Universalism and the recognition of group proceedings under the UNCITRAL Model Law in Montenegro

• Date: 01 March 2019
• Author: Vladimir Savković
• Published date: 01 March 2019
• DOI: http://doi.org/10.1002/iir.1331

RESEARCH ARTICLE

Universalism and the recognition of group

proceedings under the UNCITRAL Model Law

in Montenegro

Vladimir Savković

University of Montenegro Faculty of Law,

Company & Business Law Department,

Podgorica, Montenegro

Correspondence

Vladimir Savković, Associate Professor,

University of Montenegro Faculty of Law,

Podgorica, Montenegro.

Email: vladimirs@ucg.ac.me

Abstract

Among the most topical insolvency issues in 2017 was

the Croatian “Lex Agrokor”—a controversial “tailor‐

made”law providing a unique restructuring opportunity

for the largest Croatian conglomerate, the parent com-

pany of which was otherwise facing bankruptcy. Soon

after the “extraordinary administration procedure”

began, the appointed administrator started filing

motions for the recognition of the alleged group insol-

vency as foreign insolvency proceedings in a number

of neighbouring and other European countries, most of

which have adopted the UNCITRAL Model Law on

Cross‐Border Insolvency. It was an attempt to save the

conglomerate's property from being seized in a disor-

derly fashion by various secured creditors, most notice-

ably, the largest Russian financial institution Sberbank,

which contested these motions with varying success.

This article, however, does not present an effort to com-

prehensively analyse the ongoing legal battle but rather

adopts a broader approach to examining the Lex Agrokor

to establish grounds for more general conclusions. More

precisely, the purpose of this article is twofold. First, to

offer strong arguments that, from the standpoint of typ-

ical insolvency legislation based on the Model Law, such

as that of Montenegro, both the actual and future group

proceedings initiated under the Lex Agrokor should fail

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© 2019 INSOL International and John Wiley & Sons, Ltd

Received: 24 March 2018 Revised: 27 June 2018 Accepted: 5 February 2019

DOI: 10.1002/iir.1331

Int Insolv Rev. 2019;28:103–125. wileyonlinelibrary.com/journal/iir 103

to meet recognition requirements. Second, based on the

preceding case study, to offer conclusions on how to fur-

ther promote universal approach regarding group insol-

vencies by emphasizing exactly what the national laws

regulating group insolvency should not feature so as to

have the proceedings introduced therewith recognized

in countries adopting the Model Law.

1|INTRODUCTION

1.1 |The emergence of the Lex Agrokor—A new addition to the global

diversity of insolvency regimes

In April 2017, the Croatian Parliament passed a law that could be considered quite specific even

on the global scale of legislative instruments regulating insolvency and particularly group insol-

vency. In particular, in an effort to save from regular bankruptcy the financially troubled

Agrokor d.d. (“Agrokor”)

1

—the parent company of Croatia's largest conglomerate (“Agrokor

Group”)

2

—the Government of Croatia prepared and the national parliament adopted the Law

on the Procedure of Extraordinary Administration in Companies of Systemic Importance for

the Republic of Croatia (“Lex Agrokor”).

3

However, despite the overwhelming motive for

enacting the Lex Agrokor being to save the aforementioned company from entering into bank-

ruptcy proceeding under Croatian general bankruptcy law,

4

the law was drafted so as to avoid

any reference to this particular case. Hence, as its full title indicates, the Lex Agrokor remained

potentially applicable to any given “company of systematic importance to Republic of Croatia,”

as well as to companies considered related to companies of systematic importance under the

prescribed terms. In effect, this fact made the law itself even more important, as well as more

interesting in terms of analysing the potential consequences of its implementation both in the

country of origin and in other countries under their rules on cross‐border insolvency, where

such rules exist.

The Lex Agrokor is a specific regulatory instrument in many aspects.

5

In this regard, if not the

most drastic one of all, it seems that the most evident among its distinctive features is the notion

of the companies of systematic importance to which this law primarily applies. More precisely,

1

“D.D.”is short for “dioničko društvo,”which in fact signifies that Agrokor has a form equivalent to that of a joint stock

company.

2

Moreover, it was the largest one within the region of the former Yugoslavia, and it was also among the dozen largest in

terms of revenue in the broader region of Central Europe according to the annual survey published in 2016 by Deloitte,

available at: https://www2.deloitte.com/ce/en/pages/about‐deloitte/articles/central‐europe‐top500.html.

3

Official Gazette of the Republic of Croatia, No. 32/17 (the English translation of Lex Agrokor, as well as the translation

of Montenegrin legislation provided in this article, is entirely the author's responsibility unless otherwise noted).

4

Bankruptcy Law, Official Gazette of the Republic of Croatia, No. 71/15, 104/17.

5

It is also a controversial law that received immediately strong criticism even in its country of origin, both from the

standpoint of its constitutionality and from the standpoint of its non‐alignment with best international standards. See,

for example, Jasnica Garašić,“Izvanredna uprava države nad povezanim društvima”(2017) 55 Zbornik Susreta pravnika

Opatija 5.

104 SAVKOVIĆ