The government of Montenegro is frightening off international investors, writes Matthias Menke

Montenegrins go to the polls to vote in local elections at the same time that voters across the whole of the EU vote in important European Parliament elections. The timing may be coincidental, but is certainly propitious, for it is clear that Montenegro’s future should lie in Europe.

That is why it is extremely worrying that the actions of the government of Montenegro, the very people who should be securing and defending for Montenegro’s citizens a prosperous and secure future within the EU, are seriously harming Montenegro’s EU accession prospects.

Through its heavy-handed treatment of foreign investors in Montenegro to its questionable record on human rights – including the case of the former CFO of KAP (Kombinat Aluminijuma Podgorica, Montenegro’s largest aluminium smelter), and attacks on journalists critical of the ruling party that seem to go unpunished or under-investigated – as well as the lack of effective separation of judicial and executive powers, the government’s actions are doing serious damage to Montenegro’s reputation internationally.

A key issue in the future prosperity and wellbeing of Montenegrin society is how attractive Montenegro is as a country to attract inward investment. Significant inward investment is important in securing a strong long-term economic future for the country. But the government’s track record in its treatment of foreign investors has meant that prospective investors are understandably extremely wary of entering the Montenegrin market.

KAP, once the single biggest industrial concern of the Montenegrin economy, has been run into the ground through government interference. The Central European Aluminum Company (CEAC) invested hundreds of millions into KAP with a viable plan to make it profitable and secure its future. But CEAC has been stripped of its ownership of KAP by the Montenegrin government, and the company has been turned into a bottomless pit rather than the flourishing business it should be. Government actions have already led to the payment of over €100m in state guaranties, and it is estimated by senior international bankers that keeping KAP open is now costing €300,000 a day – that’s an annual personal cost of €175 to every man, woman and child in the country.

CEAC is unfortunately just one of several foreign investors that have suffered at the hands of the government, and it has raised its concerns with the highest-level authorities in Brussels. It is also one of several foreign investors in Montenegro that have launched arbitration proceedings against the government of Montenegro in international courts – which clearly demonstrates the government’s pattern of behaviour.

CEAC seeks international arbitration because of the government’s unwillingness to sit around the negotiating table and come to an equitable solution. CEAC has offered a negotiated settlement in good faith and with goodwill, but its offer has been rejected.

 Montenegro is unfortunately now better known internationally for these arbitration cases pending against the government than as an attractive destination for inward investment. The government through its actions has seriously damaged Montenegro’s inward investment potential for economic growth. Montenegrins should think about what future they want for Montenegro, and its future place in Europe.

Matthias Menke is a lawyer with Graf von Westphalen in Frankfurt, Germany, and external counsel for Central European Aluminum Company