Identifier
Created
Classification
Origin
09BELGRADE725
2009-07-23 12:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Belgrade
Cable title:  

SERBIA: PROPOSED LAW ON PLANNING AND CONSTRUCTION TO IMPACT

Tags:  ECON KIDE KPRV CASC SR 
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VZCZCXYZ0010
RR RUEHWEB

DE RUEHBW #0725/01 2041222
ZNR UUUUU ZZH
R 231224Z JUL 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0092
INFO RUEHBW/AMEMBASSY BELGRADE
UNCLAS BELGRADE 000725 

SENSITIVE
SIPDIS
DEPT FOR EUR/OHI - JOHN BECKER AND EUR/SCE

E.O. 12958: N/A
TAGS: ECON KIDE KPRV CASC SR
SUBJECT: SERBIA: PROPOSED LAW ON PLANNING AND CONSTRUCTION TO IMPACT
RESTITUTION CLAIMS

SUMMARY
-------

UNCLAS BELGRADE 000725

SENSITIVE
SIPDIS
DEPT FOR EUR/OHI - JOHN BECKER AND EUR/SCE

E.O. 12958: N/A
TAGS: ECON KIDE KPRV CASC SR
SUBJECT: SERBIA: PROPOSED LAW ON PLANNING AND CONSTRUCTION TO IMPACT
RESTITUTION CLAIMS

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


1. (SBU) A draft law on Planning and Construction currently under
debate in Parliament could significantly impact future restitution
claims. Although there are several necessary positive elements in
the legislation, including streamlining the construction permitting
procedure and rationalizing the urban planning process, there are
also elements that are of concern to U.S. citizens, Jewish groups and
American and Serbian organizations with regards to future restitution
of nationalized property. Of their chief concerns is that
restitution in kind is not protected and that the proposed
restitution fund that the law would create would not be appropriately
funded or managed. Post has reached out to members in the ruling
coalition in both government and parliament to voice our concerns
about the proposed legislation and to encourage a fair, transparent
and coordinated approach to restitution issues. End Summary.

THE LAW AND PROPERTY OWNERSHIP
--------------


2. (SBU) On July 9, the government approved the draft Law on
Planning and Construction and it was sent to Parliament on July 10.
Branko Trajkovic from the Serbian League for Protection of Private
Property and Human Rights told us on July 22 that debate on the draft
and proposed amendments was planned for July 29, with possible voting
on July 31.


3. (SBU) Prior to going to Parliament, Minister for Environment and
Zoning, Oliver Dulic, (Democratic Party- DS) presented the draft of
the law to the American Chamber of Commerce on June 24. The
presented draft contained significant changes to drafts previously
shared through USAID sponsored public forums that had invited and
collected stakeholder opinions and comments on the draft law. Among
those changes were provisions for private landownership which have
significant bearing on restitution of nationalized property in
Serbia. Specifically, the draft law now allows:

-- Current usage right holders to convert usage right to full private
ownership, free of charge, to provincial and local governments,
previous owners of nationalized undeveloped land and their legal
successors, and owners of buildings or part of buildings (e.g.

apartments owners would now own the nationalized land beneath their
apartments);
-- For usage right acquired through privatization to be converted to
land ownership by paying the difference between the market value of
the construction land at the time of conversion and the costs of
acquiring the land;
-- Lease right to be converted into ownership upon payment of the
whole lease amount plus 1%; and
-- Proceeds from conversion of lease and usage rights into ownership
to be shared between local government budgets and a national
restitution fund.
CONCERNS FROM CLAIMANTS, MP'S AND BUSINESS
--------------


4. (SBU) A number of U.S. citizen restitution claimants, Jewish
groups, U.S. and Serbian organizations have expressed their concern
to the Embassy and GOS that the draft law does not allow for
restitution in kind and that the funds from property conversion money
will go to the proposed national restitution fund with little details
as to how that fund would be managed and disbursed. Even some
members of parliament from the ruling coalition do not agree with the
law. At a press conference criticizing the law on July 16 held by
the Jewish Communities in Serbia (JCS) and the League for Protection
of Private Property and Human Rights, Serbian Renewal Movement (SPO)
MP Zika Gojkovic said the four SPO and three PUPS MPs would vote
against the draft law, although he expected most other government
coalition members to support the legislation. Dragana Milovanovic,
President of the Serbian League, said that they had submitted an
initiative to withdraw the law from the Parliament with the support
of SPO. Aleksandar Necak, President of the JCS said that the law
represented the "tycoonization of the nationalized property,"
suggesting that the Government was giving away property to tycoons
instead of returning property to the original owners. Opposition to
the law is also evident within parts of the business community,
including Delta Real Estate who told us on July 22 that the law could
possibly be unconstitutional and if so could leave a stigma on
Serbia's investment climate.

DULIC: LAW NECESSARY FOR ECONOMIC GROWTH
--------------


5. (SBU) The proposed law was necessary for Serbia's economic reform
effort and to attract new investment, Dulic told the Charge on July

20. Dulic said the draft Planning and Construction law focused on
streamlining business processes and would only deal partly with


property issues, stressing that denationalization would be addressed
in additional laws on public property and restitution which were the
responsibility of the Finance Ministry. It did not make sense, Dulic
said, to pass these laws as a package since doing so could further
slow down the entire process, which had already taken too long.
Dulic said Serbia needed to resolve the land ownership issue in the
most fair and transparent manner but acknowledged that the government
"could not make everybody happy." Dulic said he thought restitution
in kind was unfeasible for the government and the only viable
solution was through financial compensation. Dulic said that his own
family had ownership claims that would be affected by the
legislation. Dulic said he expected the legislation to be adopted by
the end of July.

CVETKOVIC: SERBIA CAN'T AFFORD TO PAY
--------------



6. (SBU) During a July 22 conversation at an EU reception, Charge
approached Prime Minister Mirko Cvetkovic for his views on the draft
law. Israeli Charge Yair Frommer joined the conversation. After
Charge stated her concerns vis--vis Serbia's ability to attract
foreign investment if property claims were still in dispute,
Cvetkovic stated that it was impossible for Serbia to pay the full
amount of the claims already submitted. He also stated that Serbia
should treat all claims equally and also seemed confident that the
Government was on the right track with the proposed property law.
Both Cvetkovic and National Bank Governor Jelasic, who joined the
conversation, looked vague when Charge inquired about management of
the restitution fund.


7. (SBU) Frommer called Charge on July 23 to convey his concern that
the conversation with Cvetkovic demonstrated continued Serbian
confusion on the entire restitution issue. Referring to Israel's
extensive experience with restitution issue in Eastern Europe,
Frommer said "they've got the sequencing wrong, you do restitution
first and then a property law, not the other way around which
pre-empts restitution claims." Frommer said he pursued Jelasic
further on the 22nd regarding this issue and Jelasic offered to host
a conference of experts in September to address the issue. Israel
planned to send restitution experts from the World Jewish Restitution
Conference and the American-Jewish Joint Distribution Committee.
Frommer also said that based on his talks with Cvetkovic and Jelasic
he was doubtful either of them understood either the status of a
restitution fund or how to manage one.

FINANCE MINISTRY STILL WORKING ON RESTITUTION LAW
-------------- --------------


8. (SBU) Finance Ministry State Secretary Slobodan Ilic told us on
July 22 that there was close coordination between Finance and Dulic's
Ministry and he expected there would be several amendments to the
planning and construction legislation that would further restrict its
impact on restitution. Ilic said the Finance Ministry expected to
introduce parallel laws on restitution and public property to
parliament by the end of the year. (Claims that we have heard from
the Finance Ministry for the past several years.) Ilic said Serbia
was working closely with the Council of Europe (CoE) in drafting a
fair and viable restitution law, and that with CoE support Serbia
would host a roundtable in mid September to further develop the
legislation. Ilic said Serbia was intent on cooperating closely with
the CoE to make certain that any restitution legislation would not
violate basic human rights principles. "Serbia needed to keep good
relations with the European Court of Human Rights," Ilic said.

AN EXCESSIVE COST
--------------


9. (SBU) Ilic estimated that enacting a full restitution law in
Serbia could cost the government more than $10 billion, a cost which
would be impossible for Serbia to absorb. Ilic said any restitution
would need to be a combination of in kind and financial mechanisms.
He expected once a law is enacted it would still take at least two
years to review claims. Despite the obvious burden to the state,
Serbia needed to resolve this issue if it wanted to attract
investment and become competitive, Ilic said.

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


10. (SBU) The proposed law on Planning and Construction will
certainly impact restitution claims, if it goes forward ahead of a
restitution law. While Dulic's desire to streamline business
processes in order to attract investment is admirable in this
increasingly lethargic government, he may be expanding his reach too
far, into the domain of the slow to act Finance Ministry. We will
continue to urge the government to enact in a timely manner a



coordinated, transparent and expeditious restitution process.
Serbia's failure to do so, while cheaper in the short run, may cost
Serbia more in its inability to attract investors and to compete with
neighbors who have already closed the door on their restitution
issues. End Comment.
BRUSH