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.

Previously a government owned company, KAP was privatized in 2005, when the Central European Aluminum Company (CEAC) bought 65.4 per cent of KAP for the price of 48.5 million euros.  CEAC, a corporation run by En+ and the Russian oligarch Oleg Deripaska, became the owner and operator of KAP's assets after the 2005 transaction.  However, the economic decline of 2009 forced the Montenegrin government to buy back 30 per cent of KAP, leaving current ownership divided between CEAC, the government of Montenegro, and a handful of small shareholders.  As KAP's most substantial creditor, the Montenegrin government has funded 148 million euros of its debt while providing banks with guarantees that enabled the business to borrow an additional 132 million euros.  KAP's management has refused to pay back these loans, laying the huge financial burden on the Montenegrin government.

However, 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.

Prime Minister Milo Djukanovic, a reformed communist who now supports Western values, and the Democratic Party of Socialists have led Montenegro's government for over 18 years, reflecting poorly on the democratic status of the state.  This government continuously grants KAP 3 million euros in subsidies every month, distorting the natural competition of the market by making these goods more economical in comparison to non-subsidized alternatives.  Although Montenegro continues its attempts to fulfil the standards required for membership in the European Union, these financial contributions on behalf of the government conflict with the EU's anti-subsidy rules that ensure a fair and competitive market between states.  Therefore, the International Monetary Fund suggests that Montenegro restructure its manufacturing system by ending its on-going insertion of capital into KAP, for it has only led to the misallocation of limited resources and augmented the business´s need for financial contributions.  By pursuing structural reforms that would create a more competitive system, Montenegro would be on the path towards reaching its growth potential and attracting the foreign investment that is crucial for economic recovery.

David Casa is contesting the upcoming EP elections on the PN ticket