Tiscali 2007 Annual Report Download - page 104

42. Ongoing disputes, contingent liabilities and
commitments
During the normal course of its business, the Tiscali Group is
involved in a number of legal and arbitration proceedings, as well
as being subject to tax assessments.
A summary of the main proceedings to which the Group is a
party, is presented below.
42.1 Disputes
Vereniging van Effectenbezitters/ Stichting Van der Goen WOL
Claims dispute
In July 2001, the Dutch association Vereniging van Effectenbezit-
ters and the Stichting VEB-Actie WOL foundation, which repre-
sent a group of around 10,000 former minority shareholders of
World Online International N.V, summonsed World Online Inter-
national NV (currently 99.5% owned by Tiscali) and the finan-
cial institutions tasked with the stock market listing of the Dutch
subsidiary, disputing, in particular, the incomplete and incorrect
nature, as per Dutch law, of certain information contained in the
listing prospectus and of certain public statements made, imme-
diately prior to and after the listing (on 17 March 2000), by the
company and by its chairman.
By means of provision dated 17 December 2003, the first level
Dutch court deemed that in certain press releases issued by
World Online International NV prior to 3 April 2000, sufficient
clarity was not provided regarding the declarations made public
by its former chairman at the time of listing relating to his share-
holding. Consequently, World Online International N.V was held
responsible vis-à-vis the parties who had subscribed the shares
of the company at the time of the IPO on 17 March 2000 (start
date of trading) and who acquired shares on the secondary mar-
ket up to 3 April 200o (date on which the press release was
issued, specifying the effective shareholding held by the former
chairman of World Online International NV). World Online Inter-
national BV appealed against this decision, deeming that it was
not necessary to provide further clarification, citing the correct-
ness of the information prospectus.
On 3 May 2007, the Amsterdam Court of Appeal partially amend-
ed the decision of the first level court, deeming that the prospec-
tus used at the time of listing was incomplete in some of its parts
and that World Online International BV should have corrected
certain information relating to the shareholding held by its for-
mer chairman, reported by the media before said listing; further-
more, it was deemed that the company had created optimist
expectations regarding the activities of World Online Internation-
al NV. The sentence restricts itself to ascertaining the company’s
responsibility and that of the financial institutions tasked with the
stock market listing, but does not pass judgement with regards
to the existence and the amount of any damage, which will have
to form the subject matter of new and separate proceedings, as
yet not started up. On the basis of this verdict, the investors who
became shareholders of World Online International NV between
17 March 2000 and 3 April 2000, could undertake action for the
compensation of the related damages before the competent Court.
On 24 July 2007, the Dutch association and the foundation men-
tioned above proposed an appeal before the Dutch Supreme Court
against the sentence of the Court of Appeal. On 2 November 2007,
World Online International NV and the financial institutions tasked
with the stock market listing filed their counter-appeal. Similar
proceedings have an average duration of between 15 and 18
months approximately and at present it is not possible to make
any forecasts regarding the outcome of these proceedings.
A dispute of a similar nature to that described above was for-
warded by another Dutch foundation, Stichting Van der Goen
WOL Claims, in August 2001, and letters were subsequently
received from other parties, in which the hypothesis of being able
to proceed with similar action, if the conditions should apply.
It appears premature to consider that significant liabilities will
probably arise in relation to these disputes, which are potential-
ly remarkable, and in any case sufficiently defined elements do
not exist for quantifying the potential liability. Therefore, no pro-
vision was made in the financial statements.
KPNQWest Bankruptcy dispute
The subsidiaries Tiscali International Network BV and Tiscali
International Network SA are involved in a dispute furthered
by the receivership of the company KPNQWest Bankruptcy, a
joint venture formed between the Dutch KPN and the US Qwest,
currently in liquidation. The dispute, which arose in previous
years, concerns a 5-year IRU agreement entered into between
Tiscali International Network BV and KPNQWest, which envis-
aged the payment by the former of an amount of EUR 3.1 mil-
lion for the performance of services by the second. Following
the liquidation of KPNQWest, the provision of services was
interrupted after only 5 months and Tiscali International Net-
work BV received and recognised invoices for the sum of EUR
1.5 million. KPNQWest has demanded payment of the entire
amount stipulated in the agreement.
Tiscali in turn objected to a demand for payment of this amount
given the damages sustained from interruption of the service. On
17 March 2006, Citybank (acting as liquidator of KPNQwest) filed
a precautionary attachment request for a value of around EUR
5 million on the bank current accounts of Tiscali International
Network BV which did not bring about any significant result.
The dispute, which is not expected to be concluded over the short-
term, is still underway, but it is not envisaged that significant liabili-
ties may emerge from the same. On the basis of the information
available, considering the level of risk and on a consistent basis with
the progress of the lawsuit, the provision, previously made for EUR
4.2 million, was considerably curtailed in the Tiscali 2006 consoli-
dated financial statements. The remaining liabilities in relation to this
dispute present in the consolidated financial statements refer to the
payables relating to Tinet BV amounting to around EUR 1.5 million..
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
103