(Patria) - New Zenica Steel Mill today warned of serious legal and institutional consequences that could result from the adoption of the Bill on the Procedure of Extraordinary Administration in that business entity, which the Prime Minister of FBiH sent to the Parliament of FBiH for adoption under an urgent procedure yesterday.
The Zenica Steel Mill reminds that the FBiH Government authorized Energoinvest to purchase the factory from its majority owner. However, neither Energoinvest nor the FBiH Government itself offered any concrete guarantees or a developed plan for the continuation of the integrated production of the Steel Mill during meetings with the majority owner.
Moreover, the factory states in a press release, Energoinvest used threats during negotiations with the majority owner, stating that if an agreement was not reached under the conditions of the FBiH Government, a law would be passed to deprive the majority owner of their ownership rights - "which the FBiH Government is ultimately trying to do with this Bill".
"Essentially, since it did not want to reach an agreement on the purchase of the majority stake, the FBiH Government plans to carry out a disguised nationalization with damage to the majority owner and current creditors of the Steel Mill through the Bill, thus acquiring the right as a minority owner to appoint an extraordinary administrator who manages the Steel Mill, instead of a bankruptcy court appointing a person with comparable powers.
It is evident from the Bill that the FBiH Government has not undertaken any financial obligations to maintain the integrated steel production in the Steel Mill," the press release states.
If the Bill is adopted, it is added, the establishment of an extraordinary administration can only lead to the postponement of the bankruptcy proceedings until after the elections in October this year (which is the main goal of the Bill) and the creation of enormous losses for the Steel Mill that will be covered by the bankruptcy estate, with damage to current creditors and the majority owner, as well as the creation of additional losses for all companies doing business with the Steel Mill, including the railways, due to the unsustainability of the existing integrated production model.
"The Bill constitutes a serious and unconstitutional encroachment on the property rights of the owners and creditors of the Steel Mill, guaranteed by the Constitution of FBiH, the Constitution of BiH, and the European Convention on Human Rights and Fundamental Freedoms.
The Bill deprives the majority owner and existing creditors of the Steel Mill of their property rights," the Zenica factory points out.
They note that such actions, if realized, will cause direct damage to the FBiH, which will face compensation claims from the majority owner and creditors in amounts that will likely exceed several hundred million convertible marks.
"Another type of damage that will affect the entire FBiH and Bosnia and Herzegovina, and which is harder to quantify, arises from the gross violation of legal certainty through the adoption of a law with retroactive application, which is unconstitutional in itself.
Furthermore, there is no known case in legislative practice where a law is adopted that applies only to one company, which would constitute unconstitutional discrimination and a violation of the fundamental principles of the single economic space of BiH.
In this regard, we believe that the adoption of the relevant law, especially under an urgent procedure, without broader expert and institutional discussion, would represent a serious institutional and legal precedent with long-term and unforeseeable consequences for the FBiH budget.
The proponent of the law in this case is trying to replicate the so-called Lex Agrokor, an instrument by which Croatia intervened in the business of the Agrokor group, which consequently exposed it to international arbitration where billions of dollars are sought in damages.
It should be emphasized here the key difference: Agrokor consisted of a series of operationally successful business units that generated profits intended for the settlement of creditors.
The Steel Mill, on the other hand, does not have a sustainable business model, which is why it is certain that the adoption of the Bill, under which the FBiH Government has not undertaken any financial obligations towards the Steel Mill, will result in damage to the bankruptcy estate, as well as damage to all public companies in the supply chain, instead of its protection and increased liquidity.
Accordingly, the Bill cannot achieve a higher degree of creditor protection compared to bankruptcy proceedings, nor is the maintenance of integrated production under these circumstances in the public interest, with no one questioning the continuation of the Steel Mill's operations with profitable production processes within the framework of bankruptcy proceedings already prescribed by the FBiH Bankruptcy Law.
It is undisputed that the FBiH Government, through this Bill, essentially seeks to bridge the period until the elections in the current calendar year, counting on short-term political gain, and plans to finance such a campaign from the Steel Mill's bankruptcy estate.
After the end of this year's elections, bankruptcy proceedings against the Steel Mill will inevitably be reopened - but then with drastically increased losses and a significantly damaged bankruptcy estate.
The Bill is undergoing detailed legal analysis, and all procedures for protecting the rights of the Steel Mill, its creditors, and owners will be initiated without delay," the statement from the Zenica factory concludes.
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