Following the decision on opening investigation into alleged illegal state aid to Montenegrin airline company Montenegro Airlines, which led to grounding of its airplanes and termination of transport operations in December 2020, the Montenegrin Agency for Protection of Competition (“Agency“) has opened two more investigations into alleged illegal state aid granted to state-owned transport companies.
On 10 December 2020, the Agency issued a decision to open an investigation into state aid granted by the Ministry of Transport and Maritime Affairs (now the Ministry of Capital Investments) (“Ministry“) to Crnogorska plovidba A.D., a state-owned shipping company, in the amount of EUR 4,913,358 in 2018 and EUR 4,830,093 in 2019. On 18 January 2021, it initiated an investigation into state aid granted to Barska plovidba A.D., a state-owned company for maritime transport of passengers and vehicles, in the amount of EUR 3 million in 2019. In both cases, aid was granted without prior notification for approval by the authority.
These cases are interesting because, in addition to representing significantly increased enforcement efforts of the Agency in the state aid area, they involve aid granted for payment of loan instalments due to Chinese Eksim Bank which were guaranteed by the state. The Agency ordered the Ministry to stop any payments for the benefit of these companies until the final decisions are adopted.
It has been reported that the instalments for January 2021 under both loans together amount to USD 4,65 million, out of which USD 1,95 million is the instalment due to be paid Barska plovidba and USD 2,7 million instalment due to be paid by Crnogorska plovidba. The Minister of Finance in the Government of Montenegro announced that the total remaining loan amount owed by both companies is USD 58 million. He also reported that Eksim Bank agreed to postpone the activation of state guarantees as the Government undertook to pay USD 3,9 million to the bank. It is unclear what is the basis for this payment by the Government, given that the standstill imposed by the Agency equally applies to disbursement by the state directly to the borrowers and payments to the lender.
Although the investigations into the state aid to Barska plovidba and Crnogorska plovidba have just begun, the aid to both companies is unlikely to pass compatibility test. Any recovery order by the Agency, however, would likely lead to bankruptcy of both companies.
Lenders and investors should not take state guarantees and undertakings for granted. They should verify in each case whether a sovereign guarantee or another undertaking represents state aid and if so, whether it is compatible aid. Otherwise, lenders and investors may find themselves in a situation that the aid is declared incompatible by the competition authority. As a consequence, further aid may be discontinued and received aid may be, depending on the circumstances, subject to a recovery order. A warranty by the host state that a measure is not state aid or that the measure is compatible state aid is unenforceable because any indemnification in case of breach of such warranty would be deemed incompatible state aid in itself.