EPS, the largest state-owned company in Serbia, could legally stop conducting public procurement procedures if it chose to, according to Nemanja Nenadić, director of Transparency Serbia.
If EPS were to adopt this practice, supported by domestic regulations, over 550 million euros worth of the company’s purchases in 2022 would go unnoticed by the public and other procurement participants.
It is worth noting that on April 18 last year, by amending its founding act and the Company Statute, EPS officially ceased to operate as a public company and became a joint-stock company. Concurrently, the Government adopted a new Statute for the now joint-stock company Elektroprivreda Srbije.
Around 20 more companies, subject to the Law on Public Companies, are expected to undergo similar legal transformations, most likely by 2025.
In the meantime, in September this year, the full implementation of the Law on the Management of Business Companies Owned by the Republic of Serbia will begin. This law, among other things, mandates changes in legal forms, although EPS has already undergone this change.
Nenadić explains that the legal basis for exemption from public procurement procedures is not found in the Law on Public Enterprises nor in the new Law on Ownership of Business Companies adopted in September 2023, but in regulations governing activities of general interest. “Public companies will not be exempt from the obligation to apply the Law on Public Procurement simply due to their transformation into joint-stock companies or limited liability companies, but by changing the description of their predominant activity. If they perform activities of general interest, they will apply regulations on mandatory procurement. If not, they are not obligated,” says Nenadić.
For clarity, the current Law on Public Enterprises states in Article 2 that “activities of general interest, as defined by this law, include activities specified by law in areas such as mining and energy, transport, electronic communications, publication of the official gazette of the Republic of Serbia, and so forth.”
Regarding EPS, which has not been a public company since last spring, activities of general interest are further detailed in Article 16 of the Law on Energy. It clearly states that electricity production and supply are not activities of general interest but operate according to market principles.
Given that EPS’s main activity, according to its Statute, is electricity production, it can be unequivocally concluded that EPS does not perform activities of general interest.
The EPS Statute states that in addition to its main activity, EPS also engages in “electricity trading, supply, and wholesale supply of electricity in accordance with market principles, as prescribed by the law regulating the area of energy.”
Nenadić explains, “According to the provisions of these laws, it could be interpreted that EPS is not obligated to implement public procurement procedures, meaning it is not required to apply these regulations.”
“It is commendable that they are still conducting public procurement procedures in this state-owned company. However, if they decided to stop, there is a legal basis for it,” Nenadić told Forbes Serbia. According to the Public Procurement Commission’s Report, EPS was the second-largest public procurement spender in 2022, for the first time in many years, spending 64.5 billion dinars (551 million euros).
The EXPO Law before the Constitutional Court
Transparency Serbia has submitted an initiative to the Constitutional Court to review the constitutionality of Article 14 of the Law on EXPO 2027, Nemanja Nenadić reminds, though he adds that past experiences suggest the project will be realized before any response arrives from the institution.
He explains that paragraph 1 of that law states that special companies or SPVs established by the state for this investment do not apply the Law on Public Procurement, while paragraph 2 stipulates they follow a procedure prescribed by a Serbian government decree.
“The decree has been issued, and many law provisions have been rewritten, cleverly disguising the fact that these companies do not follow procurement rules. At first glance, it appears well-regulated, with conditions and criteria, procedural openness, and information published on the Public Procurement Portal. However, the key issue is the lack of rights protection. This is neither prescribed by the regulation nor could it be, as the Law on Expo is clear on this matter,” explains Nenadić.
“Whatever is written in the Regulation, no discriminated company would have the chance to challenge the public procurement procedure. That’s the crux of the matter,” he concludes.
