The Bosnian state aid watchdog – the State Aid Council of Bosnia and Herzegovina – has issued two interesting decisions involving state guarantees for bank loans. Both cases involved alleged state assistance in the energy sector and in both instances the probe was started upon intervention by the Energy Community.
What was the alleged state aid about?
The alleged state aid consisted in loan guarantees granted to Elektroprivreda Republike Srpske (EPRS), the incumbent electric power producer in one of the two entities in Bosnia and Herzegovina. According to the Bosnian state aid watchdog, the state aid was provided by two Republika Srpska ministries – for energy and mining, and finances, respectively.
In the first case, the assistance was given to an EPRS subsidiary operating the mine and power plant in Gacko, for the purpose of overhaul of the Gacko power plant. In the other case, the aid was allegedly provided to EPRS for the purpose of acquisition of shares in the company “Ruding” d.o.o. Ugljevik (Bosnia and Herzegovina).
What triggered the two probes?
In both instances, the Bosnian state aid watchdog started its ex post probes following complaints by the Secretariat of the Energy Community. Specifically, in April 2020 the Secretariat sent letters to the State Aid Council of Bosnia and Herzegovina, drawing its attention to the alleged state aid granted to EPRS. Upon conducting the proceedings, the Bosnian state aid watchdog appears to have found the complaints grounded.
How do Bosnian state aid rules look like?
The legal framework governing state aid control in Bosnia and Herzegovina is largely based on the EU model. There is no surprise in that, since Bosnia and Herzegovina is a party to a Stabilization and Association Agreement (SAA) with the EU, which, inter alia, regulates state aid control.
According to the SAA, any state aid which distorts or threatens to distort competition by favoring certain undertakings or certain products, insofar as it may affect trade between the EU and Bosnia and Herzegovina, is not compatible with the SAA. The SAA further provides that such aid is to be assessed based on the EU Treaty and interpretative instruments adopted by the EU institutions.
Apart from this international legal framework, Bosnia and Herzegovina also has its local state aid regulations, the main being the Law on the State Aid System in Bosnia and Herzegovina. These local regulations, however, draw heavily from the relevant EU sources and are essentially a transposition of the EU law into the Bosnian legal system.
Did the Bosnian watchdog also apply EU law?
Yes, in its two decisions the State Aid Council of Bosnia and Herzegovina expressly referred to certain EU sources. For instance, the Bosnian watchdog examined the European Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees and the EU legal framework governing state aid for the provision of services of general economic interest.
What were the main findings of the Bosnian watchdog?
In essence, in both cases the Bosnian state aid watchdog established that the guarantees provided to EPRS amounted to state aid, as the recipient had not paid a market premium for them. The watchdog further established that such aid had not been cleared by it ex ante, in accordance with the Bosnian state aid legislation.
Based on such findings, the State Aid Council in both cases ordered the relevant parties to align the support with the state aid legislation within 90 days of the issuance of the watchdog’s decision. The Council further ruled that, if the assistance would not be aligned with the state aid legislative within the given deadline, it would issue a decision mandating the recovery of the state aid in question.
Key takeawayThe Bosnian state aid watchdog has been relatively dormant in the last few years, issuing only a couple of decisions annually. Whether because of that or for some other reason, state aid enforcement has not been in the spotlight in Bosnia and Herzegovina. These two decisions concerning bank guarantees may herald a more active state aid authority in Bosnia and Herzegovina – especially in cases with an international element, such as these involving the Energy Community. |
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For additional information about state aid in Bosnia and Herzegovina, please contact Dr. Dragan Gajin, Head of Competition at Doklestic Repic & Gajin.