Radevic Igor
Political and Economic Influence of China in Western Balkans through Infrastructural Investments. A Case Study of Montenegro
Masterarbeit
zur Erlangung des akademischen Grades
Master of Arts
Global Studies
Eingereicht an der
Umwelt-, Regional- und Bildungswissenschaftlichen Fakultät
Karl-Franzens-Universität Graz
Univ.-Prof. Dr.phil David Florian Bieber
Centre for Southeast European Studies
2021
CONTENTS
ABSTRACT……………………………………………………………………………..….2
1. INTRODUCTION………………………………………………………………….….3
2. RESEARCH QUESTION AND HYPOTHESES…….…………………............…7
3. METHODOLOGY…………………………………………………………………….9
4. THEORETICAL FRAMEWORK…………………………………….…..............10
4.1. EUROPEANISATION ………………………………….………….…....10
4.1.1. THE EXTERNAL INCENTIVES MODEL ……….……………..….11
4.2. THE RULE OF LAW……………………………………………………..13
4.2.1. HISTORY OF THE RULE OF LAW…………………………….…..14
4.2.2. CONTEMPORARY THEORIES ……………………………..……..16
4.2.3. THE RULE OF LAW CHECKLIST……………………………….…20
5. BAR- BOLJARE HIGHWAY…………………….…………………………………..22
5.1. INTRODUCTION………………………………………………………....22
5.2. DESIGN AND CONSTRUCTION COSTS…………………………….....26
5.3. COMPLIANCE OF POSSIBLE CREDIT INDEBTEDNESS WITH THE BUDGET OF
MONTENEGRO…………………………………….…….………………27
5.4. BEGINNING OF WORK AND ENDING DATES……………………….27
5.5. APPLICATION OF SUBSTANTIVE LAW OF MONTENEGRO……....28
5.6. ENVIRONMENTAL IMPACT………………………………….………...33
6. CONCLUSION……………………………………………….……………………....40
BIBLIOGRAPHY………………………………………….….......49
2
ABSTRACT
This paper deals with the possible political and economic influence of China in the
Western Balkans through infrastructure investments. EU integration is the most important
foreign policy discourse of these countries. On the path to EU integration, the countries of the
Western Balkans face a number of problems, among which the low level of the rule of law
and the economic and infrastructural underdevelopment of the region occupy a special place.
For infrastructure projects, however, these countries do not have the financial resources and
access to EU funds is hampered by complicated rules and procedures. This has opened the
space for China to offer its infrastructure loans to these countries under simple conditions. In
2014, Montenegro signed a preferential loan agreement with CHEXIM Bank for the
construction of the Bar-Boljare highway, which increased the country's public debt to over
100% of GDP, bringing itself into great economic dependence on China. The main research
question is whether and to what extent such agreements with China will affect the EU
integration of Western Balkans countries?
Keywords: Western Balkans, China, Highway Bar-Boljare, rule of law,
Europeanisation, EU integrations
Dieses Papier befasst sich mit dem möglichen politischen und wirtschaftlichen
Einfluss Chinas auf den westlichen Balkan durch Infrastrukturinvestitionen. Die EU-
Integration ist der wichtigste außenpolitische Diskurs dieser Länder. Auf dem Weg zur EU-
Integration stehen die Länder des westlichen Balkans vor einer Reihe von Problemen,
darunter die geringe Rechtsstaatlichkeit und die wirtschaftliche und infrastrukturelle
Unterentwicklung der Region. Bei Infrastrukturprojekten verfügen diese Länder jedoch nicht
über die finanziellen Mittel, und der Zugang zu EU-Mitteln wird durch komplizierte Regeln
und Verfahren behindert. Dies hat China den Raum eröffnet, diesen Ländern unter einfachen
Bedingungen seine Infrastrukturkredite anzubieten. Im Jahr 2014 unterzeichnete Montenegro
mit der CHEXIM Bank einen Präferenzdarlehensvertrag über den Bau der Autobahn Bar-
Boljare, durch den die Staatsverschuldung des Landes auf über 100% des BIP stieg und die
wirtschaftliche Abhängigkeit von China zunahm. Die Hauptforschungsfrage ist, ob und
inwieweit solche Abkommen mit China die EU-Integration Westbalkan Länder beeinflussen
werden.
Schlüsselwörter: Westbalkan, China, Highway Bar-Boljare, Rechtsstaatlichkeit,
Europäisierung, EU-Integrationen
3
1. INTRODUCTION
The Balkan Peninsula is an area which, due to its geographical position, has played a
significant role in the mutual relations of the countries in the region; a space where cultural
and economic exchange took place, but also the scene of conflicts between small and great
powers that sought to maintain or expand their influence.
After the 1990s wars, 6 new states emerged on the territory of the Socialistic Federal
Republic of Yugoslavia. With the introduction of multi-party system and market economy, all
of them unequivocally opted to break with the previous communist system of political
organization and to adopt liberal- capitalist economic model, so that they are still in the so-
called transition period. In addition, with the disappearance from the political scene of another
key factor in the hitherto bipolar world, namely the Soviet Union, the path to Western Europe
seemed to be the only logical one.
The term Western Balkans appears in recent times, especially after the so-called
Yugoslav wars. This concept is more geopolitical than geographical and ‘represents a kind of
European Union strategy towards the countries of the former Yugoslavia - minus Slovenia
plus Albania’ (Milardovic, 2000, p. 5). Given that the aim of this paper is to analyze the
political and economic influence of China on the countries of the Western Balkans in relation
to EU integration and the rule of law, Croatia will be excluded, because it has meanwhile
become a full member of the EU.
The Western Balkans region has gone through a difficult period of civil wars and
disintegration in the past few decades and emerging countries go through a delayed transition
to democracy and market economy (Dzankic & al., 2019, p. 3). Thus, they found themselves
on the path of Euro-Atlantic integration without properly established ‘foundations of
democracy, rule of law, political dialogue and human rights’ (Vesnic-Alujevic, 2012, pp. 11-
12) which all are criteria posed by the European Union as conditions for a full membership.
Main issues the Western Balkans have been facing in the process of European
integration can be divided into three groups - in the first group are common problems shared
by all countries in the region, the second group is made of those specific to individual
countries, while the third group of problems are external ones and they are the problems of the
EU itself (Simurdic & al, 2016, p. 8).
Speaking of common problems that are shared by all countries in different intensities,
the first and most important is the lack or insufficient level of the rule of law. According to
Simurdic (2016, p. 9) that is a whole complex of interrelated problems that appear under this
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common name and suggests that the whole complex should be covered with the expression
‘lack of good or democratic governance’. The region suffers from ‘insufficient management
capabilities and democratic credentials of its political elite’ (Balcer & Surroi, 2013, p. 7),
although there has been some progress in democratization and modernization of society. In
addition, as common problems appear freedom of the media, rising ethnonationalism, borders
issues, the status of refugees and minorities, etc. These are also some of the most important
issues that candidate countries are required to solve as the main conditions for a full EU
membership.
Specific problems are those that are distinctive of each member state and that other
member states do not have, such as the status of Kosovo or Republic of Srpska, but which,
despite their importance, will not be addressed in this paper.
The third group of issues and challenges facing the Western Balkan countries in the
process of Euro-Atlantic integration could be called external, and they concern the European
Union itself, i.e., the problems it faces. Among the most important are the economic crisis of
2008 and the migrant crisis of 2015, which is still ongoing, as is Britain's withdrawal from EU
membership (BREXIT). These issues have had a significant impact on the functioning of the
EU, with the consequence that all procedures and processes within EU have become more
difficult. This is also the case with sensitive topics and challenges, such as the enlargement
policy (Jónsson, 2017).
Lately, there has been more and more talk about the so-called ‘enlargement fatigue’,
which means that in the European Union and especially in the member states, there is
resistance to further enlargement of the Union. Enlargement fatigue has existed before (for
example, France rejected the membership of the UK twice and also expressed the reluctance
towards Spanish and Greek membership). After the 2007 accessions of Bulgaria and Romania
the debate about ‘fatigue’ reemerged. The most common objection to the membership of these
two countries is that neither was sufficiently prepared for membership and that accession to
the Union did not bring significant changes in solving the fundamental problems of
governance and state capacity (O'Brennan, 2014) . Thus, main reasons given for the
emergence of enlargement fatigue include ‘negative experience with the last wave of
enlargement, institutional and political crisis in the EU, world economic crisis and political
issues within the West Balkan states’ (Bozovic, Vujacic, & Zivkovic).
In addition to this, one of the major obstacles on the path to EU integration is the
insufficient economic development of the region. The Western Balkans countries are either
poor or very poor in comparison to other European economies. Significant infrastructure gap
5
of those countries is considered a major obstacle for them to substantially catch up in
economic terms (Milardovic, 2000), and in the same time ‘detrimental for their political
integration into the European Union’ (Holzner & Schwarzhappel, 2018, p. 1). This also
applies to Montenegro, which needs in terms of new infrastructure development are
significant.
Amongst these large infrastructure projects are highways, which, due to insufficiently
developed economy and, subsequently, lacking funds, they are not able to finance themselves,
so they are forced to seek help from international financial institutions such as the IMF, the
World Bank and the like. However, these institutions, as a condition for lending and
investing in the region, insist on reforms, respect for the rule of law, transparency, require a
strategic approach and proper application of environmental standards, which transition
countries are clearly not always able to do.
Infrastructural backwardness on the one hand and rather demanding conditions for
obtaining quality financial arrangements from European and world financial institutions have
to some extent forced the countries of the Western Balkans to provide financial resources for
the implementation of infrastructure projects under much easier conditions. An example is
Montenegro, whose government in 2014 started the project of building the Bar- Boljare
Highway. This project was initiated by the Montenegrin Government in cooperation with the
Chinese company China Road and Bridge Corporation (CRBC) and a loan obtained from the
Chinese EXIM Bank. The project was started despite the recommendations of the European
institutions that it was unprofitable both economically and financially and has been criticized
by EU institutions, international financial institutions, the domestic opposition and ordinary
citizens, from whom most of information related to the highway was hidden and declared a
state secret. Namely, almost the entire documentation about the highway was declared
confidential by the Montenegrin government1. This raised concerns in the EU, because of
‘the lack of transparency of the project, its economic feasibility, and its effects on the state
debt’ of Montenegro (Sosic, 2021).
At this point, it is worth nothing that Chinese involvement was sought after two
attempts to involve European partners and obtain EU funding had failed. The reason for such
EU stance were feasibility studies that showed the highway construction cannot be
financially viable. Instead, European partners suggested alternative solutions, such as
modernisation and broadening of existing motorways, along with fiscal caution (Grgic,
2017). 1 During the work on this Thesis the new Montenegrin government made the contract between Montenegro and
CHEXIM Bank public, but many other documents are still under the veil of secret.
6
This project is very suitable for analysis because it is a typical example of how the
ruling elites in the Western Balkans treat public goods and how they use state resources to
achieve their political goals. In addition, such actions violate the basic principles and
postulates on which the EU is based, as well as many domestic laws, international
conventions and principles. What is important for this analysis, is the fact that violations of
laws and regulations do not take place only at the highest state level, but that it is a systemic
problem that must be solved both at the top and lower instances of all state institutions.
In order to become full members of the EU, the countries of the Western Balkans are
obliged not only to adopt EU acquis communautaire2, but also to show a very high degree of
implementation of these rules and norms contained in the negotiating chapters. This approach
makes conditioning more difficult than previous rounds of enlargement because Chapters 23
and 24 which are devoted to ‘Judiciary and Fundamental Rights’, and ‘Justice, Freedom and
Security’ are opened at the very beginning of negotiations and remain open throughout the
negotiation process. This aims at consistency in respecting and implementing these norms
and principles throughout the process but at the same time gives candidates sufficient time
and space to strengthen institutions, establish all necessary legislation and demonstrate a
sufficient level of implementation. Also, the European Commission has the possibility and
power to withdraw proposals to open chapters, or to close chapters that have already been
opened, if the candidate country does not show a sufficient degree of cooperation (Dzankic &
al., 2019, pp. 24-25).
2 The EU's 'acquis' is the body of common rights and obligations that are binding for all EU countries, as EU
Members. It is constantly evolving and comprises:
the content, principles and political objectives of the Treaties;
legislation adopted in application of the treaties and the case law of the Court of Justice of the EU;
declarations and resolutions adopted by the EU;
measures relating to the common foreign and security policy;
measures relating to justice and home affairs;
international agreements concluded by the EU and those concluded by the EU countries between
themselves in the field of the EU's activities. (EUR-Lex)
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2. RESEARCH QUESTION AND HYPOTHESES
Given that European integration is the most important foreign policy course of
Montenegro and that negotiations with the European Union are formally ongoing
(Montenegro is the only Western Balkan country to have opened all 35 negotiation chapters
and temporarily closed 3), many decisions made by the Montenegrin government are
questionable, despite clear warning signals, coming even from the EU institutions themselves.
Because, the process of accession to the European Union does not only mean the formal
takeover of the acquis communautaire, but also ‘the implementation of formal and informal
rules, procedures, policy paradigms, styles, ‘ways of doing things’, and shared beliefs and
norms which are first defined and consolidated in the EU policy process and then
incorporated in the logic of domestic discourse, identities, political structures and public
policies.’ (Radaelli, 2000). Therefore, such actions of Montenegro, as in the case of the
construction of the Bar-Boljare highway, are very suitable for analysis, because they could
have a very negative impact on the credibility of the country in the international community
and the dynamics of EU integration.
Having in mind all these circumstances and the fact that the People's Republic of
China is involved in the highway section Bar-Boljare construction project in Montenegro
through a loan provided by CHEXIM Bank, this research aims to answer the question: ‘Is
China, through its infrastructure investments, influencing the processes of Europeanization
and affecting the rule of law in the countries of the Western Balkans?’. If the answer is yes,
then the question is: ‘In what way and to what extent?’. In other words, will this and similar
projects, implemented contrary to the standards that apply in the developed countries of
Western Europe, significantly slow down Montenegro's path to full EU membership? Given
the experience of some countries that had to cede parts of their territory to China due to their
inability to repay the debt, the question inevitably arises: ‘Could Montenegro be left without a
part of its territory if it is unable to repay the debt to EXIM Bank?’
This issue is especially important, not in terms of trying to discover the real
background of the Chinese involvement in these projects, but because Montenegro is a very
small country with an underdeveloped economy and this year begins the obligation to repay
loans to Chinese banks. The total public debt of Montenegro is over 100% of its GDP and it is
quite logical that there is a dilemma about how this debt will be repaid.
In August 2020, the parliamentary elections in Montenegro were held and the change
of government happened after 30 years of continuous rule of the Democratic Socialist Party
8
and their coalition partners. During his first visit to Brussels, new Deputy Prime Minister
asked for EU assistance, stating that China exerts influence through the granted loan for the
Bar-Boljare highway section (AlJazeera, 2021). On that occasion, the response from the
European Union was promising. Namely, it was said that the European Union is ready to help
Montenegro to find a solution to repay the debt to Chinese banks. However, as later reported
by the Brussels-based Politico, the European Union rejected Montenegro's request for help in
repaying the Chinese loan for the unfinished highway in the amount of one billion dollars,
‘which pushed the country into a debt crisis’ (AJazeera, 2021). This introduces great
uncertainty regarding the possibility of repaying Montenegro's debt to China.
This is particularly important because the contract itself states that ‘neither the
borrower nor any of its property, other than property relating to diplomatic and consular
missions and military property, shall be entitled to immunity on the grounds of sovereignty or
otherwise of arbitration, lawsuit, enforcement or other legal proceedings on the basis of
obligations under this Agreement, as the case may be, in any jurisdiction.’ (2014)
This means that the previous Montenegrin Government practically put a mortgage on
a part of the Montenegrin territory, without the knowledge and consent of the public, and it is
not clear or specified which part of the territory it could be. There are certain assumptions that
it could be the Port of Bar. However, Grgic (2017) believes that the Chinese do not have
interest in Port of Bar given that part of the Port has already been sold to the Turkish company
‘Global Ports’. Therefore, the question remains as to what the consequences will be if
Montenegro is not able to repay its debt to China?
There is an extensive literature dealing with China's relations with other parts of the
world, especially with key political factors on the global stage, such as the USA, Russia, the
EU. China's relations with the CEE countries are somewhat less discussed, but even in that
part there is an increase in scientific research. Literature on China's relations with the
countries of the Western Balkans is very scarce. Precisely because of this, the importance of
this work is to, through the analysis of available sources, namely books, publications, reports
of international organizations and EU bodies, newspaper articles, etc., provide an answer to
the question of possible implications of Chinese investment on EU integration processes in
Western Balkans countries. This issue concerns not only Western Balkans countries but also
the EU itself, because the region geographically belongs to Europe and possible impact of any
great power on any country or region located in or near Europe may very well have serious
implications for the EU itself. The countries of the Western Balkans are on the external border
of the EU and on the border between East and West, but they are a geographical part of
9
Europe. If, due to the impossibility of repaying the debt to China, some of these countries lose
a part of their territory, it will no longer have an impact only on the country in question, but
on the entire region.
This is an implication of the fact that great economic influence, especially in the form
of debt, also creates significant political influence and dependence of one country on another.
By investing in other countries and providing loans for infrastructure development, China is
not competing with EU institutions, but exists in parallel with them, looking for a way to
invest its capital where there is space. In this way, China is able to influence certain aspects of
these countries’ domestic and foreign policy. Also, having in mind the fact that the Western
Balkans countries have signed agreements with European Free Trade Association (EFTA),
this opens the possibility for China to penetrate the EU market through these countries. The
EU has left too much room for other actors to expand their influence, and China is just one of
those that has used this opportunity.
3. METHODOLOGY
In this paper, qualitative research methods were used, considering that the topic of the
paper is of a legal-political nature and does not require statistical or numerical data
processing. Therefore, content analysis, i.e., literature review, was used as the main method.
However, given that most of the data on the Bar-Boljare highway was declared a state secret
even before the works began, it was quite difficult to obtain relevant first-hand information.
The fact that they were not available for public inspection was the reason why many original
documents were not used. Also, no interviews were conducted because it was not possible to
reach the responsible persons, although I believe that in certain parts, they would make a
significant contribution to gathering information and clarifying many decisions. The most
important sources of information used for the analysis come from publications on China-EU
relations, China's relations with CEE countries, journal articles dealing with Chinese
infrastructure projects, newspaper articles, reports from EU institutions and reports from
domestic NGOs. Also, both domestic and international regulations were used as a source of
information. Most of these resources are available through social networking websites for
academics- academia.edu and researchgate.net.
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4. THEORETICAL FRAMEWORK
The topic of this paper is the influence of China through infrastructure investments on
the countries of the Western Balkans which are still going through so-called ‘transition’, from
the communist to the liberal-democratic system of government. The main foreign policy
priority for these countries are EU integrations. Amongst the most important aspects of this
processes are the strengthening of the principles of democracy and the rule of law, and these
are also the areas in which these countries have shown the least progress. In the process of EU
integration, the term Europeanization is often mentioned and it may seem that these terms
coincide. Also, some definitions are too broad, so it is difficult to distinguish between
Europeanization and the rule of law. However, it is wrong to equate EU integration with
Europeanization as well as Europeanization with the rule of law. These concepts have certain
similarities and partly overlap, they are often conditioned by each other and inextricably
linked, but they are not identical and therefore their proper definition and understanding is of
theoretical and practical importance. The following chapters will be devoted to this.
4.1. EUROPEANISATION
The study of Europeanisation was traditionally focused on member states, and its
purpose was to analyze and explain the impact of EU rule transfer to new member states. But
its finding is relevant to candidate countries because these are the ‘subject of the same
pressures of adaptation to EU policies as current member-states with added dimensions of
conditionality and accession negotiations’ (Grabbe, 2002). ‘Europeanisation is a broad notion;
it embraces the application of EU policy and politics and the repercussions this policy has on
national systems. It represents the penetration of a European dimension into national arenas of
politics and policy in every country.’ (Radaelli, 2000) It refers to the impact that the European
Union has on member countries as well as on countries that strive to become members (Jones
& al, 2011, p. 28) .
This process of ‘taking over and implementation of norms, rules and regulations,
procedures, policies, ‘ways of doing things’ helps to incorporate EU political, social,
economic and cultural systems into a country’s domestic discourse and political structures.’
(Radaelli, 2000). That leads to its policy change, cultural change transformation and
modernization of economies, polities and societies. For Vesnic-Alujevic (2012, pp. 21-22) the
process of Europeanisation is much broader than the formation and integration of EU policy,
although it is its integral part. Schimmelfennig and Sedelmeier (2004) see this process as the
11
‘transference of EU legislation into domestic law, the reorganization of domestic institutions
according to EU model and change of domestic political practices according to EU standards.
To some authors (Dzankic & al., 2019) , the process of Europeanization is crucial for
understanding the transformative power and dynamics of norms, rules and principles between
the EU and member countries, which also applies on candidate countries. That is a two-way
process which result in ‘domestic adaptation to EU norms, laws, and rules (top-down), and
also the changes in the dynamics of Europeanisation as a result of domestic change (bottom-
up)’ (Dzankic & al., 2019). During this process, the candidates adopt the EU acquis
communautaire as well as principles and rules in areas, such as democracy and the rule of law
(Sedelmeier, 2011).
Studies on Europeanization analyze the conditions under which EU conditionality is
effective in terms of acceptance and implementation of EU rules and principles by candidate
countries (Dzankic & al., 2019). The theory of Europeanization does not only deal with what
is transferred from the EU to the candidate countries, but also with the mechanisms, i.e., how
it is transmitted (Shimmelfennig, 2012).
As noted by Schimmelfennig and Sedelmeier (2005) Europeanisation can be EU- or
domestically driven. Also, it can be based on the ‘logic of consequences’ i.e., external
incentives model, by which EU offers rewards to a target government to comply with the EU
conditions. It can also be led by ‘logic of appropriateness’ which means that the process of
Europeanisation is based on social learning and persuasion, and candidate countries ‘consider
the adoption of EU rules and regulations as useful and legitimate’ (Dzankic & al., 2019).
Social learning and lesson-drawing models have a great theoretical significance and they
represent ideal models of the process of Europeanization. However, given their essence, they
are not considered as relevant to this research and therefore they won’t be further analyzed.
4.1.1. THE EXTERNAL INCENTIVES MODEL
External incentives model implies conditioning system by the EU towards candidate
countries. Target government has to comply with the EU conditions in order to receive a
reward, and if it fails to comply, the EU withholds the reward. These awards can be of
different natures, but most often they relate to EU membership. The effectiveness of
conditionality depends on calculation of a target government whether the reward outweighs
its domestic material, political and power-oriented costs (Jones & al, 2011, p. 33). It seems
that EU’s political conditions are generally more costly to the current candidates which results
12
in slow progress in EU integrations of the Western Balkan countries. The ruling elites do not
show enough willingness to risk their well-founded political positions and to implement real
and substantial reforms in order to transform the society in a way that would be sufficient for
full membership in the EU.
Furthermore, the effectiveness of conditionality depends on ‘the determinacy of EU
conditions, the credibility of accession, the capacity of candidate countries and domestic
costs.’ Main dimensions of determinacy are precision and consistency. Precision allows
candidate countries to know exactly what are their obligations and how relevant and binding
these are, while consistency means that requirements are the same for all candidates and that
these do not change over time (Dzankic & al., 2019, p. 19).
Credibility of the membership is another factor of EU conditionality. It has two sides
and refers to the credibility of the promise and the credibility of the punishment. This is in the
sense that if the candidate meets the required conditions, they can count on being admitted to
membership and if they do not meet the required conditions, the accession process may be
stopped (Hughes, Sasse, & Gordon, 2005). In comparison to the previous rounds of
enlargement, the determinacy of EU conditions is higher for Western Balkan candidates, but
these countries face lower credibility of EU membership (Dzankic & al., 2019). This means
that the conditions set by the EU for these countries are clearly determined, while the
dynamics of negotiations as well as possible dates of accession are uncertain. This is because
the speed in which a candidate country will progress towards EU membership depends on the
manner and speed of the reforms it will implement to that end. Also attitudes in the EU
countries towards further enlargement are more negative than in previous rounds of
enlargement which makes membership incentive less credible. This reduces the ability of
membership to be a force of reforms in candidate countries (Jones & al, 2011).
According to external incentives model, candidate states’ compliance with the EU
conditions is determined by the level of domestic adoption costs. These adoption costs
‘depend on the preferences of governments or other powerful domestic actors whose
agreement is necessary for the implementation of EU rules (i.e., veto players).’ In this sense,
adoption costs are high if rule transfer jeopardize the ‘welfare of domestic actors and groups
or the power base of parties and governments’ (Dzankic, Keil, & Kmezic, 2019, pp. 18-20) .
As a rule, a state adopts EU rules if the benefits of EU rewards are higher than domestic
adoption costs (Schimmelfennig & Sedelmeier, 2005).
Schimmelfennig and Sedelmeier (2004) conclude that democratic conditionality i.e.
adopting liberal democratic rules, significally limit the effectiveness of EU conditionality.
13
Those are, above all, the rule of law, as well as strengthening the principles of democracy, the
fight against corruption and organized crime and the like. It is in these areas that the countries
of the Western Balkans showed the weakest results, which suggests that adoption costs for
them were many greater than EU incentives.
4.2. THE RULE OF LAW
‘Where the law is subject to some other authority and has none of its own, the collapse
of the state, in my view, is not far off; but if law is the master of the government and the
government is its slave, then the situation is full of promise and men enjoy all the blessings
that the gods shower on a state.’-Plato (Tamanaha, 2004, pp. 8-9)
This chapter begins with Plato's words not only because they present the essence of
the rule of law, but also because they point out the fact that the relationship between law and
power was a topic that occupied a significant place in theoretical thought since the first social
communities. This is all the more relevant for this paper because the paper will be based
primarily on the theory of the rule of law and Europeanization. The rule of law is an integral
part of the theories of Europeanization and in some aspects it is almost equated with them,
especially in the Substantive conceptions of the rule of law which will be described and
analyzed later. Formal theories of the rule of law are not accepted in modern democratic
societies, but their analysis is necessary to better understand how undemocratic regimes use
the tools of democracy and the rule of law to justify their actions.
In contrast, substantive theories are in essence much closer to modern democratic
societies and contain values that are an integral part of the Europeanization process,
regardless of differences in theoretical concepts of this phenomenon. In the process of EU
integration, the principles of the rule of law and democracy have a special place in the
accession negotiations and represent particular problem for the candidate countries, i.e., their
ruling elites. Accession Chapters 23 and 24 relating to ‘Judiciary and Fundamental Rights’
and ‘Justice, Freedom and Security’, for the first time introduced in negotiations with Croatia,
are now fully integrated into EU negotiations with candidate countries. These chapters are
opened first and closed last. This points to the importance the EU gives to the principles of the
rule of law and democracy. Further, the key position of the rule of law within the process of
EU enlargement is also emphasized by the present circumstances in the ongoing accession
talks with the six Western Balkan countries striving for EU membership (Dzankic & al., 2019,
14
p. 88). The rule of law, however, is not defined by the EU founding treaty (Kmezic, 2017, p.
13).
As Tamanaha (2004) well observes, the rule of law is in an unusual position to be one
of the most important political ideals today, without consensus on what it actually means. No
other political ideal has ever received so much support, despite the fact that true commitment
to the rule of law is often questionable. Nevertheless, the fact remains that government
officials around the world are advocating this principle. More importantly, as Tamanaha
(2004) further concludes, ‘none make a point of defiantly rejecting the rule of law’. This is
strong evidence that respect for the rule of law is accepted as a measure of government
legitimacy around the world. For Costa and Zolo (2007) , ‘to support the rule of law means to
advocate the protection of individual rights as the primary aim of political institutions and
legal bodies’.
4.2.1. HISTORY OF THE RULE OF LAW
For a proper understanding of this concept today, it is useful to give a brief historical
overview. The reason for this we find in the fact that through a historical perspective it is
evident that the concept of the rule of law has not always been equally understood and that the
understanding of its essence plays an important role in social, political and even historical
circumstances. Therefore, the rule of law can be a guarantor of equality before the law,
personal freedoms and restriction of power by law, but it can also serve as a justification for
oppressive power and as a cover for bad actions of the government.
The debate over the rule of law begins with Aristotle (c. 350BC), continuing through
the Middle Ages with Fortescue, who sought to separate the legitimate from the despotic
forms of the kingdom. It then appears in the works of John Locke, James Harrington, Niccolo
Mahiavelli, Montesquie and others. In the modern age among the most important theoreticians
dealing with the rule of law are Dicey, Hayek, Raz, Dworkin and others.
In his Politics, Aristotle asks whether the rule of the best law or the best man is better.
He expressed the opinion that the law has certain advantages because it was adopted in
general form and before the case to which it can be applied. In addition, in the Rhetoric he
says that the law was passed after a long deliberation, ‘whereas decisions in the courts are
given at short notice’ (Waldron, 2016). It is interesting that this principle of generality is still
one of the indispensable elements of modern laws.
15
According to Hobbes, the sovereign who was created, i.e., who was given power by
the original treaty, has absolute and unlimited power. According to him, the only right that
individuals have is to ‘resist the sovereign if they are threatened with death’. Also, the
sovereign is not bound by legal restrictions. According to Hobbes, it is illogical that the law
can be above the sovereign because the sovereign makes the law and can change it at will
(Tamanaha, 2004, pp. 47-48).
Montesquieu's work on the theory of the rule of law is significant because of his
insistence on the separation of powers, especially the separation of the judiciary from the
legislature and the executive (Waldron, 2016). This principle of separation of the three
branches of government is still valid today in most democratic systems and serves as a
guarantee of independence and freedom in court decisions and as a control of the legislature
over the executive. However, as is the case in many countries, and also in the countries of the
Western Balkans, this division of power is only formal and declarative.
According to Dicey, the punishment is possible only for a ‘breach of law established
in the ordinary legal manner before the ordinary court’. In that sense the rule of law is
contrasted to every system which is based on exercise of wide, arbitrary and discretionary
powers. In essence, his idea is that there can be no punishment without preexisting law
(Craig). This concept is still valid today and is presented in the principle that retroactive
application of the law is prohibited. Further, Dicey says that any exercise of discretion by
government officials is contrary to the rule of law. According to him, discretion and law are
antithetical (Tamanaha, 2004).
The next aspect of the rule of law according to Dicey is that everyone is equal before
the law. This applies to government officials who, in his opinion, should not possess
immunity and should be as accountable to the law as any ordinary citizen: 'every man,
whatever be his rank or condition, is subject to the ordinary law of the realm and amenable to
the jurisdiction of the ordinary tribunals'. (Craig)
Nowadays, the objection to this argument is that by waiving immunity, the
performance of public functions would be significantly hampered by the possibility of
obstruction. Also, Waldron (2016) argues that the rule of law is different for ordinary person
and for the state officials. According to him, the rule of law for ordinary people means that
everything is allowed that is not explicitly forbidden by law. In contrast, ‘the state may act
only under express legal authorization.’
For Hayek, the rule of law is a cornerstone of liberty in the sense that the government
is bound by rules that are set in advance. That makes it possible for individuals to ‘foresee
16
how the authority will use its powers in given circumstances and to plan their individual
affairs on the basis of this knowledge’ (Hayek). This is the concept of ‘legal liberty’. In this
sense, the individual is free to do what he wants without fear of punishment, because he
knows in advance the limit of freedom determined by law. According to Hayek, ‘the laws
must be general, equal and certain’. (Hayek)
Law is General if it is established in advance, if it is abstract and applies to everyone
whose ‘conduct falls within the prescribed conditions of application’. Equality requires that
the law applies to everyone in the same way and thus prevents making arbitrary distinctions
among people. Law is Certain if those to whom these laws apply can assess in advance how
these laws will be interpreted in relation to their behavior and how they will be applied.
Predictability is a very important aspect because it allows an individual to behave freely
within the limits set by law (Tamanaha, 2004, p. 66).
Like Dicey, Hayek placed an essential antithesis between law and discretion, equating
discretion with arbitrariness. However, he accepted that the government, in order to function,
must apply a certain dose of discretion. And concluded that these arbitrary actions are not
necessarily contrary to the rule of law if they possess the attributes of generality, equality and
certainty. He further points out that the problem is that these traits are often missing
(Tamanaha, 2004, p. 67).
Hayek expressed support for democracy, which he called ‘one of the most important
guardians of freedom’ and considered it ‘the only peaceful way to change the government so
far discovered by human society.’ He noted, however, that decisions in parliament were not
made in the interests of the majority, but in the interests of the ruling minority. ‘Modern
democracies, encouraged by the instrumental view of law, have increasingly come to view
legislation as a tool to be used to apportion the spoils of government among winners in the
political process; the result is often particularistic rather than general, taking from some in
favor of others, frequently treating people unequally.’ (Tamanaha, 2004, p. 71)
4.2.2. CONTEMPORARY THEORIES
These theories have shown that rule of law has always been a term that has attracted
much attention but also disagreement. The term is very broad and its definition and content
change depending on the historical, social and political context. The situation is similar today.
As in the past, there are many definitions of the rule of law today. The importance of its more
precise definition is not only theoretical but also practical. Namely, in terms of EU
17
integration, the rule of law is one of the most important requirements for candidate countries.
At the same time, due to the ambiguity of the concept, this can be a problem for them as it is
often unclear what their obligations are in this regard.
Contemporary theories of the rule of law could be reduced to two basic categories -
formal and substantive theories. Tamanaha (2004, p. 91) elaborates on them in the thinner to
thicker direction, depending on whether they contain more or less requirements in their
formulation.
So, formal are:
1. Rule by law
2. Formal legality
3. Democracy + Legality
While substantive are:
1. Individual rights
2. Right of Dignity and / or Justice
3. Social Welfare
Thereby, it is important to emphasize that every subsequent formulation accumulates
the most aspects of the previous one in order that they do not mutually exclude each other.
The essential difference between them is that formal theories of the rule of law give priority to
the sources and forms of law-making, while substantive theories include requirements of the
laws’ content. These requirements are mostly for laws to be moral and just (Tamanaha, 2004,
p. 92).
Rule by Law implies that the rule of law means everything the government does must
be in accordance with the law. It is clear that the rule of law understood in this way doesn´t
essentially mean much, because in this sense every modern state, whether being democratic
or authoritarian, has the rule of law. This element of the rule of law is necessary but not
sufficient.
Raz (1977, p. 211) notes that ‘a non-democratic legal system which is based on the
denial of human rights, poverty, racial segregation or racial persecution’ could in principle
meet the conditions of the rule of law better than some democratic systems. According to
him, the law must be general, public, clear, and relatively stable.
18
Similarly, according to Lon Fuller (1969) the rule of law should meet the conditions
of ‘generality, clarity, public promulgation, stability over time, consistency between the rules
and the actual behavior of legal actors, and prohibitions against retroactivity, against
contradictions, and against requiring the impossible’. Thus formulated the rule of law
provides personal autonomy by giving individuals the opportunity to plan their activities
knowing in advance what the law is. However, this argumentation of the rule of law says
nothing about basic human rights, justice, equality, etc. Although they still say nothing about
the internal value of these laws, Fuller (1969) believes that ‘legal systems with these formal
characteristics will more likely also have laws with fair and just content’.
Raz (1977, pp. 225-26) objects to this saying that like any other instrument, law as an
instrument is neutral in its essence. The rule of law in the service of an ‘immoral legal
regime would be immoral’ (Tamanaha, 2004, p. 95). The discussion on the morality of law is
not only theoretical. The formal rule of law has served, and still serves, autocratic regimes to
justify their every decision or law. According to formal legality, a government can do
whatever it wants if the formal requirements for passing a law are provided. If a government
wants to do something illegal, it can simply change the law. As Tamanaha (2004, p. 96)
concludes- ‘formal legality has more in common with the idea of rule by law than with the
historical rule of law tradition’.
This could be observed with regimes in the Western Balkans which, by invoking the
laws, give legitimacy to their actions. In doing so, they avoid mentioning the manner and
purpose for which these laws were enacted. This is exactly the case with the Bar-Boljare
Highway Act, which was passed as a lex specialis3, which allowed the government to
circumvent existing laws in order to pursue their plans about building the highway. Among
other things, this is the topic of this work and it will be discussed in the following chapters.
The third formal version of the rule of law involves democracy with formal legality.
However, neither formal legality nor democracy says much about the content of the law.
According to Habermas the authority of a law lies in the consent of the governed. It implies
that all in the society must follow and apply the law as enacted by the people. Thus, formal
legality draws its authority from democracy and at the same it serves democracy. It is
because formal legality is preventing circumventing democracy, while absence of democracy
3 Lex specialis is a Latin phrase which means “law governing a specific subject matter”. It comes from the legal
maxim “lex specialis derogat legi generali”. The doctrine states that a law governing a specific subject matter
overrides a law that only governs general matters (USLegal).
19
takes legitimacy of formal legality, because the content of the law has not been determined in
a legitimate procedure (Habermas).
It is emphasized by Tamanaha (2004, pp. 100-101) that taking democracy as a
procedural mode to legitimate the law has the same limitation as formal legality. He
concludes that ‘democracy may serve as ‘tool’ by which an organized subgroup in society
occupies the power and then uses the law to serve their own interests’. It is the case when
‘democratic principles and mechanisms are implemented in a non-democratic society or
where coexist antagonistic subcultures.
All substantive theories incorporate elements of the formal rule of law. To this they
add certain characteristics, i.e., values such as individual rights, morality, etc. The most
common version of the substantive theory of the rule of law includes personal rights and the
requirements of morality. This raises the question ‘what are the moral values in a society?’,
i.e., is there any value that will be absolutely accepted by all members of society?
After the II World War and the atrocities committed by the Nazi regime it was obvious
that the law cannot serve as a barrier against the State. The law was understood more in terms
of rule by law. If law and rights are whatever the state says they are, that means that there can
be no way to set legal limits on state action. German post-War constitution, The Basic Law,
changed that by including substantive content into the rule of law (Tamanaha, 2004, p. 108).
Besides including some of the generally accepted formal and procedural aspects (such
as the principle of legality, the right to a fair hearing before the courts, the prohibition of
retroactive criminal laws), the Basic Law surpasses formal understanding of the rule of law
and establishes ‘the respect for and the protection of the dignity of man as the guiding
principle of all state action’. (Tamanaha, 2004, p. 109).
This view unequivocally puts individual rights within the framework of the rule of law
and at the same time puts them outside the reach of constitutional changes. The only question
left is the content and protection of these rights, and it is given to the judiciary. One of the
consequences of such stance regarding the relationship between personal rights and the
authorities is that many political issues have been transformed into constitutive issues before
the courts (Grote, 1999). This reduced the discretion of the Parliament in passing laws and the
focus of power was transferred to the judiciary. This phenomenon is not limited to Germany
but to the whole of Europe where ‘both national and supranational courts have begun to play a
much more active and important role in deciding important and controversial social questions,
20
which were traditionally decided by governments’ (Ferejon & Pasqino, p. 249). It could be
said that there is ‘a marked trend toward the global expansion of judicial power around the
world today’ (Mc Donald).
If it aims to limit authoritarian ruling and institutions, this trend can be positive. But,
as McDonald notes, giving so much power to the judiciary can be disastrous for the rule of
law when the judiciary is politicized, subject to external influences, corrupt, or simply
insufficiently professional or experienced (Mc Donald).
The essence of the rule of law is reflected in the definition by the English theorist
Allan (1993), to whom the term ‘rule of law’ means primarily ‘a body of basic principles and
values, which bring certain stability and coherence to the legal order’. According to him the
rule of law is a cluster of ‘standards, expectations, and aspirations which encompasses
traditional ideas about individual liberty and natural justice, and, more generally, ideas about
the requirements of justice and fairness in the relations between government and governed.’
This definition of the rule of law seems to go beyond the essence of the Acquis
chapters 23 and 24 of the Treaty on European Union which state that ‘the Union is founded on
the values of respect for human dignity, freedom, democracy, equality, the rule of law and
respect for human rights, including the rights of persons belonging to minorities.’ (Nozar,
2012) This clearly shows that the rule of law is understood as an integral part of these set of
values, and not as an umbrella term that includes them.
4.2.3. THE RULE OF LAW CHECKLIST
Defining the term rule of law is of great theoretical significance, but its practical and
applicable significance is even greater. In the process of EU integration, the requirements of
the rule of law occupy a particularly important place, but the vagueness of this concept could
be a problem for candidate countries because there are often ambiguities about what their
responsibilities really are. However, in an absence of a clear and precise definition of the rule
of law the needs of this paper will benefit from the guidelines of the Report on the Rule of
Law adopted by the Venice Commission, which is a kind of a catalog of features that make up
the essence of the rule of law. This guide identifies common features of the Rule of Law and
provides its core elements (Bartole & al, 2016). Thanks to them, it is possible to determine not
only the existence but also the degree of rule of law in a given country.
21
In its report, the Commission concluded that, despite differing definitions and
opinions, there was still agreement on the essential elements of the Rule of Law. Those
elements that make up the Rule of Law are:
1. legality, which includes transparency, democracy and accountability in law-making;
2. legal certainty;
3. prohibition of arbitrary action by the authorities;
4. respect and protection of human rights;
5. non-discrimination and equality before the law;
6. the right to a fair and just trial, including the review of a court decision before a
higher court.
This list is neither final nor exhaustive. It is changeable over time, as new issues might
arise and it can evolve to cover other aspects of the rule of law or to develop existing ones.
This is because achieving a high level of rule of law is an ongoing process, even in developed
democracies.
The basic requirement of the rule of law is that the powers of public authorities are
independent from each other and defined by law. In this sense, public officials must have the
authority to act and must act only within the limits of those powers. The rule of law implies
the ‘sanctioning of illegal conducts as well as insufficient or selective application of relevant
sanctions’ (Bartole & al, 2016). Impunity is considered to be the violation of this principle.
Also, inaction can be contrary to the principles of the rule of law, and this is often the case in
undemocratic regimes.
The catalog of the Venice Commission also envisages the obligation to explain
administrative decisions. This is the obligation of the authorities to make their decisions
publicly and transparently, as well as to justify their decisions with reasons of necessity and
expediency. In this way, in developed democratic societies, arbitrariness of government is
prevented because decisions are the subject of public debate and exchange of opinions.
One of the most important indicators of the level of the rule of law is the position of
the judiciary, i.e., an independent judiciary that is free from external pressures and political
influence or manipulation of executive power. An independent judiciary is essential in the
fight against corruption and conflicts of interest, which are cited as special examples of the
violation of the rule of law. Corruption leads to arbitrariness and abuse of power, because
decisions are not being made in accordance with the law, which further leads to arbitrary
decisions. Further, ‘corruption can offend the equal application of the law and therefore
undermine the very foundations of the rule of law’ (Bartole & al, 2016). Corruption occurs in
22
all segments of society and is particularly worrying when it occurs in the judiciary, the
prosecutor's office and other bodies that play a key role in the fight against corruption.
Conflict of interest is also recognized as a form of corruption. It occurs when a public servant
has a private interest (which may include a third party, such as a relative or spouse) that could
affect the impartial and objective performance of his or her official duties.
European Union, as a supranational organization, has developed a concept of the rule
of law ‘as a general principle of law applicable to its own legal system’. Thus, the rule of law
implies the supremacy of the law, the balance of the institution, judicial review, fundamental
procedural rights, including the right to a remedy, as well as the principles of equality and
proportionality. Also, the actions of the state must be in accordance with the law and
authorized with the need for judicial review of acts and decisions of executive and other
bodies performing public tasks (Bartole et al., 2016).
5. BAR- BOLJARE HIGHWAY
5.1. INTRODUCTION
Highway as a term appears for the first time in the Regional Spatial Plan for the South
Adriatic Region from 1969. In 1986, the Spatial Plan of the Socialist Republic of Montenegro
established the spatial concept of long-term development of transport infrastructure, which
was treated as one of the key preconditions for balanced regional development. In addition to
main and regional roads, this spatial plan also envisages highways, including the Belgrade-
Montenegrin coast highway (Bar-Boljare, 2020). In 2008, with the adoption of the ‘Spatial
Plan until 2020’ and ‘Spatial Plan for the Bar-Boljare Highway’, the basic preconditions for
the realization of the construction of this project were achieved.
According to the Detailed Spatial Plan, four phases of construction of the Bar-Boljare
highway are planned:
Phase I: Smokovac – Matesevo;
Phase II: Matesevo – Andrijevica and bypass Smokovac – Tolosi – Farmaci;
Phase III: Andrijevica – Boljare;
Phase IV: Podgorica – Djurmani (Bar-Boljare, 2020).
23
Figure 1- Map of the Bar-Boljare highway. Source: researchgate.net
For now, only the work on the 41 km long Smokovac-Matesevo section has been
started. This is also the most expensive and most difficult section of the planned highway
because it passes through difficult terrain, and almost half of this section will be made of
bridges and tunnels.
This project was objected to by both domestic and foreign experts and institutions,
among others, professor at the Faculty of Architecture Jelisava Kovacevic, who opposed this
project in the Parliament, claiming that all studies showed that the highway is unprofitable,
and expressed a serious dilemma whether it is necessary or the problem could be solved by
building new roads and third lanes (Babovic, 2014). However, the position of the
Montenegrin government expressed on the official website of the Bar-Boljare highway was
that the highway ‘is one of the elements of the strategy for the country's integration into the
European Union, which will enable better and safer mobility of people, goods and services’.
This is also recognized in the Regional Development Strategy of Montenegro for the period
2014-2020 and stands out as ‘one of the instruments for reducing regional disparities in
Montenegro and for achieving a more balanced socio-economic development of the region,
based on competitiveness, innovation and employment.’ (Bar-Boljare, 2020). In addition, the
mentioned Strategy states that ‘the need to raise the level of safety and reduce the number of
24
traffic accidents’ is an important reason that speaks in favor of the need to build the Bar-
Boljare highway.
The road network in Montenegro consists of state and regional roads as well as local
roads, and before the construction of the Bar-Boljare Highway began, Montenegro was the
only country in the region that did not have a highway. Most of these roads pass through hilly
and mountainous areas, include a large number of bridges and tunnels, do not have a light and
safety network and therefore pose a great risk to drivers. This is especially the case in the
winter. In addition, these roads do not have a stop lane or a lane for slow vehicles. They were
built according to the standards that applied in the former Yugoslavia 60-70 years ago. All
these reasons speak in favor of the construction of a highway that will connect the
Montenegrin coast with the north of Montenegro and then through Serbia with other countries
in the region.
Mostly cited main difficulties associated with these mountain roads are steep slopes
with no stop lane and lane for slow vehicles, insufficient opportunities for overpassing,
inadequate security barriers, inadequate lighting and bad weather conditions, combined traffic
of new and older cars as well as heavy trucks and buses, no footpaths, etc. (Bar-Boljare, 2020)
For the purpose of examining the justification of the construction of the highway, as it
is pointed out on the official website, study projects and accompanying documentation were
made, among them general projects (conceptual solutions) for highway sections but also
feasibility studies done by consulting companies the Louis Berger SAS, France in 2008 and
the Scott Wilson, Scott House, UK, in collaboration with the World Bank's International
Finance Corporation (IFC) in 2009 (Bar-Boljare, 2020). There is no mention, however, of
reports from these consulting firms. The outcome of these feasibility studies, according to
Grgic (2017) showed that the 41 km stretch of the Highway, prioritized by the Montenegrin
government, was not feasible.
Nevertheless, despite these assessments made by independent consulting companies
and despite the recommendations of European institutions, Montenegro has decided to
continue with the highway project. Initially, the project was planned as a private-public
partnership agreement between the Government of Montenegro and the winning bidder with a
concession for a period of 30 years. The public bidding process, as stated on Bar-Boljare
official website, was divided into two phases: pre-qualification and bids submission. In the
pre-qualification procedure, the Ministry made a selection of six potential bidders, of which
25
four submitted their bids in a timely manner. After evaluating the technical and financial
characteristics of these offers, a ranking list of two was compiled:
1. KONSTRUKTOR CONSORTIUM, (consisting of the companies Konstruktor -
inženjering dd (Croatia), Institut Građevinarstva Hrvatske dd (Croatia) and
Tehnika dd (Croatia), with the company Konstruktor at the head of the consortium;
2. AKTOR / HCH CONSORTIUM, (consisting of Aktor Concessions (Greece) and
Housing & Construction Holding Co (Israel) (Bar-Boljare, 2020).
The construction of the highway was handled to Konstruktor Consortium and it was
supposed to be financed from a Montenegrin budget. However, a few months later after
failing to provide guarantees for the project, the Croatian company announced its withdrawal
(Grgic, 2017). After this unsuccessful attempt to close the financial structure and provide
funds for the construction of the highway, the Montenegrin government began negotiations
with the second-ranked Aktor / HCH consortium. In their case, the support of the European
Investment Bank was also expected, which was lacking, so the partnership was not realized.
After these two failing attempts, the Ministry of Transport and Maritime Affairs has focused
its activities on ‘the selection of the optimal model, source and method of financing the
implementation of the highway project, and accordingly, the selection of the appropriate
contractor for its construction’ (Bar-Boljare, 2020).
In 2012 the Government of PR China announced plan to form a credit line with the
value of 10 billion US dollars, to provide ‘project cooperation with Central and Eastern
Europe, which would be partially in shape of preferential loans and from which projects in the
infrastructure sector would be financed.’ (Loan, 2014) In September 2012, the Government of
Montenegro concluded a Memorandum of Understanding on Cooperation with THE
EXPORT-IMPORT BANK OF CHINA and in February 2014. requested a loan of
943,991,500.00 US dollars for the purpose of financing the construction the first section of the
future Highway, namely section Smokovac –Matesevo. The contract on the design and
construction of the Bar-Boljare highway, sections: Smokovac-Uvac-Matesevo, between
Ministry of Transport and Maritime Affairs of Montenegro and the China Road and Bridge
Corporation, was concluded on February 2014 (Loan, 2014).
The basic principles that the Montenegrin government was guided by when choosing a
potential partner were among other things:
- design and construction costs;
26
- compliance of possible credit indebtedness with the budget of Montenegro;
- time of beginning and end of works;
- application of substantive law of Montenegro (Bar-Boljare, 2020).
This should be paid attention to, because the stated reasons act more as reasons against
and not in favor of building the highway under these conditions. In addition, there is a
deliberate omission of important facts by drawing attention to elements that are accurate but
not relevant to the extent that the government wants to present them. In this way the public is
deceived while trying to present the project in the best possible light.
5.2. DESIGN AND CONSTRUCTION COSTS
The total value of the contract for this section is €809 million of which 15% will be
financed from Montenegrin government funds- via the state budget, while 85% of the funds
will be secured with a loan from Exim's Bank, ‘with a yearly interest rate of 2% for 20 years,
with a 5-year grace period’ (Medjedovic, 2017). Considering that this section is 41 km long,
this makes it the most expensive highway in Europe.
Beside that, Montenegrin Parliament has passed a Law on Highway for this project,
which is in form of lex specialis, as mentioned before, and a series of tax exemptions have
been allowed covering such items as:
• Value added TAX
• Customs Duties on imported equipment and materials
• Expatriate Income tax and social contributions
• Corporate tax of the Contractor’s company having its registered seat in Montenegro
• Excise tax on motor fuel (Medjedovic, 2017).
According to NGO MANS4 Chinese company has been exempted from paying at
least €140 million of taxes, not counting taxes and contributions to foreign workers (Calovic
4 MANS is a non-governmental organization that fights against corruption and organized crime in Montenegro.
MANS struggles for a fair, open and free society of active citizens and for a government that serves the public interest. It is engaged in investigating cases of corruption and organized crime, monitoring the implementation of
legislation and government policy, providing free legal aid to citizens, CSOs, media and businesses, developing
law and policy proposals and analysis, conducting advocacy campaigns. It has dealt extensively with the issue of
freedom of information and access to public information in Montenegro.
https://www.rcmediafreedom.eu/Tools/Stakeholders/MANS-Network-for-Affirmation-of-the-NGO-Sector
27
& al, 2019). In addition, construction costs will increase by additional € 203 million due to
‘forgotten works’ and more expensive credit.
Namely, at the beginning of 2019, the Government admitted that the additional costs
on the Smokovac-Matesevo section will amount to € 113 million. This was the result of
omission - the contract did not include the construction of Smokovac loop, regional roads on
Verusa and Matesevo, as well as the construction of water supply and electricity network on
the highway. These are all works necessary to bring the project of the highway into use
(Calovic & al, 2019).
5.3. COMPLIANCE OF POSSIBLE CREDIT INDEBTEDNESS WITH THE BUDGET OF MONTENEGRO
The loan from EXIM Bank for the construction of the first section of the highway, has
increased the public debt to over 100%. This is controversial for several reasons. First,
Montenegro is a prospective EU member state that has signed the Stabilization and
Association Agreement (SAA). Based upon the Maastricht criteria for EU candidates a debt
ceiling is being imposed which means that debt-to-GDP ratio must not be greater than 60%
(Gray, 2018, p. 2). In addition to this, as pointed out by Kovacevic (2021), due to such a high
public debt, it is very difficult for Montenegro to obtain funds on the financial market, while it
has been already borrowing at less favorable interest rates. Montenegro’s public debt
discourages potential investments and without the inflow of investments and other revenues, it
will be difficult for the country to continue financing reform projects. Furthermore, after the
Government’s decision to allow an increase in debt to take loans for the Bar-Boljare highway,
the World Bank withdrew $ 50 million in direct budget assistance (Gray, 2018, p. 3). The
IMF (2019) report states that Highway construction has weighed heavily on public finances
since the total public debt of Montenegro, as of 31.12.2020 amounted to 4.409 billion Euros,
or 105.15% of GDP (Bankar.me, 2021).
5.4. BEGINNING OF WORK AND ENDING DATES
The contract with Chinese stakeholders has been enforced in Montenegrin parliament
with the Law on the Bar-Boljare highway (2014). Under the contract, the estimated time to
complete the work was 48 months. According to MANS (Calovic & al, 2019), at the end of
28
2018, government officials announced a delay in the completion of works by at least a year.
Shortly afterwards, the Ministry of Finance announced the possibility that the delay would be
more than a year. and the Ministry of Transport announced that works on the priority section
will be carried out in the course of 2020 as well. The contract states that in case of delayed
completion of works, FIDIC rules apply, according to which compensation for damage due to
delay is calculated in the amount of 0.01 percent of the contract amount per day for delays of
up to 90 days, and after a period of 90 days per day compensation is 0.02 percent of the
agreed deadline. If the delay lasted a year, through the fault of the contractor, the total amount
of compensation according to this formula would be worth 6.4 percent of the amount of
contracted works of 809 million, which would be €51.7 million. However, the contract
stipulates that the total compensation for the delay cannot amount to more than five percent,
which would amount to €40.4 million (Kapor, 2018).
Given that according to the contract, the contractor has the right to extend the deadline
under certain conditions5, it remains to be seen whether the Chinese company will pay
penalties for delays in the execution of works.
As one of the criteria for the selection of the most favorable partner, the Government
stated ‘engagement of Montenegrin construction companies and labor force’. However, this is
certainly not true because under the contract the Chinese company was obliged to employ
only 30% of domestic workers. At the construction site of the highway Bar – Boljare about
1,100 workers were hired to complete the works. Of that about 400 workers are Chinese
citizens. About a hundred refer to domestic and labor force from the region engaged by
CRBC. The rest relates to the staff of subcontractors (Investitor, 2021).
5.5. APPLICATION OF SUBSTANTIVE LAW OF MONTENEGRO
The Government of Montenegro justified its decision, inter alia, by applying the
substantive law of Montenegro during the decision-making and implementation of this
project, thus trying to give legitimacy to this project. At the same time, the agreement itself, as
well as all the details of this work, were declared a state secret. Besides, as Grgic (2017)
points out, ‘the contract was confirmed in parliament to avoid existing procedures for similar
5 Those conditions are modification in relation to the contracted works that affect the basic deadline, extremely
unfavorable climate conditions, an unpredictable shortage of labor or goods due to an epidemic, interference
caused by the investor's non-fulfillment of obligations
29
projects, but also to circumvent certain regulations by making it a lex specialis’. Namely, lex
specialis as such, annuls all other laws regulating this type of business. In this way, the
government, by circumventing the regulations, gave itself the opportunity to allocate work to
contractors without announcing tenders, as well as to offer them conditions that would be
unacceptable under ordinary laws. This fact is justified by the reference to the Law on Public
Procurement, according to which the announcement of tenders is not mandatory if the project
is implemented at the intergovernmental level.
Another aspect of this agreement is controversial and not in line with EU practice and
that is that the borrower waives immunity for himself and his property on the basis of
sovereignty or in any other way, except for diplomatic and consular missions and military
facilities and in the case of arbitration the process shall be carried in Beijing (Kmezic, 2017)
This means that in the event of a dispute, the court in Beijing has jurisdiction and applies
Chinese law.
Further, MANS states in its report (2019) that the contract on the construction of the
first section stipulates that CRBC will engage domestic companies as subcontractors, in the
range of at least 30% of the contracted price, but by the end of 2018 they contracted works
worth almost half of the total price, i.e., little less than €400 million. Most of the money, as
they found out, was given to only one company – Bemax. The four largest domestic
subcontractors are exempted from € 25 to 30 million of VAT on goods and services related to
the construction of the first section, but a precise calculation is not possible because more
detailed information was declared secret. According to official data, four domestic companies
‘Bemax’, ‘Cijevna Komerc’, ‘Montenegro Petrol’ and ‘Ramel’ in four years realized the
turnover of goods and services that was exempted from VAT payment in the amount of about
€151 million (Calovic & al, 2019) These companies are owned by people close to the ruling
regime, and it is speculated that money from controversial businessmen is being laundered
through ‘Bemax’ company (Borba, 2021). It is therefore not surprising that many see this
project as ‘a spectacular manifestation of government incompetence, corruption,
environmental harm, criminal opacity, and resource misallocation’ (Mardell, 2019).
It seems worthwhile repeating at this moment that most of the information on the
construction of the largest infrastructure project in Montenegro, the Bar Boljare highway, has
been declared secret in advance. This includes data on financing and payments,
implementation of works, control of works, and even the route of the highway passing
through the protected area of the river Tara has been declared a secret.
30
Information declared a state secret are shown in the following table
TYPE OF ACT DOCUMENT DESCRIPTION
Contractor’s charges notices
Investor charges notices
FINANCE Contractor payment schedule
Temporary situations and issue requests for them
Requests to issue a completed situation
Contractor’s progress report
CONTROL
Engineer conclusions and reports
Monthly project manager reports
Non-final technical documentation audit reports
Criteria for measuring and evaluating additional and
unpredicted works
LITIGATIONS Notice of legal action before the Commission for Settlement of
Disputes
Decisions of Commission for Settlement of Disputes
TECHNICAL
DOCUMENTATION AND
OTHER
Program of works
Technical documentation audit plan
Textual and graphic documentation of a technical nature
Documentation on performed works
Minutes of meetings
Proposals of contractors, engineers, project managers and
government representatives that are variable categories and
affect current contract positions
ADMINISTRATIVE ACTS Approvals, consents, opinions, decisions, confirmations,
instructions, notices, requests / orders Table 1- Source: MANS
The Ministry's explanation states several reasons for declaring the data secret. They
are listed as follows:
- trade secret;
- protection of competition;
- economic interests
- intellectual property of the Government;
- security and
- variability of data and misinterpretation of information.
According to the Law of Data Secrecy of Montenegro ‘classified information is
information the disclosure of which to an uninvited person would or could have harmful
31
consequences for the security and defense, foreign, monetary and economic policy of
Montenegro.’ (Law, Law on Data Secrecy of Montenegro, 2008)
Article 10 of this Law further states:
‘Information may be classified if that is necessary in a democratic society and if the
interest referred to in Article 3 paragraph 1 of this law is more important than the interest in
free access to information. The person authorized to determine the degree of secrecy of the
data by above reasoned decision shall mark the data as secret and determine the degree of its
secrecy.’ (Law, 2008)
Therefore, in order for the information to be, according to the law, declared secret, its
disclosure should represent a certain degree of danger to Montenegro. Also, it is necessary for
the authorized person to state the reasons by which he/she confirms the justification of
declaring the data secret. According to MANS (2018), in determining the level of secrecy, the
Ministry referred to the general need to prevent negative consequences, and therefore limited
public access to this information. Such interference with citizens' rights is arbitrary and does
not meet ‘the requirement of necessity in a democratic society’. Concealment of this
information is also contrary to the provisions of the European Convention for the Protection
of Human Rights and Fundamental Freedoms as well as to the positions of the European
Court of Human Rights in which the Convention is interpreted6 (MANS, 2018).
A ban on access to information by the Ministry is considered to be a general ban
because all data are classified - administrative acts, data on control and supervision, technical
documentation, etc. As another reason in the explanation of the decision to declare all data
secret, it is stated - trade secret. The government claims, contrary to international standards,
that all the mentioned documentation is a business secret. As noted in the report, the
contracting authority is the Government and not a company that may have trade secrets. In
addition, this project is partly financed from the budget and therefore the Government should
not hide this information because budget spending must be public and transparent.
As another reason for hiding information about the highway from the public, the
Ministry cited protection from competition and economic interests (MANS, 2018). This refers
both to the activities on the existing section of the Smokovac-Matesevo road, and to the
6“States are to link the standard ‘necessary in a democratic society’ with one of the specific grounds for
restriction, which are listed in the relevant article: the state cannot legitimately invoke a general need to justify a
restriction of the rights and freedoms of the individual ... The term 'necessary' means that any interference with the enjoyment of a protected right must correspond to an urgent social need, and in particular, must be
proportionate to the aim pursued. In assessing whether the interference was ‘necessary’, the Court takes into
account the degree of discretion enjoyed by the State authorities. However, the Court considers that it is the duty
of the responsible State to show that such an urgent need exists in the event of a specific interference.” McLeod
v. The United Kingdom 1998 and Klamecki v. Poland (no. 2) 2003 (MANS, 2018)
32
preparation of the next sections. The objection to this could also be that the Government, as
the contracting authority, ensures the protection of competition by publicly announcing the
conditions that must be available to all potential bidders. Also, as further stated in the MANS
report (2018), ‘the existing section of the highway is being built on the basis of the Main
Project, done by CRBC, while the vast majority of documents classified by the government as
secret are already owned or produced by a Chinese company’. Should a dispute and
arbitration arise, the government would not be jeopardized by the fact that this information is
already known to the public because there is already an obligation between the parties to
inform each other in the event of a dispute.
The government further defends its actions by invoking the protection of intellectual
property. It is unclear which aspect or which part of the highway construction project could
fall into this category and thus be protected by secrecy. Intellectual property rights are the
subject of several substantive laws, application of which is prescribed by the Law on the
Application of Regulations Regulating Intellectual Property Rights (Directorate, 2006).
Intellectual property rights are:
-author and related rights,
-industrial property rights (trademark, design, patent, geographical indications,
semiconductor topography).
These laws protect intellectual property but never mention that this is done in a way
that a certain fact is declared a secret.
The Ministry of Transport stated that many documents about the highway were
declared secret because they are not final, but ‘represent variable contract categories’, so
‘publishing them before the final form of the decision could lead to misinterpretation of the
content of information’ (MANS, 2018). In that way, the Ministry prevents public debate and
public participation in decision-making, as well as determining responsibility in the work of
public officials.
The Ministry also declared secret the presentation of payment deadlines to the Chinese
company. Because they contain data on chestnut prices and payment deadlines, hiding this
data limits the right of citizens to have insight into how their money is spent.
All of the above mentioned, shows how Montenegrin Government was misusing
domestic laws to legitimate their actions. It is an example of how the rule of law can become
the rule by law.
33
5.6. ENVIRONMENTAL IMPACT
Apart from the public debt, which has risen to over 100% of GDP due to the loan for
the construction of the highway, one of the most obvious indicators of the harmful impact of
this project is the impact on the environment. The priority section Smokovac-Matesevo passes
through the bed of the Tara River, and during the construction there was a devastation of the
river which is a pearl of nature, and in 1980 was declared a ‘UNESCO World Heritage Site’.
The river has been protected and included in the ‘Man and the biosphere’ list (Stojic & al,
2008). The Tara River is stretching along 144 km and it is the longest river in Montenegro. Its
canyon is 82 km long and 1300 m deep and it is the second deepest in the world after canyon
Colorado.
The importance of the protection of the environment and natural resources is shown by
the fact that the Constitution of Montenegro already in the first article stipulates:
‘Montenegro is a civil, democratic, ecological and social justice state, based on the
rule of law.’ (Constitution, 2007)
In the part dedicated to human rights says:
‘Everyone shall have the right to a sound environment. Everyone shall have the right
to receive timely and full information about the status of the environment, to influence the
decision-making regarding the issues of importance for the environment, and to legal
protection of these rights. Everyone, the state in particular, shall be bound to preserve and
promote the environment.’ (Constitution, 2007)
Montenegro is the first ecological country in the world. The Declaration on the
Ecological State was adopted at the session of the republican parliament, which was held in
Zabljak on September 20, 1991. It defined the strategic commitment of Montenegro to adopt
and apply the highest standards and norms in the field of environmental protection, nature
conservation and economic development on the principles of ecologically sustainable system
(CDM, 2018).
The European Parliament, on 31 May 2001, and the Council of Europe, on 5 June
2001, formally adopted the Directive on the Assessment of the Effects of Certain Plans and
Programmes on the Environment, also known as the SEA Directive (Strategic Environmental
Assessment). The purpose of the SEA Directive is to provide for the identification and
34
assessment of the environmental consequences of certain plans and programs during their
preparation and before their adoption (Stojic & al, 2008). Based on it, the Strategic
Assessment of the Environmental Impact for the Detailed Spatial Plan of the Bar - Boljare
Highway was adopted in 2008 by the Ministry of Tourism and Environmental Protection. The
key objectives of the SEA Directive include contributing to a high level of environmental
protection and the integration of environmental factors in the preparation and adoption of
plans and programs in order to achieve sustainable development (Stojic & al, 2008).
When assessing the impact on the environment, the following characteristics of the
impact must be taken into account: complexity, probability, intensity, reversibility, time
dimension (duration, frequency, recurrence), spatial dimension (location, geographical area,
number of exposed inhabitants, transboundary nature of impact), and other impact
characteristics. Accordingly, a selection of significant environmental factors was made, which
are included in the report and for which the impact on: air and climate, land, water, flora and
fauna, habitats and biodiversity, protected natural resources, noise, waste, light emission,
social environment (socio-economic characteristics, population and human health), landscape
and cultural-historical heritage has been determined (Stojic & al, 2008).
The possible negative impacts and the approximate determination of the significant
content of the environmental report are multiple. However, for this paper, what is important
is:
- impact on flora and fauna, habitats and biodiversity (vegetation cut down, habitat
endangerment, noise, occupation of protected nature areas);
-impact on water (emissions into surface and groundwater, interventions in
watercourses) and
- impact on waste (generating municipal, construction and hazardous waste).
These are areas where there was a negative impact during the construction of the
highway due to irresponsible behavior of contractors, namely the Chinese company CRBC, as
well as failure of the competent state authorities to adequately monitor and punish
perpetrators, as well as to prevent further negative impacts.
The Strategic Assessment states, among other things, that the description of the basic
factors is one of the key steps, which are generally needed to achieve the objectives of any
environmental impact assessment. In order to properly perform the environmental impact
assessment, it is necessary to take into account the natural and socio-economic components.
The presented basic factors define the characteristics of the environment in Montenegro in the
area of the highway corridor. They are the base for a strategic impact assessment. The
35
presented data provide a general overview of the basic factors in order to create an
elementary picture that would enable the initiation and start of the environmental impact
assessment process in parallel with the highway design and construction processes. This will
require more precise studies and analyzes in the next phases of the project, which will provide
more detailed data to be included during determining feasibility in design (Stojic & al, 2008,
p. 21).
This shows that these are only basic guidelines or a general framework for making a
strategic assessment for a specific project, in this case for a Detailed Spatial Plan (DSP). This
allows the process of environmental impact assessment to begin, which in this case has not
been done. In addition, MANS points out that the Assessment Study was made only on the
basis of literature, some of which is more than half a century old. An on-site assessment of the
actual state of flora and fauna in the area has not been made (Calovic & al, 2019).
Apart from the fact that no adequate assessment of the state of flora and fauna,
including some protected species, was made before the construction of the highway, many
measures provided by strategic documents are not adequate, while some important
environmental guidelines during the construction of the highway were simply rejected by the
government and the relevant ministry. Practice shows that the damage caused during the
construction of the highway is huge and that the project has a very negative impact on the
Tara River, its flora and fauna (Calovic & al, 2019).
At the Matesevo loop construction site, where two bridges are being built, it is
noticeable that the contractor, the Chinese company CRBC, has completely devastated the
river flow and in some places the riverbed has been relocated. Hundreds of cubic meters of
waste material from nearby construction sites were deposited on both banks of the Tara River,
while a whole mountain of earth and gravel was formed at the location next to the Jabuka
camp. In addition, part of the road as well as several permanent and temporary bridges were
built in the riverbed. The damage caused in some segments is irreversible (Milovac &
Grdinic, 2018).
Photos from the field clearly show the condition of the Tara River, which is protected
by UNESCO
36
Figure 2: Matesevo loop construction site. Source: MANS
Disposal of excess material in the creeks and rivers beds, on the banks of rivers as well
as on agricultural land is strictly prohibited by the Study of the Impact of the Highway
prepared by the Chinese company CRBC, which was approved by the Environmental
Protection Agency in late 2015. Special landfills were provided for the disposal of surplus
material and waste generated during construction, which, however, were never opened.
Instead, the Chinese company dumped the excavated material in the riverbed and on the banks
of the Tara River (Milovac & Grdinic, 2018). In mid-2017, CRBC drafted a document
envisaging measures to protect the Tara River during the construction of the highway, but at
the same time announced that excavated material would be deposited in the riverbed and its
banks, allegedly for its regulation. This document has been accepted by the relevant Ministry
(Milovac & Grdinic, 2018). Thus, the Government practically abolished the contractors for
the damage already done and gave legitimacy to their further activities that directly have a
negative impact on this protected area.
In addition to the physical devastation, the Chinese company pollutes the Tara River
by discharging wastewater directly into the Jabucki stream, which flows directly into the Tara
River. This is confirmed by the recordings made by MANS.
37
Figure 3a: Stream of river Jabucica. Source: MANS
Figure 3b: Stream River Jabucica. Source: MANS
Official findings from the Institute of Public Health confirm the pollution of the Tara
River because in numerous water quality tests they found that the samples were contaminated
(MANS, 2018). As part of the monitoring of the construction process, the NGO MANS tried
to obtain information on whether the Montenegrin authorities in charge of control and
inspection of works noted these irregularities and whether the Chinese company had any legal
consequences in this regard. However, the Directorate for Inspection Affairs in charge of this
refused to provide the requested information (MANS, 2019-20), thus clearly violating the law
on free access to information.
38
In the information request, according to MANS (2019-20), copies were requested as
listed:
- acts of the Administration for Inspection Affairs,
- records regarding the construction,
- requests for misdemeanor orders submitted by water inspectors and environmental
inspectors of the Administration for Inspection Affairs to the competent courts on the basis of
established irregularities
- conclusions on ordering a fine made by the Ecological Inspectorate during
inspections on the construction site.
These informations were requested in order to inform the NGO MANS and thus the
general public about the extent to which the competent authorities are actually dealing with
this issue. The requests were repeatedly rejected on the grounds that ‘their publication before
the end of the project would not be in accordance with the applicable regulations and laws
declaring the project a trade secret.’ (MANS, 2019-20). In this case, MANS initiated several
proceedings before the Agency for Personal Data Protection and Free Access to Information.
However, even after their intervention, the Agency refused to provide the requested
information, although they were obliged to do so by law, which states:
‘Inspections are public. When it comes to the protection of life and health of natural
persons or serious violation of the public interest, the inspection body is obliged to inform the
public about the facts and irregularities identified during the inspection procedure.’ (Control,
2011).
Due to the inaction of state institutions regarding the devastation of the Tara River, six
non-governmental organizations filed criminal charges against officials of competent
ministries, officials whose duty was to supervise and inspect possible abuse of authority, and
against contractors for environmental pollution, environmental damage, and damaged natural
property (MANS, 2020). The criminal charges with evidence in the form of recordings and
photographs were submitted to the Supreme State Prosecutor's Office in October 2018, but the
Supreme State Prosecutor's Office, without explanation, forwarded the report with evidence to
the Special State Prosecutor's Office. In March 2020, the Special State Prosecutor submitted
the case files to the jurisdiction of the Basic State Prosecutor's Office. This is explained by the
fact that ‘the Prosecution did not find in its conduct that any criminal offense for which
prosecution is undertaken ex officio has been committed by any of the persons covered by the
39
report, which is within the competence of the Special State Prosecutor’s Office.’ However,
the Basic State Prosecutor's Office rejected the criminal complaint on the grounds that ‘it will
not prosecute a person for a criminal offense for which they are being prosecuted ex officio.’
(MANS, 2020)
From the case described above, it is possible to derive two assumptions, namely that
the judiciary is not independent and / or that these are unprofessional persons who, in this
case, are not suitable to perform the highest judicial functions. The conduct of the judiciary on
these criminal charges gives a clear picture of the situation in the Montenegrin judiciary, i.e.,
the fact that the judiciary is not independent and/or professional. This is certainly one of the
indicators why the assessments of Montenegro's progress in the field of rule of law are
continuously poor.
Finally, the European Parliament and the European Commission have recognized the
negative impact of highway construction. In their reports, they called for the urgent
implementation of measures to repair the damage in the protected area of the Tara River and
prevent its further devastation, as well as to make information related to this project available
to the public. The European Parliament's 2018 report expresses the need for:
‘timely and accurate information on the impact of the highway construction on the
Tara River to be made available to a wide public, as well as for the cessation of all activities
of waste dumping and riverbed alteration, in line with the commitments entered into by
Montenegro to preserve areas having special national and international protection.’
(Parliament, 2018)
Also, in the European Commission’s 2019 report in Chapter 27 relating to
environment and climate change the impact of the construction of the highway on the Tara
River is mentioned:
‘The authorities should also strictly assess and prevent possible negative
environmental impacts of building construction in the Skadar Lake national park and on Tara
River in the context of the Bar-Boljare highway development.’ (Commission, 2019, p. 86)
These reports clearly show that Montenegro's progress in these areas has been recognized as
moderate and insufficient.
Norms related to the protection of this area of the Tara River derive from the
UNESCO Convention Concerning the Protection of the World Cultural and Natural Heritage,
of which Montenegro is a member. Therefore, Montenegro is obliged to not intentionally take
40
any measures that could cause negative consequences for the heritage in question. Given that
the highway passes through this area, this can be considered a violation of these international
legal norms. UNESCO concluded that the construction of bridges, as well as the exploitation
and disposal of gravel and sand had seriously devastated the Tara riverbed within the
UNESCO-protected area “Man and the Biosphere” (Milovac, 2019). This may result in the
deletion of areas from the List of World Network Biosphere Reserves (Stojic & al, 2008, p.
54).
Figure 4: Tara River before and after building the Highway. Source: Aleksandar Dragicevic
6. CONCLUSION
According to the ‘external incentives’ model, the process of Europeanization implies a
system of conditioning the candidate countries by the EU. If the target government complies
with the EU conditions, the EU will pay the reward, and if it fails to comply, the EU
withholds the reward. The ultimate reward, according to this model, is full EU membership.
One of the main hypotheses of this theory is that the candidate country will meet the
accepted obligations if the offered reward is greater than domestic material, political and
power-oriented costs. In addition, an important precondition for a successful Europeanization
41
process is the credibility of the promise made by the EU. Analysis of the Bar-Boljare highway
construction project confirms these hypotheses as it will be explained further.
Namely, EU is unable to provide assistance to the countries of the Western Balkans in
the implementation of large infrastructure projects due to its internal problems (economic
crisis, migrant crisis, BREXIT, etc.) as well as due to too demanding procedures for these
countries for joining EU financial funds. In addition, there has been a fatigue in the EU
enlargement, which can be recognized in the statement of the former President of the
European Commission Jean-Claude Juncker that there will be no EU enlargement during his
term (Vidal, 2017). On the other hand, countries of the Western Balkans region do not meet
their obligations sufficiently and do not implement reforms aimed at rapid progress towards
full EU membership. According to Freedom House (Evropa, 2021), these countries belong to
the so-called Hybrid Systems, between democracy and autocracy, and, as maintained by the
European Commission, ‘show clear elements of state capture, including links with organized
crime and corruption at all levels of government and administration.’ (Dzankic & al., 2019).
This gap between the needs of the Western Balkan countries for infrastructure
investment and strict conditions by European financial institutions, opened the space for
expanding the influence of great powers such as China, which offered financial resources to
these countries without complicated procedures and requirements. In case of Chinese loans,
the domestic costs of the ruling elites are significantly lower than the benefits, at least in the
short term. Expensive loans obtained from China are presented to the public as necessary and
useful investments. In reality, they bring short- term benefits for the ruling elites, while in the
long run they represent a huge fiscal burden to the country, without significant economic
profitability.
Due to its size and possible consequences, the Bar-Boljare highway construction
project is indicative because through its analysis it can be seen how China, through its
infrastructure investments, is able to exert economic and political influence on economically
underdeveloped countries. This impact is often not direct and obvious, because China does
not condition its investments on economic, political, sociological, environmental and similar
reforms, as is the case with the EU institutions. On the other hand, relationship between the
EU and the Western Balkans countries in the process of EU integration is based on mutual
expectations. Thus, as a condition for comprehensive cooperation, EU expects these countries
to fulfill their previously undertaken obligations, while the Western Balkan countries expect
the EU to make their promises credible and clear. This was also highlighted in the report of
the Commissioner for Neighborhood and Enlargement, Olivér Várhelyi, which states that the
42
Commission will better define the conditions set for candidate countries and will provide clear
and tangible incentives. He also emphasizes that serious stagnation or setbacks in the
implementation of reforms and meeting the requirements of the accession process will be
sanctioned and ‘negotiations could be put on hold in certain areas, or in the most serious
cases, suspended overall’ (Commision, 2020).
It should be reminded that research question of this paper is ‘Is China, through its
infrastructure investments, influencing the processes of Europeanization and affecting the rule
of law in the countries of the Western Balkans?’ Based on the previous analysis of the
construction of the highway and possible implications for the EU integration of Montenegro,
in response to the research question of this paper, it is concluded that China has a very
significant economic and therefore political influence on Montenegro (and this applies to
other Western Balkans countries). Namely, through its infrastructure investments China has
the opportunity to indirectly shape and direct the behavior of key political actors in the
country and the country itself. As seen in the example of the highway project, such financial
arrangements, which are contrary to the principles of neoliberal economy, may have far-
reaching consequences for the borrower's country. This influence of China, in an indirect way,
further affects the relations of the Western Balkan countries with other strategic foreign policy
partners, primarily the EU. In this way, China is able to change the foreign policy direction of
these countries. Pavlicevic (2019, p. 454) also concluded that ‘by deepening diplomatic ties,
promoting its own model of economic cooperation and channeling significant funds to the
region, (…), Beijing is increasingly capable of shaping preferences and policies of the
Western Balkan states.’
However, it is very important to point out that through its infrastructure investments,
China does not change, nor does it strive to change the political or social system in these
countries. Guided by its economic interests, China has found a suitable ground for engaging
its capital, materials and labor under conditions that deviate significantly from the standards
applicable in Western European countries. In other words, it took advantage of the
weaknesses of the systems in the Western Balkans, the low level of rule of law and
democracy, low standards of environmental protection, the lack of strong institutions to
control and supervise the execution of works, and the shortcomings of the judicial systems,
thus enabling its companies to avoid liability for possible violations of domestic and
international rules, norms and standards.
Therefore, through its participation in the Bar-Boljare project, China does not affect
nor change these Europeanisation principles and rules, or the level of the rule of law in a
43
direct way. Its influence is reflected in the fact that China, through this type of engagement,
indirectly helps to maintain existing conditions. This is because China, unlike the EU, does
not set requirements regarding achievement of certain standards of the rule of law and other
principles on which the countries of Western Europe, as well as the entire EU, are based.
Hence, since the adoption costs are very low for them, the ruling elites in the Western Balkans
consider such financial arrangements favorable.
The Bar-Boljare highway is just one in a series of projects implemented in the
Western Balkans with the support of the Government of the People's Republic of China and
their financial institutions through the “17 +1”7and “Belt and the Road”8 initiatives. Such and
similar projects, mostly in the field of infrastructure, energy and telecommunications, are
being implemented in other countries of the Western Balkans - in the Republic of Srpska9,
Bosnia and Herzegovina10, Northern Macedonia11and Serbia12, which received the largest
share of Chinese loans comparing to other Western Balkan countries.
7 The 17+1 initiative is a China-led format founded in 2012 in Budapest with an aim to expand cooperation
between Beijing and the CEE member countries, with investments and trade for the development of the CEE region. The framework also focuses on infrastructure projects such as bridges, motorways, railway lines and modernization of ports in the member states. The initiative includes twelve EU member states and five Balkan states — Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia. The platform is largely seen as an extension of China’s flagship Belt and Road initiative (BRI) (Gupta). 8 The Belt and the Road initiative is a connectivity and integration project, comprising a broad area of economic, political, and social interaction amongst state and non-state actors. The initiative includes a combination of
economic measures and infrastructural works, including railways, roads, pipelines, ports and logistic hubs, but
also promotes exchange of goods, people, money, ideas and cultures, transiting through Asia, China, Europe and
Africa. Over 70 countries are involved in the BRI, covering a total of 70 percent of World’s population with an
estimated cost ranging around USD 6 trillion (Changming & Yilmaz, 2018). 9 In Republika Srpska, the Chinese have invested €350m in the construction of the Stanari private thermal power
plant near Doboj through the China Development Bank, which is about 70% of the project's value, while the
owner, EFT, provided 30% of the funds.
EFT has a concession for a lignite (coal) mine, which is estimated to have about 100 million tons of coal worth
about €1.5 billion (Sadikovic, 2019). According to this paper, if the borrower is unable to repay the loan, the
Chinese Development Bank will take over concessions for the extraction of lignite (coal), water needed for the operation of the thermal power plant as well as the thermal power plant itself (Sadikovic, 2019). 10 Bosnia and Herzegovina has approved a loan from China to expand a coal-fired power plant in Tuzla,
prompting the energy community in charge of extending European energy policies to Southeast Europe to file a
complaint, arguing that the loan approval violates a set of laws relating to subsidies. It then imposed sanctions on
Bosnia and Herzegovina at the end of January this year, which could have serious consequences in terms of
reducing or suspending funding for energy projects, as well as suspending the opening of a negotiating chapter
on energy (Sadikovic, Al Jazeera, 2021).
11 The largest investment in northern Macedonia is contained in two road projects from Skopje to Stip and from Kicevo to
Ohrid, for which China has given Macedonia a €580million loan (Marleku, 2019). 12 According to the data available to the Development Agency of Serbia, three largest Chinese investments in
Serbia until September 2019 are: -"Zijin Mining" - Mining and smelting basin Bor. The Chinese company became the owner of 63% of RTB Bor for $350 million, and it also committed to repaying $200 million of debts of the largest Serbian mining company.
Zidjin's binding business plan included $ 1.26 billion in investments by 2024. How much of that was realized is
not known to the public.
-"Shandong Linlong" factory for the production of car tires - Zrenjanin. In August 2018, an agreement was
signed on the construction of a tire factory of the Chinese company "Shandong Linglong" in Zrenjanin. The
44
Even the superficial analysis of these projects allows to notice the lack of uniformity
of the rules and conditions under which China concludes infrastructure loan agreements. This
means that they adapt these conditions to each individual country according to the given
circumstances. What all these projects have in common is non-transparency, the absence of
public tenders, low environmental standards, the transfer of financial risk to the borrower by
insisting on state guarantees, and so on. Also, as can be seen in the case of the devastation of
the Tara River, there is a lack of control over the execution of works by the competent
inspection bodies and subsequently of adequate action by the judicial authorities. This
indicates a very low level of rule of law, which is one of the main obstacles to further progress
towards the EU.
This and similar projects, besides China, are mostly beneficial for the authorities in
these countries, which present borrowing from Chinese banks as direct investments, thus
strengthening their own political position. As attracting foreign investment is one of the most
frequently mentioned pre-election promises of all political parties in these countries, the
fulfillment of these promises is of priority political importance for them. In the case of
Montenegro, the highway was part of the pre-election promise and as such was of great
importance to the Montenegrin government. As Grgic notes (2017) ‘it was a point of no return
and the rhetoric was consistent with the mystification of infrastructural projects in former
communist regimes’. Or as Dalakoglou maintains (2012) ‘The importance attributed to the
highway goes beyond its technical and economic value.’ As these authors well note, such
huge infrastructure projects do have not economic but primarily strong political significance
for the ruling elites. The highway project in Montenegro was an ‘obvious example of state-led
development, where a political decision took precedent over economic and financial
concerns.’ (Grgic, 2017, p. 14)
In the narrative of political leaders, Chinese investments in the Western Balkans often
sound much better than they really are. The word ‘loan’ is almost never used, but always
‘investment’. However, Chinese investments in this region are commercial loans by which
China simultaneously employs its labor force and uses its materials. In addition, by obtaining
state guarantees, the risk of such transactions is reduced to a minimum.
director of the Chinese company, Wen Wang, then stated that this was an investment worth €800 million and
that the factory would employ 1,200 workers. The factory is not finished yet, and it is not known how much of
that amount was really realized. The state gave the Chinese investor free construction land for the construction of
the factory. -"HBIS Group" - Zelezara Smederevo The then Hestil, today's HBIS Group in 2016 for €46 million buys part of
the property of the ironworks in Smederevo. Then, an investment of an additional €300 million was announced.
It is not known how much of that amount was realized even today, and Radius Free Europe did not submit the
answer to that question neither HBIS Group nor the National Bank of Serbia, which states that due to the
principle of statistical confidentiality, cannot publish this information. * (Djurdjevic, 2020)
45
When it comes to China's influence in the Western Balkans, it is important to mention
some positive aspects of this influence. China offers these countries ‘favorable’ conditions in
terms of the procedure for access to its financial funds. Although these loans are a great
burden for the already burdened fiscal system, in economic terms there is a possibility that
these infrastructure projects contribute to the economic development of the region. If realized,
these projects would enable overcoming some of the region’s infrastructure deficiencies.
Photos of the site show the gigantic proportions of the project, and when the highway is
finished, it will give Montenegro a different perspective in terms of economic development. It
will for sure make travels through Montenegro faster and safer and as some point out, it
‘could increase demand, reduce transport costs and time, help with the diversification of
exports, and strengthen regional connectivity and cooperation.’ (Holzner & Schwarzhappel,
2018, p. 16)
Figure 5a: Moracica Bridge. Source: AOS
46
Figure 5b: Moracica bridge. Source: AOS
However, these positive impacts of building a highway are only a possibility and will
highly depend on the ability of the new government to regenerate the economy through its
own fiscal economic and political measures. Until then, the negative consequences of these
investments are much more visible, and that is what makes them very important from the EU
integration process aspect.
An additional research question of this paper is the ‘whether Montenegro will lose part
of its territory if it is not able to repay the loan to the Chinese EXIM Bank?’ It is still not
possible to give a definitive answer to this question because the messages coming from
various addresses are contradictory. The first installment of the loan that Montenegro took
from CHEXIM bank is due on July 21, 2021 and amounts to €36.6 million. During his first
visit to Brussels, Montenegrin Deputy Prime Minister Dritan Abazovic asked the EU for help
in repaying the debt, saying China was exerting influence through a loan granted for the Bar-
Boljare highway section. On that occasion, assistance was requested in terms of debt
rescheduling, i.e., a new credit arrangement with EU financial institutions, which would break
the dependence on China's influence (BizLife, 2021). However, the EU rejected Montenegro's
request, making the possibility of debt repayment questionable.
Such a decision by the EU not to help Montenegro repay its debt to China as a direct
consequence may have the takeover of strategically important parts of Montenegrin territory
by China. This scenario has already happened in countries such as Sri Lanka, Djibouti, and
also in Greece, when the EU refused to help repay China's debt, which gave China the right to
47
use the port of Piraeus in full capacity. This is noted by the Member of the European
Parliament Viola von Kramon, who believes that it is not a wise decision of the EU not to
help Montenegro, citing the case of the port of Piraeus in Greece (Kankaras-Trklja, 2021).
This issue is not just an internal matter of Montenegro but also the EU, which despite
the problems it faces, should find a way to bring the region of the Western Balkans closer to
itself and to make enlargement policy one of its priorities. Because, as stated before, the
question of the fate of the Western Balkans and the possible influence of other great powers,
which do not share European norms and values, is a question that concerns the whole of
Europe.
In the case of the construction of the highway, under such conditions, the
responsibility lies largely with the former government of Montenegro, which has subordinated
the state and economic interests of Montenegro to its personal and political interests.
However, if Montenegro is unable to repay its debt to China and fails to complete the other
three sections under more favorable conditions, this deal will be even more pointless and the
economic and political crisis that Montenegro will face will be even greater. If in the process
it loses part of sovereignty over a part of its territory, it could have even more far-reaching
consequences, and what those consequences could be, can be seen in the example of Djibouti,
where China has built a military base, the first outside Chinese territory.13
There is another aspect of the relationship between the EU and the candidate
countries, that seems to be very important. It does not refer to the ruling elites and state
institutions, but to individuals and society as a set of individuals. Namely, the existence of the
rule of law is possible only in societies in which exists what is in slang called a ‘political
culture’. This implies a certain high degree of understanding of law and politics, a high
awareness of the importance of advancing democracy and the rule of law, a high awareness of
the importance of human rights protection, environmental protection and the like. This is
close to the notion of civil society experienced through the paradigm of ‘civil society-rule of
law’, as Dragica Vujadinovic (2009) points out, in the sense that ‘constitutional democracy
and the rule of law require for their preservation and promotion - in addition to
13 Although, since the creation of the People's Republic of China, ideological opposition to military bases overseas has been a
cornerstone of Beijing's global posture and image in the international politics, it is logical that the growing economic interest
also generated the need to protect such interest. In this regard, there are reasonable assumptions that OBOR could rationalize
higher military spending to protect overseas investments (Jones & Zeng, 2019).
The justification for such assumptions can be drawn, inter alia, from a statement by Chinese Foreign Minister Wang Yi who
explained the reasons for building a military base in Djibouti. ‘Like any major country that is growing, China’s overseas
interests are expanding…So it has become a pressing task for China’s diplomacy to better protect our ever-growing overseas
interests.’ (Chaziza)
48
constitutionally guaranteed universal equality and institutional mechanisms for the division
and control of government – also the control, partnership and critical role of civil society.’
Civil society, understood in its ideal form, implies ‘self-organization of individuals
into voluntary spontaneous, non-violent associations, based on legally guaranteed human and
political rights, in the struggle to improve the quality of life on the principles of freedom,
equality, solidarity, justice, to achieve principles of democracy, to defend social, political,
economic rights from abuse of power.’ (Vujadinovic, 2009) In this sense, civil society is a
driver of positive change in a country, but also a counterweight to the power of the
government. In order for an individual, and then the majority in a society, to reach such
awareness, it is necessary, first of all, to reach a certain level of personal fulfillment and
satisfaction through the ability to meet their basic living needs. A satisfied individual, as a
rule, has more time to deal with things that are outside the ‘struggle for survival’.
In addition, an individual who have reached a certain standard of living that satisfies
them will, as a rule, endeavor to maintain it. In this way, an interest in politics is formed, as
well as a proper understanding of its essence. This further leads to the development of a
society that is the bearer of democracy and the rule of law in a country. On the other hand, it
could be said with certainty that the impossibility of reaching a high standard of living is one
of the consequences of insufficient political and civic awareness. This therefore creates a
vicious circle - to reach a certain level of political consciousness it is necessary to reach a
certain quality of life beforehand. This is, however, very difficult in conditions where political
elites have seized power and where e.g., the issue of religion is more important than human
rights or reaching a certain standard of living, as is the case in Montenegro and other Western
Balkan countries.
In this sense, the EU's support in terms of facilitating access to funds for
infrastructure development is crucial to Montenegro and the entire Western Balkans. This
would slow down (and then, with good strategies, stop) other players like China to
excessively influence the region, while supporting the development of such a civil society,
which in the future will be the bearer of the values on which the foundations of the EU are
based.
49
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