Procedure and Privatization in Kosovo:
A Critique and Assessment of the Special Chamber
By Edward Pauker
in one form has arrived in Kosovo and independence has been coming ever since
UNMIK began transferring some of its authority to local institutions of the
PISG (Provisional Institutions of Self-Government).
But with the calls for self-determination getting louder and louder, a
negotiated solution between Kosovo and
No matter the political result envisioned by a particular Contact Group member, there is consensus that Kosovo must be politically stable region or sovereign state. Political stability will not come overnight, and regardless of whether a solution is imposed or generated by final status negotiations, it will lack any hope of permanence if it is not accompanied by sustained economic growth as well. On this, the concern among the Contact Group, the internationals on the ground, and Kosovars is the same. Economic stability, if not prosperity, is critical to all their goals.
Foreign companies will invest in Kosovo only if there is reasonable political stability, as they will have little reason to believe that they can get any return on their investment if a state cannot manage to support itself. The problem is the same for local investors as well. If their government is unstable, forward-thinking Kosovars with capital to spend will not continue to invest in their own country purely for patriotic reasons. Like all other investors, they require a basic belief that they can at the very least break even. The alternative is political and economic instability, resulting in high unemployment, and dissatisfaction with the local government and the international presence. The problem is that alternative is the reality today in Kosovo. Something must be done to fix the current situation. For there to be any lasting peace in Kosovo, and for UNMIK to leave any desirable lasting impression, the attention of the international community must shift towards Kosovo’s many economic problems.
The Kosovo Trust Agency
June 13, 2002 provided a step in the right
direction. On that date, UNMIK established through Regulations No. 2002/12 and
2002/13 respectively, the Kosovo Trust Agency (KTA) and the Special Chamber of
the Supreme Court of Kosovo on Kosovo Trust Agency Related Matters (Special
The KTA, established as an independent body, was given the primary
responsibility “to administer Publicly-owned and Socially-owned Enterprises . .
. in the
The KTA administers these enterprises with the goal of freeing up as much money as possible for investment in the Kosovo economy. Privatization and liquidation are the two main mechanisms the KTA uses to accomplish its objectives, and when performing each, the KTA attempts to sell each business and each asset at the highest price. Liquidation proceedings have not yet started in earnest, but will be administered by individual liquidation committees. In liquidation proceedings, the KTA makes the decision to liquidate as if it were the management of the defunct company, and regional liquidation committees determine the merit and hierarchy of creditor claims regarding the assets of the bankrupt enterprise. The liquidation process has been stalled recently because of the liquidation committee members’ ill-founded fears of personal liability. With more assets up for grabs because of liquidation, the Special Chamber will be deluded with what has been described as a “tsunami” of claims. Furthermore, the KTA will soon begin reorganization proceedings for some of Kosovo’s larger enterprises, most notably Trepça, a mining and manufacturing conglomerate based in northern Kosovo. The Special Chamber issued a moratorium decision on the reorganization of Trepça, but it will be dealt with as the KTA completes its nomination of an Administrator. Liquidation and reorganization cases are coming, but the first four years of the KTA’s existence has been spent privatizing businesses that are already producing goods and employing workers. As such, the majority of the claims brought before the Special Chamber involve the KTA’s role in privatization.
The KTA privatizes businesses through primarily two types of proceedings, regular spin-off and special spin-off. Regular spin-offs comprise the majority of the KTA privatization process and involve small and medium size socially-owned enterprises. The enterprises undergo a rigorous screening process by the KTA. After the major economic, legal, and any political issues have been considered, the KTA announces the privatization to the public and through a formal tender process selects the new owner of the now-privatized enterprise. The privatization process begins when the KTA publishes a list of the enterprises being sold, including the name and location, area in square meters of each enterprise and its prior operational capabilities. To receive more information regarding any particular enterprise, or make a site visit, a potential bidder for the enterprise must sign a confidentiality agreement. All potential bidders must pre-qualify, allowing the KTA to screen for the candidates with a legitimate chance of winning the bid. Part of this screening process is a required deposit, from €10,000 to €100,000, which each potential bidder must transfer to the KTA’s accounts prior to submitting its bid. Bids are then collected with the one offering the highest price announced as the winning bidder.
Special spin-offs follow a similar procedure in terms of the announcement of the privatization, pre-qualification, and bid collection. What makes these spin-offs “special” is that they involve the selling off of the “crown jewels” of the Kosovo economy, such as prestigious hotels and successful factories. Generally, these enterprises employ hundreds of workers and are well-known throughout Kosovo. In order to qualify as a bidder for such enterprises, potential bidders must demonstrate substantial expertise in the relevant field of operations and pay a far higher deposit fee. Likewise, the bidding process for them is more competitive than it is for regular spin-offs. The KTA has identified more than 500 SOEs, and in the seventeen waves involving more than 300 enterprises, the KTA has only privatized fifteen enterprises by special spin-off.
Through privatization, the KTA hopes to transfer formerly socially owned enterprises to new management with the resources and incentives to for success and wider economic growth. When the KTA sells off these enterprises, whether by regular or special spin-off, the proceeds from the privatization tender are placed in trust. The proceeds of privatizing such enterprises are set aside to deal with any future creditor or ownership claims regarding privatization. As this paper makes clear, claims regarding privatization abound. Claimants file suit in the Special Chamber against the old socially-owned enterprises, the current owners of the newly privatized ones, and against the KTA itself. Whatever the result of such claims, by selling such businesses off at a high price, the KTA seeks to use such funds to compensate investors, creditors, and employees in the hope that such compensation will ultimately be reinserted into the Kosovo economy.
With a mandate to privatize and, implicitly, to modernize the Kosovo economy, the KTA had a substantial task in front of it. For many reasons, however, Kosovo’s economy has sputtered since the KTA’s inception. Despite the fact that the KTA is in its 17th wave of tenders, most locals and international economists posit that Kosovo is headed for a substantial depression in the next few years. Between the fits and starts of a complicated and politically charged privatization process, and the general growing pains of a burgeoning democracy and economy, there is blame enough to go around. Privatization has progressed too slowly and Kosovo’s economy and its stability are threatened along with it. This paper is an attempt to lay out a smoother road for privatization. Foremost, this paper concerns the work of the Special Chamber of the Supreme Court of Kosovo. The Special Chamber is the only judicial body overseeing the privatization process. The Special Chamber was established along with the KTA to aid and legitimize privatization in Kosovo, but its track record in that regard is mixed. Consolidating privatization claims in the Special Chamber is a necessary part of a successful privatization process. This paper offers an assessment and critique of the current state of one of the key institutions driving privatization. Such an assessment is overdue. The failure of the Special Chamber to function properly and adjudicate privatization claims threatens the economy and future stability of Kosovo itself.
The Special Chamber’s Power and Jurisdiction
critiquing the Special Chamber, it is necessary first to clarify its power and
jurisdiction, if only to mark the parameters and applicability of such
criticism. The Special Chamber comprises five judges, three internationals and
two judges that are residents of Kosovo.
Individual judges can hold preliminary and evidentiary hearings, but the full
panel is required to hear, deliberate, and sign off on each case.
The Special Chamber’s jurisdiction and its authority to resolve privatization
disputes are established by UNMIK regulations. The Special Chamber derives its
power from Regulation 2003/13. Promulgated by the Special Representative of the
Secretary-General (SRSG), the regulation in its preamble states that the
purpose for creating a new judicial body was “to adjudicate claims relating to
the decisions or actions of the Kosovo Trust Agency.”
Along with its authority to hear claims against the KTA itself, the Special
Chamber also has authority to hear claims in regard to decisions by subsidiary
parts or creations of the KTA, such as challenges to liquidation committee
claimants challenge the KTA’s decisions to privatize a business in the first
place (so-called illegal privatization cases) or the KTA’s selection of
bidders. Other claims relate to a KTA decision but do not, in general,
challenge its merit or the KTA’s authority to make such decisions. Challengers
in these actions simply ask for what they claim they are owed. They are the
alleged creditors, owners, and employees that will be discussed in greater
detail infra. The Chamber only has jurisdiction over persons and matters related to
KTA decisions, and pursuant to Section 5.1 of Regulation 2002/12, the KTA has
the authority to administer Enterprises and assets within the
UNMIK regulations are only so helpful in trying to understand how the decisions of the Special Chamber affect the privatization process. This paper proposes a more realistic approach, introducing the nature of the Special Chamber’s work and the problems of the privatization process through a description of the claims the Special Chamber hears. The first part of this paper introduces the typical claims that occur in the privatization process. It briefly explains the relevant actors and assets involved in each of these claims, and then discusses in greater detail the possible forums available to assert such claims. The second part of this paper lays out jurisdictional options for claims made regarding privatization, and suggests that such a range of possible forums will only inhibit Kosovo’s progress.
The focus of all privatization claims should remain concentrated in the Special Chamber. To accomplish this consolidation, the Special Chamber cannot assume that the various foreign courts which may be seized with jurisdiction will readily defer to the Special Chamber. The third part of this paper focuses on the problems presently confronting the Special Chamber. There are many, and they need to be resolved if the Special Chamber is going to function as an effective judicial body and receive the international support it needs. If the Special Chamber continues to operate in its current form, it may leave the privatization process encumbered, and Kosovo’s economy similarly endangered. Such a prospect is not a welcome one, nor is it a foregone conclusion. Some heavy lifting must be done however, if the Special Chamber is to reform itself to spur on the privatization process, rather than remain a hindrance to it.
To understand the challenges of the privatization process, it is critical to have a basic knowledge of the players involved and how the process moves from the KTA to the Special Chamber. In regard to this particular exercise, a description of some of the many claims brought before the Special Chamber illustrates the point. The Special Chamber enters the privatization process only after the decision to privatize a publicly-owned or socially-owned enterprise is made by the KTA. After such a decision, any individual or entity can bring a claim against the privatization to the Special Chamber.
Individuals and businesses may file claims with the Special Chamber against the former SOE and the KTA. Claims brought against a socially-owned enterprise not yet privatized are, more often than not, referred by the Special Chamber to municipal courts in Kosovo or to the Economic District Court in Pristina. When a claim is filed against a newly privatized company, however, the KTA is joined as a co-respondent, and the Special Chamber then proceeds to hear the case. The types of claims most frequently brought against the KTA’s decision to privatize are those by private corporations or individuals who assert that the KTA took their private property. Most often, the claimants in these cases are alleging that they are creditors, owners, or former employees of the privatized enterprise, and are suing for the collection of unpaid debts, unpaid wages, pension benefits, and secured assets. The Special Chamber is flooded with creditor and ownership claims over assets of the enterprise or the enterprise itself whether the claimant is Serb or Albanian. These creditor claimants make up the bulk of the Chamber’s docket, are frequently referred to lower municipal courts, and more often than not, do not involve complicated policy issues.
second category of claimants includes the alleged owners or shareholders of the
newly privatized entity. The claimants in this category are primarily individuals
of Serbian descent, displaced during the 1998-1999 war, the reprisals, or because
of the economic effects of the volatile post-war period. Typically these
claimants reside in
Illegal privatization claims require a detailed understanding of Kosovo’s recent political history. Such transformations, occurring most often in the 1990s, from SOE to joint-stock company or another form of private business, were performed pursuant to a series of laws that stripped Albanians of their rights in the enterprises they had managed and at which they had worked for their entire lives. These laws, known as “interim measures,” looked non-discriminatory on their face, but were used to eliminate socially-owned enterprises, restructure boards of directors, all in favor of promoting Serbian rights over those of Albanians. When determining which entities are privately or socially owned, the KTA takes such relevant political and legal background into account. If a socially-owned enterprise was transformed pursuant to interim measures laws, with the result being one of discrimination, then the KTA retains the authority to administer such an entity, whatever its formal designation.
The KTA thus has authority to administer not only Publicly-owned and Socially-owned Enterprises, but also such Enterprises as had been privatized earlier, but in a discriminatory manner. Because the transformation was legally invalid under the UNMIK regulation, the enterprise reverts back to its previous status as an SOE. It is the invalidation of the earlier privatization under Interim Measures that the alleged Serbian owners are challenging in illegal privatization claims. In their submissions to the Special Chamber, complainants state that the enterprise in question was validly privatized under the law in effect at the time and also in a non-discriminatory manner according to current UNMIK regulations. Despite the frequency of such claims, the Special Chamber has yet to find in favor of such a claimant.
The final categories of claimants that are frequently before the Special Chamber are alleged former employees of socially-owned Enterprises who claim they should be on the list of employees entitled to proceeds from the privatization. These employee list cases deserve further discussion because of their growing frequency, the number of communities directly affected by the Chamber’s eventual decisions, and their increasing political importance. For as each employee-list case passes, and each time the KTA publishes in a Serb newspaper a list comprised solely of Albanians, the privatization process receives more and more attention in the final status negotiations.
Section 10 of UNMIK Regulation 2003/13, as amended by UNMIK Regulation 2004/45, recognizes the “special status” of employees of Socially-Owned Enterprises and the impact that privatization has on their status. As employees of socially-owned enterprises, individuals were not only compensated by being on the payroll, but were also provided with share of the enterprise’s profits, housing, health care, pensions, and other social services. Such benefits were a reward for the proletariat that the newly imposed capitalist system attempts weeded out. UNMIK Regulation 2003/13 now recognizes the importance of the employees in pre-1999 Kosovo, and the amendment is a nod to the fact such communist ideology lingers. In short, both Albanians and Serbs alike believe that compensating former employees for their services is a necessary and just part of the privatization process.
Regulation 2003/13, as amended, provides for these
employees, subject to their meeting certain conditions, a 20% share of the
proceeds from privatization.
Thus, when the KTA decides to privatize an
In order to be eligible for a share of the 20%, a claimant must have been employed with the enterprise at the date of privatization and have been on the payroll of the enterprise for not less than three years. If a claimant demonstrates that he or she had been discriminated against, however, and fails to meet the requirements because of such discrimination, such an employee is eligible as well. When an enterprise is privatized, anywhere from 10 to 400 employees file claims with the Special Chamber, stating that they were employees of the enterprise and would have met the requirements for their 20% share had they not been discriminated against. The Special Chamber must analyze each of these claims, thus creating literally hundreds of employment discrimination cases out of one privatization decision. The task of the Special Chamber in regard to these employee list cases is monumental, but the required factual analysis does not eliminate the need for the Chamber to resolve these claims more swiftly. To do so, it must work together with the KTA.
The substance of these discrimination claims takes the Chamber back through the past fifteen to twenty years of Kosovo’s tumultuous political history. Many of the claimants in employee list cases are Serbs. They claim that after the NATO bombing campaign of 1999, either the newly-empowered Albanian directors of an enterprise refused to rehire any Serbian workers, or, that the political situation in the region made it too dangerous for Serbian employees even to attempt to make it to the factory door.
Albanians also comprise a substantial number of
the complainants involved. In general, Albanians claimants in employee-list
cases allege that they were forced to leave the enterprise, and most likely the
region, because the Interim Measures laws discriminated against them and made
life and work under the Milosevic regime too difficult to endure. Often they
The KTA, as the respondent for such claims, provides minimal substantive material in its defense. KTA frequently makes specific factual investigation into any of the claims, and for each, the KTA merely states that the claimant has not fulfilled its burden of proof. The KTA’s defense often includes an admission that it did not review the list submitted by the trade union, and at times only includes a historical account of the region and the effect of interim measures laws on the municipality where the enterprise in question operated. The Albanians respond to Serbian claimants at the hearing before the Special Chamber, usually through one of the directors of the enterprise who drew up the base employee list. The director usually states that there was no direct discrimination against Serbs, that the company is not responsible for a tenuous security situation, or finally, that Albanians had suffered just as the Serbs were doing now.
More than anything, employee-list cases have created a public awareness regarding privatization, whereby Serbs feel as if they are being disenfranchised, and Albanians continue to fight for their own personal foothold in Kosovo’s new economy. Whoever the claimant, whether a creditor, owner or employee, the Special Chamber is tasked with unravelling a mountain of claims, counterclaims and accusations, in which the facts are shrouded by hatred, greed, and unfortunately, advocacy that is, at its best, mediocre. Knowing the types of claimants in the cases before the Chamber is vital if one is to understand the wide-ranging effects of the privatization process. The KTA’s decisions and the Special Chamber’s review of them affect Serbs and Albanians in the Balkans and around the world. The KTA and the Chamber’s failure to deal with these cases fairly and efficiently will continue to impact privatization negatively if both institutions continue to shirk responsibility. The consciousness created by privatization claims and the corresponding politicization of them may ultimately cause individuals to feel more harmed than helped by privatization, and some claimants, most likely Serbs, may seek justice elsewhere.
The Assets – The Jurisdictional Dilemma Explained
After introducing the specific claimants in privatization cases, it is now necessary to provide a basic knowledge of what exactly the involved parties are after. The assets sought by the claimants are almost always physically located within Kosovo. Many of the claims made by Albanians are for immovable industrial and manufacturing equipment or other chattels and assets associated therewith. The Albanian claimants usually seek the return of real and immovable personal property, in the hope that they will continue their work in whatever industry they had been involved in earlier. Serbian claimants more frequently file claims regarding liquid assets, ones that may be currently in Kosovo or controlled by the PISG or UNMIK, in the hope that they could be transferred to Belgrade or elsewhere.
of the claimants involved in privatization, liquidation, reorganization,
illegal privatization cases and employee-list cases are located within Kosovo. But
compared to the relevant claimants, the assets involved are not so
concentrated. A claimant could easily file a claim seeking assets not located
within Kosovo’s provisional borders. One of these claimant may be an individual,
just as likely Albanian as Serbian, who asserts a claim for his or her pension.
These claimants may contend that their employment with a publicly-owned or socially-owned
enterprise was terminated because of discrimination, war, and, more recently,
privatization. They would file claims regarding privatization, seeking a
judgment enforceable against the money administered by the enterprise that
employed them and promised them in their pensions. The claimants in such cases may
be scattered across Europe and the
Capital pays little attention to national borders, and where and with whom enterprises and governments invested their employees’ pensions is uncertain. Therefore, consolidating claims regarding such assets is not a foregone conclusion. Claimants who do not want to bring suit against the KTA in the Special Chamber in Kosovo may be able to do so in other jurisdictions. An aggrieved former employee could successfully sue in another tribunal other than the Special Chamber. What follows is a brief description of exactly how this happens.
A U.S. bank that accepts the investment of Serbian pension funds could be sued in the court of the jurisdiction in which they are headquartered. Thus, if a Serbian company invested some of the pensions of its employees with Citibank, with its corporate headquarters in midtown Manhattan and its investment transactions executed on Wall Street, it is possible that a Serbian employee would choose to bring its claim for the funds due its in state or federal court in New York. This potential Serbian claimant would claim that the court had in rem jurisdiction over the assets managed in its jurisdiction, and would submit that by taking the claimant’s private property, the KTA violated its right to its pension assets. The claimant would then have to establish its right to such assets, and that the KTA stripped such assets when it decided that the employing enterprise had been illegally transformed pursuant to interim measures. The claimant would thus be challenging the power of the KTA to privatize the business which had employed him, essentially bringing an illegal privatization claim in New York instead of in Pristina. If the claimant received a judgment in its favor, it could execute a writ of garnishment against the assets within the court’s jurisdiction. If there are assets within a court’s jurisdiction, then foreign claimants would quite clearly be able to file a successful claim against privatization in a court outside of Kosovo. Such claims are not just hypothetical. They are real, and pose a threat to the international community’s goals in Kosovo.
successful, claimants in foreign courts could bring a halt to privatization in
Kosovo. Even if foreign claimants are ultimately unsuccessful, however, the
litigation and the corresponding uncertainty would do serious damage to the
privatization process. With the long arm of investment, these claims could be
Claim Consolidation - Forum Non Conveniens
Privatization simply must be managed in a way that provides assurances to current owners and possible investors that a claimant in a foreign court will not seize their work and their money. But foreign courts are influenced by foreign interests, and not necessarily those with Kosovo’s future in mind. The scattering of claims relating to privatization around the globe is a real threat, and it is therefore imperative to understand how foreign courts can avoid undermining nationbuilding and economic development in Kosovo when such litigation develops. Part of the solution lies within the legal framework and the political realities that allows and encourages foreign courts to dismiss these privatization claims. Of even greater importance, however, is demonstrating to foreign courts that the legal framework already established in Kosovo to resolve privatization disputes is a viable and fair one for all.
courts in the
threshold question is easily answered. The Special Chamber is an alternative
forum to hear all claims arising out of privatization in Kosovo. The Chamber clearly has adjudicatory power over claims
challenging or relating to actions of the KTA.
The private factors also weigh in favour of the Special Chamber hearing the
suit in lieu of a
Public factors again push for a dismissal based on forum non conveniens. A district court
Conversely, the Special Chamber’s unique mission and
authority provides it with expertise on privatization cases in general and knowledge
of the particularities of the conflict in Kosovo that transcend each case and
the story of each claimant. The Chamber sits in Pristina, and is staffed by
international and local staff fluent in the relevant languages used in court
proceedings. It is centrally located amid the assets in question, and close to
the likely claimants, respondents and witnesses that sit before it. Moreover,
there is an obvious local interest in trying the cases in Kosovo. The ease and
common sense of adjudicating decisions of the KTA in a court located in the
Kosovo capital makes it apparent that the Special Chamber is, at the very
least, an appropriate alternative forum. Based on the N.Y. court’s lack of
familiarity with the subject matter and the administrative difficulties of
trying the case there, a forum non
conveniens dismissal is a feasible way to consolidate claims originally
brought in the
More than likely however, a foreign court will not give effect to the decisions of the Special Chamber based solely on the application of legal theory, but based on the foreign court’s more nebulous confidence in the judicial process in Kosovo. A foreign court most likely will not weigh each and every public, private, and local interest, but will instead consider, as a whole, whether the Special Chamber presents a viable alternative forum for hearing the claim. Such a court’s concern regarding the effectiveness of the Special Chamber is well-placed unfortunately, and this concern potentially jeopardizes consolidation of privatization claims by the application of forum non conveniens alone.
Claim Consolidation - Standing
second basis for a court in the
A claimant’s ability to fulfil the second requirement of causation is at times less obvious. The link between the challenged KTA decision and the harm suffered is clear when the claimant directly complains of a harm perpetrated by the KTA during the privatization process. This is the case with illegal privatization claims, when a claimant is challenging the KTA’s specific determination that its property had not been privatized earlier in a non-discriminatory manner. Causation is clear when, for example, a Serbian individual had been managing a private company for ten years in the 1990s, only to have the KTA strip him of his title and his assets, asserting that the sale of the company to him was a product of a discriminatory law promulgated during the interim measures period. Quite simply, the KTA made a decision as to what it could privatize, and an individual suffered.
causal connection is more tenuous in employee list cases. In such cases,
claimants allege that discrimination caused their failure to appear on the
Redressability is the third constitutional
Forum non conveniens and standing are two of the legal mechanisms that a
Consolidating Claims outside the
methods discussed supra, by which a
court in the
The closest analogue to forum non conveniens dismissal in civil-law countries is the doctrine of lis pendens. Lis pendens provides that a court may stay an action brought before it if a similar action based on the same facts is pending in the court of another country. Ostensibly, this would apply to suits pending before the Special Chamber. Unfortunately, the helpfulness of lis pendens as a means to consolidate claims in the Special Chamber is limited. The doctrine is only applicable if a claimant brings the same action in a German court as is already pending before the Special Chamber. If the same claimant were to sue first in a German court, or if the action were to be different somehow, then strict jurisdictional rules would apply, lis pendens would be unavailable, and the German court would be forced to hear the claim.
solely on the strict jurisdictional rules of the continental courts does not
provide the level of claim consolidation in the Special Chamber that Kosovo
needs to further its economy. Similarly, the discretion of an individual court
Immunity under Conventional International Law
The power of a court, whether based in Frankfurt or New York, to award compensation for a claim or undo a decision of the KTA may be limited by the immunity of the UN and its subsidiary organs under conventional and customary international law. The Convention on Privileges and Immunities of the United Nations provides the UN with almost complete immunity. This Convention also applies to officers and subsidiary organs of the United Nations, and therefore should include both the full scope of UNMIK activities and the laws enacted by the SRSG. Similarly, UNMIK Regulation 2000/47 states that all UNMIK property, funds, and assets “shall be immune from any legal process.” Foreign courts would most likely be far less willing to address privatization claims if doing so involves breaching a convention to which their country is a signatory or if it violates the rules of customary international law. A foreign court would not want to violate an international convention, nor would it want the decisions of their country’s own government litigated abroad.
the KTA was established in UNMIK Regulation 2002/12, however, it was
purposefully excluded from such immunity. The KTA was set up by the UN as an
independent body and given “juridicial personality,” allowing it to file suit
and be sued in return.
The KTA was not established on its own however. The companion legislation establishing
the Special Chamber and giving it primary jurisdiction over challenges to KTA
decisions made clear that the UN sought to concentrate all claims against the
KTA in one competent court.
The UN did not abrogate the immunity assumed by its subsidiary organs when it
created the KTA. The nature of the UNMIK regulations demonstrates that the UN
simply established the KTA as an independent body to lead privatization in
Kosovo and waived immunity for such a body only in regard to the Special
Chamber. Thus, when the KTA is sued in the
Immunity under the FSIA and Customary Law
provides that a “foreign state” is immune from the jurisdiction of
Unfortunately, the actions of an independent privatization agency set up by a sovereign government fall somewhere in the middle. Whether the KTA’s actions are covered by FSIA and international customary law or are part of the commercial activities exception depends on what perspective a court takes. Each suit regarding privatization focuses on the actions that gave rise to the claimed injury, and most claims against the KTA concern private individuals and commerce. According to this more narrow view, the KTA is involved in private contracts, selling companies to the highest bidder, and indeed almost all of its activities that are commercial in nature.
A broader perspective, however, leads to a different conclusion. Each claim should be viewed in context of how the alleged injury occurred, and the existing framework regarding suits against the KTA is the privatization process. Privatization is “an action that could only be taken by a foreign sovereign,” and as a whole should fall outside the commercial activities exception of FSIA. The KTA’s responsibilities simply do not correspond to those of a private individual engaged in a commercial transaction. At least in theory, the KTA has no self-interest in regard to the enterprises it decides to privatize, nor any profit motive other than freeing up as much money as possible for the Kosovo economy. Thus, while it is true that the KTA will sell an enterprise to the highest or most qualified bidder, its motivation in concluding such a contract is the same as a sovereign government. Even though it is independent from UNMIK, the KTA continues to function as part of the governmental structure currently running Kosovo. Thus, whether or not it is a de jure part of the government of Kosovo, the KTA was envisioned as, founded with a similar purpose, and continues to operate as a de facto part of the government of Kosovo. Courts should consider privatization claims in full context of the UNMIK’s and the KTA’s authority and objectives, and claims regarding KTA decisions should therefore be dismissed as they fall outside the commercial activities exception of both FSIA and international customary law.
The Act of State Doctrine
a court in the
Political Realities and Confidence in the Rule of Law in Kosovo
preceding sections of this paper explore mechanisms by which foreign courts
could defer hearing claims regarding privatization efforts in Kosovo. The hope
is that all such claims could be handled by the Special Chamber, creating a
stable legal framework for privatization, thereby encouraging investment in
Kosovo and improving Kosovo’s economic and political chances. Whatever the legal
methods for consolidating claims brought before courts in the
best chance for consolidating claims within the Special Chamber lies within the
Special Chamber itself. Although there are many paths to consolidating claims, above
all else, it is imperative that the governments and courts of the
Currently though, there are many problems with the institutions driving privatization, including the Special Chamber. Though not insurmountable, they continue to cast a shadow over privatization and will inhibit Kosovo’s growth as long as they remain. Many of the available targets for criticism are not the result of the failures of the Special Chamber per se, but the Special Chamber was established to ensure that the privatization was done properly and in compliance with international legal standards. The Special Chamber is therefore the body relied upon by international courts and indeed by each claimant and respondent as the arbiter of what is right and what is wrong with Kosovo’s privatization efforts. If the Special Chamber fails to act as a proper judicial body or is perceived to not be one, then claimants and courts will simply look elsewhere. That uncertainly is something Kosovo cannot afford.
Standards Applicable to the Special Chamber
The Special Chamber must at the very least provide a forum for resolving claims that complies with basic judicial standards. The applicable law in Kosovo regarding such standards is laid out in UNMIK Regulation 1999/24. That regulation makes the European Convention on Human Rights (ECHR) part of the substantive human rights law in Kosovo, and all public acts and officials must comply with the standards it sets forth. In addition, the Special Chamber looks to Article One of Protocol One of the ECHR when reviewing the decisions of the KTA. The ECHR should be applied to the Special Chamber as well. Article 6 of the ECHR states that “everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal.” The Special Chamber is susceptible to a human rights challenge based on all counts.
A Reasonable Time
Concerns regarding the efficiency of the Special Chamber may be the easiest to resolve. For its small staff and the task with which it is charged, the Special Chamber tries its best to move efficiently through each of the many claims it hears. In 2005, the Special Chamber resolved approximately 22 cases a month. The majority of these cases are referred to lower municipal courts. Thus while the Chamber may superficially appear to be efficient, there are still important claims, some from 2003, that the Chamber still has not resolved by August 2006. The reason that many of the cases languish for so long before the Chamber is not because the Chamber belabours each and every fact. Most often, the parties fail to submit enough evidence to support their claim, or the facts presented are so utterly complex that the Special Chamber spends most of its time doing work more properly suited to the parties’ attorneys. In employee-list cases in particular, the lead complainants often represent themselves, and the Chamber gives such claimants greater latitude than it would a professional attorney. The Chamber tries not to so strictly impose rule of law when claims of discrimination merit more than a rote application of the procedural guidelines. The Chamber acts in such a way, and in keeping with the civil law’s tradition of a more active judiciary, because of the poor state of legal representation in Kosovo.
Though claimants are frustrated with the speed at which the Special Chamber moves, they appreciate their compensation whenever it comes. The KTA, on the other hand, is not concerned about which claimant receives compensation in the Chamber’s judgment. Of greater concern to the KTA is that the Chamber process claims more quickly in order to get privatization off and running. When a creditor of a SOE or the allegedly rightful owner sues the KTA or the SOE, the KTA does not halt privatization proceedings. Privatization can and does proceed in those cases, but the stress and consternation of a pending case hangs heavily on the KTA and the new owners of privatized enterprise each time a claim is filed and each day it sits in the Chamber’s docket. Moreover, when a claimant requests a preliminary injunction freezing the tender of an enterprise, the KTA will actually halt all privatization proceedings regarding the enterprise. The problem, however, is that requests for injunctions languish as long as some cases, freezing privatization and frustrating the KTA’s effort to create an economically successful Kosovo. The KTA and a healthy privatization process require that the Chamber process all such claims more effectively, and the KTA seems to have gotten its wish.
UNMIK and its EU partners have put forth a plan to expand the Special Chamber in the hope that it will resolve the Chamber’s inability to resolve claims efficiently. It will hopefully be accepted and implemented in a matter of months. In the proposal, the current five-member Special Chamber will function as an appellate level review panel. Beneath it will be five three-judge panels, each covering a distinct type of privatization claims. Though subject to change based on the types and number of cases that it hears, one panel will hear claims regarding the following five subjects: creditor claims against socially-owned enterprises; illegal privatization claims against the KTA; employee-list claims; claims regarding liquidation decisions made by the KTA; and finally, claims involving reorganization. To ensure at least the appearance of impartiality, each panel will comprise a majority of two international judges and one resident judge. With proper staffing, an expanded Special Chamber could process more claims than before, and would hopefully put many of the concerns regarding timeliness to rest.
More important, however, is that the Special Chamber, in its present or enlarged form, actually begin to make policy decisions. Of the 22 Special Chamber decisions each month, most do not set down specific policies that can function as precedent. More often than not, they deal with a claim of a specific creditor or simply involve a decision to refer the claim to another court. Clearly, the Special Chamber must continue to wade through such submissions, but it also needs to produce decisions regarding illegal privatization claims, employee-list claims, and liquidation and reorganization decisions which will serve as precedent for future claims. There are a series of test cases currently before the Chamber regarding such important policy matters, and the Special Chamber should resolve them as quickly as possible. They will act as signpost for future KTA decisions, will ease the workload of the Special Chamber in the future, and will speed up the privatization process and better ensure that it comports with basic human rights standards.
The Chamber’s Power to Determine Civil Rights
Of all the test cases before it, the Chamber has studiously avoiding dealing with the claims regarding illegal privatization. According to the ECHR, one’s right to a fair trial must involve a judicial “determination of [an individual’s] civil rights.” Among these rights is the “peaceful enjoyment of one’s possession” as defined in Protocol One. Couched in language denouncing both the Chamber and UNMIK in general, claimants frequently challenge the Special Chamber’s power to determine one’s right to property and to give effect to its decisions. The Chamber usually disregards these naked challenges to its authority more based more on politics than law. Claims regarding illegal privatization, however, allege that the KTA administered property that had already been privatized at an earlier date, violating, depending on the claim, the Universal Declaration for Human Rights, Article 1 Protocol 1 of the Convention for the Protection of Human Rights and Fundamental Freedoms (the European Convention), and various parts of local law. Based on Section 5.3 of UNMIK Regulation 2002/12, if a claimant successfully proves that the property was transferred to them in a non-discriminatory manner, then the property was not the KTA’s to administer, and Chamber should provide a remedy in the claimant’s favour.
The relevant language regarding this issue is Section 10.5 of Regulation 2002/13. It states that “[n]o party shall be entitled to a remedy that would require the rescission of a transaction or nullification of a contracted entered into by the Agency pursuant to its Authority under UNMIK Regulation No.2002/12.” The Special Chamber has debated whether this allows the Chamber even to address the issues raised in illegal privatization cases. In essence, such a claimant submits that the KTA administered and privatized the relevant enterprise ultra vires, and requests that the Chamber undo the KTA’s sale to the winning bidder, and restore the property to its rightful owner. At present the Chamber has yet to decide one of these cases directly on such grounds, and therefore has not been forced to address the issue. It is this author’s contention that the relevant section prohibits the Chamber from rescinding any contract that the KTA had the authority to make. The Chamber cannot second-guess the business acumen of the Agency. The threshold question, however, is whether the KTA had the authority to privatize a particular business in the first place. If the Chamber decides that initial issue in the negative, then the only remedy for an illegal privatization claim would be for the Chamber to award damages for the unlawful taking of such property. The Chamber feels, however, that limiting itself to issuing only compensatory damages in this regard may leave itself open to a challenge based on the ECHR. For claimants in illegal privatization cases, returning their property is the ultimate goal, and if the Chamber is unable to so, then it may not properly be able to determine their civil rights.
As the Special Chamber weighs its options, the local pressure in favor of privatization grows greater. The Chamber is concerned about overturning the actions of the KTA, and the possible negative public reaction that such a decision would have. Whether this cautious approach is sensible, the product of good political foresight, or coincides with the Special Chamber’s implied task of imposing rule of law is not the role of this author. What such an issue does illuminate, however, is the inextricable link between on-the-ground politics in Kosovo and the burgeoning legal system imposed by UNMIK.
It is not politically feasible for the Special Chamber to begin undoing privatization. The international and more importantly, the local community, would simply not allow it. A human rights challenge regarding illegal privatization would likely be unsuccessful at any rate. For the most part, these challenges are political jabs at the international community and UNMIK. Whatever the Special Chamber decides regarding its power to issue relief in such cases, it still retains the power to award monetary damages. With the financial resources available in KTA accounts, the available relief that the Special Chamber could issue is no chestnut. Even in regard to illegal privatization claims, the size of the KTA’s coffers may enable the Special Chamber to provide adequate relief. After all, illegal privatization claims are commercial in nature, and the Special Chamber could issue a monetary remedy. Thus, because of the funds at its disposal, a challenge to the Special Chamber’s ability to determine one’s civil rights would most likely be unsuccessful.
That said, the Chamber can no longer afford to be hamstrung by this issue. Its insecurity regarding illegal privatization claims and the scope of its own authority makes the Chamber appear to be more ineffective at resolving claims than it actually is. That need not be the case. The Chamber must process illegal privatization claims quickly, and more importantly, make the difficult policy judgments regarding its own authority that the resolution of such claims require. At this point, any decision by the Chamber, regardless of the success of a possible human rights challenge, would be better than the present stalled state of affairs.
Fairness, Impartiality, and
This dichotomy between judicial procedure and political reality is what makes the present situation for claims resolution so untenable. If the Special Chamber itself is concerned about the political ramifications and enforceability of its own judgments, then there is little hope that a foreign claimant will think that it would fare any better. Many claimants understand the gravity of this political reality, and use it to challenge the judgments and capacity of the Special Chamber to provide a “fair and public hearing” as required by Article 6 of the ECHR.
Critics challenge the ability of the Special Chamber to offer a “fair” hearing, citing issues regarding the impartiality of both the local and international judges. These critics site the unique pressures exerted on local judges by powerful local interests, and sometimes simply allege that Albanian judges are tainted by their own ethnicity. Other critics challenge the relationship between judges and the international community in Kosovo. The SRSG, after consultation with the Presiding Judge of the Supreme Court of Kosovo, appoints judges to the Special Chamber for a six month period, subject to renewal. In keeping with the political power of that office, the decisions of the SRSG in this regard are not subject to appeal. Thus, the close connection between the job security of the judges in the Special Chamber and the SRSG, and the frequency with which their employment is reviewed and renewed, may provide fodder for the critics who assail the dependency of the Special Chamber on the political will of the SRSG and UNMIK.
These critics correctly emphasize the mix of politics and justice that pervades the work of the Special Chamber, from the hiring of each judge to the Chamber’s judgments themselves. If foreign governments and foreign courts believe such criticism is valid, then courts in those countries will not allow the Special Chamber to be the only body available to resolve disputes on privatization. Yet most of the criticism discussed supra regarding the independence and fairness of the Special Chamber is political in nature. As such, the criticisms most likely are not enough to convince foreign courts that the Special Chamber is an unfair judicial body. However, combined with the Chamber’s present inefficiency, the allegations of unfairness will cause courts and future investors alike to begin to lose confidence in the Special Chamber and privatization process.
Each challenge to the Special Chamber’s authority, every critique of its procedures and policies, and indeed, almost every claim the Chamber hears, is essentially a microcosm of Kosovo conflict itself. Each critique and each claim is laced with history, hatred, discrimination, and at times, the doubt that the international power supporting Kosovo since June 1999 can provide create judicial process that administers justice to Serbs and Albanians equally. The Special Chamber should not wade into these rough waters, as assuaging these fears and overcoming many of these issues require the skills of politicians rather than judges.
What the Chamber must do, however, is confront the legal and structural problems that thus far have made it an impediment to the privatization process. In that way, the Chamber will be able to assure courts and politicians around the world, that even it is not the most efficient judicial body, it is at the very least a fair and reasonable one. Convincing such parties requires the Chamber to make policy decisions and issue judgments more quickly. If it does so, then it will be providing an effective forum for all claimants, and the Chamber will be doing its part to advance the Kosovo’s economic prospects.
The Special Chamber cannot accomplish all this alone. The EU and UNMIK must provide the funding the Chamber needs to function effectively; and the KTA and the Chamber must work together to push privatization forward in an equitable manner for all. With its economic and political future uncertain, Kosovo itself can tolerate no less.
 Candidate for Juris
Doctor, Spring 2007, Chicago-Kent College of Law,
 See S.C. Res. 1244, U.N. SCOR, 54th Sess., 4011th mtg., U.N. Doc. S/RES/1244 (1999.)
 On the Authority of the Interim Administration in Kosovo, U.N. Interim Administration in Kosovo, U.N. Doc. UNMIK/REG/199/1 (July 25, 1999).
 S.C. Res. 1244 § 11(d).
 On the Establishment of the Kosovo Trust Agency, U.N. Interim Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/2002/12 (June 13, 2002); On the Establishment of a Special Chamber of the Supreme Court of Kosovo on Kosovo Trust Agency Related Matters, U.N. Interim Administration Mission in Kosovo U.N. Doc. UNMIK/REG/2002/13 (June 13, 2002).
 UNMIK/REG/2002/12 § 5.1.
 See Privatization in Kosovo: General Information, Kosovo Trust Agency, 3 (November 2005).
 On the Reorganization
and Liquidation of Enterprises and their Assets Under the Administrative
Authority of the Kosovo Trust Agency, U.N. Interim Administration
 UNMIK/REG/2005/48 §44.
 Privatization in Kosovo: General Information, at 3.
 UNMIK/REG/2002/13 § 3.1.
 See generally Implementing UNMIK Regulation No. 2002/13 On the Establishment of a Special Chamber of the Supreme Court of Kosovo on Kosovo Trust Agency Related Matters, U.N. Interim Administration Mission in Kosovo, U.N. Doc. UNMIK/DIR/2003/13 (June 11, 2003).
 UNMIK/REG/2002/13, Preamble.
 UNMIK/REG/2002/12 § 5.1.
 In describing the privatization process and the difficulties confronted by the Special Chamber and the KTA, the author relies primarily on his work experience during the summer of 2006. However, due to the fact that Kosovo has no legal publications, and for reasons of confidentiality, much of the information contained herein is not accompanied with a citation.
 UNMIK/REG/2002/13 § 5.2.
 See UNMIK/DIR/2003/13 § 17.1.
 UNMIK/REG/2002/12 § 5.3.
 Amending UNMIK
Regulation No. 2003/13 On the Transformation of the Right of Use to
Socially-Owned Immovable Property, U.N. Interim Administration
 U On the
Transformation of the Right of Use to Socially-Owned Immovable Property, U.N.
 UNMIK/REG/2003/13 § 10.2.
 UNMIK/REG/2002/13 § 4.1.
 Warth v. Seldin, 422
 See Lujan v. Defenders of Wildlife, 504
 Allen v. Wright, 468
 See Henry H. Perritt, Jr., Providing Judicial Review for Decisions of Political Trustees, 15 Duke J. Comp. & Int'l L. 32 (2004).
 Perritt, at 32.
 Convention on the Privileges and Immunities of the United Nations, Feb. 13, 1946, art. II, § 2, 21 U.S.T. 1418, 1422.
 On the
Status, Privileges and Immunities of KFOR and UNMIK and Their Personnel in
Kosovo, U.N. Interim Administration
 UNMIK/REG/2002/12 § 1.
 UNMIK/REG/2002/13 § 4.1.
 Perritt at 24.
 On the Law Applicable
in Kosovo, U.N. Interim Administration
 Convention for the Protection of Human Rights and Fundamental Freedoms, as amended by Protocol No. 11, Nov. 4, 1950, ETS No. 155 (entered into force Nov. 1, 1998), art. 6.
 See UNMIK/REG/1999/24.
 See UNMIK/REG/2002/12.
 UNMIK/REG/2002/13 § 10.5.
 Convention for the Protection of Human Rights and Fundamental Freedoms, art. 6.