ČASLAV PEJOVIĆ: UAE AGREEMENT IS NOT WITHOUT RISK FOR MONTENEGRON: Podcast Istražuj.me

In this episode of the Istražuj.me podcast, Časlav Pejović, a renowned expert in international law, shares insights drawn from his professional experience in Japan, discusses opportunities for Montenegro, and highlights potential risks associated with recent international agreements signed by the Montenegrin government.

Until a few years ago, Pejović was a tenured faculty member at the Faculty of Law, Kyushu University in Japan. Although officially retired, he continues to teach there under a contractual arrangement and also serves as a visiting professor at several other universities across Asia.

Here are the key takeaways from our podcast conversation:

Q: You continue to teach in Japan and other parts of Asia. And this is one difference: Japan does not abandon its senior citizens, but encourages them to work until late in life.

 To some extent, Japan is forced to do so due to the rapid ageing of the population. The Japanese live the longest in the world, despite having one of the lowest birth rates globally. The consequences of this are clear. The pension system is based on a pyramid model, in which older individuals who receive their pensions are at the top, and the young who support the system through their work are at the bottom. The pyramid system is no longer effective. At the top, there is an increasing number of older people. At the same time, at the bottom, there are fewer and fewer young people, so the model of the pyramid changes to a model of a rectangle with irregular dimensions. Japan is addressing this problem in various ways. One way is to offer people who have retired the opportunity to continue working, albeit at a significantly lower fee than their previous salary. It is now a legal obligation for companies to offer a resumption of work to people who have retired, if they wish to, and it is up to individuals to accept or decline. This proved to be a very successful solution. Companies can utilise the accumulated knowledge and experience of retired individuals at significantly lower remuneration than their wages. For retired Japanese who are in good health, work can be a pleasure, and the remuneration they receive is usually well above Japan's very low pensions. I love teaching students, and I'm happy to accept the university's offer. Working with young people is a kind of privilege. It makes you younger if you earn something along with that, so much the better.

Q: How much can mature people give to their country, after all these years of experience? It seems to me that Montenegro, which otherwise has problems with human resources, is easily giving up entire categories of the population. The younger ones are leaving, and the older ones don't seem to need anyone after retirement.

 The example of Japan can serve as a model for Montenegro. Montenegro is also facing an ageing population, which, combined with the departure of young people, has the potential to jeopardize the pension system seriously. As the number of older people who are retired and no longer contribute to the economy increases, while the number of young people working decreases, it can lead to the collapse of the pension system. Perhaps a lesson can be drawn from Japan to encourage older people to continue working. Of course, provided that this does not close opportunities for young people. This should also be taken into account. In Japan, this issue is addressed by employing older people as instructors in companies that transfer knowledge to younger individuals. Thus, they do not take positions of young people, but rather serve the function of educating them.

Q: You are active in Montenegro in the story of the agreements that the Government of Milojko Spajić signed with the UAE. What are the risks of these Agreements?

Since I have been spending more time in Montenegro for the last few years, I somehow feel obliged to point out the problems I notice. The agreement with the UAE poses several significant risks to Montenegro, which I felt compelled to highlight. For example, the agreement failed to include a provision on Montenegro's right to regulate some matters of public interest, such as environmental protection, especially if the Long Beach (Velika plaža) in Ulcinj was considered a destination for investors from the UEA. It's incomprehensible that the government has failed to do this. Most likely, it is simply a matter of ignorance, because the preparation of this type of agreement requires specific knowledge of foreign investment law, which lawyers working in the government are unlikely to possess. However, the Government should have made an effort to find an advisor who is familiar with this matter.

Q: How risky is it for Montenegro, which is in the lobby of the EU, to give investors jobs and resources without a tender, especially given the obligations we have under the EU integration process, Chapter 5, which was recently closed?

I do not know the reasons for some strange provisions in the Agreement, and I would like to believe that it is just ignorance, although some provisions raise eyebrows. Why are UAE investors being offered something contrary to Montenegro's Constitution? Such as the provision that excludes the provisions of the Montenegrin laws relating to the tender. Why is this done? Worse still, the government has inadvertently offered the same privileges to investors from other countries with which Montenegro has concluded bilateral agreements that include a most-favoured-nation (MFN) clause. If Montenegro has granted some privileges to investors from the UAE, on the basis of such clauses, Montenegro must grant those same privileges to investors from countries with which it has concluded bilateral agreements containing such a clause. For example, a company from Montenegro can register a subsidiary in the Netherlands or Serbia and then appear in Montenegro with a request to be granted the same privileges as investors from the UAE. And Montenegro can't deny them. Some clauses known as the "denial of benefit" clauses could have protected Montenegro from such claims. However, Montenegro failed to include these clauses in its bilateral agreements. Thus, Montenegro was left without protection, left at the mercy of investors.

Q: In the last few days, the government has announced that on the basis of bilateral agreements with Hungary, Ukraine, France, it will conclude deals with companies from these countries without tenders. What are the reasons for signing such agreements?

A sharp increase in BITs occurred in the early 1990s, with the fall of the Berlin Wall, which symbolically marked the end of the Cold War. This was followed by an offensive of neoliberalism, promoted by the World Bank, which strongly supported the practice of concluding bilateral agreements, promoting this practice as the best way to obtain foreign investment. This theory has never been confirmed in practice. Some countries, such as Brazil, have received substantial foreign investments without signing such agreements. The Government of Montenegro obviously believes that the signing of bilateral agreements will lead to greater investment. This can happen, but it is crucial to examine the obligations Montenegro undertakes with such agreements. At the beginning of the 21st century, a negative trend emerged, following numerous lawsuits by investors against states, which resulted in some astronomical awards to investors. Some countries are suspending existing bilateral agreements or have demanded their revision (e.g. India, Indonesia, South Africa). Bilateral agreements carry certain risks, and it is imperative to enter into this process very carefully. The example of the Agreement with the UAE serves as a warning that Montenegro has unnecessarily taken on numerous risks and has not adequately protected itself.

Q: You were involved in the early 2000s in the processes on the demarcation between Croatia and Montenegro, the disputed strip around Prevlaka. How do you feel about the fact that this issue has remained stagnant for a decade? Open issues with Croatia are already slowing down Montenegro, not only because of the demarcation at sea, but also due to new problems, such as the Resolution on Jasenovac.

The situation around Prevlaka is much clearer than it seems to many in Montenegro. As early as 1992, the Badinter Commission took the position that the borders of the republics of ex-Yugoslavia, as they existed at the time of Yugoslavia's breakup, were established as the borders of the newly created states. These borders are protected by international law and can only be changed by agreement between states. The Badinter Commission was not a private initiative of Badinter, as some might believe, but rather a commission formed by the European Commission. The European Commission is the most important institution in the European Union. By the decision of the Badineter Commission, the borders on the land were defined, and Prevlaka became part of the internationally recognised borders of Croatia. Some circles in Montenegro dispute this, arguing that Prevlaka is part of Montenegro. The problem with this attitude is that Prevlaka can become Montenegrin only if Croatia renounces Prevlaka in favour of Montenegro, or if it agrees to bring the issue of the land borders before the International Court of Justice or some international arbitration, and then a decision is made in favour of Montenegro. How realistic is that? Croatia will never agree to that. And Montenegro can't do anything about it. Montenegro has no way to force Croatia to do so. In Croatia, no one has ever stated that they would be willing to negotiate a land border, regardless of their political affiliations. Any Croatian politician who would agree to open the issue of the land border regarding Prevlaka would thereby commit a political harakiri and thus end their political career. For Croatia, the issue of the land border has been resolved, and it is now prepared to discuss only the maritime delimitation. How do you intend to force Croatia to agree to open the issue of the border on the land if Croatia does not want it? All this talk about who was in charge of the administration of Prevlaka, or the story about boxes with documents that have gone missing, does not make sense unless Croatia accepts that the issue of Prevlaka is brought before arbitration. When considering participation in an arbitration, governments typically conduct an analysis of the potential benefits and risks, a process similar to what economists refer to as a "cost-benefit" analysis. What would be the benefit for Croatia if it agrees to arbitration? There is none. On the other hand, there may be certain risks and costs associated with a potential arbitration. Montenegro has no power to force Croatia to agree to an arbitration. Hypothetically, if Montenegro were in the EU, and if Croatia applied for membership, then Montenegro could exert some pressure on Croatia to agree to arbitration like Slovenia pressured Croatia to agree to arbitration on Piran Bay, when Croatia was in the process of joining the EU. However, the situation is reversed; all the trump cards are in Croatia's hands. Just put yourself in Croatia's position: why would it agree to something that could potentially be a risk to Croatia's interests, if it doesn't have to? What did Montenegro deserve that Croatia could be expected to make such concessions? Perhaps, the resolution on Jasenovac? Let's be realistic. All the stories about Montenegro's right to Prevlaka are a misleading of the public by people who do not understand this problem, or who deliberately want to muddy the waters. The only effect that this can have is to make Montenegro's path to EU membership more difficult. And maybe that's exactly the intention.