PRESS RELEASE
CEAC welcomes the findings of the European Commission’s progress report on Montenegro's EU accession re KAP
CEAC is encouraged by the Report’s findings on the need to find swift resolution to the KAP issue in particular
Nicosia, Cyprus, 08 October 2014 – Central European Aluminum Company (CEAC), a Cyprus-based major shareholder and one of the largest creditors of Montenegro’s Kombinat Aluminijuma Podgorica (KAP), today welcomed the findings of the European Commission’s Progress Report on Montenegro’s EU accession, which is explicit about the urgent need for the Government of Montenegro to resolve the ongoing dispute around Kombinat Aluminijuma Podgorica (KAP), once the county's largest industrial concern.
The Progress Report points to the deep problems within the state of Montenegro. In particular, the report is explicit about the urgent need for the government of Montenegro to resolve the ongoing dispute around KAP, once the country’s largest industrial concern. It explicitly says that “the political consensus on market economy fundamentals has broadly been maintained, with one particular exception concerning the resolution of the bankrupt aluminium firm (KAP) and its debt clearance.”
CEAC acquired a controlling stake in KAP in 2005 and invested heavily in the smelter. CEAC's investments in and management of KAP have been systematically undermined at the hands of the Montenegrin government over the course of past years, culminating in the illegal expropriation, and sale of KAP's assets in July 2014, against which the District Court of Nicosia, Cyprus, issued an injunction. The progress report acknowledges the Cypriot court’s decision and dissention with the opinion of the Montenegrin courts: “One of the former co-owners (CEAC) filed several complaints against the sale of KAP that were rejected by local courts. However, a Nicosia court adopted a decision banning the sale of KAP’s assets.”
CEAC has initiated two 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 total more than €900m, including the damages incurred as a result of the actions of the government of Montenegro and for violation of investor partnership agreements. Just last week (30 September), CEAC increased the amount of its claim in one of its cases against the government of Montenegro from €100m to some €310m. A further claim of €140m was lodged in favour of all KAP creditors.
CEAC has repeatedly called for a negotiated settlement to the KAP dispute, which the Montenegrin government has consistently either 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, of €3.4bn. The progress report explicitly talks to the grave risk to the Montenegrin economy that the unresolved KAP dispute represents: “The sale of KAP remains on hold until the bankruptcy administrator can transfer the property free of litigation, with risks of a new round of contingent liabilities for the public finances.”
Commenting the conclusions of the European Commission’s progress report on Montenegro's EU accession, CEAC General Counsel, Pavel Priymakov said:
“While we have always stated that we support Montenegro’s eventual EU membership, it cannot be at any cost. The hard facts on the ground demonstrate that extremely serious issues of the rule of law and investor protection persist, as attested in this report. We are extremely encouraged that the European Commission recognises these problems. Now, there is clear pressure on the Montenegrin government to implement meaningful reforms, to resolve the KAP dispute and to bring to a satisfactory resolution the multiple cases against it from foreign direct investors like CEAC”.