Montenegro is required to pay 620 thousand euros as per the law’s estimates to Adriatic Properties, the tenant of the exclusive Saint Stefan and Milocer hotels, which has filed a lawsuit before the Arbitration Court in London.

Since these hotels have remained closed for the last four years, the Montenegrin party requested the Court to implement several “temporary” measures, the primary one being the reopening of the hotels.

The court dismissed these requests and allowed Adriatic Properties to recover costs associated with lawyer fees incurred during the procedure.

This is merely a part of the ongoing court disputes between Adriatic Properties, the tenant of the hotels located in the most prestigious section of the Budva Riviera, and the majority owners — “Sveti Stefan hotels” and the Government of Montenegro.

The primary dispute in the Arbitral Tribunal in London has been ongoing for over three years.

When inquired about the potential costs of the court proceedings, Radio Free Europe received no response from either the Ministry of Economic Development or Adriatic Properties.

Closure of hotels and legal proceedings

The hotels in Sveti Stefan, Milocer, and Queen’s Beaches are tied to a long-standing issue that began in 2007 with a Greek Company, Adriatic Properties, represented by Petrosa Statis. The democratic political parties led by the Socialists under Mila Đukanović were in power at that time.

In August 2020, Đukanović lost power. A year later, a group of locals, led by officials from the new government, demolished fences around the rented hotel beaches, seeking unrestricted access.

In response, Adriatic Properties shut down the hotel prior to the 2021 season, citing an inability to ensure the privacy of its guests.

This prompted them to sue the state of Montenegro and the hotel-owner company “Sveti Stefan hotels”, in which the state holds the majority of shares, claiming compensation estimated at approximately 100 million euros due to breaches of the lease agreement.

The Montenegrin side retaliated against Adriatic Properties, aiming to protect its rights, capital, and properties, which they believe have been devalued due to improper management.

The Arbitration Court in London has consolidated both lawsuits into a single procedure.

Initial ruling in favor of Adriatic Properties

While the main hearing is still anticipated, the Court has made two “partial arbitration decisions” regarding the proceedings initiated by both parties in 2021, centered on breaches of the lease agreement.

As clarified by RSE from the “Sveti Stefan hotels” company, they requested the court to implement several temporary measures, primarily seeking the reopening of the hotels, arguing that their rights were violated by the lease agreement’s breaches.

The court refused these demands and granted Adriatic Properties, which opposed the measures, the right to collect 620 thousand euros in legal fees incurred during the proceedings.

This sum will be paid by “Sveti Stefan hotels” and the Government of Montenegro.

However, for this Tribunal decision and associated costs to be enforced, local courts, including the Economic Court of Montenegro, need to recognize it — a process initiated this month.

Bojana Ćirović, the Property and Legal Interests Protector of Montenegro, has appealed to the Appellate Court.

Ongoing legal disputes lead to increasing debts

Meanwhile, debts are piling up.

The company “Sveti Stefan hotels” stated to RSE that Adriatic Properties owes 2.7 million euros in rent.

An annual lease of 1.5 million euros is payable quarterly, yet Adriatic Properties disputes the billed amount due to an additional VAT charge.

This prompted a 2022 Commercial Court case to determine the legitimacy of this new VAT calculation.

RSE did not receive a response regarding the tenant’s dues to the state-managed marine good overseeing Montenegrin beaches.

By late July 2024, Adriatic Properties owed slightly over 70,000 euros for the rent of four beaches associated with the hotels.

In conjunction with the Sveti Stefan and Milocer hotels, Adriatic Properties also rented Hotel Kraljičina Beach and its land, owned by the state enterprise HTP “Milocer”.

Construction of a new hotel on the site of the old one has commenced by Adriatic Properties but was halted once arbitration proceedings began.

The annual lease for Stari Hotel, agreed upon by Adriatic Properties, is 348 thousand euros, which is also paid on a quarterly basis of approximately 87 thousand euros.

Currently, “Milocera” has not responded to RSE’s inquiries regarding the tenant’s debts.

According to the latest official figures, in mid-2024, the tenant’s debts were about 430 thousand euros.

Since that rent is the sole income for “Milocera,” unpaid taxes led Budva to block the corporation and register a mortgage on its property by the end of July.

The original lease agreement for the hotel with Adriatic Properties was signed 30 years ago, following Montenegro’s independence in 2006, with management awarded to the world-renowned Aman Resort.

Amendments to the 2015 Contract saw some items change.

The lease for Sveti Stefan was extended for an additional 12 years, until 2049, and the lease was reduced from 1.6 to 1.1 million euros.

The lease for Queen’s Beach was extended from 30 to 90 years, allowing for the construction of a new hotel featuring around 130 rooms, some of which are half apartments for sale, sparking protests from local residents and the local government.

Moreover, there have been several protests from the locals demanding that Sveti Stefan be returned to state ownership.

The hotel, located on a peninsula of about 25 thousand square meters, was once a fishing village for the local community. In 1960, the former Yugoslav authorities turned it into a state-owned hotel.