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State aid BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006 During the last meeting of the EC Enhanced Permanent Dialogue with the representatives of Montenegro, the Commission positively marked progress achieved in the area of state aid, noting that the Ministry of Finance of Montenegro did a lot within a short 10 month period of time. LEGAL REGULATIONS CONCERNING THE STATE AID CONTROL IN THE EU The state aid system in the European Union is defined under the Articles 87 and 88 of the Treaty Establishing the European Community (hereinafter referred to as the Treaty). Pursuant to relevant EU regulations, state aid means any aid in terms of benefit or advantage granted by a state, or from state resources through a public, state authority, which favours certain companies or products (selection principle) or distorts or may distort level playing field in market According to Article 87, paragraph 1 of the Treaty, the following shall be deemed state aid: 1. any aid granted through State resources; 2. any aid which favours certain undertakings, sector or region 3. any aid which is selective because it distorts the market competition by favouring certain undertakings, sector or region; 4. any aid which affects competition and trade between Member States. Types of state aids are as follows: horizontal state aid (intended for all economic entities participating in the market), sectoral state aid (intended for economic entities within specific economic and non-economic activities) and regional state aid (intended for less developed areas). State aid may include: subventions, tax allowances or any other form of Danijela Jauković non-payment of state fees; exemptions from payment of social contributions; granting interest rates/loans/guarantees/real estate under conditions which are more favourable then market ones; approving allowances for incurred business losses; export aid or regressive export crediting; establishing funds for development/housing construction; providing income and price support; providing goods or services which are not part of the public services; approving more favourable treatment in the public procurement, etc. Certain categories of the horizontal, sectoral and regional state aid may be allowed under conditions set forth under the EU by-laws. According to regulations and methodology of the EU, the following shall not be considered state aid: aid for beneficiaries which are not economic entities (households, handicapped persons, aid for infrastructure, educational institutions, hospitals, public housing, vocational training centers); general economic policy measures (quotas, public procurement, technical standards, general VAT reduction); aid granted by national and multinational organizations, EU funds, government functions (defense, public works). Article 88 of the Treaty defines procedure related to applying for and control of state aid, which is under the competence of a separate European Commission established to this end. The European Commission, together with Member States, constantly monitors all systems of aid existing within Member States and requires appropriate measures required for gradual development and action. Such authorization enables the Commission to indicate a change in state of affairs (by monitoring progressive development or functioning of common market) and accordingly launch examination of the existing state aid. If the European Commission finds that an aid granted by a Member State or through State resources is not in compliance with acquis communitarie or with common market or such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission. If the State concerned does not comply with this decision within the prescribed time, the Commission may refer the matter to the Court of Justice On application by a Member State, the EU Council (hereinafter referred to as the Council) may decide that aid which that State is granting or intends to grant shall be considered to be compatible with the common market, if such a decision is justified by exceptional circumstances If, however, the Council has not made its attitude known within three months of the said application being made, the European Commission shall give its decision on the case. Regulations governing state aid by the WTO and those in the European Union are compatible particularly with respect to definitions and practical purposes. ADVISOR TO THE MINISTER On co-operation with the EU and international financial institutions DANIJELA JAUKOVIĆ, 30
Enforcement of claims BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006 Enforcement of claims secured by the Contract on Fiduciary Transfer of Immovable Property Ownership Right Development of the monetary transactions, credits, banking and other forms of debtor-creditor relations brought about debt security problem. Creditors have more confidence in the right of pledge, as a mean of security, because the credit is then really secured. Pledge, as a mean of security, has a history in the Roman Law as trust and mortgage as well as in the Customary Law in the old Montenegro, when a debt was secured by Property Title Deed, and the existing documents testify to it. This issue is now regulated in the legal system of Montenegro by the Law on Trust, Law on Mortgage and Law on Pledge. In the course of allocation of credit funds from the Republic Budget, the Government of the Republic of Montenegro decided to secure credits through concluding Fiduciary Contracts. Real Estate Administration is in charge of estimation of property value, which is taken into trust. Pursuant to the provisions of the Law, this Administration is also established as specialized agency for registration of the contracts in the Real Estate Register. The Ministry of Finance uses the other two laws to secure debt only in cases when it is not possible to register a trust. Namely, in the period of the UN sanctions, on the proposal of relevant Ministries and according to appropriate decisions of the Government, funds from the Republic Budget were approved for crediting the tourist economy for the purpose of creation of conditions for summer and winter tourist season. For the aforementioned purposes over 17,0 mil. eur was approved, and in order to secure the extended credits, for the following companies' property was registered trust: "Ada Bojana" - Ulcinj riviera, Vila "Albatros" - HTP "Albatros". Hotel "Sozina" - HTP "Korali", Hotel "Palas" - HTP "Budvanska rivijera", Hotel "Tivat" - HTP "Primorje", Autocamp "Ciparis" - HTP "Mimoza" - Tivat, administrative building in Jaz - Montenegroexpress, Autocamp in Dobrota - HTP "Fjord", trust was also registered for five facilities HPT "Boka", Hotels "Boan" and "Šavnik" - HTP "Onogošt", six catering and tourst establishments of the SKI Center "Durmitor", Hotel "Mojkovac" - HTP Mojkovac, Restaurant "Kisjele vode" - HTP "Brskovo" Bijelo Polje, annexe to the Hotel "Lokve" - HTP "Berane", two tourist facilities HTP "Bjelasica" - Kolašin, Small stadium of the Sports Center Nikšić, Hotel "Bor" - HTP "Plavsko jezero", Hotel "Rožaje" - GTP "Turjak", Hotel "Grand" Cetinje - "Turist" Cetinje etc. Apart from tourist economy, in the framework of credit support to economy and realization of the Program of Restructuring as an instrument of credit security, the Ministry of Finance registered trust also in relation to the other companies' property, mostly administration buildings, land or social standard facilities. In the procedure of privatization of Montenegrobank, the Ministry of Finance assumed certain claims as well as significant property registered by the Bank for the purpose of approved credits security, which value amounts to over 12,0 mil. eur. On this basis Hotel "Galeb" - property of HTP "Ulcinjska rivijera" was assumed, and the ownership was transferred to the benefit of Government, Factory of Juices "Primorka" - Bar, five manufacturing divisions "Eksport drva" - Kolašin (ownership transferred to the Government), administrative building "V. Kruščića" - Mojkovac (ownership transferred to the Government), property "Restaur Art" - Budva (land and several flats in Budva, also registered to the benefit of Government), administrative building EI "Obod" - Cetinje (transferred ownership), bus station in Budva and land in Podgorica - ownership "Merkur" Budva etc. Ministry of Finance keeps relevant records and valid documentation, on the basis of which the enforcment of claims is executed, for the aforementioned and other fiduciary property. ENFORCEMENT OF CLAIMS In the procedure of initiating the enforcement of claims, the Ministry of Finance reviews the company's status, its financial standing and development perspective. Thus, the Government of the Republic of Montenegro, on the proposal of relevant ministry and consent of the Ministry of Finance, to the benefit of resolving the future development of company or its privatization, approves debt restructuring, debt conversion into shares (e.g. Metalac - Nikšić, Factory "4. novembar" - Mojkovac etc.) or, in relation to extraordinary cases, when the future of company is certain, it releases the debt (Mill "M. Asović" - Nikšić, "Javorak" - Nikšić, Brown coal mine Berane, ŠIP "Berane" - Berane, "Vukman Kruščić" - Mojkovac etc.). When debt recovery is done through bankruptcy, the Ministry of Finance and Government also have impact on social and economic status of debtors as well as on the privatization process. In that process, special attention is paid to workers of companies and their enforcement of rights. As regards certain cases the Government abandoned the enforcement priorities or a part of debt to the benefit of workers (SKI Cen- 31
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Page 5 and 6: TABLE OF CONTENTS BULLETIN OF THE M
Page 7 and 8: Introduction BULLETIN OF THE MINIST
Page 9 and 10: PROJECT "1000 HOUSING CREDITS” BU
Page 11 and 12: PROJECT "1000 HOUSING CREDITS” BU
Page 13 and 14: Guidebook to the tax system BULLETI
Page 21 and 22: Budget suficit BULLETIN OF THE MINI
Page 23 and 24: Budget suficit BULLETIN OF THE MINI
Page 25 and 26: Tax administration BULLETIN OF THE
Page 27 and 28: Public debt BULLETIN OF THE MINISTR
Page 29 and 30: World Bank and Relations with the W
Page 31: State aid BULLETIN OF THE MINISTRY
Page 35 and 36: Enforcement of claims BULLETIN OF T
Page 37 and 38: Functioning of the games of chance
Page 39 and 40: Agenda of the Ministry of Finance B
Page 41 and 42: Agenda of the Ministry of Finance B
Page 43 and 44: Activities of the minister BULLETIN
Page 45 and 46: Macrofiscal report BULLETIN OF THE

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