Koprivica: Null and void contracts must be eliminated from the legal system – a measure against corruption to protect public interest

These days, we are witnessing the culmination of damage to the state and its citizens due to controversial concession contracts for the construction of small hydropower plants (SHPs) in Montenegro, signed during the previous government. These contracts were created in favor of privileged individuals and to the detriment of the state, said Momo Koprivica, Deputy Prime Minister for the Political System, Justice and Anti-Corruption. 

He pointed out that, until now, these contracts have been analyzed from the perspectives of energy, ecology, spatial planning, and similar fields, but not from the perspective of anti-corruption regulations. 

Based on the anti-corruption analysis of the publicly and NGO-contested concession contract for the Bistrica SHP with the company BB Hidro, owned by the son of the former Prime Minister, it is concluded that the contract is illegal and absolutely null and void. Chronologically, the Ministry of Economy issued an energy permit to BB Hidro on 26 July 2016 for the construction of the Bistrica small hydropower plant, with a planned annual production of 3.154 GWh, to be built in the cadastral municipality of Lipovska Bistrica in the Municipality of Kolašin. The decision to award the concession for Bistrica SHP was made at a Cabinet session on 6 October 2016. Finally, the Government of Montenegro, led by then-Prime Minister Milo Đukanović, signed the concession contract with BB Hidro from Podgorica on 28 November 2016. The company's co-founder, co-owner, and executive director was his son, Blažo Đukanović, said Koprivica. 

He emphasized that the Law on the Prevention of Corruption, which came into force on 1 January 2016, explicitly states in Article 14, paragraph 3: "The authority in which the public official exercises public function shall not conclude a contract with the company or other legal person in which the public official and a person related to him have a private interest." 

In this case, the authority is the Government of Montenegro as the concession provider, and the public official exercising a public function within it is its prime minister, who represents and manages its work – at the time, this was Milo Đukanović. According to the Law on State Property and the Law on Concessions, the Government is the sole contracting party and concession provider, not the ministry, and this is explicitly stated in the contract. The law defines a related person as, among others, a direct relative of the public official – in this case, the Prime Minister’s son, Koprivica stated. 

He further explained that, under the law, a public official's private interest includes ownership and other material or non-material interests of the official or their related persons. 

In this case, it is the 50% ownership stake in BB Hidro held by the then-Prime Minister’s son – the company that signed the concession contract and is a contracting party, i.e., the concessionaire. The factual description fully corresponds to the mandatory provision of the Law on the Prevention of Corruption, showing that, in their relentless pursuit of profit, the actors fell into a legal trap and blatantly violated this imperative norm, which also exists in comparative law and is enshrined in the UN Convention Against Corruption, Koprivica stated. 

He further noted that Article 14, paragraph 4 of the Law prescribes: "If a public official or authority acts contrary to paragraphs 1, 2 and 3 of this Article, the provisions of the Law on Contracts and Torts relating to the nullity of contracts shall apply mutatis mutandis to the concluded contract."   

Therefore, due to the violation of the prohibition prescribed by an imperative norm, if an authority which the public official exercises public function concludes a contract with a company in which they or a related person have a private interest, the contract is considered null and void. The concession contract for the Bistrica SHP with the company owned by Đukanović’s son is null and void in its entirety and, as such, should not produce any legal effects. Null and void contracts, according to the Law on Contracts and Torts, are those contrary to mandatory regulations or societal morals. They must not remain valid, be legally enforceable, or produce any legal effect. Nullity is the most severe form of sanction for a grave violation of legality, a fundamental characteristic of the rule of law, and requires measures to exclude the legal act from the legal system and eliminate the legal consequences it has produced. In this case, it is not just about the procedural rule prohibiting participation in decision-making due to a conflict of interest, which the previously compromised leadership of the Agency for the Prevention of Corruption attempted to relativize. Instead, there has been a fundamental violation of Article 14 of the Law, leading to the contract’s nullity. This is a completely new aspect of this case, linked to the violation of conflict of interest regulations and corrupt practices, Koprivica explained. 

He also pointed out that, based on this null and void contract, numerous benefits were obtained, the most significant being the guaranteed purchase of every megawatt produced. The contract even stipulates that if it is more profitable for the company to sell electricity on the market, it can exit the contract, sell on the market, and later return to selling to the state.   

Today, I informed the Cabinet at its session about the legal aspects of the nullity of this contract, and tomorrow, this topic will be on the agenda of the National Council for the Fight Against Corruption during a thematic session on combating corruption in the exploitation of natural resources and environmental protection. Additionally, the competent judicial authorities will be informed, as courts must ex officio recognize nullity, while the State Prosecutor’s Office has the right under the Law on Contracts and Torts to request a ruling on nullity. The Protector of Property Interests and other relevant authorities will also be notified. By initiating legal proceedings, the process of establishing the contract’s nullity will begin. Null and void contracts must be eliminated from the legal system, and their consequences must be rectified. This is a measure to combat corruption and conflicts of interest to protect the public interest, the state budget, and public assets, Koprivica concluded.