The Montenegrin Agency for Protection of Competition (“Agency“) adopted on 15 March 2024 two decisions in which it found that unlawful state aid has been granted and ordered its recovery. It has not yet published decisions.
Steel mill “Željezara Nikšić”
The first decision concerns a former state-owned company, steel mill Željezare Nikšić (“Željezara“). At the time a state-owned undertaking, Željezara received state aid for restructuring in 2010, based on a restructuring program approved by the former State Aid Control Commission. That restructuring was unsuccessful and led to the bankruptcy of the company in 2012 which was then acquired from the bankruptcy estate by the Turkish investor Toscelik. The new owner continued with the steel production under the new name Toscelik Alloyed Engineering Steel Niksic. However, in March 2021, Toscelik halted production due to a decrease in demand for steel products caused by the COVID-19 pandemic. Despite the recovery of the steel market in Europe and a subsequent rise in prices, production did not resume and Toscelik was considering closing the steel plant. The Government stepped in through the state-owned electricity company Elektroprivreda Crne Gore (EPCG), which signed a contract on 30 December 2022 to purchase the assets of Željezara from the Turkish company Toscelik.
In 2021, the year preceding the acquisition, Željezara recorded losses. EPCG acquired the assets of Toscelik’s steel plant without a restructuring plan and without any prior economic analysis of the investment, which made the acquisition state aid given EPCG is a state-owned entity. However, EPCG did not notify state aid to the Agency nor did it request the Agency’s opinion on the proposed acquisition.
In its decision still to be published, the Agency ordered EPCG to take necessary measures to recover the incompatible state aid from Željezara and its parent company “TOSCELIK PROFIL VE SAC ENDUSTRISI” A.S without delay, and no later than within four months from the receipt of the decision. EPCG has two months to determine the amount of incompatible state aid and submit to the Agency a plan for the recovery of incompatible state aid, including information on the recovery measures that will have been taken in the meantime.
Unlawful state aid to Institute “Simo Milošević” and the new state aid plan
The Agency found that the Ministry of Finance granted unlawful state aid to the Institute for Physical Medicine, Rehabilitation, and Rheumatology “Dr. Simo Milosevic” a.d. Igalo (“Institute“) on the basis of the Contract on partial settlement mutual obligations, concluded on 29 September 2023 between the Serbian Deposit Insurance Agency from Belgrade, Jugobanka AD Belgrade in bankruptcy, and the state of Montenegro via its Ministry of Finance. By that contract, the state assumed the obligation of the Institute under a loan taken from Jugobanka AD more than three decades ago. The contract stipulates that the Institute’s debt would be reduced by EUR 1.36 million, which is the amount Serbia owes to Montenegro on the account of frozen foreign currency savings. After this reduction, Montenegro’s obligation would be reduced to EUR 5.3 million. The Agency ordered the Ministry of Finance to take necessary measures to recover the incompatible state aid from the Institute in the amount of EUR 1,366,113.32 without delay, and no later than within four months from the receipt of the decision. The Ministry of Finance also has two months to submit to the Agency a recovery plan and information on the measures that will have been taken in the meantime to recover the aid.
In the aftermath of this decision, the Government of Montenegro announced a solution for the Institute to avoid its bankruptcy and prepare it for privatization. The package consist of:
- de minimis aid of EUR 300,000 to ensure the continuity of operations;
- rescue aid of up to EUR 10 million for a period of six months to unblock accounts, continue operations, and pay salaries, with the obligation to develop a restructuring plan to be submitted to the Agency for approval; and
- restructuring aid, based on a restructuring plan to be submitted to the Agency for approval.
The proposed EUR 300.000 for de minimis aid assumes that the Government will have to adopt the amendments to the Rulebook on the List of State Aid Rules to increase the ceiling for de minimis state aid from current EUR 200.000 to 300.000, in line the recent amendments of the EU De Minimis Regulation.
The proposed rescue aid to the Institute will have to be notified to the Agency, along with a rescue plan for a period of six months, to be followed by a five-year restructuring plan in line with the Guidelines on state aid for rescue and restructuring of companies in difficulty.
