The process of reaching a settlement under the extraordinary administration procedure of Agrokor is one of the most complex in Croatia and in Europe due to the complexities of Agrokor as a business and the total amount of the debt as well as the large number of creditors, 5.700 of them. This section contains all the news on the process of reaching of a settlement for all the key stakeholders, as well as the latest details and developments.

Slovenia unfoundedly expropriates Agrokor d.d.’s private property by interim measure of seizure of Mercator d.d. shares

The Public Agency of the Republic of Slovenia for the Protection of Competition (Javna agencija Republike Slovenije za varstvo konkurence (AVK)) passed a decision on December 16th, 2019 whereby it has temporarily seized the shares of Mercator d.d. from Agrokor d.d. Unprecedented in the working practice of this Slovenian regulatory agency to date, this decision amounts to an expropriation of the private property of Agrokor d.d. by way of an interim seizure of Mercator shares, without any underlying court decision and with no valid legal justification.

The seizure is based on a disproportionate, non-final penalty in the amount of EUR 53.9 million, as well unprecedented in the practice of this regulator. This penalty, imposed by AVK in September 2019 in relation to a concentration case, has been appealed by Agrokor. The non-final penalty is clearly disproportionate since the company in question, Costella d.o.o., generates only slightly more than EUR 1 million in revenue yearly. This company was acquired by Ivica Todorić, ie. Agrokor AG from Switzerland, back in 2016.

The seizure of Mercator shares is in itself also largely disproportionate, since the shares in question have an appraised value of in excess of EUR 140 million, and the appealable penalty – that is being contested – is in the amount of EUR 53.9 million.

Moreover, according to AVK’s explanation, the interim measure of seizure of Mercator d.d. shares was passed pursuant to the Misdemeanor Act, in particular the provisions of that Act which in their essence apply to traffic offences or similar offences, which are discovered in flagranti, committed by foreign nationals – natural persons in the Republic of Slovenia.

Therefore, Agrokor considers this act of seizure of shares as a gross, intentional misapplication and misuse of law, committed by a state regulatory body that is supposed to enforce the national laws and whose head officers are appointed by the Parliament of Slovenia as the supreme legislative body of the country.

By way of background, the Misdemeanor Act which has been applied in this case to seize shares, essentially provides for the possibility of interim seizure of the driver’s license or car from a foreign national who was for example driving too fast, for as long as the fine is not paid, as there is a reasonable likelihood that the accused may escape, which would result in possible non-payment of the fine. The core pre-conditions that must be satisfied under the Act in order for a temporary seizure to be imposed, are that the infringer would either escape abroad or seek to hide himself. However, it goes without saying that neither of these pre-conditions can be fulfilled with respect to a validly existing foreign legal entity (given that such an entity can neither “run away” nor can it “hide itself”). In addition, the purpose of the law is to provide immediate protection. The written resolution has to be served on the infringer within 3 hours and the courts should decide on the appeal within 48 hours, whereas in the case at hand AVK waited for two months to seek temporary seizure, which in addition casts doubt on AVK’s intentions.

Although AVK has in its practice to date never seized any property from anyone as a means of security for a payment, let alone pursuant to the Misdemeanor Act, which has been in force since 2006, in the current case, by inadequately applying that law, it has now seized Agrokor d.d.’s 69.57 per cent share in Mercator d.d., allegedly as a means of security for paying the non-final penalty in the amount of EUR 53.9 million, against which Agrokor has sought court protection based on firm arguments.

By way of reminder, due to not having reported the concentration of the companies Agrokor AG and Ardeya Global Ltd., AVK passed a decision on September 24th, 2019 imposing a fine in the amount of EUR 53.9 million on Agrokor as legal person and EUR 5.000 for the accountable (natural) person. According to AVK’s explanation, by that concentration Agrokor acquired a 100 per cent share in the company that owns the Slovenian company Costella d.o.o. and was, pursuant to the Slovenian Competition Act, allegedly obliged to report the concentration within 30 days of signing of the takeover agreement. As such a report was not filed, on April 9th, 2019 AVK instituted proceedings to assess the concentration ex officio.

Agrokor has both publicly and directly explained that it considers this decision of the AVK to be completely unsubstantiated, since all decisions related to the above described acquisition were made and executed solely by Ivica Todorić alone, without the knowledge or participation of any other member of the then Management Board of Agrokor d.d. and thus the acquisition had nothing to do with Agrokor d.d., but with Agrokor AG from Switzerland, which has not been under control of Agrokor d.d., but was initially run solely by Mr. Todorić and since 2017 by an administrator/commissioner appointed by the Swiss court, who in October 2019 sent the concentration form to AVK on behalf of Agrokor AG.
Furthermore, the decision of AVK imposing the EUR 53.9 million fine is not final, as Agrokor filed a request for court protection against it, which was submitted to AVK on November 8th, 2019. But AVK has unexplainably not yet forwarded this request for court protection, filed by Agrokor, to the competent County Court of Ljubljana in order to allow the court to decide on the request for court protection and has instead by its own decision, without participation of the court, on December 16th, 2019 initiated the temporary seizure of Mercator d.d. shares owned by Agrokor d.d.

To put the disproportionality of the AVK ruling imposing a fine on Agrokor in the amount of EUR 53.9 million, as well as of the seizure of Mercator shares as alleged security for the collection of that fine into context, it is important to note that Costella d.o.o. is a company that globally generates only slightly more than EUR 1 million of revenue per year. This fact clearly indicates how disproportionate the magnitude of the fine imposed by the AVK is, let alone the seizure of Agrokor’s Mercator shares. It is also worthwhile mentioning that back in 2006, when the Misdemeanor Act was undergoing the Slovenian Parliamentary procedure, the Parliaments’ legislative and legal body expressly warned about the possibility that in some instances seizures under the law might be significantly disproportionate.

As regards the magnitude of the fine, by way of comparison, the European Commission fined Canon EUR 28 million for not having reported a concentration by which it acquired control of Toshiba Medical Systems and has previously in similar circumstances fined Electrabel EUR 20 million with respect to its acquisition of Compagnie Nationale du Rhône, where the acquired company had generated at least EUR 25 million in not less than three countries, otherwise the European Commission would not have been involved in the first place.

Historically, the AVK has never imposed a fine of more than several hundred thousand euros. In fact, its previous highest fine ever in the context of acquisitions and takeovers amounted to around EUR 150.000 (belated concentration report), while the fine for Pop TV in the amount of EUR 4.9 million was later declared null and void by the court in the judicial part of the misdemeanor procedure.

The above arguments, individually and collectively, clearly indicate that AVK’s ruling on the fine is unsubstantiated and the Extraordinary Administrator of Agrokor has to express serious concerns that the ruling has only been passed to serve as a means to expropriate Mercator shares.

The seizure of Agrokor’s Mercator shares was executed without any court decision, pursuant to a law that as a rule applies mostly to traffic offences. Such actions, irrespective of the final outcome, render Slovenia exceptionally insecure for foreign investors and call into question Slovenia’s commitment to compliance with Article 63 of the Treaty on the Functioning of the European Union, which ensures that the fundamental principle of European Union of the free movement of capital between EU Member States is respected, and certain provisions contained in the European Convention on Human Rights, including the protection of private property.

We have today informed the Embassies of all EU member states in Slovenia, as well as the US and Russian Embassies, given the origin of the key investors in Agrokor, of the aforesaid facts. The Extraordinary Administrator of Agrokor shall continue to protect the company’s property with all available legal means.