Gecic Law has acted as legal counsel to the Government of Serbia and the Zelezara Smederevo steel mill with respect to an European Commission investigation on State Aid received by the old company, and the potential obligation of Hesteel Serbia to reimburse it, under the Stabilization and Association Agreement.
The Smederevo steel mill – Serbia’s leading producer of steel – is the second largest Serbian exporter and is currently responsible for nearly 1% of Serbia’s GDP. The previous company, Zelezara Smederevo was acquired by US Steel through the privatization process, then sold back to the Government of Serbia in 2012. In April 2016, China’s HBIS submitted a binding offer to buy a number of assets of Zelezara Smederevo for a total of EUR 46 million and established HBIS Group Serbia Iron & Steel d.o.o. Beograd – Hesteel Serbia.
According to Gecic Law, "on Wednesday, November 8, 2017, Johannes Hahn, Commissioner for European Neighborhood Policy and Enlargement Negotiations, informed the Prime Minister of the Republic of Serbia, Ana Brnabic, that the European Commission concluded that “the HeSteel-owned steel mill does not have to reimburse any state aid received in the past."
According to Gecic Law, "Despite the clearly positive tone of said message, Commissioner Hahn’s notification includes a very important forewarning for all stakeholders in the Serbian economy and foreign investors – Serbia’s obligations arising from the SAA give the European Commission undisputed authority to investigate and analyze compliance with the EU State aid rules. According to the Delegation of the European Commission to the Republic of Serbia, the Commissioner noted that 'the Commission was required to conduct this analysis based on Serbia's obligations under the EU-Serbia Stabilization and Association Agreement, which commits Serbia to respecting the EU state aid regime, in particular for companies in restructuring.' This subtle, but very clear message, coupled with the fact that latest Screening Report for Chapter 8 – Competition Policy is primarily concerned with matters relating to state aid, present a direct indication that the EC will, given this unequivocal SAA legal basis, continue to diligently follow and analyze all relevant State-aid cases, with specific focus on the firms that underwent, or are planned to undergo, the restructuring process and/or privatization in line with the EU State aid regime."
This marks the second recent positive decision in relation to the Smederevo steel mill, and the third in total, achieved by the Gecic Law Competition/State Aid and European Law, Trade & Enlargement teams before the European Commission, following its recent decision not to impose anti-dumping measures on steel producers from Serbia (as reported by CEE Legal Matters on October 10, 2017) and in the 2016 case of Air Serbia/ Etihad (as reported by CEE Legal Matters on August 26, 2016). According to Gecic Law, "it is important to note that the state aid analysis is completely independent of the recent anti-dumping case, which also ended with a positive outcome for the Smederevo steel mill."
The Gecic Law team was led by Partner Bogdan Gecic and included Senior Associate Marija Papic and associates Milusa Okiljevic, Tatjana Sofijanic, and Rastko Pavlovic.
