VZCZCXYZ0002
RR RUEHWEB

DE RUEHBW #1144/01 2781417
ZNR UUUUU ZZH
R 051417Z OCT 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0273

UNCLAS BELGRADE 001144 
 
SENSITIVE 
SIPDIS 
DEPT FOR EUR/OHI - JOHN BECKER AND EUR/SCE 
AID FOR E&E/ECA 
 
E.O. 12958: N/A 
TAGS: ECON KIDE KPRV CASC EAID SR
SUBJECT: SERBIA: RESTITUTION LAW PROMISED BY YEAR END AMID GROWING 
FRUSTRATION 
 
REF: BELGRADE 996, AND OTHERS 
 
SUMMARY 
------- 
 
¶1.  (SBU) The Government of Serbia has promised that it will adopt a 
long-awaited restitution law for nationalized property by the end of 
the year.  In preparation, the Government hosted a conference, 
co-sponsored by the Council of Europe and European Commission, to 
review restitution laws and "lessons learned" in Croatia, Germany, 
Hungary, Latvia and Romania, as well as legal considerations from the 
perspective of the European Court of Human Rights.  The European 
Commission delegation in Serbia, presenters from other European 
countries, and restitution claimants stressed the need to resolve 
this long festering issue, a prerequisite for EU membership.  The 
GoS, which has failed to deliver on a promised restitution law in the 
past, needs to finally fulfill this obligation if it wishes to 
attract investment and move closer toward Europe. End Summary. 
 
SERBIA'S LONG ROAD TO RESTITUTION 
---------------------------------- 
 
¶2. (SBU) Serbia is one of the last remaining former East-bloc 
countries without a restitution law.  A restitution law is a 
prerequisite to EU membership, and uncertainty regarding property 
ownership rights has hampered foreign investment and economic growth. 
 Previous promises to adopt a restitution law were not fulfilled and 
existing legislation that touches on this issue, such as the law on 
Planning and Construction, the law on Reporting and Recording of 
Property Seized, the law on Property Restitution to Churches and 
Religious Communities, have been criticized for not addressing 
directly the restitution issue and for a lack of transparency 
(reftel). 
 
RESTITUTION CONFERENCE INCONCLUSIVE 
---------------------------------- 
 
¶3.  (U) On September 23, Serbia's Finance Ministry, the Council of 
Europe, and European Commission co-hosted a round table at which 
State Secretary Slobodan Ilic stated that political consensus for a 
restitution law had been reached, and promised the conference would 
be the first step in a transparent and open process based on the 
experiences of other European countries.  Ilic said the Ministry 
Working Group, together with Council of Europe experts, would develop 
a model by the end of October and submit a proposed law to the 
government by the end of the year.  Ilic offered his resignation if 
the GoS failed to pass by the end of 2009 a "balanced solution" that 
created "efficiencies" for the State, allowed Serbia to reach its 
economic potential, and did not create "new injustices". Note:  Ilic 
has talked of resigning over the last year for various reasons, and 
at one point may have actually submitted a resignation that was not 
accepted.  End Note. 
 
EU LOOKS FOR PROGRESS 
----------------------- 
 
¶3.  (U) Adriano Martins, Deputy Chief of the European Commission in 
Serbia, said that restitution and other property rights were an 
essential criterion for EU membership and expressed disappointment at 
Serbia's slow pace to resolve these issues.  Martins said the EC had 
encouraged Serbia in 2004 to address restitution issues, but to date 
progress had been restricted to the Law on Registration of 
Nationalized Property in 2005 and Law on Restitution of Property to 
Churches and Communities in 2006.  Martins said the continued 
privatization of nationalized property without a restitution law was 
problematic and encouraged the government to consider the mounting 
concerns of the former owners' associations and other interest groups 
on the current proposed solutions. 
 
EUROPEAN EXPERIENCE FOR SERBIA 
------------------------------ 
 
¶4.  (U) Experts from Croatia, Germany, Hungary, Latvia and Romania 
presented summaries of their restitution laws and experiences.  Some 
of these countries addressed restitution quite early in their 
post-communist eras, and others have tackled the issue more recently. 
 While the content of the laws and their historical circumstances 
differ, each presenter emphasized that addressing restitution as part 
of property rights reform, either together or prior to privatization, 
was an essential part of wider economic development in their 
countries.  They stressed the need for transparency and procedural 
safeguards regardless of the solution ultimately adopted, as well as 
the need to establish adequate institutional infrastructure to 
implement the law.  The Romanian representative cautioned of the 
dangers of altering the law midstream.  The German expert noted the 
danger of creating new self-perpetuating government institutions, and 
 
 
highlighted the German approach, which provided new responsibilities 
for those offices after several years. 
 
¶5. (U) Nadia Cuk, Deputy Special Representative for the Council of 
Europe in Serbia, spoke of the importance of restitution and property 
rights in the Human Rights Chapter and the EU Court of Human Rights. 
Katarina Nedeljkovic from the European Court of Human Rights said the 
Court viewed restitution claims through the context of human rights 
violations, including disruption of the peaceful disposal of private 
property, denial of access to the courts, or unduly long court 
procedures. 
 
UNIVERSALLY UNPOPULAR PROPOSALS 
------------------------------- 
 
¶6. (SBU) Various restitution claimants' organizations expressed 
growing frustration at the Government's continued delays, both in a 
small demonstration outside the building by the Restitution Network 
and in a session set aside for public comments.  These groups 
reiterated their long-standing demands for restitution in kind or 
with property of equal value and included Amcits Bogdan Veljkovic 
 
(Restitution Network) and George Ilic (Serbian League), and the 
Association of Jewish Municipalities in Serbia.  The claimants' 
groups openly criticized the government for dragging out the problem 
for years, and profiting by selling the nationalized property through 
privatization or grants of urban construction land through the 
recently approved Law on Spatial Planning and Construction leaving 
almost nothing for restitution in kind. 
 
¶7.  (SBU) The government's proposed solutions are also opposed by 
land developers.  On September 30, Dejan Racic, CEO of Delta Real 
Estate, told us that implementing a law on restitution was imperative 
to Serbia's economic growth, but that his company was considering a 
constitutional challenge to such a law on grounds there are 
insufficient protections for those who acquired land rights through 
privatization. 
 
COMMENT 
------- 
 
¶8.  (SBU) Serbia must resolve property restitution in order to join 
the EU, encourage private investment, clarify property rights, and 
strengthen the market economy.  Compared with other East-European 
countries where restitution and privatization served as part of 
broader economic reform tools early in their post-communist journeys, 
Serbia's options are more limited due to its own haphazard approach 
to economic reform.  Serbia has already privatized a significant 
portion of socially owned property and with the passage of the new 
construction law restitution in kind is unlikely.  The GoS has 
already calculated that the cost of litigating some cases would be 
less costly, and more politically palatable, than to return numerous 
properties in kind to claimants.  Despite Serbia's renewed promises 
to finally resolve this issue and our and EU continued pressure, we 
are doubtful that Serbia will find the political will - let alone the 
necessary funds - to pass a restitution scheme by the end of 2009. 
BRUSH