Finance Minister Aleksandar Damjanović informed the public at the beginning of the regular government session that the company North Star sent a notice of termination of the land lease agreement for the construction of the hotel Ritz Carlton (Marriott) in Luštica, the construction of which had been planned by the ruling family of Kuwait.
“Taking into account the aspects of the contract, we immediately formed a team and in mid-August gave a response, where we invited representatives and owners of North Star to look at what problems exist in the direct agreement, and ultimately try to find a solution in favor of the national interests, the interests of tourism and the interests of investors,” Damjanović said.
The company, he added, called in early September to discuss the issue outside Montenegro.
“A response was given in which the owners of North Star proposed to look at what the problems are and try to find a solution in favor of Montenegro’s interests,” the minister added.
Agreements on the lease of state land in Luštica
The consortium consisting of North Star and Equest Capital Limited Jersey paid just under four million euros to lease almost half a million square meters of state land in Luštica. The lease payment covers a period of 10 years, that is, until August 26, 2023.
In September 2009, the government signed a long-term land lease agreement with the consortium, with an obligation to build, develop and manage an exclusive tourist complex, which entered into force in August 2013, when a protocol on its legal validity was signed. The protocol was signed, but implementation of these investments has still not begun. In August 2013, the first annex to the agreement was signed, defining the investor’s obligation to invest 141.8 million euros in the first phase of the project over the next five years. The second annex, proposed in 2017, reduces the first-phase investment amount to 80 million, with a new five-year deadline, and it was stated that “the contracting parties have not fulfilled their obligations under the main agreement.” With the second annex, the government and the Municipality of Herceg Novi undertook to provide infrastructure (electricity, water and transport) at the site where the complex will be built.
The investor’s obligation from the annex is that the minimum investment commitments amount to 80 million euros for the first phase of the project and another 130 million after the minimum investment commitments are fulfilled, as well as to pay an advance lease payment of two million euros. The investor paid the lease for the first 10 years of the lease, that is, for the period until August 26, 2023, in accordance with the contract, in the amount of 3,934,211 euros. In addition, it paid funds based on the contractual penalty due for the delay in providing the performance guarantee in the amount of 82,857.14 euros. According to Annex II, the investor also paid an advance in two equal installments totaling two million euros. This became a prerequisite for the return of the previously submitted performance guarantee of one million euros by the project company.
In the second annex to the contract, the government and the Municipality of Herceg Novi undertook to provide general infrastructure and access to the project implementation site in accordance with the spatial planning documentation and the expressed needs of the investor no later than the planned date. It was also noted that any delay in the agreed deadlines for fulfilling the minimum investment obligations would be extended proportionally to the pace of construction of the infrastructure on site.
For the purpose of implementing the project, a coordination group was formed to carry out the obligations set out in the second annex, consisting of representatives of the Prime Minister’s Office, the Ministries of Tourism and Finance, the municipalities of Herceg Novi and Tivat, the state enterprise for managing Montenegro’s marine resources, Montenegro’s electricity transmission and distribution system (CGES, CEDIS), and Northstar.