Allegations of corruption in Slovenia and across the EU

9 August 2012, Public Service Europe

Despite fines and alleged scandals, questionable companies win new contracts every day and posts impressive profits – claims campaign group

At first, Sostanj was a simple story – a new coal plant was to be built in Slovenia and we, as environmentalists, opposed it because we know it is high time to stop constructing fossil fuel infrastructure. But as we followed the case closely, we discovered important details about how business is done and how little space there is for citizen oversight on these transactions.

For several years now, Slovenians have been planning to build a new 600 MW lignite unit at Sostanj in the north of the country. Experts say that, when constructed, the carbon dioxide emitted would make it impossible for the country to reduce its emissions in line with climate science and the European Union 2050 climate targets. But environmental arguments are often sidelined in Central and Eastern Europe, and the construction plan has been marching ahead. In 2007, French industrial giant Alstom won the contract to build the new unit.

With estimated costs going above €1bn, the new unit is too costly for the Slovenian state company TES – which is managing it. So half of the costs are set to be covered with cheap loans from two European public banks, the European Investment Bank – the house bank of the EU – and the European Bank for Reconstruction and Development. The banks are still to disburse the funds: they have been waiting for the Slovenian parliament to approve a state guarantee for the biggest chunk of the loans, €400m from the EIB. The parliamentary approval, which finally happened this July, is necessary for the Slovenian government to officially offer the state guarantee.

While waiting for this state guarantee approval, worrying news emerged. This spring, the Slovenian State Anti-Corruption Commission announced that corruption conditions existed in the awarding of the contract to Alstom. Slovenian business partners of Alstom were allegedly in the commission responsible for the tender and the contract. The European Anti-Fraud Office OLAF is now looking into the case as well, alongside local police in Slovenia. The EIB and EBRD too, as public banks with extra responsibility, are conducting internal investigations.

Alstom subsidiaries have faced corruption and bribe allegations before and are suspected of wrongdoing on several continents. Some susidiaries have been convicted in Italy, Switzerland and Mexico and even blacklisted by the World Bank. In spite of this and a national commission saying that similar things may have happened in Slovenia, the country’s executive supports going ahead with the project and the parliament voted the same way. Actually, the parliament failed to approve the state guarantee on a first attempt last year and this year managed to pass it because an unimpressive 29 parliamentarians voted for it – only 59 out of the total of 90 MPs were present at the vote and of those present 20 opposed the guarantee and 10 abstained.

So 29 Slovenian parliamentarians decided that this project should move forward despite the State Anti-Corruption Commission virtually begging national authorities not to go ahead with the project until corruption allegations are properly investigated. The Slovenian public is at least torn on the issue – with the media debating frantically the pluses and minuses, street actions organised and even an attempt to organise a referendum over the future of the plant. But this seems to matter not.

Although the story is not yet over. Before the government confirms the guarantee, the Slovenian project promoter is expected to come up with a new – less costly – investment plan. Regardless of what happens at the national level though, much depends on the EIB and the EBRD. Without their money, it is hard to see how the project can go ahead.

Yet results of the EIB and EBRD internal investigations are unlikely to ever be made public, regardless of the findings. The banks keep a close guard over this information, not in the least because they are big protectors of business confidentiality; they do not want to scare off their potential business partners. But the banks’ money is largely our money – the money of Europeans, of Slovenians even. The banks are able to invest only because they have a starting capital from national budgets of EU countries and others. The EIB has a mandate to promote EU goals and the EBRD is supposed to encourage democracy and sustainable development.

How come, then, that we feel so little in control over this decision? Despite fines and alleged scandals, questionable companies win new contracts every day and posts impressive profits. Now that there are doubts about their practices in our own EU backyard, we are hoping more can be done. We are hoping that our two public banks, financed with our tax money, will conduct solid investigations. And we hope the results will be made public so that they impact the decision to pay the money for Sostanj or not.