PODGORICA (Montenegro), November 15 (SeeNews) – The Central European Aluminum Company (CEAC), a subsidiary of Russia’s En+ Group and one of the largest creditors of Montenegro’s aluminium smelter Kombinat Aluminijuma Podgorica (KAP), has launched a lawsuit in Cyprus over a commercial dispute with the Montenegrin government, CEAC said.
"CEAC would seek a compensation worth hundreds of millions of euros for the expropriation of KAP by the Montenegrin government," the group said in a statement on Monday.
The company also accused the Montenegrin government of fraud, claiming the government had deceived CEAC to invest as much as possible in the operation of the plant with the intention of expropriating it at a later stage,
In an emailed statement to SeeNews on Monday, the Montenegrin economy ministry said that CEAC had already lost a lawsuit against the country before the International Centre for Settlement of Investment Disputes (ICSID) in Paris in July and expects this ruling to be upheld.
"Bearing in mind the problems of the judicial system of Montenegro and the lack of a clear separation of powers, a fair trial is not guaranteed in Montenegro, which is why we were forced to state our demands before the courts in Cyprus, where the company is based. We are convinced that the Cyprus court took our request seriously and we are convinced in the fair and equitable hearing that we were denied in Montenegro," the director of CEAC, Andrey Petrushinin, said in the company statement.
KAP's performance worsened signficantly due to the economic crisis in 2008. The company was generating a daily loss of 280,000 euro ($302,525) and was unable to survive without government subsidies, mainly in writing off debt on electricity bills.
As of June 2009, the financial situation at the company had not improved. The Montenegrin government, not wanting to see the country's largest company being shut down, agreed to guarantee a 45 million euro loan to Deutsche Bank.
KAP entered bankruptcy proceedings at end-2013 and in 2014 was sold by the government to local company Uniprom, owned by entrepreneur Veselin Pejovic, for 28 million euro.
CEAC, owned by Russian oligarch Oleg Deripaska, launched proceedings against Montenegro before ICSID in March 2013 on the basis of an agreement for the protection of investments between Cyprus and Montenegro. The company said at the time that Montenegro's government interfered with its investments in KAP, which resulted in significant losses for the company, and sought 600 million euro in damages.
However, in July 2016, ICSID ruled in favour of Montenegro after finding that CEAC is not headquartered in Cyprus and does not represent a foreign investor in accordance with the terms prescribed by the international investment agreement and as such cannot launch this type of arbitration.
CEAC was established in 2005 to manage the aluminium business interests of the En+ Group in Central and Eastern Europe. CEAC’s portfolio includes Aluminum Plant Podgorica and Bauxite Mines Niksic, both in Montenegro, and Alumina Refinery Cemtrade in Oradea, Romania.
($ = 0.925126 euro)