Further the Tribunal recalls to the terms of Art. 8 (7) of the Treaty, according to which the Arbitral Award "shall be final and binding". The UNCITRAL-Rules similarly provide that the Final Award of a Tribunal is "final and binding" (UNCITRAL-Rules, Art.32 (2)). Consistently with this rule, no provision of the Treaty or the UNCITRAL-Rules provides any mechanism for appeal, re-hearing or revision of an arbitral award unless by way of interpretation or correction within a time period of 30 days or by appeal to the Swedish Courts within the bounds of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The Tribunal itself is not authorized to reconsider its Partial Award and, in any event, the Tribunal finds no good reason to do so.

"We refer to Debevoise & Plimpton's faxed letter of November 10 and the joint proposed agenda. We comment below on those matters where we disagree with the Claimant.

1. Co-ordination of CME proceedings with Lauder arbitration.

As noted by Debevoise & Plimpton, the Czech Republic does not agree to the consolidation of the CME and the Lauder arbitrations, and does not agree to be bound in the CME arbitration by determinations of the Lauder Tribunal. If Mr. Lauder and CME are concerned by duplicative proceedings, clearly the proper course for them to take would be to discontinue the Lauder proceedings. Mr. Lauder provides no explanation as to why he is unwilling to do so. This is inexplicable given that his explanation for bringing the CME proceedings is that that "a damage award (and other potential forms of remedy) to Mr. Lauder would not fully compensate all of CME's shareholders for the harms CME has claimed" (Debevoise letter, 10, November) and that an award in favour of Mr. Lauder "would not, however, make CME itself whole" (Statement of Claim, para. 77). It is respectfully submitted that the continuation of separate proceedings both by CME and Mr. Lauder - who purports to have voting control over CME - amounts to an abuse of the bilateral investment treaty regime.

The Czech Republic opposes CME's application that the substantive hearing in this arbitration be postponed until the Lauder Tribunal has issued its award.

The Czech Republic does not consider it appropriate that claims brought by different claimants under separate Treaties (which give rise to obligations of the Czech Republic to two different sovereign States - the United States and the Netherlands - under international law) should be effectively consolidated and the Czech Republic asserts the right that each action be determined independently and promptly. (Emphasis supplied.)

As stated in the Partial Award the Respondent expressly and impliedly waived any lis pendens or res judicata defence. The Tribunal decided this question in the Partial Award in passing upon its jurisdiction pursuant to UNCITRAL-Rule Art. 21(3). The Respondent in its pleadings expressly stated that it is not seeking to rely upon technical doctrines of lis ali pendens or res judicata. It invoked the argument of "abuse of process" by Mr. Lauder for initiating two parallel proceedings, which argument was dealt with and rejected by the Tribunal in the Partial Award (paragraphs 412, 419).

"if the determination of a Quantum of monetary damages is necessary - e.g. because the arbitral tribunal orders a [the] remedy referred to in para. 111 or para. 112 of Claimant's Statement of Claim - that Quantum should be established in further proceedings, so that the briefs and witness statements will not deal with the amount of monetary damages."

"The Quantum of damages should take into account, among other factors, the fair market value of Claimant's investment prior to the Czech Republic's treaty violations, the value of the investment after restoration of CNTS' rights and the loss of revenues or other harm that has resulted from the treaty violations. (Emphasis supplied.)

"should award damages to Claimant for the full amount of the losses and harms Claimant has suffered as a result of the Treaty violations. Those losses are in excess of $ 500 million. Claimant respectfully proposes in the interest of efficiency, that its proof respecting the amount of monetary damages to which Claimant is entitled be reserved, pending the Tribunal's issue of an award of the merits and on Claimant's entitlement to the various forms of relief requested." (Emphasis supplied.)

The relief sought by the Claimant was, inter alia, as follows:

"2. Declaring that Respondent is obliged to remedy the injury that Claimant suffered as a result of Respondent's violations of the Treaty by payment of the fair market value of Claimant's investment in an amount to be determined at a second phase of this arbitration."

"(3) And/or CME's claim be dismissed and/or CME is not entitled to damages, on grounds that the alleged injury to CME's investment was not the direct and foreseeable result of any violation of the Treaty".

"The Chairman of the Council complied relatively quickly with his [Dr. Zelezny's] request. We [CME/CNTS] believe that the change of the existing conditions led to a partial confiscation of CME's investments without compensation ." (Emphasis supplied.)

"At the same time there was another process going on which we watched with fluster and disconcertion, that especially since 1996, 1997, when administrative procedures was stopped based on a contract that be registered by you [Media Council] and inserted into your file, which has a non-exclusive character and which does not stipulate the scopes of cooperation and which defines some other principles that you set down as conditions to stop the administration procedure,......"

"Zelezny: I want to assure you Mr. Chairman, that performing the licence is not endangered in our opinion. No danger is expected that we would interrupt broadcasting for a period longer than 30 days, we do not expect any interruption of broadcasting at all and at present we are being assured by the other party that they are interested in providing good-quality services and if it is so, we will not break this structure. However, we reserve the right that to be sure that the licensed subject will not be blackmailed due to a certain exclusive position of CME and you warned us about this danger three or four years ago, to build a parallel production base, which will focus on production so it will not endanger activities provided by CNTS, nevertheless, it will be possible to convert this production base into full-value television including dispatching, the dispatching workplace and some other supporting services to make it into a television. It is a safeguard against the case that services provided by CNTS would fail, would not be professional, good-quality or would be sabotaged."

" Josefik: I have quite a principal comment. All these processes are developing in time to a considerable extent, all of us know the history of the effort of the Council to make the relations between the licence holder and other organisations completely transparent. Within the concluded administrative holder and other organizations completely transparent. Within the concluded administrative proceedings about unauthorized broadcasting of CNTS some changes were made that are proved on contractual basis here and at the last meeting with the Council we agreed that if some current changes of the structure that made it possible to stop the administrative proceedings had occurred, we would like to have the contracts in their updated form."

"Furthermore, I would like to know what has led you to a conclusion of exclusivity of relationship between my client [CET 21] and your company, if such exclusivity has not been established by an agreement and it is just my client's sole discretion, whether he will require the services of your company or not".

"Re: Opinion of the Council of CR for Radio and Television Broadcasting regarding an attempted unauthorized broadcasting on the part of CNTS, spol. s.r.o.
Prague, June 9, 1999
In our 11th session on June 8-9, 1999, the Council of CR for Radio and Television Broadcasting concluded that in the case of the "Call the Director" show on Saturday 5, 1999, there was an attempt to broadcast without authorization on the part of CNTS, spol. s.r.o. We also remind you of the Appeal of the Council as of May 27, 1999, reference no. 1446/99. Should such situation occur again on the part of CNTS, the Council will start relevant administrative procedures.
Enclosed we send you a statement of the Council of CR for Radio and Television Broadcasting published on June 9, 1999,
Yours sincerely,
Josef Josefik Chairman of the Council"

"We would like to kindly ask you, as a public administration body, participating by its decisions in establishing of the legal structure of relationships between CET21, CNTS and CME in 1993 and having a decisive influence on modification of this legal structure and some of its significant conditions in 1996-1997, to give your position, or possibly to take measures which would resolve the current dispute between CET21, CNTS and CME in connection with the legal structure of these relationships and prevent their violation on the part of CET 21 and Ph.Dr. Vladimir Zelezny."

"We hope the above specified facts (which represents the basic, however not the complete inventory of arguments) will help to evaluate the legal relationship between CNTS and CET 21 is an exclusive relationship which was as such established, construed, and, up until the creation of the dispute with Dr. Zelezny, as such respected by all participated physical and legal entities and by concrete legal acts was being fulfilled."

"basically an advisor in constructing and creating of arrangements between CET 21 and CEDC, CNTS. Therefore, we presume that the Council has a real obligation towards the sides concerned and towards state as well to participate in finding a solution and not to take standpoint that it regards exclusively commercial dispute".

"during its active involvement in the relationship between CNTS and CET 21, the Council has taken certain actions which seem to indicate a bias on the part of the Council in favor of Dr. Zelezny and CET 21 in a manner contrary to the provisions of the bilateral investment treaties between the Czech Republic and The Netherlands and the United States of America, respectively. Furthermore, should the Council or any other Czech governmental entity make any ruling or issue any statement contrary to the interest of CME and CNTS, it is likely that such ruling or statement would violate the protections afforded by such treaties".

"Dear ladies and gentlemen, members of the Committee, we hope that you will understand that we feel compelled to provide you with our concerns on the actions of the Council in connection with the relationship between CNTS CET 21. For almost seven years we have made large investments in the Czech Republic, and now those investments are being seriously threatened by the actions of Dr. Zelezny with the complicity of the Council. We hope, that in the light of the convincing arguments and facts set forth in Exhibit C attached hereto, you will, within your authority, take the position that the relationship between CNTS and CET 21 has been, and should remain exclusive and that the Council, through its actions, has demonstrated an inability to act in accordance with law and in an impartial manner. Should you feel that it would be helpful, we would welcome the opportunity to meet with you to discuss the issues raised in this letter at your convenience".

The Respondent in its argument in the Quantum Phase referred to Mr. Klinkhammer's witness statements and differences between his witness statements in this arbitration and the ICC arbitration. The Tribunal considered these differences carefully. Mr. Klinkhammer's witness statement in respect to his presentation to the Media Council on April 27, 1999 turned out to be correct once the respective hand-outs and the out-print of the audio-tapes came to the attention of the Tribunal in the Quantum Phase. These two documents reinforce the Tribunal's view, in support of the Tribunal's findings in the Partial Award, that CNTS strongly objected to the Media Council's regulatory letter of March 15, 1999 and, more than that, that the Media Council collaborated with Dr. Zelezny unhesitatingly in the realization of his scheme to oust CNTS.

CNTS shareholders (coerced by the Media Council) mutually agreed to lift the legal protection of the exclusive right to use the license by removing this protection from the MoA and transforming it into the Service Agreement. The right to use the license was still in place, however, without the legal protection of the MoA.

Moreover, as a matter of law, Czech Law does not support Respondent's contention. Professor Dedic has founded his argument on Art. 37 of the Czech Civil Code, a general provision that an act is invalid if not taken freely, whereas Art. 49 of the Civil Code is a specific statute addressing the effects of coercion under Czech law. While Respondent does refer to Art. 49 its characterization of this section as stating that "the consequences of coercion are a legal nullity, unless affirmed by the coerced party" is contradicted by the statute's plain language, which provides only for the voidability of a coerced act - not its invalidity. Civil Code Art. 49 says: "A party that has entered into agreement under duress citing conspicuously disadvantageous conditions has a right to withdraw from such agreement". Moreover, Art. 49 is legally inapplicable to the MoA and the Cooperation Agreement. The Czech Commercial Code specifically excludes the possibility of claiming invalidity on the grounds of coercion. See Czech Commercial Code Art. 267(2). "The provisions of Art. 49 of the Civil Code shall not apply to the relationships governed by this Code".

"The Respondent is obligated to remedy the injury that Claimant suffered as a result of Respondent's violations of the Treaty by payment of the fair market value of Claimant's investment as it was before consummation of the Respondent's breach of treaty in 1999 [...]". (Emphasis supplied.)

Respondent's contentions contravening the Tribunal's decision in the first Phase with respect to the standard of compensation fail. The Tribunal awarded damages on the basis of the fair market value of Claimant's investment as it was before consummation of the Respondent's breach of Treaty on August 5, 1999. This date is in accordance with Art. 443 of the Czech Civil Code, according to which the assessment of the amount of damage shall be based on the value at the point of time when the damage occurred. It is in accordance with customary international law, with the provisions of bilateral investment treaties, and with the holdings of tribunals applying international law.

"[..] that Respondent is obliged to remedy the injury that Claimant suffered as a result of Respondent's violation of the Treaty by payment of the "fair market value" of Claimant's investment […]."

"Neither contracting Party shall take any measure depriving, directly or indirectly, investors of the other contracting Party of their investments unless the following conditions are complied with:

[…] c. The measures are accompanied by provision for the payment of just compensation. Such compensation shall represent the genuine value of the investment affected […]"

As the NAFTA Award of October 11, 2002 put in Mondev International Ltd. V. United States of America, ICSID Case No. ARB (AF)99/2."the vast number of bilateral and regional investment treaties (more than 2000) almost uniformly provide for fair and equitable treatment of foreign investments, and largely provide for full security and protection of investments. Investment treaties run between North and South, and East and West, and between States in these spheres inter se. On a remarkably widespread basis, States have repeatedly obliged themselves to accord foreign investment such treatment. In the Tribunal's view, such a body of concordant practice will necessarily have influenced the content of rules governing the treatment of foreign investment in current international law." (at para. 117). "current international law, whose content is shaped by the conclusion of more than two thousand bilateral investment treaties and many treaties of friendship and commerce." (at para. 125).

International Law requires that compensation eliminates the consequences of the wrongful act. The Articles adopted by the United Nations International Law Commission on the Responsibility of States for Internationally Wrongful Acts provide for the "obligation to compensate for the damage caused", and specify that that compensation "shall cover any financially assessable damage including loss of profits..." (Art. 36). Paragraph 22 of the Commission's Commentary on its Articles states that: "Compensation reflecting the capital value of property taken or destroyed as the result an internationally wrongful act is generally assessed on the basis of the ‘fair market value' of the property lost." (As reprinted in James Crawford, The International Law Commission's Articles on State Responsibility, Introduction, Text and Commentaries, 2002, pp. 218, 225.). The World Bank Guidelines on the Treatment of Foreign Direct Investment specify that compensation will generally be deemed "appropriate" if it is adequate, effective and paid without undue delay and provide that (op. Cit., p.407):

"Compensation will be deemed "adequate" if it is based on the fair market value of the taken asset." (Emphasis supplied.)

Czech Law which contrary to Respondent's contention would only govern in the case of a more favourable treatment (see also Art. 3 (5) of the Treaty), also refers to international law for the determination of compensation. However, even in domestic disputes Czech Law provides for compensation comprising the "fair market value".

In any event, Czech law itself excludes its applicability in proceedings based on "International Agreements (treaties, conventions) binding on the Czech Republic" (Art. 25 (3) Czech Commercial Code). The Treaty is an international agreement within the meaning of Art. 25 (3) Czech Commercial Code. Art. 25 (3) Czech Commercial Code, therefore, excludes its applicability for valuation and determination of Quantum.

"The provisions of this Act shall apply to cases of expropriation unless provided otherwise in international investment protection agreements that are binding on the Czech Republic."

1998 1999 2000 2001 2002 2003

102,2 107,8 112,5 117,7 118,7 128,0

These projections by SBS were largely in accord with NOVA management forecast of February 17, 1999 (Exhibit CQ11, page 5 compared with Exhibit CQ147, page 1):

1998 1999 2000 2001 2002 _ 2003

102,1 96,0 104,6 109,2 116,4 126,1

The EBITDA projections used by SBS for CNTS (NOVA) station operating cash flow (STOCF) were as follows (Exhibit CQ147, page 3):

1997 1998 1999 2000 2001 2002 2003

49,9 51,1 48,2 48,6 52,3 54,2 56,1

These assumptions were largely consistent with the management forecast of February 17, 1999 (CQ11, page 5):

1997 1998 1999 2000 2001 2002 2003

49,9 54,9 47,8 50,5 49,6 54,9 63,1

• Necessity for effective agreement with Zelezny to insure control of license and operation

• Broadcast Council support for SBS entry in market

• Advertiser disappointment at loss of potential entrant

• NOVA has ceded important rights to non-related third party, Beseda Holdings (trademarks and merchandising)

• Zelezny and IPB have apparent control of Prima

• Feudal Lord may continue to resist operational control making it difficult to institute "best practices"

Therefore, the SBS valuation of CNTS in the amount of USD 400 million (STOCF 50.0 times 8.0 multiple) has a sound basis. This value is taken before allocating 18 % shareholding to Dr. Zelezny and before having deducted the 4 % CET21-fee. The NOVA management fee of 4,0 million projected for 2000 was not included in the valuation of CNTS as these items had been calculated by SBS at the level of the consolidated STOCF and not at the level of the individual company. The Tribunal is of the view that (similar to the SBS analysis) the management fee cannot be added to the individual value of CNTS taking into account that management services also on a stand alone basis must be paid anyway. Unclear is, whether the discounted "Zelezny annuity for license renewal = USD 27 million" was reflected in the attributable CNTS 2000/2001 STOCF (USD 41,506 million). According to the narrative of the March 29, 1999 SBS transaction update (page 4), the USD 27 million present value "has been assumed in pricing" (Exhibit CQ149, Exhibit E-2).

The Tribunal makes two observations in respect of this assessment. The equity value identified by Rothschild for CME Ltd on the basis of the SBS March 1999 analysis is not far from the valuation made by SBS for CNTS as separate asset, here above identified by USD 400 million, taking into account that the individual asset value for CNTS as used for the final determination of the share ratio included the "peace price" of USD 125 million, which to a certain extent must be eliminated from the value of CME Ltd and the value of CNTS, respectively, as explained above. After adding back a portion of the "price of peace" in accordance with the Tribunal's findings related to the "Zelezny Factor" and when disregarding certain deductions, which the Tribunal cannot accept (see below) Rothschild's calculation for the value of CNTS comes rather near to the Tribunal's valuation.

Rothschild Offer value (nominal) CME USD 374 million
Rothschild net debt added USD 134 million

Enterprise value of CME (without discount) USD 508 million
"price of peace" added back USD 125 million

USD 633 million

Rothschild value of non-CNTS assets deducted USD 207-259 million

Implied value of CNTS (before deducting attributable "price of peace") USD 426-374 million

Mean value on the basis of the Rothschild valuation without discounts, as adjusted by the Tribunal before deducting "price of peace" USD 400 million

• that he is not acting against the interest of CNTS in respect of either CET 21 license terms or competing against it; and

• is not actively influencing any competitor in the interests of CNTS.

Rothschild DCF valuation USD 320 - 350 million

Change to

- Monitor advertising share assumptions + USD 101 million
- Monitor programming assumptions + USD 79 million
- Monitor terminal growth rate (4% vs. 3.4%) + USD 27 million
- Other revenues + USD 2 million

Adjusted Monitor DCF valuation USD 545 million
- Inclusion of Jan-Aug 1999 cash flows USD 11 million

Monitor DCF valuation USD 556 million

(i) Market share and size

(ii) Revenues

(iii) Acquired programming (cash flow)

(iv) Production expenses

(v) Total programming costs (production expenses plus acquired program)

(vi) EBITDA margin

The following tables and the chart, prepared by Rothschild, are, as the Tribunal crosschecked, sufficiently reliable for the purpose of this arbitration.