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

To my family and a loving memory of my father

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

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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

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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

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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.

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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.

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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.

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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

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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).

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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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