The "Becchetti" Arbitration bill puts public institutions in a chain of debts

2023-07-26 12:00:22Investigim SHKRUAR NGA REDAKSIA VOX
Illustrative photo

Air navigation company Albcontrol is headed for financial collapse after the Brussels Court of Appeal ordered the freezing of accounts in favor of businessman Francesco Becchetti. The data provided by INA show that, of the 71.8 million euros blocked so far, 67.3 belong to Albcontrol and 4.3 million to the Civil Aviation Authority.

To hide the failure, the state helped Albcontrol with 32 million euros, through some secret transactions, in the form of loans. This has caused Albania to de facto pay 30% of the bill of 108 million euros for the lost trial in international arbitration.

On May 15 of this year, the Court of Appeal in Brussels decided to freeze the accounts of the state-owned air navigation company, Albcontrol, putting it in a spiral of financial difficulties. After the refusal of the Albanian state to compensate him with 108 million euros, the accounts of the Albanian state have been blocked since 2020, in favor of the Italian businessman Francesco Becchetti, as an enforcement measure against the assets of Albania. Becchetti won the right to damages in the case of Hydro and Others v. Albania, based on a decision handed down by the International Court of Settlement of Investment Disputes in 2019.

Hopes of a court victory to release the money, which the flight operators put into its account with Eurocontrol, were finally dashed a few weeks ago, as the government continues to refuse to pay the Arbitral Tribunal's dues.

"The Arbitration Decision is based on the Convention and the bilateral Agreement with the Italian State for the Protection of Foreign Investments. Afterwards, the Albanian side requested the annulment, requested correction, and requested a review of the decision, referring to a criminal decision, where Francesco Becchetti was convicted. In these conditions, the legal remedy allowed by the Convention has been completely exhausted, they have no other way to refuse the recognition of the decision. It is final and enforceable", explains Ledina Mandija, former State Attorney.

The data provided by INA MEDIA show that since November 2020, when the Court of First Instance in Vienna granted the right to the businessman Becchetti to block Albanian assets in the countries of the European Union, and until June of this year, Albcontrol 67.5 million euros have been blocked and another 4.3 million euros have been blocked from the Civil Aviation Authority, amounting to 66% of the bill that Albania must pay to the Italian businessman, not including interest.

In order to survive, the Albcontrol company received a total of 32 million euros in loans from 3 state agencies: the Port Authority, Durrës, the General Directorate of Road Transport Services and the Civil Aviation Authority.

Contacted by INA MEDIA, Albcontrol officials did not respond to a request for comment. INA MEDIA also contacted officials of the Ministry of Finance and Economy and that of Infrastructure and Energy, but the comment was not available until the moment of publication of the article.

Paralysis of Albcontrol

Albcontrol Company (formerly ANTA) is a public company owned by the Ministry of Finance and Economy, founded in 1992. Its main purpose is to provide air traffic control and signaling services, a vital need for any country that offers air travel and has traffic space for airlines.

As a private enterprise owned by the state, Albcontrol collects its own income, which enables it to invest, pay controllers and carry out its operational tasks. The revenues, which have the highest weight in Albcontrol's budget, are the fees paid by the flight companies for the navigation service, which are divided into fees for landing and taking off planes and fees for overflights through Albanian space.

"The airspace is divided into 3-4 layers and some layers in the Albanian part are managed by Albcontrol. If Albcontrol cannot perform this function, no aircraft would be able to pass through the space of the Republic of Albania", says civil aviation expert, Dritan Goxhaj.

In 2021, the revenue from the navigation service was 27 million euros, but of this money, Albcontrol managed to use only 4.3 million euros, which were the fees for landings on Albanian soil. Another 22.8 million euros, which are paid by the flight companies to Eurocontrol (the European Air Traffic Unit), which should then be transferred to Albcontrol's account, were blocked after a decision of the Court of First Instance First in Brussels, where Eurocontrol's headquarters are located. The court ruled in favor of the lawyers of the businessman Francesco Becchetti, to block the bank accounts of Albcontrol, considering the money as an asset owned by Albania.

"The company has faced the difficulty of liquidity as a result of the impossibility of using funds in its bank accounts abroad, affecting the inhibition of a normal progress of its work. The company has reduced most of the expenses this year, trying to cover only the most necessary expenses for the progress of the work", - it is stated in the annual report of Albcontrol for 2021.

Albcontrol's income in 2022 increased, due to the high flow of flights that the period after the Covid-19 pandemic had, but again 30 million euros were blocked and only 4.4 million euros managed to be collected from the ups and downs of planes on Albanian soil. This amount appears to be negligible to carry out normal navigation operations and constitutes only 13% of the revenue the company receives from air traffic control fees. Occurred in a difficult financial situation, after a year where due to the pandemic it had resulted in a loss of 5.2 million euros, the result did not change even after the boom that flights had in the following years.

During 2021, the profits for the Albcontrol company were 5 million euros, but even though the Minister of Finance and Economy, Delina Ibrahimaj, made the decision that the money should go to cover the losses, the operation was not carried out due to the blocking of the accounts in Brussels.

"The importance of Albcontrol begins with the selection of individuals on its board, who are personalities and the highest level of representation of the Albanian government. Having this kind of importance in terms of the entire Civil Aviation, there was no need to suffer the effect of a problem that is not related to this sector. This has forced it, lacking the relevant finances, to limit its expansion in the future in terms of human capacity and technology, which in this field is evolving rapidly", explains Eduart Gjokutaj.

 Agencies, in debt chain

Found in a difficult situation and unable to cope with its functions, the public company is assisted by several state agencies under the coordination of the Ministry of Infrastructure and Energy and that of Finance and Economy. Last year, Albcontrol received a loan of 5.8 million euros from the Port Authority, Durrës, 4 million euros from the Road Transport Service Directorate and 18.8 million euros from the Civil Aviation Authority. Albcontrol received another 4.5 million euros in debt from the Directorate of Road Transport Service for the first part of this year, accumulating a total of 33 million euros in liabilities.

"Albcontrol has lost its financial independence, being in debt to all these public entities, and thus its business plan depends on the amount it will borrow. Although they are public enterprises, each state-owned company has its own balance sheet, which aims to optimize its objectives. Financial discipline has been lost here and this affects the financial performance of each one", explains the expert of the Altax center, Eduart Gjokutaj.

The "Becchetti" Arbitration bill puts public institutions in a chain
Facsimile of the Civil Aviation Authority budget for 2023

The decision of the Court of Appeal of Brussels ended the hope of having access to the blocked money and now the company is facing demands for repayment of debts. Albcontrol managed to pay only the loan taken from the Port Authority, Durrës. The Port Authority itself, Durrës, was forced to destroy an investment worth 1 billion lek (9.4 million euros) near the Credins Premium fund, where through the operations, which was the function of this investment portfolio, it lent to the Albanian state, earning in 2 years 670 thousand euros. When the authorities realized that the Durrës Port Authority was not transferring the profits to the budget, but was using the money earned to give it to the state with interest, they ordered the investment to be broken and the fund to go to help the company Albcontrol.

"In January 2022, the company withdrew all funds invested in the Credins Premium investment fund. In March 2022, the company concluded a loan contract with a joint-stock company owned by the Ministry of Finance and Economy for an amount of 5 million euros and a repayment term within the month of December 2022", - says the report of the financial audit of the year 2021 of the Port Authority , Durres.

The "Becchetti" Arbitration bill puts public institutions in a chain
Financial statements for the Port Authority, Durrës for the year 2021

"The Supreme State Control is the institution that must control the applicability in these agencies and these are serious violations in the discipline of what these legal-public entities have in their object. This case describes how the entire system of public companies is managed. This should be analyzed and be part of the administrative investigations of the parliamentary commissions", explains Gjokutaj.

Albcontrol's financial plan foresees that the loan worth 8.5 million euros to the Road Transport Service Directorate will be paid in two installments, 2.8 million euros, during the third quarter of 2023 and the remaining part, at the end of the year. At the end of the year, 18.8 million euros are expected to be paid, which were received from the Civil Aviation Authority, but these projections, according to experts, will remain on paper, if the blocked money is not released.

The "Becchetti" Arbitration bill puts public institutions in a chain
Revenue planning for 2023 by the Civil Aviation Authority

"The place of execution of the obligation has found the applicable law to be the law of the country where the obligation is enforced. In the present case it is the Belgian state. The money was found in Brussels, they contracted a Belgian bailiff and there, according to the law, enforcement actions are carried out. They are enforcement actions based on the law there and the money can also be withdrawn based on the process provided by the Code of Civil Procedure there", explains Ledina Mandija.

A source close to Albcontrol said on condition of anonymity that, even though in 2022 the company results in a net profit of 11.2 million euros, it is only a figure on paper, as the money remains blocked. In these conditions, Albcontrol does not even calculate the payment for the profit to the Tax Directorate for 15% of the profit of 2022, much that according to the company's balance sheet it would have to pay 1.7 million euros. For the year 2023, the financial tables, provided by INA, show that Albcontrol will not generate profit even in accounting value, despite the increase in the flow of flights in Albanian airspace.

Civil Aviation experts consider the infringement of navigation operations by the lack of liquidity as dangerous and irresponsible, while expressing indignation that the maneuvers of budget assistance were done in secret and without giving safety signals to the public.

"Until today, there have been no problems with the maintenance of the equipment or the purchase of radars and the payment of the salaries of the controllers. These are necessary for the safety of flights in the Albanian space, but this company has gone completely outside its charter, which sanctions, that it can use the funds only for its needs, but in fact it has made investments, such as it is to Air Albania. There was no good management of finances", says expert Goxhaj.

Financial experts are concerned that the involvement of other agencies in a network of debts destroys financial discipline and may create problems for the basic function of the services they provide to citizens and businesses.

"We need a plan for the exit scenarios from this situation. Accumulating too much debt makes the company then either have to be bailed out by the state, or declare bankruptcy. Both of these can be prevented, if the law on the management of public finances is applied", says Eduart Gjokutaj.

They say that, even though the government has not accepted to pay the Arbitration bill, if the loan amounts that went to Albcontrol and were not transferred to the state budget, or the effect on the state budget of taxes, would be collected, that would be paid by the company, has made Albania de facto pay 30% of the Arbitration bill.

"No one is happy to pay the Arbitration bill, but this has already become an economic issue and there should be transparency. The public should be told how much will be taken from their taxes for the bill of this fine", adds Gjokutaj.

The government helps with secret transfers

10 days before the end of 2022, the Ministry of Infrastructure and Energy orders the transfer of an amount worth 2 billion lek (18.8 million euros) in the form of a grant from its accounts to the coffers of the Civil Aviation Authority. The letter to send the amount was signed on December 21, 2022 and the spending order from the Treasury was executed on December 27.

The purpose of the secret transaction was to send money to the Albcontrol company to save it from numerous bills and debts, but this is not legally allowed, since the state cannot inject capital into public companies, only if it is done by a special law or when there is aimed at subsidizing prices. In order to fulfill the legal obligations, it is decided that the transfer should be made to the Civil Aviation Authority, using it as a transit account, which will then send it as a loan to Albcontrol.

On December 29, the state budget is revised and adds an approximate amount (16.1 million euros) to the budget of the Ministry of Infrastructure and Energy. According to the documents of the financial statements of the Civil Aviation Authority, provided by INA MEDIA, it results that the fund worth 2 billion lek (18.8 million euros) entered and left within a few days from the CAA account.

"We are dealing with a company that cannot be given capital injection, and there are clearly defined rules for granting money from the budget, which is done either when it is on the verge of bankruptcy, or when there are difficulties in its operation. In fact, Albcontrol is suffering the consequences created by the decisions of the European authorities to settle the Arbitration bill", Gjokutaj explains.

The Civil Aviation Authority itself is awaiting the release of accounts from Eurocontrol for the collection of the en-route cost fee, which for the years 2021, 2022 and 2023 is calculated to be 4.3 million euros. The fee is collected by Albcontrol, which then passes it on to this agency, but the blocking of funds has caused this institution to freeze its plans on how to use these revenues or their transfer to the state budget. if they are more than the planned expenses.

"Even for this year, the income from the en-route fee has not been taken into consideration, as it is impossible to predict how long the blocking of funds at Eurocontrol will remain in effect", - it is stated in the approved economic program from the board of the Civil Aviation Authority.

"The Aviation Authority is the authority that, based on the Air Code, must supervise Albcontrol and must also see the expenses it has made over the years, how much it has had reserves and what it has done with them, not only make aid transfers", - explains the aviation expert, Dritan Goxhaj.

Interest and millions of euros in court costs

To date, it has cost Albania 5.1 million euros in payments to law firms to defend it in the case against Francesco Becchetti. Albania was punished in 2019 to compensate the businessman with 108 million euros, but then the decision was appealed once again to the same court, ICSID. The second decision was again in favor of Becchetti. The value of the compensation money did not change and remained 108 million euros. Several other legal attempts have been made to annul the decision, but have been unsuccessful. Finally, the prime minister has accepted the obligations that will have to be paid by Albanian taxpayers' money and has proposed the country's withdrawal from the jurisdiction of the International Court of Arbitration.

"We will open big problems, starting from next week, from which we are even analyzing the possibility of leaving the jurisdiction altogether, as what happened is scandalous", said Prime Minister Rama in April of this year.

"In the published decisions, Albania has the only case with such a high financial bill in Investment Arbitration. The government's reaction, saying that "we will withdraw from the Convention", was also pointless, because doubting the justice of that tribunal is a little inappropriate, as long as Albania has been successful in other, legal battles with this court. This is the biggest loss, not only in commercial arbitration, but also in investment arbitration, and it is the only case where Albania loses in investment arbitration", says the former State Attorney, Ledina Mandija.

She states that exiting this jurisdiction will only aggravate Albania's situation and cannot save it from paying the fine.

"Even if we leave the ICSID Convention, we are obliged to pay the bill of 108 million euros for Becchetti, not only for him, but also for all the cases that are registered today and will continue to be judged and will to be mandatory to be executed", says the former State Attorney General, Ledina Mandija.

Economic experts say that exiting this jurisdiction penalizes the country in the eyes of foreign investors and damages business climate indicators.

"Albania has entered into the payment of the obligation, as it is no longer in its will. To my knowledge, Albania will be vulnerable to pay the obligations of five other European jurisdictions, where we have income generation due to the activities carried out by the Albanian state. It should now be clear to say the relevant costs of this process, which do not have to be paid in this kind of form, but to return to the normality they were and to prevent this whole chain of debts from happening", - concludes Eduart Gjokutaj.

To date, the government's position remains that the money will not be paid. Asked by INA MEDIA, if there is a new position regarding the payment of the fine or the progress of this matter, the Ministry of Finance and Economy has not commented until these moments./InaMedia