“Neither the Borrower nor any of its property has immunity on the grounds of sovereignty or otherwise from the jurisdiction, seizure – either before or after judgment – or execution regarding any measure or procedure related to the Loan Agreement.”
Someone who follows only pro-Western media or is simply not interested in important topics could easily, after reading this legally entangled passage, think that the Chinese Exim Bank concluded yet another credit arrangement, dragging a new African, Asian, Serbian, or South American “victim” deep into the Chinese debt trap, after which, as the pro-Western media readily claim, follows the seizure of natural and infrastructural assets.
“THE CHINESE ‘DEBT TRAP’ IS A MYTH”
Putting aside the fact that there has never been a recorded case of China seizing natural or infrastructural assets due to a country’s inability to repay its foreign debt to China.
This fact is testified by a scholarly conducted research by Professor Deborah Brautigam of Johns Hopkins University and Meg Rithmire of Harvard (“The Chinese ‘Debt Trap’ Is a Myth”).
Brautigam and Rithmire in their scientific work state that Chinese banks are willing to restructure the terms of existing loans and have never seized property from any country, including the Hambantota port in Sri Lanka, which American spin doctors cite as the crown “proof” of the existence of a Chinese debt trap. Brautigam and Rithmire, in fact, state that the Chinese leased the mentioned port, not seized it, and the paid lease price was not used to settle debts to the Exim Bank.
But let’s return to our passage.
HOW DOES THE EUROPEAN UNION LEND TO “KOSOVO”?
The presented passage is copied from the loan agreement of the European Union to the so-called Kosovo from 2020, and not from the archives of the Exim Bank. In that agreement, it is also possible to read that the borrower irrevocably and unconditionally waives any immunity, including, without limitation, immunity from suit, judgment or other orders, from seizure, arrest, or injunction before judgment, and execution and application over its property. Exclusive jurisdiction under this agreement, by the principle “the judge is both the accuser and the judge,” is entrusted to the Court of Justice of the EU, in accordance with Article 272 of the Treaty on the Functioning of the EU.
Seizure of property, therefore, is not a characteristic of China, but similar or identical provisions are standardized in all international commercial arrangements, with the difference that Chinese debtors are judged not by Chinese but by international courts.
If you rightly believe that “Kosovo” is not a state, has no own foreign policy as one of the so-called prime ministers in Pristina once admitted, and that, in the end, it never became a UN member, and thus not part of the international community, so that “Kosovo” agreements are not a relevant example, I note that there are countless similar examples.
BOSNIAN “PRIMA FACIE”
To find them, we don’t need to look further than our own surroundings. In the loan agreement concluded between the European Bank for Reconstruction and Development (EBRD) and Elektroprivreda BiH, it states that the borrower irrevocably waives the right to immunity from the seizure of its property, and if the two parties enter into a dispute, the EBRD’s confirmation will be “prima facie” evidence for the demanded amount. Moreover, Elektroprivreda BiH, i.e., BiH itself, is irrevocably subjected to the jurisdiction of courts in England. The rights of the EBRD, if the EBRD itself decides so, can be forcibly enforced through the court. Every lender, be it the EU, EBRD, IMF, or Exim Bank, tries to protect its interests as firmly as possible.
To claim that Chinese loans lead to debt slavery, while loans from the West are “aid” or at least represent a geopolitical inevitability, is quite naive.
HOW WAS THE PORT OF BAR “SEIZED”?
Three years ago, Voice of America reported that the Chinese Exim Bank’s loan for the construction of 41 kilometers of highway in Montenegro, amounting to 809 million euros (other sources mention 944 million), represents a millstone around the neck of the Montenegrin economy, or that China is known for “predatory loans.” When we read this report today, it seems ridiculous. But in 2021, when it was published, it didn’t seem so.
The Hamburg weekly “Zeit” claimed that Montenegro would end up like Sri Lanka and that, just like Sri Lanka with the Hambantota port, Montenegro would have to cede the port of Bar to China as payment for unpaid debt, which, of course, never happened.
According to the “research” of the American Center for Global Development, 8 out of 68 countries were “at risk” of falling into the Chinese debt trap, and Montenegro was listed as one of those countries. China, however, was never Montenegro’s largest creditor, nor did it seize the port of Bar, nor any other infrastructural or natural assets of this former Yugoslav republic, as was announced.
THE CUP OF GEOPOLITICAL HONEY
Although Montenegro requested EU assistance to maintain stability and solvency, China never seized the port of Bar, nor any infrastructural or natural assets of Montenegro, as Western and pro-Western media had long and eloquently predicted. Simply put, a deal was reached, and the port of Bar, just like Piraeus, Hambantota, Rotterdam, or Genoa, never became the spoils of the Chinese Exim Bank.
Amidst announcements that the port of Bar and the rest of Montenegro would become prey to a cunning Chinese credit trap, Beijing held only a fifth of Montenegro’s total debt, with the remainder owed to Western creditors. However, in the media narrative of pro-Western outlets, constructed by the principle that “no one has ever drunk the cup of geopolitical honey without gagging on the cup of media bile,” this fifth was then portrayed as Montenegro’s sole headache.
The reason lies in the fact that pro-Western media often portray loans from Western financial institutions as “aid,” while loans coming from the East, predominantly from China, are depicted as leading to debt slavery and the spread of “malign” Chinese or Russian influence.
FANNING ANTI-CHINESE HYSTERIA
The European Union immediately announced that Montenegro, by borrowing money from China, could become a “victim of Chinese debt diplomacy” if it failed to repay the loan. In a Voice of America report dated June 19 last year, it was stated that China is known for “predatory lending” and taking advantage of the other side in deals made by Chinese companies.
“Therefore, the countries of the Western Balkans have an obligation to be very cautious when it comes to contracts with countries known for this negative practice, including not only China but also Russia,” the Voice of America report from Podgorica stated.
However, the argumentation of Voice of America regarding the Chinese loan to Podgorica is at least interesting:
“The borrower irrevocably waives immunity on the grounds of sovereignty or otherwise for itself or its property, except for property related to diplomatic-consular missions and military property, concerning any arbitration procedure in accordance with Article 8.5 of this agreement or enforcement of any arbitration decision,” it states, among other things, in the loan agreement with Chinese creditors for the preferential loan, published in December 2014.
No one in the editorial office or the broader public was interested in the fact that almost identical provisions exist in the contracts of Western financial institutions, as mentioned in this report. From the report, one could conclude that waiving immunity is a Chinese characteristic, not a European or generally global practice of protecting lenders, regardless of what one might individually think about that protection. Some Montenegrin politicians went so far as to claim that by taking the “Chinese loan,” Montenegro gave up sovereignty over its territory and state property, completely ignoring identical provisions in many other contracts. One of them even claimed that Montenegro would lose the port of Bar, some parts of the territory, and the highway that would “belong to the Chinese” due to the “Chinese loan.”
In vain did the former Minister of Transport and Maritime Affairs, Ivan Brajović, explain that these are standard contractual clauses and that he would gladly support a European bank if it offered better terms, and that the stories about the seizure of territory and property are fabrications that cannot come into consideration because they are prohibited by the Constitution of Montenegro.
HAVE YOU SEEN THE LOCH NESS MONSTER?
The epilogue of Montenegro’s loan arrangement with the Exim Bank is not simple. The government of that country concluded a hedging arrangement to protect itself from the currency risk that arose due to the exchange rate difference between the euro and the dollar, and not due to China’s intention to “seize” anything in Montenegro. Thanks to the arrangement from which it later exited, Montenegro paid in euros, with an interest rate of 0.88 percent, instead of in dollars, with an interest rate of 2 percent.
With EU assistance, Montenegro contracted a hedging arrangement with Goldman Sachs, Merrill Lynch, Société Générale, and Deutsche Bank, but two years later, it exited this arrangement as it assessed that it would be more cost-effective to pay the remainder of the debt in dollars. Radio Free Europe and other media services of the USA and the EU rushed to announce that the small NATO member had lost its currency shield.
None of them mentioned the Chinese seizure of the port of Bar and other Montenegrin infrastructural and natural assets anymore, let alone the seizure of territory – which is an oxymoron in itself – simply because it never happened, but the false story of the Chinese debt trap remains floating in public discourse, for which, like the Yeti or the Loch Ness monster, many know it exists but are not at all bothered that they have never seen it.
