SERBIA: RESTITUTION LAW PROMISED BY YEAR END AMID GROWING

UNCLAS BELGRADE 001144

SENSITIVE
SIPDIS
DEPT FOR EUR/OHI - JOHN BECKER AND EUR/SCE
AID FOR E&E/ECA

E.O. 12958: N/A
TAGS: ECON KIDE KPRV CASC EAID SR
SUBJECT: SERBIA: RESTITUTION LAW PROMISED BY YEAR END AMID GROWING
FRUSTRATION

REF: BELGRADE 996, AND OTHERS

SUMMARY
--------------


1. (SBU) The Government of Serbia has promised that it will adopt a
long-awaited restitution law for nationalized property by the end of
the year. In preparation, the Government hosted a conference,
co-sponsored by the Council of Europe and European Commission, to
review restitution laws and "lessons learned" in Croatia, Germany,
Hungary, Latvia and Romania, as well as legal considerations from the
perspective of the European Court of Human Rights. The European
Commission delegation in Serbia, presenters from other European
countries, and restitution claimants stressed the need to resolve
this long festering issue, a prerequisite for EU membership. The
GoS, which has failed to deliver on a promised restitution law in the
past, needs to finally fulfill this obligation if it wishes to
attract investment and move closer toward Europe. End Summary.

SERBIA'S LONG ROAD TO RESTITUTION
--------------


2. (SBU) Serbia is one of the last remaining former East-bloc
countries without a restitution law. A restitution law is a
prerequisite to EU membership, and uncertainty regarding property
ownership rights has hampered foreign investment and economic growth.
Previous promises to adopt a restitution law were not fulfilled and
existing legislation that touches on this issue, such as the law on
Planning and Construction, the law on Reporting and Recording of
Property Seized, the law on Property Restitution to Churches and
Religious Communities, have been criticized for not addressing
directly the restitution issue and for a lack of transparency
(reftel).

RESTITUTION CONFERENCE INCONCLUSIVE
--------------


3. (U) On September 23, Serbia's Finance Ministry, the Council of
Europe, and European Commission co-hosted a round table at which
State Secretary Slobodan Ilic stated that political consensus for a
restitution law had been reached, and promised the conference would
be the first step in a transparent and open process based on the
experiences of other European countries. Ilic said the Ministry
Working Group, together with Council of Europe experts, would develop
a model by the end of October and submit a proposed law to the
government by the end of the year. Ilic offered his resignation if
the GoS failed to pass by the end of 2009 a "balanced solution" that
created "efficiencies" for the State, allowed Serbia to reach its
economic potential, and did not create "new injustices". Note: Ilic
has talked of resigning over the last year for various reasons, and
at one point may have actually submitted a resignation that was not
accepted. End Note.

EU LOOKS FOR PROGRESS
--------------


3. (U) Adriano Martins, Deputy Chief of the European Commission in
Serbia, said that restitution and other property rights were an
essential criterion for EU membership and expressed disappointment at
Serbia's slow pace to resolve these issues. Martins said the EC had
encouraged Serbia in 2004 to address restitution issues, but to date
progress had been restricted to the Law on Registration of
Nationalized Property in 2005 and Law on Restitution of Property to
Churches and Communities in 2006. Martins said the continued
privatization of nationalized property without a restitution law was
problematic and encouraged the government to consider the mounting
concerns of the former owners' associations and other interest groups
on the current proposed solutions.

EUROPEAN EXPERIENCE FOR SERBIA
--------------


4. (U) Experts from Croatia, Germany, Hungary, Latvia and Romania
presented summaries of their restitution laws and experiences. Some
of these countries addressed restitution quite early in their
post-communist eras, and others have tackled the issue more recently.
While the content of the laws and their historical circumstances
differ, each presenter emphasized that addressing restitution as part
of property rights reform, either together or prior to privatization,
was an essential part of wider economic development in their
countries. They stressed the need for transparency and procedural
safeguards regardless of the solution ultimately adopted, as well as
the need to establish adequate institutional infrastructure to
implement the law. The Romanian representative cautioned of the
dangers of altering the law midstream. The German expert noted the
danger of creating new self-perpetuating government institutions, and


highlighted the German approach, which provided new responsibilities
for those offices after several years.


5. (U) Nadia Cuk, Deputy Special Representative for the Council of
Europe in Serbia, spoke of the importance of restitution and property
rights in the Human Rights Chapter and the EU Court of Human Rights.
Katarina Nedeljkovic from the European Court of Human Rights said the
Court viewed restitution claims through the context of human rights
violations, including disruption of the peaceful disposal of private
property, denial of access to the courts, or unduly long court
procedures.

UNIVERSALLY UNPOPULAR PROPOSALS
--------------


6. (SBU) Various restitution claimants' organizations expressed
growing frustration at the Government's continued delays, both in a
small demonstration outside the building by the Restitution Network
and in a session set aside for public comments. These groups
reiterated their long-standing demands for restitution in kind or
with property of equal value and included Amcits Bogdan Veljkovic

(Restitution Network) and George Ilic (Serbian League),and the
Association of Jewish Municipalities in Serbia. The claimants'
groups openly criticized the government for dragging out the problem
for years, and profiting by selling the nationalized property through
privatization or grants of urban construction land through the
recently approved Law on Spatial Planning and Construction leaving
almost nothing for restitution in kind.


7. (SBU) The government's proposed solutions are also opposed by
land developers. On September 30, Dejan Racic, CEO of Delta Real
Estate, told us that implementing a law on restitution was imperative
to Serbia's economic growth, but that his company was considering a
constitutional challenge to such a law on grounds there are
insufficient protections for those who acquired land rights through
privatization.

COMMENT
--------------


8. (SBU) Serbia must resolve property restitution in order to join
the EU, encourage private investment, clarify property rights, and
strengthen the market economy. Compared with other East-European
countries where restitution and privatization served as part of
broader economic reform tools early in their post-communist journeys,
Serbia's options are more limited due to its own haphazard approach
to economic reform. Serbia has already privatized a significant
portion of socially owned property and with the passage of the new
construction law restitution in kind is unlikely. The GoS has
already calculated that the cost of litigating some cases would be
less costly, and more politically palatable, than to return numerous
properties in kind to claimants. Despite Serbia's renewed promises
to finally resolve this issue and our and EU continued pressure, we
are doubtful that Serbia will find the political will - let alone the
necessary funds - to pass a restitution scheme by the end of 2009.
BRUSH