Montenegro is not the EU poster child it claims to be

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The European Commission’s latest progress report on enlargement shows growing frustration at Montenegro’s sclerotic progress and what can only be interpreted as window-dressing to receive a good scorecard, writes Dr Matthias Menke.

Dr Matthias Menke is an attorney at Graf von Westphalen in Frankfurt. He acts as an external counsel to the Central European Aluminium Company (CEAC), a Cyprus-based company which aims to become an integrated aluminum producer for Central and Eastern Europe.

This week’s enlargement progress report from the European Commission marked a new departure in the EU’s attitude towards Montenegrin accession.

For the first time, there has been explicit recognition from most senior diplomatic circles that Montenegro is not the poster child of European enlargement it has claimed to be.

In reaction to the progress report on Montenegro, Enlargement and Neighbourhood Policy Commissioner Stefan Füle himself said that “the degree to which […] rule of law related reforms produce results will determine the overall pace of the accession negotiations. If no tangible progress is made, negotiations would have to slow down”.

This is pretty strong language from the European Commissioner – the strongest we’ve seen in relation to Montenegro’s EU accession in a long time – and for the first time opening the prospect of putting the brake on Montenegrin accession.

It seems clear that there is growing frustration within the EU at Montenegro’s sclerotic progress and what quite frankly can only be interpreted as window-dressing: doing the very minimum possible at the last minute in order to receive a good scorecard. We had further proof of this only on Tuesday, when after more than a year of procrastination, the government finally appointed a Superior State Prosecutor, just one day before the publication of the Progress Report.

European diplomats see through such tactics and are rightly increasingly impatient with the Montenegrin government’s antics. Media reports that Prime Minister Milo Djukanovi? has been running the country “as though it were a family business” is extremely worrying – so much so that the safeguard clause freezing accession negotiations was very nearly invoked.

Commissioner Füle also raises concerns over Montenegro’s judicial system, saying that “citizens deserve to be able to rely on the swift, efficient and impartial administration of justice” – the clear implication being that they currently cannot.

Sadly, we can confirm that impartial justice not a reality in Montenegro, and the politicisation of the judicial process remains a real problem. The Central European Aluminium Company (CEAC) made significant investments in the KAP smelter, at the time the largest industrial concern in Montenegro, but over the course of the past decade saw its investments undermined by the Montenegrin government. Unable to receive justice within the Montenegrin legal system, CEAC has had to initiate several international arbitration proceedings against the government of Montenegro for breach of the KAP settlement agreement, and the foreign investments protection treaty between Cyprus and Montenegro.

And CEAC is not the only aggrieved foreign investor from EU with claims pending against the Montenegrin government in international courts, which serves to underline how deeply broken the legal system is.

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”.

Indeed, the cumulative value of the many international arbitration cases pending against the state of Montenegro from foreign investors now exceeds €1bn. This represents almost a third of the country’s GDP of €3.4bn. If the State of Montenegro is found against in these proceedings, as is likely, this would seriously endanger the Montenegrin economy. Through its contempt for the rule of law and international investors’ rights, Djukanovic’s government is wilfully imperilling the wellbeing of its own citizens.

While we have always stated that we support Montenegro’s eventual EU membership, it cannot be at any cost, and Stefan Füle rightly recognises this. The hard facts on the ground demonstrate that extremely serious issues of the rule of law and investor protection persist. We are extremely encouraged that the European Commission recognises how serious these are.

Now, there is clear pressure on the Montenegrin government from the European Commission itself 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.