S EBASTIAN PAWLOWSKI used to gush about the economic potential of the Czech Republic and the wealth of Czech culture. The Swiss investor with Polish roots arrived in Prague in the early 1990s and became one of the top property developers in the Czech capital, then full of promise and excitement. He founded a popular private museum dedicated to Alphonse Mucha, a local art-nouveau master, and one to Franz Kafka, a Prague-born writer.

These days Mr Pawlowski is still a supporter of Czech arts, but would not invest another koruna in the country. He blames a kerfuffle over an investment in Benice, a Prague district where he bought land for residential development in 2007. This, Mr Pawlowski claims, was scuppered by local authorities, which in 2012 reversed zoning rules by court order.

Even now Mr Pawlowski still lacks permission to build the planned 800 flats. In 2017 he sued the Czech state at the World Bank’s International Centre for Settlement of Investment Disputes ( ICSID ) for $218m over a violation of the bilateral investment treaty ( BIT ) between Switzerland and the Czech and Slovak Federative Republic concluded in 1990, and still in force despite the country’s subsequent break-up.

Mr Pawlowski is not the only investor who says he was stiffed by local or national governments in central and eastern Europe. Some of these legal tussles are part of the transition to a modern market economy. A lack of co-ordination between local and national authorities that make different promises is partly to blame. Increasingly, however, the region’s governments seem wilfully to ignore international rules.

Investors’ biggest concern is the subjugation of local courts by populist rulers. Andrej Babis, the Czech prime minister who is facing criminal charges over the misuse of EU funds, recently replaced his justice minister with a loyalist. Last week his Hungarian counterpart, Victor Orban, shelved a plan to create a parallel court system that would handle cases involving the state. But his earlier overhaul of the justice system has fuelled concerns about judicial independence. So have similar moves by Poland’s ruling Law and Justice party.