Legislation Update - Montenegro

The Montenegrin Competition Agency Starts an In-Depth Investigation on Latest Rounds of Airline State Aid

On 3 September 2020, the Montenegrin Competition Agency (the “Agency”) initiated a formal investigation over the compliance of provided to the Montenegrin national airline with the EU framework and the local state aid rules. The European Commission has been underlining the support given to Airlines as potentially problematic from a state aid control perspective for quite a while and has had noted concerns about the company’s financial sustainability. State aid issues involving national carriers have not been news across the region, as similar schemes were subject to similar review and much controversy in neighboring jurisdictions.

The situation at hand was kick-started back in December 2019, when the Agency was asked to issue an official opinion on the lex specialis adopted by the Montenegrin Parliament, intended to stabilize the operations of the struggling airline, i.e. the Law on Investment in Consolidation and Development of Montenegro Airlines (the “MA Law”). The Agency was supposed to assess, in line with EU best practices, whether the measures introduced are compatible with the market economy operator principle (i.e. whether the state acted as a private investor would) and whether they would thus not constitute state aid.

In its opinion, the Agency stated that it did not receive enough information to make a proper assessment, i.e. the Agency was only provided with the draft of MA Law and the Plan of Financial Consolidation of Montenegro Airlines (the “Plan”). The Agency underlined that no business plan was provided, and that the Plan did not substantiate claims that Montenegro Airlines’ profits would provide a return on the state investment. Since the Agency was not able to reach a conclusive opinion, the entry into force of the MA Law was postponed.

Following the opinion, in May 2020, the Ministry of Transport and Maritime Affairs and the Ministry of Finance provided the Agency with an analysis of the market operator principle to support their argumentation. In a preliminary assessment, the Agency has once again analyzed all the measures provided within the MA Law, amounting to a total of EUR 155.1 million. While financial support for airlines is not uncommon at all in the days of COVID-19, the Agency indicated that the analysis and information provided thus far did manage to prove that the MA Law meets the corresponding legal requirements, thus questioning whether the measures provided within that law would have constituted state aid, which should then be cleared by the Agency (if compliant with the corresponding framework). This will be investigated in detailed within the formal procedure ahead. The competent ministries indicated that they would contest the Agency’s decision by judicial means, relying on the analysis rendered. The coming days will show the way for the Montenegrin national carrier, and the country’s track record in state aid review.

 

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.