The High Representative for the International Community in Bosnia and Herzegovina (BiH), Christian Schmidt, issued a directive on July 17th mandating that €56 million owed to Viadukt be settled using funds from fuel tolls, specifically from the allocation meant for the Republika Srpska (RS) entity’s budget.

Furthermore, Schmidt ensured funding for the Central Election Commission of Bosnia and Herzegovina to cover expenses related to the acquisition of election technologies, like ballot scanners, which are expected to be utilized during the General Elections slated for 2026.

Exercising his authority under the Bonn powers to intervene in domestic legislation, Schmidt enacted these decisions by introducing amendments to the Law on Financing Institutions.

Origin of RS Debt That BiH Must Address

The Slovenian firm Viadukt initiated arbitration against BiH after the Government of Republika Srpska granted a concession to its own Elektroprivreda RS in 2013, which jeopardized an existing hydroelectric project on the Vrbas River.

Following a ruling by the ICSID, an arbitration court in Washington in 2022, Viadukt pursued measures to claim BiH state assets both domestically and internationally to resolve the debt, which included the assets of the BiH Air Navigation Services Agency (BHANSA).

They also sought to enforce claims against the real estate holdings of the Central Bank of BiH located in multiple cities across the country.

For the past seven years, officials in Bosnia and Herzegovina have struggled to agree on the distribution of over €160 million collected from tolls imposed on each liter of fuel sold, intended for financing road and highway construction nationwide.

Disputes arose regarding how to split this revenue between the entities of the Federation of BiH, Republika Srpska, and the separately administered Brčko District. The state and the finance ministers of the two entities, who make up the Board of Directors for the Indirect Taxation Authority of BiH (collecting various taxes), have been unable to come to a consensus.

According to past statements from the Finance Minister of the Federation of BiH, Toni Kraljević, RS representatives sought a larger share than what was estimated to have been collected from road tolls in RS territory.

Meanwhile, officials from Republika Srpska and their representatives in the state government have not adhered to the arbitration findings in the Viadukt case, in spite of obligations stipulated under the 2017 Agreement with the BiH Council of Ministers regarding mutual rights and responsibilities in that context.

High Representative Christian Schmidt clarified, “This share [of tolls designated for settling the Viadukt debt] is not intended for RS budget needs and will not impact RS budget stability. It will not affect payments or services for RS citizens.”

He detailed that the funds will be transferred to the BiH Ministry of Finance and Treasury, which will then handle the payment to Viadukt.

Schmidt also noted that if there are alternative proposals for addressing this matter through negotiations, that is within their purview, but ultimately, the responsibility lies with the Republika Srpska, not the state.

Utilization of the Central Bank of BiH’s Profit

Under the High Representative’s directive, a portion of the Central Bank of BiH’s profit, which totaled approximately €200 million in 2024, will be allocated to the state treasury. The finance minister or deputy will then transfer these funds to the Central Election Commission of BiH for implementing the election technology project.

The Central Election Commission of BiH previously estimated that around €59 million would be necessary to implement new election technologies.

In a decision made in July 2022, Schmidt amended the BiH Election Law, initiating the adoption of biometric voter data scanners, ballot scanners, and other essential equipment. A pilot project was rolled out for local elections in the same year.

As the draft budget for 2025 has yet to be approved and did not include these funds, Schmidt opted to secure them from the profits of the Central Bank of BiH.

The remaining funds will be allocated to the Federation of BiH entity following regulations governing the distribution of the Central Bank of BiH’s profits, with a portion retained by the bank itself.

Authorities from the RS, along with state finance minister Srđan Amidžić from the ruling Alliance of Independent Social Democrats in that entity, proposed that the debt to Viadukt be settled from the profits of the Central Bank of BiH, a suggestion rejected by representatives from the Federation of BiH.

Schmidt declared, “By law, the profits of the Central Bank of BiH should be directed towards state needs, not those of the entities. With this decision, the Central Bank of BiH, recognized globally, can now allocate its profits to state institutions, funding the much-anticipated purchase of electoral technologies for the 2026 general elections.”

BiH currently faces additional claims arising from investment arbitrations related to bilateral investment agreements, suggesting potential claims for financial compensation exceeding €1.3 billion.

In closing, the High Representative urged authorities across all levels to fulfill their responsibilities and promptly adopt the state budget, emphasizing the need for resolutions for other institutions, including cultural entities, that have long awaited clarity regarding their legal and financial status.

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