“Too big to fail”? The Agrokor case and its impact on West Balkan economies

• Author: Djuro Djuric,Vladimir Jovanovic
• DOI: http://doi.org/10.1002/iir.1327
• Date: 01 March 2019
• Published date: 01 March 2019

RESEARCH ARTICLE

“Too big to fail”? The Agrokor case and its

impact on West Balkan economies

Djuro Djuric

1

| Vladimir Jovanovic

2

1

College of Applied Studies for

Economics and Administration, Belgrade,

Serbia

2

University Business Academy, Faculty of

Economics and Engineering

Management, Novi Sad, Serbia

Correspondence

Djuro Djuric, Lecturer, College of Applied

Studies for Economics and

Administration, Belgrade, Serbia.

Email: djuro.mdjuric@gmail.com

Abstract

From about April 2017, Agrokor became the main eco-

nomic topic in the Balkans. Once the greatest pride of

the Croatian economy, it became a serious problem

for its government. Its systemic importance for the

country and the region required an immediate legisla-

tive solution. The Government had Parliament pass a

special law intended to save this company. The special

law on the procedure of extraordinary administration

in companies of systemic importance adopted in April

2017 is an interesting example, because it introduced

a new insolvency procedure titled “extraordinary

administration”clearly following the example of the

Italian Legge Marzano, which was adopted in order to

save the Parmalat group in 2003. It also represents an

example of a collision of legislation in the case of

cross‐border insolvency proceedings inside and outside

of the European Union, where different jurisdictions

have diverging standpoints on the question of its recog-

nition as a foreign insolvency procedure. However,

once the rescue proceedings began, numerous (and

some dubious) interests of the different stakeholders

came to the light. The government tried not only to res-

cue the company and its assets throughout the Balkans

region but also to acquire control of it. This was espe-

cially visible through the prerogatives of the extraordi-

nary commissioner, formally appointed by the court,

but in fact a government official. Creditors at risk,

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© 2019 INSOL International and John Wiley & Sons, Ltd

Received: 16 October 2017 Revised: 1 August 2018 Accepted: 5 February 2019

DOI: 10.1002/iir.1327

22 Int Insolv Rev. 2019;28:22–43.wileyonlinelibrary.com/journal/iir

mainly Russian and Italian banks, filed lawsuits to pre-

vent the selling of the debtor's assets. At the end, the

majority creditors called to vote on the settlement

agreement became the new owners of the company.

However, Agrokor is still far from the end of the crisis.

It has more than 60,000 employees in the region and

their destiny depends on the outcome of the crisis. In

more recent times, the case also revealed major politi-

cal scandals.

1|INTRODUCTION

“It is too big to fail.”From the time it was established in 1976 until 2017, the Agrokor company

became one of the leading companies in former SFR Yugoslavia

1

and beyond. Today, it is the

largest Croatian company, a privately owned concern, located in Zagreb. The Agrokor Group

encompasses three business groups with several dozen companies (joint‐stock companies and

limited liability companies), with over 60,000 employees. The group's activities include the pro-

duction and distribution of food and beverages, retail, and other activities. The operations are

carried out in Croatia, Serbia, Slovenia, Bosnia and Herzegovina, Montenegro, and Hungary,

with affiliated and subsidiary companies employing thousands.

According to the last consolidated report from 5 October 2017,

2

the company made a total of

EUR 6 billion.

3

Bearing in mind the importance of this corporation, when Agrokor entered into

financial difficulties, the Croatian government urgently proposed the adoption of a lex specialis

with the aim to rescue this company. The law was dubbed the Lex Agrokor. This Law, promulgated

on 6 April 2017, introduced a procedure of extraordinary administration for use by companies hav-

ing systemic importance like Agrokor.

4

Shortly thereafter on 10 April 2017, the Agrokor Group

submitted a petition to the Commercial Court,

5

following which the procedure of extraordinary

administration was initiated for the Agrokor concern for the management of companies, produc-

tion and trade in agricultural products joint‐stock company

6

from Zagreb, and 24 affiliated and

subsidiary companies. An extraordinary commissioner (trustee) of the Group was proposed by

the Government. A certain number of banks

7

supported the Group's attempt to exit the crisis.

1

Socialistic Federal Republic of Yugoslavia, a federal state which existed until 1992.

2

Agrokor Group, Consolidated Financial Report submitted by Price Waterhouse Coopers Croatia, 05.10.2017, available

at .

3

This number represents 12% of the Croatian Gross Domestic Product (GDP). The number of employees in the Agrokor

Group represents 4.3% of the total number of employees at the national level.

4

Law on Procedure of Extraordinary Administration in Companies of Systemic Importance of the Republic of Croatia

[2017] National Gazette (Narodne novine) No 32/17 (“Lex Agrokor”).

5

Decision of the Commercial Court in Zagreb, Agrokor [2017] Ref. No 47 St. 1138/17 (10 April 2017).

6

The full Agrokor Group name.

7

Banks from Croatia, Zagrebačka banka d.d., Privredna banka Zagreb d.d., Erste & Steiermärkische banka d.d., and

Raiffeisenbank Austria d.d. allowed the credit to the Agrokor Group to support the restructuring and rescue of the

Group; see Agrokor Group, Consolidated Financial Report (n 2).

DJURIC AND JOVANOVIC 23