Bloomberg | 12 August 2021
Discovery legal challenge escalates Poland-US media row
By Thomas Seal and Wojciech Moskwa
Discovery Inc. plans to take legal action against the Polish government for potential breach of a bilateral investment treaty with the U.S., escalating a standoff over the media giant’s television assets in the east European country.
A “notice of dispute” for violating the pact between the two NATO allies was sent to President Andrzej Duda, Discovery said late on Thursday.
A day earlier, Poland’s lower house of parliament passed legislation that — if implemented — will force the U.S. company to sell more than 50% in its TVN unit, triggering criticism from U.S. Secretary of State Antony Blinken and senior European Union officials.
Furthermore, Poland’s media regulator has for more than a year refused to renew the broadcasting license for Discovery’s TVN24 news channel, drawing accusations that the country was seeking to silence independent journalism. Its chief, Witold Kolodziejski, said Friday that the 1990 bilateral treaty exempts broadcasting ownership.
Discovery, the third-largest U.S. investor in Poland, said the ordeal is a warning for other foreign companies seeking to do business in the European nation, calling the government’s actions “damaging and discriminatory.” If it can’t reach a resolution with Poland, Discovery said it will pursue the case through arbitration.
“We are deeply committed to safeguarding our investment in Poland and its people, defending the public’s interest in independent media and the rights of freedom of expression,” said Jean-Briac Perrette, President and CEO of Discovery International. “This legislation will have a chilling effect on U.S. and European investment into the Polish economy, and we will aggressively defend our rights.”
Shares of Silver Spring, Maryland-based Discovery fell as much as 2.5% in New York trading Thursday.
Kolodziejski, the head of the National Broadcasting Council, told Radio24 that the regulator hasn’t been able to extend TVN24’s license because some legal assessments show the station’s U.S. ownership breaches existing rules.
TVN has rejected such thinking, saying its operations were cleared by the watchdog after it was purchased by U.S.-based Scripps Networks Interactive Inc. in 2015. Two years later, Discovery acquired Scripps and took control of the Polish broadcaster.
Also, the regulator has prolonged broadcasting licenses for other TVN channels in past years.
The current law bans companies from outside the European Union, as well as the associated economic areas of Iceland, Liechtenstein and Norway, from controlling television and radio stations. Discovery effectively gets around this by controlling its TVN group through a unit domiciled in the Netherlands.
The draft legislation, which will be debated by Poland’s Senate next month, tightens the ban by specifying that both direct and indirect ownership from outside the European Economic Area is banned.
Prime Minister Mateusz Morawiecki has said the legislation is vital for the country to prevent Russian or Chinese media taking over a Polish broadcaster. It also showed Poland was finally standing up for its rights after decades of passively accepting the international order, he said.
Poland’s nationalist leaders considered themselves political allies of Donald Trump, but under President Joe Biden ties have cooled. U.S. officials have spoken out on the erosion of the country’s democracy, its treatment of the LGBTQ+ community and, most recently, growing investment risks.
Discovery said it will seek “seek full compensation for Poland’s breaches” of the treaty, citing concerns over fair and equitable treatment, non-impairment by arbitrary and discriminatory measures, non-discrimination in granting licenses, and the prohibition on expropriation without compensation.
The company “continues to strive for a positive resolution to this situation, but should this fail, Discovery intends to commence arbitration proceedings.”