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Obstinacy is jeopardising Montenegro’s stability and EU prospects

With the adoption of its robust resolution on Montenegro in plenary (11 March), the European Parliament has become the third of the EU’s three major institutions to voice its grave concern over that country’s complacency regarding its eventual accession writes Matthias Menke The European Parliament’s resolution is a damning indictment of the Montenegrin government’s sclerotic pace of reform, clear recalcitrance and utter irresponsibility.

The Parliament is rightly worried to see how little progress Montenegro has made in addressing fundamental issues around the protection of foreign investors in the country. The resolution has highlighted the Montenegrin government’s contempt not just for EU rules, but also for the rulings of EU Member State courts, and, to my mind, confirms the serious concerns already voiced about Montenegro’s suitability – indeed, its ability – to become an eventual EU member under its current leadership.

It is the government’s downright disregard for the rule of law within Montenegro which has led to the numerous international arbitration cases against the state that risk endangering the country’s fundamental financial stability. I fail to understand how the government of Montenegro can be so complacent about the incredibly dire situation in which it finds itself – and which it itself has created. Only last week the country’s prime minister Milo Đukanović once again dismissed out of hand any negotiated settlement of the KAP dispute. It is this arrogant posturing that is jeopardising the country’s long-term economic stability.

The government’s cavalier treatment of foreign investors has led to a raft of commercial disputes in international courts that could cost the country in excess of US$1bn. That’s almost a staggering 30% of the country’s GDP. This would cripple the economy in a period when the state will be facing what the IMF calls “substantial repayments of Eurobonds and commercial bank loans” over the next five years, peaking at 8-9% of GDP a year in 2015, 2016 and 2019*. The IMF’s recent country report on Montenegro warns that the country’s “public finances are subject to numerous risks”, and the European Commission in its own conclusions on Montenegro spoke of the “risk of a new round of contingent liabilities for the public finances” of the state.

As one of a handful of international companies that believed in the potential of Montenegro and put its money where its mouth is to support and develop the economy, CEAC deeply deplores the authorities’ behaviour and track record towards foreign investors. The KAP dispute may be the most flagrant example of the government’s contempt for foreign investors, but unfortunately it is far from being the only one, as the massive claims against the state attest. It is due to its complete disregard of our repeated demands for a negotiated settlement and the non-application of the rule of law in Montenegro that we, like many other foreign companies, have had to resort to international courts.

While we have always said that we support Montenegro’s eventual EU membership, and continue to do so, that cannot be at any cost. The recent reports and resolutions from the European Commission, Council and Parliament rightly recognise this fact. How can Montenegro aspire to EU membership when it refuses to respect the jurisdiction of EU Member State courts and the fundamentals of EU law?

We can only hope that the government of Montenegro will at last take heed of the repeated and resounding calls on it from the EU to take all the measures necessary to resolve the KAP dispute and the multiple other cases against it that are impeding its progress and imperilling its prosperity. If it does not, it could well see its path to the EU barred.

*http://www.imf.org/external/pubs/ft/scr/2015/cr1526.pdf

Dr Matthias Menke, is an External Counsel for the Central European Aluminium Company.

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