Five hundred million awaits the agreement between Spajić and Knežević

Proceedings before the Permanent Court of Arbitration in The Hague which he initiated Dusko Knezevic against the state of Montenegro is surrounded by a wall of silence. All actors, from the legal representatives of Knežević and the Government, lawyers Garija Born i Thierry Augsberger, to the cabinet Milojko Spajić and the Ministry of Finance, did not want to talk about the process that could cost Montenegro more than 500 million euros.

On April 23 of this year, the legal team of the Atlas Group informed the public that the arbitration proceedings, which Knežević, Atlas Capital Holding Limited and Meljine Complex Limited initiated against the Government of the Republic of Montenegro, should officially begin in a month.

So far, there is no information, neither from the interested parties nor on the official portal of the Permanent Court of Arbitration in The Hague (PCA), about the start of the proceedings.

The legal team of the Atlas group states that Montenegro was obliged to "protect foreign investments according to internationally assumed obligations", and the behavior of state authorities, according to them, clearly indicated serious omissions and illegal actions against the Atlas group and its companies.

"A compensation claim of EUR 500 million was submitted, which is the estimated amount that Atlas Capital Holding Limited, Meljine Complex Limited and the president of Atlas Group suffered damage, as a result of a politically motivated campaign against Knežević's investments in Montenegro, which includes two banks - Atlas Bank and Invest Bank Montenegro (IBM), and the project of building hotel complexes on the seashore", announced the legal team of the Atlas Group.

Selection of arbitrator

Since the two parties did not reach an agreement on the election of the president of the Arbitral Tribunal, according to the announcement, the permanent Arbitral Tribunal in The Hague appointed a professor Donald McRae as president at his discretion, which was the last step before the start of the hearing before the arbitral tribunal.

The Atlas Group stated that "the two parties previously each chose their own arbitrator".

The Government of Montenegro decided on a lawyer and an expert in arbitration law Bernarda Sepulveda Amor from Mexico, while the election of the president of Atlas Group Knežević and his companies is prof. Ph.D Guido Santiago Tavil from Argentina.

The legal team of the Atlas Group and Knežević, it is further emphasized, sent a Request for Arbitration on December 1, 2020, which initiated arbitration proceedings against the Government of the Republic of Montenegro, for damages.

Despite the announcement, the proceedings at The Hague have not yet started, and Knežević has been in the Investigation Prison in Spuž since April 30 after his extradition from Great Britain.

"The 'Knežević vs Montegro' procedure was initiated on December 1, 2020, according to the UNCITRAL arbitration rules, and based on the BIT - the bilateral agreement that the joint state of Serbia and Montenegro signed with Cyprus in 2005 between Cyprus and Montenegro ", he explains Nina Janković, a lawyer at the international law firm Aceris Law LLC from Geneva, specializing in international arbitration.

Vojin Biljic, a lawyer from Belgrade, also an expert in the field of international arbitration, says that the specificity of arbitration is that the procedure is initiated by notification, and the lawsuit comes only later and then the selection of the arbitration panel begins.

"Only after the arbitration panel is constituted, a lawsuit is filed within the time limit set by the panel", adds Biljić and states that in this particular case, the so-called UNCITRAL Arbitration Rules, according to which a claimant can decide that his notice of arbitration is considered a claim, if it has all the prescribed elements.

Biljić clarifies that the lawsuit is delivered to the defendant for a response, whereby the defendant can also decide that his response to the notice of arbitration is considered a response to the lawsuit.

Details that could clarify what stage the procedure is in can only be found out from the legal representatives of both Knežević and the state of Montenegro.

"Confidential Procedure"

One of Knežević's legal representatives, but not in the arbitration dispute, a British lawyer Toby Cadman, at a recent press conference in Podgorica, only said that it was a "confidential procedure", and that he hoped that "the Government of Montenegro does not try to influence the case by detaining Knežević".

For lawyer Janković, on the other hand, it is not clear whether the institution administering the procedure is the Permanent Court of Arbitration (PCA) in The Hague, or whether it is a completely ad hoc arbitration.

"It is very possible that it is an ad hoc UNCITRAL arbitration, which means that it is not bound to any institution, unlike the ICC, PCA, LCIA and other arbitrations, but it also means that it is possible that the whole case is confidential. , which would explain why there is not much information, even on the Internet," she said.

Precisely because of these ambiguities, "Vijesti" tried on several occasions to reach lawyer Gary Born, according to the Knežević legal team, representative of the Atlas Group and "one of the world's largest experts in the field of international arbitration, who has so far led over 600 arbitration proceedings". Although questions were directed directly to Born, then to the office of the international law firm Wilmer Hale (Wilmer Cutler Pickering Hale and Dorr LLP) in London and the Media Relations Service at the headquarters of this company in Washington, there was no answer. This is not a frequent practice of such reputable law firms, which, even when they want to avoid answers, provide at least a polite explanation.

The representative of the state of Montenegro, lawyer Thierry Augsberger ((Thierry P. Augsburger) from the law firm Four Knights LLC, based in Geneva, acted in a similar way, who, according to the legal team of the Atlas Group, was chosen by the Ministry of Finance in 2021 managed by Milojko Spajić.

Augsberger first replied to "Vijesti" that he was not authorized to speak about this dispute, and when asked again, he asked for a few more days to consult with the client. After the expiration of this period, Augsberger, until the conclusion of this edition, did not answer the questions raised in connection with the arbitration procedure.

On the other hand, Spajić's cabinet referred "Vijesti" to the Ministry of Justice in the case of arbitration. From this department, however, they told us to contact the Ministry of Finance, which by the time of publication of this text had not answered the questions regarding the arbitration, the current course and future actions of the Government of Montenegro.

Lawyer Biljić says that the Permanent Court of Arbitration in The Hague will determine the schedule for undertaking procedural actions, submission of submissions, expert reports, the date of the hearing...

"Since it is a complex procedure in which the law of Montenegro will certainly be interpreted, and additionally, from the announcement, it appears that, among other things, the dispute is presumably based on the claim of a violation of public law, it is to be expected that numerous expert opinions will be submitted in this procedure analysis, both in terms of legal interpretations and in terms of economic parameters for determining the amount of damage", says Vojin Biljić.

Three settlement proposals

This lawyer believes that Wednesday's proceedings are highly complex and that the issue that stands out in the foreground, which is the politically motivated persecution of the owner, is much more difficult to prove in the context of the cause-and-effect relationship for compensation than the question of whether Montenegro took measures that did not have equal treatment towards foreign investment and as such were contrary to the ratified international agreement and the laws of Montenegro.

"Of course, the prosecutor's strategy cannot be evaluated based on the announcement itself, and for any more specific comment, it would be necessary to have insight into the legal argumentation, which, given the non-public nature of the proceedings, is very difficult," adds Biljić.

In the aforementioned statement, the legal team of the Atlas Group points out that, although they are aware of the amount of damage caused to the Atlas Group and its companies, they are ready to find a compromise solution with the Government of the Republic of Montenegro.

"So far, the settlement proposal has been submitted three times - to the Government Duško Marković, Zdravka Krivokapića i Dritan Abazović. The proposal will also be sent to Prime Minister Milojko Spajić to reach an agreement and find a settlement solution, because it would be unfair for the citizens of Montenegro to pay for the damage caused by his actions. Milo Djukanovic", it was said in the announcement.

Knežević's defense sent a question to the Ministry of Finance and Prime Minister Spajić - whether they are ready to accept the offered agreement with the legal team of Knežević and the Atlas Group, or, as stated, they will risk losing the case before the Arbitration Court in The Hague, in which case they would have to foreign countries to pay several hundred million euros, which would seriously threaten the Montenegrin budget and negatively affect the credit rating of Montenegro, which would affect new debts abroad.

As a local well-informed person of both parties in the proceedings, who wished to remain anonymous, explained to "Vijesti", the closure of all sources in this dispute, both the defendant and the defendants and their legal representatives, can be explained by the fact that both sides expect that a mutual agreement is reached.

"Both Duško Knežević and Milojko Spajić are waiting for the other party's offer and therefore do not want to make a specific statement about the arbitration procedure. Their silence shows that the offers have not yet been exchanged and, I would venture to say, that the arbitration will be only one segment of a much more complex mutual agreement. If there is an agreement at all", says this "Vijesti" interlocutor.

Funding the costs of the lawsuit

The Atlas Group expert team engaged in this process, as announced, "found investors who are financing the arbitration proceedings that Mr. Duško Knežević, Atlas Capital Holding Limited and Meljine Complex Limited initiated against the Government of the Republic of Montenegro".

For lawyer Biljić, it is particularly interesting that the prosecutor, as stated in the press release of the Legal Team of the Atlas Group, managed to find the so-called "litigation funding", i.e. financing the procedure for a percentage fee in case of success in the dispute.

"Since the costs of such a procedure are very high and run into millions of euros, this potentially means that the fund that finances the arbitration for the plaintiff estimated that the procedure can be won and took a risk with investing in the dispute," explains Biljić.

He does not believe that the legal team's announcement that the financier of the arbitration has been found is just a bluff to try to put pressure on the Government of Montenegro to agree to a settlement, since it is a very serious dispute.

"On the other hand, if the plaintiff has already agreed on the financing of the arbitration by some fund, I don't see the argument that tens of millions of costs of the procedure will be paid by both parties," this lawyer points out.

Procedure before the court

The procedure for initiating arbitration before the Permanent Court of Arbitration (PCA) in The Hague includes several basic steps that are required to initiate arbitration proceedings.

After submitting the Request for Arbitration, the opposing party is notified, which has the right to respond to the request within a certain period.

Then follows the formation Arbitral tribunal in accordance with the arbitration agreement between the parties. The court may be composed of one or more arbitrators.

If the parties have not reached an agreement on the composition of the tribunal, the PCA may appoint arbitrators in accordance with its rules.

According to the available data, in the "Knežević vs Montenegro" procedure, it is certain that this part of the procedure was fulfilled, it took a full four years.

It is not known, however, whether the Arbitral Tribunal organized a preliminary meeting with the parties to agree on procedural issues, including deadlines, rules of procedure and other relevant issues.

Anyway, then both parties submit their evidence and submissions in accordance with the agreed procedural schedule. This includes presenting legal and factual arguments, as well as submitting relevant documents.

After the exchange of written submissions, the arbitral tribunal may organize an oral hearing where the parties have the opportunity to present their arguments and answer the court's questions.

After the end of the proceedings, the arbitral tribunal makes a decision (judgment), which is binding on the parties and can be executed in accordance with the national legislation of the party states or according to relevant international conventions, such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Specific procedural details may vary depending on the nature of the dispute, the arbitration agreement between the parties, and the rules applicable to the particular case.

There are no rules on the duration of arbitration proceedings. Everything depends on many elements, so even in this dispute, if no agreement is reached, it is difficult to predict how long it will take until the verdict.

Deripaska and Knežević, similarities and differences

On December 5, 2016, Russian businessman Oleg Deripaska, on the basis of the Agreement on Stimulation and Mutual Protection of Investments (BIT), which was concluded between the then Federal Republic of Yugoslavia and the Russian Federation, and in accordance with the UNCITRAL Arbitration Rules, initiated arbitration proceedings against Montenegro regarding the privatization of KAP and Bauxite Mine.

The decision of the tribunal in this proceeding was made on October 15, 2019, by which the tribunal unanimously decided that the BIT between the FR Yugoslavia and Russia is not applicable to Montenegro, that it accepts the objection of lack of jurisdiction raised by Montenegro on that basis and, therefore, refused jurisdiction to decide on the claims and awarded all costs in the total amount of 1,6 million euros in favor of Montenegro.

Lawyer Vojin Biljić says that it is not in dispute that the SCG bilateral agreement does not bind the new states a priori, but that such agreements need to be strengthened by the contracting states. These issues, he explains, are regulated by the Vienna Convention on the Succession of States in relation to treaties.

"In the succession of international treaties, the obligation of multilateral and bilateral treaties for states that have gained independence differs. This is due to the fact that for multilateral agreements there must be a written notification of the state that has gained independence, while the obligation of bilateral agreements can arise not only on the basis of a new agreement, but also on the basis of the behavior of the states if, on the basis of their behavior, it should be considered that the states thus agreed. That's why this is an issue that must be considered in each individual case," Biljić points out.

He states that the fact, for example, that the Agreement with the Russian Federation was not strengthened does not necessarily mean that it did not happen in the case of the agreement with Cyprus, not necessarily with a new agreement.

Biljić assumes that both parties in the arbitration have their own arguments for which there is, or is not, the obligation to apply the bilateral agreement.

"What is indisputable is that the arbitration has the authority to decide on its own jurisdiction, the so-called "competence doctrine". Whether Montenegro has already raised an objection of lack of jurisdiction and what are the chances of the success of that objection, if so, only arbitration knows," concludes lawyer Vojin Biljić.