Shady activities of shady individuals will not cloud Regionalni vodovod

Due to the continuously expressed interest of partners, business network of the Managing Board, management and employees of PE “Regionalni vodovod Crnogorsko primorje”, after the 34th session of the Managing Board deliberating upon and adopting the Report on implementation of the recommendations of the State Audit Institution’s (SAI) Collegium, prepared by Regionalni vodovod (RV), I decided to communicate my opinion to the professional public due to media promotion of inaccurate parts of the Report of the SAI Collegium whose work was coordinated by Zoran Jelić, the member of the Senate of the State Audit Institution.

First of all, the Report of the State Audit Institution team on the control audit is strangely inconsistent with the extensive amount of documentation that Regionalni vodovod submitted to the State Audit Institution, as well as with standards of a transparent and evidence-based reporting. The attitude assumed by the team of the State Audit Institution is far different from that of external audits of the company performed by Ernst & Young, Deloitte and Crowe. I responsibly claim that there is not a sole proof for untrue allegations, especially of outrageous introductory part of the report of the State Audit Institution. Why did the State Audit Institution start up the personal and political conflict by using vocabulary uncommon for auditors and untrue allegations stated therein, is not a task that occupies me, at least not for now…

By a wrongful interpretation of discounting application of the International Accounting Standard 39, the State Audit Team made a “rookie” mistake falsely accusing Regionalni vodovod through media that “it tried to hide from the Government of Montenegro and the World Bank 2.5 million euro worth interest of an interest- free loan provided by the World Bank in 2007!”

We had waited for two years for the control audit, in order to be able to institutionally correct the “failures” made by State Audit Institution in 2017. The question then arises as to whether and how the subject to audit may prove the accuracy of its operation? When it happens that Regionalni vodovod, while defending its integrity, institutionally proves that the way it operates is legal, the State Audit Institution does not approve the inclusion of media as they want to prevent the blame to be put on the State Audit Team either institutionally or through the media. When it happens that Regionalni Vodovod, ultimately conscientiously, submits the required documentation, which is disregarded by the State Audit Team, the unofficial spokesman initiates new media campaign against Regionalni vodovod, thus breaching Article 54 of the Law on The State Audit Institution, which might be witnessed by the eminent Montenegrin journalists and editors.

Regionalni Vodovod will insist on proving the truth trough the institutions such as the World Bank, Ernst & Young, Deloitte, Crowe, Tax Administration, the Institute of the Certified Accountants of Montenegro and the professors of the Faculty of Economics, who have all confirmed the accurate application of the IAS by Regionalni Vodovod, whereas solely the team of the State Audit Institution claims otherwise. The highlight of the State Audit Institution Report, obviously having a peculiar aim and containing the lines which cannot be deemed common for Auditors’ Reports, is the accusation that the director of Regionalni Vodovod, according to the opinion of Zoran Jelić, the member of the SAI Senate, tried to influence the Government, Parliament, the World Bank, EBRD, including the globally renown auditors such as Ernst & Young and Deloitte (globally recognized as highly independent with the reputational risk exceeding several billion euros). The Governments of the most powerful countries can hardly influence these two institutions, so that any comment made related to the impact of either Regionalni vodovod or its director shall be deemed redundant, regardless how big the State Audit obsession with Regionalni Vodovod is. In the end, had the power of Regionalni vodovod been that extensive, its accounts would not have been frozen for 268 days!

After we had received the SAI Final Audit Report in 2017, the company RV implemented 93% of the recommendations in just two months and proved that the two recommendations (7%) were not compliant with both, the Accounting Law and the IAS, which is another proof that RV does not need to hide any documents, especially not from the SAI. Therefore, I would like to use this opportunity and publicly emphasize once again what RV has been suggesting since 2017, that pursuant to Article 38 of the Law on the SAI, the Senate of the SAI is required to review this, to say the least, odd report of its Collegium!

Regarding the question raised by the SAI why “the RV did not pay 7.6 million to Strabag”, with full responsibility I would like to point out to the fact that, according to the manner the SAI team’s findings were presented in the report, there are more than serious indications of the intentions of the author of this audit report which cannot be in any way deemed compliant with the legal responsibilities and powers of the SAI. There are many arguments supporting the point of view and claims of the RV, dated at the time of the previous management when the dispute actually arose, and especially the present one, but at this point I just want to emphasize the lawyer’s position, that “under the given circumstances, only an insane person”, and we in the RV would add, a corrupt person, would have paid a multi-million dollar compensation without being supported by valid documentation.

From the following, abbreviated statements, one can chronologically follow the dispute between the RV and Strabag, verify the correctness of the RV’s economic behavior, and detect the essence of the “error” the SAI team have made:

  1. By the time the Contract between the RV and Strabag was terminated (01/12/2009.), Strabag had already been paid out an amount of € 9.5 million, i.e. 55% of the total contracted price of € 17 million, for 40% of the completed construction works and delivered material.
  2. In 2010, contrary to the provisions of the Contract, and the international conventions, Strabag initiated a proceeding before the arbitration in Paris, which was not competent or previously agreed under the provisions of the Contract, and in March 2013 Strabag initiated negotiations through the Ministry of sustainable development and tourism (MORT). The Managing Board of the RV made a decision on the Negotiating team which comprised of the Chairman of the RV Managing Board and three former RV directors who were familiar with all the details and every segment of cooperation with Strabag.
  3. Negotiations were held in Budva, in the period 9-10 June 2014, when Strabag requested € 7.6 million to be paid out to their company. The RV Negotiating Team accepted to pay out € 2.1 million as the undisputed remaining liability, according to the available and valid documentation, accompanied with the documented position of the Engineer, pursuant to the FIDIC contract. After they had consultations in Vienna, the representatives of Strabag did not return to the negotiations, which indicated that Strabag suspended negotiations with the RV.
  4. Instead of providing support to the anti-corruption activities of the RV, five years after the termination of the said negotiations, in 2019, the SAI team has accused the RV and stated that the RV should have paid out a multimillion-dollar amount without valid documentation, which would have left Strabag with an amount equal to 100% of the contracted value paid for 40% of the works completed! Such an attitude of the SAI is directly opposite to and non-compliant with the legislation in the field of anti-corruption and criminal law in business operations. Why would the SAI team challenge the attitudes of the RV, as the law-abiding company which trusted the Montenegrin judiciary system? This question should be reviewed and inspected by the competent institutions.
  5. The business attitudes of the RV are based on the following facts: all decisions of the Commercial and Constitutional Court were made in favor of the RV; the legal opinion of the law firm Paunović from Belgrade and Vukčević in Podgorica are also positive in respect of the RV standpoint; the clear stance of renowned and globally recognized Prof. Dr. Časlav Pejović, an arbitrator in the dispute, who delivered a separate opinion in Paris, with clear and convincing arguments that the decision of the incompetent and non-agreed MTK arbitration was legally unsustainable; following the suggestion of Prof. Dr. Dragan Vukčević, the most eminent expert in arbitration in the Western Balkans, professors of the University of Zagreb, Prof. Dr Dike, Prof. Babić and Prof. Dr Sikirić prepared two studies in favor of the RV, who all, with a convincing argument, have taken the unambiguous stand that the decision of a non-agreed arbitration cannot be acknowledged in Montenegro. In addition, the provisions of the Law on Arbitration of Montenegro, the UN and EU Conventions also support the opinion which protects the  interests of the RV;
  6. In January 2017, Strabag submited a request to the Ministry of Finance (MiF) in respect of the dynamics of payment of € 12 million, awarded by non-agreed and incompetent arbitration from Paris. Two months later, in March 2017, the Commercial Court rejected Strabag’s request for the fourth time, which meant that therefore Strabag was not entitled to a single dime, and particularly not to € 12 million!
  7. I would like to remind you that after the contract was terminated in 2009, RV completed the project with subcontractors in 2010. It is strange, though, why and on what purpose would the SAI team accuse the RV in 2019, when the same institution did not issue a recommendation in respect of this matter in 2017, even though the audit of the RV began in February 2017, almost at the same time when Strabag sent the above letter to the MiF in January 2017?
  8. On 9th May, 2019, with the support of the Government, the RV bank account was unfrozen and the amount of € 12 million was paid according to the court decision, without increasing the price of water delivered from the RV (0.37 €/m3), and thus the Government and the RV managed to maintain both, the stability of the RV, despite such major challenges, but also the stability of the coastal economic system.

All of us at the RV believe that this dispute will soon be positively resolved, while we are still committed to continuing to responsibly implement development projects, approved by the Government and the EBRD, which granted € 24 million loan facility to the RV. International institutions, such as the EBRD from London, would have never provided such immense support to the RV, had the members of the RV management not proved their personal integrity.

After almost three years, if there was anything unclear or “blurry” to someone, now everything is bright and crystal clear! Therefore, because of the stated facts, and in particular because of the false allegations by the SAI Collegium and the media headlines about “Murky water at the RV”, on behalf of my colleagues and myself, I would like to say that the shady activities of shady individuals will not cloud Regionalni vodovod!