Lawsuit filed against Montenegro over KAP bankruptcy

In early July, the Commercial Court of Podgorica launched the bankruptcy proceedings for Montenegro's aluminum giant Krombinat Aluminijuma Podgorica (KAP). This massive aluminum plant was founded in 1971 with the intentions to become a stable pillar of the nation's economy; however, KAP has now absorbed millions of euros worth of government stimulus, entering the bankruptcy proceedings with 340 million euros of debt, which equates to approximately 10 per cent of the nation's GDP. The global financial crisis had a detrimental effect on KAP, for the drastic decrease in aluminum prices worldwide caused the company to be unable to pay its workers and buy the necessary manufacturing materials. Prior to the economic crisis, an estimated 10 per cent of Montenegro's population of 680,000 depended on KAP for financial stability; thus, questions regarding the corporation's health and future are at the forefront of many citizens' minds.

Montenegro's declaration of KAP's bankruptcy without the parent company's approval will not stand uncontested. Yury Moiseyev, the former director of KAP and a representative of En+, is organizing a lawsuit against the government, claiming that accounts were falsified during the privatization negotiations years ago and the true financial condition of the company was not disclosed until after they were complete. The 93 million euro lawsuit will be presented to the Frankfurt Arbitration Court to challenge the unfulfilled promises and lost profits that the Montenegrin government has caused KAP to undertake, and the preliminary damages inflicted by the government are currently set at 1 billion euros. This is not the first time that En+ and the government have clashed during KAP's time of divided ownership, for a lawsuit emerged in 2012 when the Montenegrin government attempted to eliminate CEAC from its shareholder position. Such measures taken by the government deter future foreign investors and companies from contributing to the Montenegrin economy, hampering its potential for growth.

When KAP's former CFO, Russian citizen Dmitry Potrubach, attempted to cross the Montenegrin-Syrian border just two days after the bankruptcy proceedings began, he was arrested by Montenegrin officials on charges of concealing crucial information from investors regarding the corporation's financial status. However, En+ claims that Potrubach was not engaged in the alleged activity, asserting that his arrest was the government's effort to prevent the firm from taking legal action on the matter. The treatment of KAP's foreign stockholders has revealed the lack of investment protection for European companies in Montenegro, diverting a possible stable source of income from the state.