The company Ahold Delhaize is initiating proceedings against Serbia over interference in its margins, and thus in retail prices, reports the Frankfurter Allgemeine Zeitung.
The Dutch retail group has filed an arbitration lawsuit with the International Centre for Settlement of Investment Disputes (ICSID), which is based within the World Bank Group in Washington.
This was reported by people familiar with the proceedings.
In response to an inquiry, the group added that it had spent months unsuccessfully negotiating with the authorities on an amicable solution.
State intervention has “with immediate effect put the local company Delhaize Serbia in a position of operating at a loss.”
In the background are rising living costs, which in many countries have become a political issue. Through price regulation, governments in some places are trying to ease public discontent. Serbia, like Hungary, is an example of this. Last March, Hungary capped margins for certain retail products – which there, for example, affects the German drugstore chain Rossmann.
Ahold Delhaize is primarily known for its Albert Heijn supermarket chain on its home market. Serbia is considered a significant market, although with less than five percent of European turnover. The group is lodging a complaint over a regulation from last September. The government initially capped margins in 23 product categories for six months. Large retailers are expected to be affected across more than three quarters of their product assortment, which accounts for more than four fifths of turnover. Retailers operated with only two to four and a half percent net returns without the prescribed margins, said people familiar with the proceedings.
Stores operating at a loss
According to available information, Ahold Delhaize has closed 25 stores since September, and thus nearly every twentieth one.
The group will publish its annual results next Wednesday.
Delhaize Serbia has been active in the country for 25 years and now operates 547 stores with more than 11,000 employees.
As a foreign investor, Ahold, with its claim for damages, in addition to a possible lawsuit before national courts in Serbia, can turn to an international arbitration court.
The basis is, as a rule – as in this case – bilateral investment protection agreements (BITs) or other international treaties.
Such an agreement existed between the Netherlands and the former Yugoslavia. After the breakup of the multinational state, the agreement was re-established between Serbia and the Netherlands and entered into force in 2004. In addition, there is an agreement between EU member states and Belgrade, which has been in force since 2013.
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Source: Euronews, Foto: Euronews