Privatisation of national electricity distribution company (ČEZ Shperndarje)
More resultsIntroduction
In 2009, the Albanian government privatised the national electrical energy distribution company, but retained 24 per cent of the company’s shares. ČEZ, the Czech company that bought the remaining 76 per cent, was considered to be a strategic investor by the Albanian government. After privatisation, the company was renamed ČEZ Shperndarje.
- Country
- Albania
- Sector
- Energy and natural resources
- Offence
- Abuse of power
- Phase
- Prelim. investigation
Description of the case
In 2009, the Albanian government privatised the national electrical energy distribution company, but retained 24 per cent of the company’s shares. ČEZ, the Czech company that bought the remaining 76 per cent, was considered to be a strategic investor by the Albanian government. After privatisation, the company was renamed ČEZ Shperndarje.
Owing to mismanagement by ČEZ, the company incurred heavy financial losses whilst its investments in the distribution network were considered insufficient by the Energy Regulatory Authority, which decided to revoke ČEZ's licences to operate in January 2013. Subsequent to the Albanian authority’s revocation of ČEZ’s licences, the Czech company sued the Albanian government under UNCITRAL arbitration rules on 15 May 2013 (see here and here).
The government decided by a Decision of the Council of Ministers No. 969, dated 25 October 2013, to appoint a working group for the purpose of settling the dispute with ČEZ. The settlement agreement was signed by both parties on 23 June 2014 and ratified by the Albanian Assembly on 31 July 2014 (see here and here).
The Albanian Supreme State Audit Institution (SSAI) conducted an audit of the procedures followed by the Albanian negotiating team in the settlement, and it alleged that the team had failed to keep records of the negotiations and to safeguard the taxpayer's interest when it agreed to pay a settlement that was not justified by ČEZ's financial records. According to the SSAI, the then Minister for Infrastructure and Energy Damian Gjiknuri had failed to safeguard the interest of the Albanian taxpayers by accepting the costs presented by ČEZ as fact without scrutinising the loan agreements that the company in Albania had made with ČEZ in Prague and with Albanian banks (see here).
In addition to Minister Gjiknuri’s failure as chief negotiator to capitalise on the company’s managerial and financial failures and strengthen the negotiating position of the Albanian government, he had involved only six of the 14 negotiators mandated in the prime minister’s order to establish the negotiating team. On 14 October 2015, the SSAI filed charges with the Prosecutor General’s Office against Minister Gjiknuri (as chief negotiator) and the state advocate general (as a member of the negotiating team) alleging that the state had incurred financial damages of €479 million because of their actions or inactions.
The Prosecutor General's Office decided to close the investigation of the case in June 2016 arguing that the facts confirmed by the investigation did not amount to a crime under Articles 248 and 25 of the Albanian Penal Code (abuse of power in collaboration). The SSAI appealed the prosecution's decision to the High Court, which decided in favour of the prosecution.
Legal description of the case
The High Court decision was issued in October 2016 (see also here).
The charges filed by the SSAI concerned two main issues. First, while 14 public officials were part of the negotiating team as per Prime Minister's Order No. 228, dated 2 December 2013, only six took part in the negotiation meetings in direct violation of the order. Second, the Albanian government had agreed to include in the settlement agreement any costs incurred through loans given to ČEZ Albania by ČEZ A.S. in Prague, but not to include documents and financial data that would strengthen the negotiating position of the Albanian government.
The High Court decision accepts the prosecution's conclusions by citing procedural acts without providing a comprehensive analysis of the SSAI findings. The decision fails to explain either the prosecution’s legal reasoning for determining that the facts confirmed by the investigation did not amount to a crime, or the High Court’s basis for supporting the decision taken by the Prosecutor General's Office (see here and here).
Applicable corruption offence
Abuse of power in collaboration: favouring the Czech company ČEZ A.S., whilst failing to safeguard the interests of the Albanian state (see here)
Other laws breached
- Law No. 8480/1999 “on the functioning of collegial bodies of the state administration and public entities”
- Prime Minister's Order No. 228, dated 2 December 2013, “on the selection of the working group for the settlement of the dispute between the Republic of Albania and ČEZ A.S.” (see here)
Suspects' institutional affiliation
Ministry of Energy and Industry; State Advocate General
Date of offending
December 2013 to June 2014
Sector affected
Energy & natural resources
Related developments
The charges were perceived by Gjiknuri, now serving as Minister for Energy and Industry, as political and based on false pretences.
On 28 December 2015, Gjiknuri filed criminal charges alleging that the leadership of the energy and finance ministries in the previous government had failed to protect the public's interest whilst favouring ČEZ and thereby causing damages of €414 million.
The charges referred to the procedures followed in the privatisation of the company and in its renationalisation. The Ministry of Energy and Industry claimed that legal deadlines were not followed and that the company was privatised without a full inventory of its assets, while its renationalisation was done without a prior agreement with ČEZ A.S. in Prague (see here and here).
Court
The case did not reach court proceedings because it was closed by the Prosecutor General, but the decision to close the case was appealed to the High Court by the Supreme State Audit Institution. (For High Court Decision No. 20, dated 24 October 2016, see here).
Related domestic or foreign cases
The case has been closed without reaching court proceedings. The prosecution decided that the charges did not amount to criminal offences (see here).
Procedural history
The Albanian SSAI filed criminal charges against Minister for Energy and Industry Damian Gjiknuri and State Advocate General Alma Hicka on 14 October 2015. The Prosecutor General's Office transferred the file to the Tirana District Prosecutor’s Office. After the investigation, the Prosecutor General's Office decided on 6 June 2016 that the charges did not amount to criminal offenses thus closing the file. The decision to close the file was appealed by the SSAI in the High Court. On 24 October 2016, the High Court upheld the decision of the Prosecutor General's Office to close the file (see here).
Obstacles
The prosecution limited itself to the facts without any further investigation of the conduct of the negotiating team or of Gjiknuri as chief negotiator. Nor did the High Court hold the prosecution accountable for its failure (see High Court Decision No. 20, dated 24 October 2016).
Resolution of the case
N/A
Applicable minimum and maximum penalty
For abuse of power (Article 248 of the Albanian Criminal Code)
Minimum: Prison for six months
Maximum: prison for seven years
Charges pressed by the prosecutor in the actual case (including the penalties requested)
N/A
Sanctions imposed
N/A
Sanctions enforced
N/A
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