The air navigation company, Albcontrol, is heading toward a financial collapse after the Court of Appeals in Brussels decided to freeze the accounts in favor of businessman Francesco Becchetti. Data secured by INA Media shows that out of the €71.8 million frozen so far, €67.3 million belongs to Albcontrol, and €4.3 million belongs to the Civil Aviation Authority. To conceal the failure, the state has assisted Albcontrol with €32 million through several concealed transactions in the form of loans. This has led to Albania de facto paying 30% of the €108 million bill for the lost case in international arbitration.
Ola Xama
On May 15th of this year, the Court of Appeals in Brussels decided to keep the accounts of the state-owned air navigation company, Albcontrol, frozen, pushing it into a difficult financial situation. After the Albanian government’s refusal to pay up €108 million, the Albanian state’s accounts have been blocked since 2020, in favor of the Italian businessman Francesco Becchetti, as a measure of enforcement against Albania’s assets. Becchetti has won the right to be compensated in the Hydro and others against Albania case, based on a decision issued by the International Centre for Settlement of Investment Disputes in 2019.
The hopes for a favorable court victory to release the funds that airlines deposit into its account near Eurocontrol were permanently extinguished a few weeks ago, as the government continues to refuse payment of the arbitration obligation.
“The Arbitration decision is based on the legal framework of the Convention and the bilateral agreement with Italy for the Protection of Foreign Investments. Later, the Albanian side sought annulment, correction, and review of the decision, referring to a criminal judgment where Francesco Becchetti was convicted. Under these circumstances, all the legal means provided by the Convention have been completely exhausted, and there are no other avenues to challenge the recognition of the decision. It is final and enforceable,” explains Ledina Mandija, former State Attorney.
Data secured by INA MEDIA shows that since November 2020 when the First Instance Court in Vienna ruled in favor of businessman Becchetti, allowing him to block Albania’s assets in European Union countries, and until June of this year, Albcontrol’s accounts have been blocked with €67.5 million, and an additional €4.3 million have been blocked from the Civil Aviation Authority accounts, which constitutes 66% of the bill that Albania must pay to the Italian businessman, not counting interest.
To survive, Albcontrol has borrowed a total of €32 million from three state agencies: the Port Authority of Durrës, the General Directorate of Road Transport Services, and the Civil Aviation Authority. Contacted by INA MEDIA, officials from Albcontrol did not respond to a request for comment. INA MEDIA also attempted to contact officials from the Ministry of Finance and Economy and the Ministry of Infrastructure and Energy, but comments were not obtained up to the time of publication of the article.
Albcontrol paralyzed
Albcontrol (formerly known as ANTA) is a state-owned public company under the ownership of the Ministry of Finance and Economy, established in 1992. Its main purpose is to provide air traffic control and signaling services, which are crucial for any country offering air travel and having airspace for flight routes.
As a state-owned enterprise, Albcontrol generates its own revenue, enabling it to make investments, pay its controllers, and carry out its functional duties. The highest portion of Albcontrol’s budget comes from the fees paid by airlines for the navigation service, which are divided into charges for aircraft takeoffs and landings and charges for flight overflights through Albanian airspace.
“The airspace is divided into 3-4 layers, and several layers in the Albanian airspace are managed by Albcontrol. If Albcontrol fails to perform this function, no aircraft will be able to pass through the airspace of the Republic of Albania,” says aviation expert Dritan Goxhaj.
In 2021, revenue from navigation services amounted to 27 million euros, but Albcontrol was only able to use 4.3 million euros, which were the fees for aircraft takeoffs and landings in Albanian territory. Another 22.8 million euros, paid by airlines near Eurocontrol (European Air Traffic Control Unit), which should then be transferred to Albcontrol’s account, were blocked following a decision by the Court of First Instance in Brussels, where Eurocontrol’s headquarters are located. The Court ruled in favor of businessman Francesco Becchetti’s lawyers to freeze Albcontrol’s bank accounts, considering the funds as assets owned by Albania.
“The company has faced liquidity difficulties due to the inability to use funds in its bank accounts abroad, affecting the normal course of its work. The company has reduced most of its expenses this year, trying to cover only the most necessary expenses for its operations,” states Albcontrol’s annual report for 2021.
Albcontrol’s revenue increased in 2022 due to the high influx of flights following the Covid-19 pandemic period, but again, 30 million euros were blocked, and only 4.4 million euros were collected from aircraft takeoffs and landings in Albanian territory. This amount seems insufficient to carry out normal navigation operations and constitutes only 13% of the revenue the company receives from air traffic control fees. Facing a challenging financial situation after a year where the pandemic resulted in a loss of 5.2 million euros, the situation did not change even after the surge in flights in the subsequent years.
During the year 2021, Albcontrol’s profits amounted to 5 million euros. However, despite the decision of the Minister of Finance and Economy, Delina Ibrahimaj, to allocate the funds to cover the losses, the operation could not be carried out due to the blocking of accounts in Brussels.
“The importance of Albcontrol begins with the selection of individuals on its board, who are prominent representatives of the highest level of the Albanian government. Given this importance in the context of the entire Civil Aviation, there was no reason for it to suffer the effects of an issue that is unrelated to this sector. This has forced the company to limit its future expansion in human resources and technology, which are rapidly evolving in this field, due to the lack of appropriate finances,” explains Eduart Gjokutaj.
The agencies, in a chain of debts
Facing a difficult situation and unable to meet its functions, the state-owned company receives assistance from several state agencies under the coordination of the Ministry of Infrastructure and Energy and the Ministry of Finance and Economy. Last year, Albcontrol borrowed 5.8 million euros from the Port Authority of Durrës, 4 million euros from the Directorate of Road Transport Services, and 18.8 million euros from the Civil Aviation Authority. Albcontrol also received another 4.5 million euros in debt from the Directorate of Road Transport Services for the first part of this year, accumulating a total of 33 million euros in liabilities.
“Albcontrol has lost its financial independence due to its debts to all these public entities, and its business plan now depends on the amount it can borrow. Although they are state-owned enterprises, each state company has its own balance sheet aimed at optimizing its objectives. Financial discipline has given way here, and this affects the financial performance of each one,” explains Eduart Gjokutaj, an expert from Altax Center.
The decision of the Court of Appeals in Brussels put an end to the hope of accessing the blocked funds, and now the company is facing demands for debt repayment. Albcontrol managed to pay only the loan taken from the Port Authority of Durrës. The Port Authority of Durrës itself was forced to terminate a 1 billion lek (9.4 million euros) investment with Credins Premium fund, where through operations, this investment portfolio provided loans to the Albanian state, earning 670,000 euros in two years. When authorities realized that the Port Authority of Durrës was not transferring the profits to the budget but using the earned money to give interest to the state, they ordered the investment to be terminated, and the fund was directed to help Albcontrol.
“In January 2022, the company withdrew all monetary assets invested in Credins Premium investment fund. In March 2022, the company entered into a loan agreement with a joint-stock company owned by the Ministry of Finance and Economy for an amount of 5 million euros with a repayment term by December 2022,” states the financial audit report of the Port Authority of Durrës for the year 2021.
“The Supreme State Audit is the institution that should oversee the implementation in these agencies, and these are serious violations of discipline by these public legal entities. This case describes how the entire system of public companies is managed. It should be analyzed and be part of the administrative investigations of parliamentary committees,” explains Gjokutaj.
In Albcontrol’s financial plan, it is foreseen that the loan of 8.5 million euros to the Directorate of Road Transport Services will be paid in two installments, 2.8 million euros during the third quarter of 2023, and the remaining part at the end of the year. At the end of the year, it is also expected to pay 18.8 million euros, which were borrowed from the Civil Aviation Authority, but these projections, according to experts, seem to remain on paper if the blocked funds are not released.
“The place of the performance of the obligation has found applicable law of the country where the obligation is performed. In this specific case, it is the state of Belgium. The funds have been found in Brussels, and they have contracted a Belgian enforcer, where enforcement actions are carried out according to the law there, and the funds can also be withdrawn based on the process provided by the Civil Procedure Code there,” explains Ledina Mandija.
A source close to Albcontrol, speaking on condition of anonymity, said that even though the company reported a net profit of 11.2 million euros in 2022, it is just a number on paper as the funds remain blocked. Under these circumstances, Albcontrol does not even consider making the payment for the profit to the Tax Directorate for 15% of the 2022 profit, an amount that, according to the company’s balance sheet, would be about 1.7 million euros. For the year 2023, financial tables secured by INA show that Albcontrol will not generate any profit on an accounting basis, despite the increase in the air traffic flow in Albanian airspace.
Civil Aviation experts consider the impairment of navigation operations due to liquidity shortages as risky and irresponsible, expressing indignation that budget support maneuvers were carried out secretly without providing clear signals to the public.
“So far, there have been no issues regarding the maintenance of equipment, radar purchases, or payment of air traffic controllers. These are essential for the safety of flights in Albanian airspace, but this company has completely deviated from its statute, which sanctions the use of funds solely for its needs. In reality, it has made investments, such as the one in Air Albania. There has been poor financial management,” says Goxhaj.
Financial experts are concerned that involving other agencies in a network of debts undermines financial discipline and may create problems for the core function of services they provide to citizens and businesses.
“A plan for scenarios to get out of this situation is needed. Accumulating such a high level of debt makes the company either dependent on the state’s rescue or leads to bankruptcy. Both scenarios can be prevented if the law on public finance management is implemented,” says Eduart Gjokutaj.
They point out that even though the government has not accepted to pay the Arbitration bill, the accumulation of debts and the effect on the state’s budget due to loans provided to Albcontrol, which were not transferred to the state budget, or the effect on state budget revenues through taxes that would have been paid by the company, effectively resulted in Albania paying 30% of the Arbitration bill.
“No one is happy about paying the Arbitration bill, but this has now become an economic issue and should be transparent. The public should be informed about how much of their taxes will be used to cover this fine,” adds Gjokutaj.
The government provides assistance through secret transfers
Ten days before the end of 2022, the Ministry of Infrastructure and Energy ordered the transfer of a sum worth 2 billion lekë (18.8 million euros) in the form of a grant from its accounts to the treasury of the Civil Aviation Authority. The letter for the transfer was signed on December 21, 2022, and the payment order from the Treasury was executed on December 27.
The concealed transaction aimed to send money to Albcontrol to rescue it from numerous bills and debts, but this is not legally allowed, as the state cannot inject capital into public companies unless it is done through a special law or aims to subsidize prices. To comply with legal obligations, it was decided that the transfer should be made to the Civil Aviation Authority, using it as a transit account, which would then send it as a loan to Albcontrol.
On December 29, the state budget was revised, and an approximate sum of 16.1 million euros was added to the budget of the Ministry of Infrastructure and Energy. According to financial statement documents from the Civil Aviation Authority, secured by INA MEDIA, it appears that the fund of 2 billion lekë (18.8 million euros) entered and left AAC’s account within a few days.
“We are dealing with a company that cannot be provided with capital injection, and there are clearly defined rules for giving money from the budget, either when it is on the verge of bankruptcy or when it faces operational difficulties. In fact, Albcontrol is suffering the consequences of decisions made by European authorities to settle the Arbitration bill,” explains Gjokutaj.
The Civil Aviation Authority itself is waiting for the release of accounts at Eurocontrol to collect the en-route cost fee, which is estimated to be 4.3 million euros for the years 2021, 2022, and 2023. The fee is collected by Albcontrol, which then transfers it to this agency. However, the fund blockade has led this institution to reconsider its plans on how to use these revenues or transfer them to the state budget, if they exceed the planned expenses.
“Even for this year, revenues from the en-route fee have not been taken into account because it is impossible to predict how long the fund blockade at Eurocontrol will last,” according to the economic program approved by the board of the Civil Aviation Authority.
“The Civil Aviation Authority is the authority that, based on the Air Code, should oversee Albcontrol and examine the expenses it has incurred over the years, its reserves, and how they have been used, rather than simply making assistance transfers,” explains aviation expert Dritan Goxhaj.
Interest and millions of euros in legal expenses
So far, Albania has incurred payments of 5.1 million euros for legal fees to defend itself against Francesco Becchetti’s claim. In 2019, Albania was ordered to compensate the businessman with 108 million euros, but the decision was appealed once again at the same court, ICSID. The second ruling also favored Becchetti, and the compensation amount remained unchanged at 108 million euros. Several other legal attempts were made to annul the decision, but they proved unsuccessful. Recently, the Prime Minister has acknowledged the obligations to be fulfilled with the taxpayers’ money and has even considered the possibility of withdrawing from the jurisdiction of the International Centre for Settlement of Investment Disputes (ICSID).
“We will face significant issues, starting from the next week, and we are even considering the possibility of completely withdrawing from the jurisdiction, as what has happened is scandalous,” said Prime Minister Rama in April of this year.
“In the published decisions, Albania is the only case with such a high financial bill in Investment Arbitration. The government’s reaction, stating that ‘we will withdraw from the Convention’, was incomprehensible because doubting the fairness of that tribunal is unfounded, given that Albania has been successful in other legal battles with this court. This is the largest loss, not only in Commercial Arbitration but also in Investment Arbitration, and it is the only case where Albania lost in Investment Arbitration,” says former State Advocate, Ledina Mandija.
She expresses that withdrawing from this jurisdiction will only worsen Albania’s situation and will not exempt the country from paying the fine.
“Even if we withdraw from the ICSID Convention, we are obliged to pay the 108 million euros fine for Becchetti, not only for him but also for all the cases currently registered and those that will continue to be adjudicated and will be binding for enforcement,” says former Attorney General of the State, Ledina Mandija.
Economic experts say that leaving this jurisdiction penalizes the country in the eyes of foreign investors and damages business climate indicators.
“Albania has entered the payment obligation, as it is no longer within its discretion. To my knowledge, Albania will be vulnerable to pay the obligations of five other European jurisdictions, where we have revenue generation due to the activities carried out by the Albanian state. Now, we must clearly state the relevant costs of this process, which should not be paid in this way but returned to the normality they once had and avoid this chain of debts,” concludes Eduart Gjokutaj.
Until now, the government’s position remains that the money will not be paid. Asked by INA MEDIA if there is a new stance regarding the fine payment or the progress of this issue, the Ministry of Finance and Economy refused to comment.
*Note: For all the values reflected in the article, an average exchange rate Euro/ALL has been used.
Ky shkrim është pjesë e projektit që mbështetet financiarisht nga Zyra e Mardhënieve me Publikun e Ambasadës së SH.B.A. në Tiranë. Opinionet, gjetjet, konkluzionet dhe rekomandimet e shprehura janë te autor-it/ve dhe nuk përfaqesojnë domosdoshmërisht ato të Departamentit të Shtetit. / This article is part of a project that is financially supported by the Public Relations Office of the US Embassy in Tirana. The opinions, findings, conclusions, and recommendations expressed are those of the author(s) and do not necessarily represent those of the Department of State.