Nicosia, Cyprus, 10 November 2015 – Central European Aluminum Company (CEAC), a Cyprus-based major shareholder and one of the largest creditors of Montenegro’s Kombinat Aluminijuma Podgorica (KAP), has given a cautious welcome to the European Commission’s Progress Report on Montenegro’s EU accession.
CEAC welcomes that the report has mentioned its ongoing litigation with the Montenegrin authorities over the illegal expropriation of KAP. However in a break with previous years’ reports and indeed with the European Parliament’s own resolution in March this year, the European Commission’s 2015 Progress Report does not capture the critical political and financial ramifications of the non-resolution of the KAP dispute, at a time when decisions in the international arbitrations on the dispute approach and the risk of contingent liabilities on the Montenegrin economy are becoming more concrete.
Moreover, the Progress Report requires an important clarification. It states that “the final instalment for the sale of KAP’s aluminium smelter was made in August 2015”. However this information is incorrect and the European Commission may have been deliberately misled in this regard. Payment was never made to the bankruptcy administrator. The money was paid into an escrow account, and a number of conditions must be fulfilled before the bankruptcy administrator can receive that money – not least of which is the resolution of all court proceedings relating to the bankruptcy proceedings.
Unfortunately the European Commission’s Progress Report seems not to have taken into account the European Parliament’s own grave concerns regarding the rule of law in Montenegro. In its March 2015 resolution, the European Parliament explicitly called on the government of Montenegro to “resolve commercial disputes with foreign investors that are critical to the economy of Montenegro”; expressed its grave concern over “the delay in the resolution of the bankruptcy procedure of Montenegro's biggest industrial manufacturer, the aluminum plant KAP”; and called for a sustainable solution to the dispute “based on transparency and the rule of law”. Indeed, the Parliament resolution singled out Montenegro’s cavalier disregard for the rule of law, particularly regretting that “Montenegro has ignored the injunction of the Cypriot court regarding the KAP sale”. In robust language that seriously called into question Montenegro’s willingness to abide by EU rules and rulings, the European Parliament called on Montenegro to “fully recognize relevant decisions by the judicial authorities of EU Member States”.
Commenting on the Progress Report, CEAC’s Director of Corporate Affairs Andrey Petrushinin said:
“While we cautiously welcome the European Commission’s progress report, it is unfortunate that the report contains inaccurate information regarding the KAP dispute, and it is perfectly conceivable that EU officials were deliberately misled in this regard. If this were to prove to be the case it would be further prove of the disdain with which the Montenegrin government holds the European institutions. We urge the European Commission to insist that the Montenegrin authorities to arrive at a swift, negotiated resolution of the KAP dispute.”
CEAC welcomes comments by Montenegro Rapporteur Tannock MEP that Montenegro needs to redouble its efforts in improving the rule of law and the independence of the judiciary and in fighting corruption. CEAC urges the European Parliament and Council to maintain continued pressure on the Montenegrin government to reform and to arrive at a swift and equitable resolution of the KAP dispute. To that end, we call for an independent, EU-backed inquiry into the KAP issue, from CEAC’s acquisition through to today. And we call on the government of Montenegro to heed the repeated urgings of the European institutions – Commission, Parliament and Council alike – to end this dispute, overhaul its governance and embed real and meaningful application of the rule of law in the country.
About the KAP dispute
CEAC has initiated international arbitrations against the government of Montenegro for breach of the KAP settlement agreement, and the foreign investments protection agreement between Cyprus and Montenegro. CEAC’s claims against Montenegro include for damages incurred as a result of the actions of the government of Montenegro and for violation of investor partnership agreements. CEAC has repeatedly called for a negotiated settlement to the KAP dispute, which the Montenegrin government has consistently ignored or rejected, imperilling the welfare of its own citizens. CEAC is not the only aggrieved foreign investor from EU with claims pending against the Montenegrin government: the cumulative value of which are now in excess of €1bn, which represents almost a third of the country’s GDP.
Media contact:
George Candon
FTI Consulting
+32 2 289 09 55