The Commercial Court has acknowledged the ruling from the London Court of Arbitration, directing “Sveti Stefan Hotels” and the Government to pay £522,000 (approximately €620,000) to “Adriatic Properties,” the lessee of the prestigious Sveti Stefan-Miločer resort, covering the expenses incurred during the arbitration process.

The court’s decision states, “The application to recognize a foreign arbitration award by ‘Adriatic Properties’ DOO Budva and ‘Aidway Investments Limited’ from the British Virgin Islands is accepted. The foreign arbitration award—specifically the Second Partial Arbitration Award from the London Court of International Arbitration dated September 25, 2023, along with its appendix dated October 12, 2023—is recognized, holding the same legal weight as the rulings from Montenegrin courts and producing equivalent legal effects.”

Bojana Cirovic, the Protector of Property and Legal Interests of Montenegro, has submitted an appeal to the Court of Appeal against the Commercial Court’s decision…

According to the Second Partial Arbitration Award from the London court, the predominantly state-owned “Sveti Stefan Hotels” is mandated to pay £226,575.70, representing half of the legal costs incurred.

The ruling also specifies that if “Sveti Stefan Hotels” fails to make payment within 30 days from the date the decision is provided, interest will accrue at the LIBOR rate plus 3.5% per year.

Furthermore, the award requires that “Sveti Stefan Hotels” and the Government, or the previous Ministry of Economic Development, jointly and severally compensate “Adriatic” with £295,341.45, subject to the same interest conditions if they do not comply within one month.

The tenant of the upscale Montenegrin resort articulated in court that the arbitration arose from proceedings related to claims for the reimbursement of costs in two cases concerning interim measures against “Sveti Stefan Hotels” and the Ministry of Economic Development.

They also pointed out that the arbitration was linked to the Lease Agreements for the Sveti Stefan and Miločer hotels, and for the Kraljičina Plaza Hotel, which were established on January 31, 2007.

Representatives from “Sveti Stefan Hotels” and the Government, through the Protector of Property Relations, requested the Commercial Court to dismiss the tenant’s proposal. They asserted that Montenegrin courts have exclusive jurisdiction over this matter.

The protector’s stance maintained that “The Montenegrin court must proactively ensure that domestic law is not evaded, asserting that in this matter, English law cannot be applied to bypass Montenegrin law.” However, the Commercial Court rejected this position.

The “Budvanska rivijera” hotel group referenced the Supreme Court of Montenegro’s stance, asserting that Montenegrin courts possess exclusive jurisdiction over disputes involving entities registered in Montenegro, thereby contesting the basis for initiating international arbitration.

“Adriatic Properties,” owned by Greek businessman Petros Statis, has kept the Sveti Stefan city-hotel and Villa Miločer closed for the fourth consecutive summer. Additionally, construction on the new Kraljičina plaza hotel has been halted since the arbitration proceedings commenced. The hotel operator, “Aman,” has stated that without a resolution regarding the operation of Queen’s Beach and the access path between the beach and Miločer Park spa center, they cannot ensure guest safety or privacy.

The use of Queen’s Beach, which had been privately reserved for hotel guests and the political elite for decades, resulted in the closure of the Svec. Following a local incident in 2021 where residents breached the fence at Queen’s Beach, the Public Company for Coastal Zone Management mandated its removal, thus restoring public access to Miločer Park.

After the 2021 incident, Adriatic Properties sought assurances from the state to prevent recurrences of such events, which were not provided. Subsequently, the state initiated arbitration in London, leading to a retaliatory response from Adriatic Properties.

This situation escalated further, as for nearly two years, Statis’ company neglected to pay rent to the government-owned HTP “Miločer” for the Miločerski Park complex, where the old Kraljičina plaza hotel once stood and new construction is underway, with residential apartments planned for the market. The quarterly rent, which amounts to €87,000, remains unpaid.

Additionally, “Sveti Stefan Hotels” has not received a quarterly rent of €380,000 for the property encompassing the Sveti Stefan city-hotel and Villa Miločer.

These developments have led both entities into a precarious financial position.

Protector: Misguided Court Approach

Bojana Ćirović, the Protector of Property and Legal Interests of Montenegro, argues in her appeal to the Court of Appeal that “the necessary conditions for recognizing the arbitration award have not been met.”

She elaborates, “According to the Law on Private International Law, the Law on Arbitration, and Article V, point 2a of the New York Convention concerning the Recognition and Enforcement of Foreign Arbitral Awards, the approval of the foreign award in question has circumvented mandatory legal principles of Montenegro, avoided applying conflict of laws norms, distorted essential facts, and artificially created a ‘connecting point,’ representing a foreign element to improperly administer English law. In this context, Montenegrin courts have exclusive jurisdiction. The court’s approach is flawed, as the core dispute revolves around a legal transaction involving real estate in Sveti Stefan, and the arbitration decision pertains specifically to this matter, rather than merely costs, which the court inaccurately concludes,” she stated in the appeal, which “Vijesti” accessed.

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