UPDATE 2-Czechs, Nomura agree to drop compensation claims

(Adds expected payment, opposition protest, details)

By Jan Lopatka

PRAGUE, Nov 30 (Reuters) - The Czech Republic and Japan's Nomura Holdings <8604.T> agreed on Thursday to call a truce in a six-year legal battle over the failure in 2000 of the third biggest Czech bank.

The two sides agreed they would halt multi-billion dollar arbitration cases against each other and end further disputes which arose from the largest-ever bank collapse in the Czech Republic.

"The threat of payments in the range of (dozens of) billions of crowns has been eliminated and the main arbitration cases are being abandoned," Finance Minister Vlastimil Tlusty told reporters after signing the agreement.

Tlusty said the settlement could still see the Czech Republic pay some award to Nomura, but it would be much smaller than the up to 70 billion crowns he estimated the Czechs could have been ordered to pay in arbitration.

"It is close to nil ... We are talking about billions (of crowns), and no longer about tens of billions," he added.

IPB bank was controlled by Nomura through an affiliate before it ran into a liquidity crunch in 2000.

A central bank-appointed administrator seized the bank with the help of armed police units and three days later sold it to rival CSOB, a Czech unit of Belgium's KBC <KBKBt.BR>, for 1 crown in a deal involving state guarantees.

The government took over IPB's non-performing debt, which cost it more than 100 billion Czech crowns ($4.72 billion), or over three percent of the country's annual economic output.

The Czech government and Nomura blamed each other for IPB's collapse and each demanded compensation.

The EU newcomer had at one point said it might demand Nomura pay up to 263 billion crowns to cover the costs the government incurred to avert what it said could have been a serious economic crisis.

Previous Czech left-wing Social Democrat governments had unsuccessfully sought a settlement with Nomura. The new government of right-wing Civic Democrats, who had criticised the way IPB was taken over, started a new talks in September.

As a part of the settlement, Tlusty will ask President Vaclav Klaus to pardon people investigated in the Czech Republic in connection with the case, triggering an immediate protest by the Social Democrats.

"The government has no right... to influence criminal prosecution in such a way, the government cannot and must not do so," deputy speaker Lubomir Zaoralek said in parliament.

The Czech Republic lost an arbitration case launched by Nomura in March, and also an appeal against that decision, but no compensation was awarded in the case. There has been no ruling on a Czech counter-suit. Tlusty said he expected CSOB to join the agreement by the end of they year, ending further disputes. ((Reporting by Jan Lopatka, editing by Rory Channing/Sue Thomas; prague.newsroom@reuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474)) ($1=21.19 Czech Crown) ($1=21.19 Czech Crown)

Keywords: CZECH NOMURA/