50. Contingent liabilities and proceedings before courts, arbitration or public administration bodies

50.1. Sureties and guarantees

The table below presents actual bank guarantees under the agreements concluded with BZ WBK S.A. and Pekao S.A. to the limits specified therein:

Guarantees as at 31 December 2014

Guarantees of Lubelski Węgiel Bogdanka S.A.

50.2 Pending proceedings before courts of general jurisdiction

Actions brought by the Group

Actions which ENEA S.A. and ENEA Operator Sp. z o.o. brought to courts of general jurisdiction refer to claims for receivables due to sale of electricity (the so–called electricity cases) and claims for other receivables – illegal consumption of electricity, connections to the grid and other specialized services (the so-called non-electricity cases).

Actions brought to courts of general jurisdiction by ENEA Wytwarzanie Sp. z o.o. are connected mainly with claims for outstanding invoice payments and contractual penalties from the Company vendors.

As at 31 December 2015 the total of 11 584 cases brought by the Group were pending before common courts for the total amount of PLN 219 468 thousand (10 662 cases for the total amount of PLN 105 621 thousand as at 31 December 2014).

None of these cases can significantly affect the Group’s net profit.

Actions brought against the Group

Actions against the Group are brought both by natural and legal entities. They mainly refer to issues such as compensation for interrupted delivery of electricity, identification of illegal electricity consumption and compensation for use by the Group of real property where electrical devices are located. The Group considers actions concerning non-contractual use of real property as particularly important (Note 50.5).

As at 31 December 2015 there were 2 282 cases pending before common courts which have been brought against the Group for the total amount of PLN 301 815 thousand (as at 31 December 2014 1 928 cases for the total amount of PLN 281 481 thousand). Provisions related to the court cases are presented in note 34.

50.3 Arbitration proceedings

Proceeding brought by Mostostal Warszawa S.A. and Acciona Infraestructuras S.A. against Lubelski Węgiel Bogdanka S.A. is conducted before the Arbitration Court at the Polish Chamber of Commerce in Warsaw under file number SA 64/15. Arbitration proceeding was commenced on the basis of request for arbitration filed by the Consortium on 7 April 2015. The Consortium ordered that LWB should pay to the Consortium the amount of PLN 574 thousand with statutory interests on the above amount from 23 April 2015 (ie. from the date of submission of letters extending the call for arbitration) to the date of payment. The Consortium reserved the right to further claims in the course of this or any other proceeding. Currently the Company expects to the Court's decision within its jurisdiction pursuant to the paragraph 3 of the Rules of the Arbitration Court at the Polish Chamber of Commerce in Warsaw.

50.4 Proceedings before public administration bodies

Regarding ENEA Wytwarzanie Sp. z o.o. before the public administration bodies and administrative courts are carried out proceedings on:

1. “Towarzystwo na rzecz Ziemi” filed a complaint to the Administrative Court (WSA) against the upholding decision to refuse to initiate proper proceedings in subject of statement of the decision invalidity. After exhausting the administrative appeals case mentioned above was transfered strictly to the Supreme Administrative Court (NSA). Currently pending for recognition of cassation (related to the construction of a new power unit). By judgment of 10 December 2015 (ref. no. act. IIOSK949/14 and II OSK 950/14) the Supreme Administrative Court dismissed the cassation appeal lodged by “Towarzystwo na rzecz Ziemi”. The cases have been validly terminated.
2. “Towarzystwo na rzecz Ziemi” filed a complaint to the Administrative Court (WSA) against the refusal to initiate proceedings to state the decisions setting environmental conditions and decision changing aforementioned decision as invalid (related the construction of a new power unit).
3. Complaint filed by foundation ClientEarth Poland about permission to participate in administrative proceedings in case of emission of greenhouse gas, proceeded on the basis of art. 50 of Act on trading greenhouse gas emission privileges from 28 April 2011. The Supreme Administrative Court (NSA) repealed the WSA’s sentence. WSA repealed the decision of the Minister and the Marshal refusing the Foundation admission to participate in proceeding, through the sentence dated 5 November 2015. The Court has not delivered substantiation yet. The party is entitled to file a cassation appeal to the decision.

Proceedings conducted by public administration courts regarding company Lubelski Węgiel S.A. refer, inter alia, to disputes with local government units regarding real property tax. The question stems from the fact that the Company, drawing up the real property tax, did not take into account (similarly to other mining companies in Poland) the value of underground mining pits or the value of equipment included in them in the calculation of this tax. Disputes are currently conducted with the Puchaczów, Cyców and Ludwin municipalities, i.e. where the Company has been conducting extraction, as well as with the Milejów municipality. The suits refer to both the reimbursement of surplus payments, and the establishment of basis for taxation with real property tax for 2004-2007 in terms of surplus payments, and for 2008-2012. To cover possible claims in real property tax, the Company has established provisions of PLN 23 881 thousand. Furthermore, a proceeding is conducted by the District Court in Lublin, regarding ZUS claims in accident insurance contribution – namely the legitimacy of requalification of accidents at work and the repeal of sanction imposed as a result of ZUS (Lublin Division) inspection of the Company. The company has provisions of PLN 18 727 thousand to cover any possible claims in this respect.

The contingent liability in reference to legal claims concerning the remuneration for the co-creators of inventions covered by patents No. 206048 and 209043, functioning in the Company, from which the Company does not create provisions, mainly may result from an inability to assess the merits of the amount of the claim and the discrepancy between the Company's position and the position of the co-creators of inventions, covered by aforementioned patents.

The value of potential liability at the date of LWB acqusition is PLN 48 million. The Company estimated the provision for the remuneration for the co-creators of inventions in accordance with their best knowledge and principles previously applied by the Company. In the position of provision for legal claims, the Company presents on the acquisition date, provision for claims relating to remuneration for the co-creators of inventions covered by patent No. 206048 and 209043, functioning inside the Company, in the amount of PLN 3 554 thousand. Remuneration’s value issue will be a subject to the work of court experts or experts mutually accepted by both parties.

Until the acquisition day, the LWB issued to the Consortium of Mostostal Warszawa S.A. and Acciona Infraestructuras S.A. („Consortium") a debit notes in respect of contractual compensation, contractual penalties for delays in the realization of the contract and compensation for lost of benefits – in the total amount of PLN 34 592 thousand. At the same time, on 7 April 2015, a claim against LWB filed from the Consortium to the Court of Arbitration at the Polish Chamber of Commerce. The complaint relates mainly to claims of reimbursement of costs incurred by the Consortium in relation to the longer time of the realization of the contract and the contractual penalty for withdrawal from the contract due to the fault of the company, in the total amount of PLN 27 232 thousand. Legal action of the Consortium to the Court of Arbitration, according to the opinion of the Management Board, was a reaction to penalty imposed on Consortium, contractual compensation and compensation for the lost benefits. According to the Management Board, probability of adverse verdict and possible necessity to pay the claim is low and final financial result of the mutual claims should not be negative for the Company. At present, the Company awaits for Court’s decision on the basis of par. 3 item 3 of Arbitration Rules of Court of Arbitration in Polish Chamber of Commerce in Warsaw.

50.5 Risk related to the legal status of property used by the Group 

The risk related to the legal status of the property used by the Group results from the fact that the Group does not have all legal titles to use the land where transmission networks and the related devices are located. The Group may have to incur costs related to non-contractual use of property in the future.

Considering the legal status, there is a risk of incurring additional costs related to compensation claims for non-contractual use of land, rental fee or, rarely, claims related to the change of facility location (restoring land to its previous condition).

Decisions related to these issues are significant as they considerably affect both the Group’s strategy towards persons who raised pre-trial claims related to devices located on their land in the past and the approach to the legal status of devices in case of new investments.

The risk of loss of assets is low. The lack of legal status of the land where transmission networks are located does not constitute the risk of loss of Group’s assets, but generates potential additional costs to be incurred as a result of claims for non-contractual use of land, rental and easement fees or exceptionally, in individual cases, relocation of assets (restoration of the land to the original state). The relevant provisions for that purpose have been made by the Group.

ENEA Group also recognized provision for the compensations for non-contractual use of the real properties on which the grid assets are located (power lines), in connection with transmission corridors and transmission easements on the above mentioned real properties.

As at 31 December 2015 the Group recognized the provision for non-contractual use of land in the amount of PLN 189 429 thousand.

50.6 Motions for settlement of not balanced energy trading in 2012

On 30 and 31 December 2014 ENEA S.A. submitted motions for settlement to:

The subject of motions was claim for the payment of electric energy consumed under the system of energy balancing. Claimed companies earned unjustified benefits by refusing ENEA S.A. to issue invoice corrections for 2012.

Till the reporting date five proceedings were conducted but claims of ENEA S.A. were not accepted.

In the absence of amicable settlement of the above case, ENEA S.A. filed the following lawsuits against above mentioned entities:

• FITEN S.A. - lawsuit of 24 November 2015, the amount of dispute: PLN 207 thousand,
• TAURON Polska Energia S.A. – lawsuit of 10 December 2015, the amount of dispute: PLN 17 086 thousand,
• TAURON Sprzedaż GZE Sp. z o. o. – lawsuit of 10 December 2015, the amount of dispute: PLN 1 826 thousand,
• PKP Energetyka S.A. – lawsuit of 28 December 2015, the amount of dispute: PLN 1 272 thousand,
• PGE Polska Grupa Energetyczna S.A. – lawsuit of 29 December 2015, the amount of dispute: PLN 7 410 thousand.

Claim of ENEA S.A. against FITEN S.A. is pending before the District Court in Katowice under file number XIII GC 561/15/IW. In the course of the dispute, defendant prepared a response to the lawsuit on 22 December 2015.

ENEA S.A., in response to the position of the other party, upheld in full the demands contained in the lawsuit of 24 November 2015. The date of the next hearing has been set on the 17 March 2016.

Claim of ENEA S.A. against TAURON Polska Energia S.A. is pending before the District Court in Katowice under file number XIII GC 600/15 / AM. On 20 January 2016 the defendant requested an extension of the deadline for submission of the response to the lawsuit due to the complexity of the facts in the case and the extensive evidence attached to the lawsuit, which - according to the defendant - requires detailed analysis.

In other cases, as at the date of the preparation of these consolidated financial statements, no action has been taken.