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 
------- 
 
¶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