On 2 May 2018 the Croatian Constitutional Court ("Constitutional Court") upheld the Law on Extraordinary Administration Procedure for Companies of Systematic Importance for Croatia, better known as "Lex Agrokor".
With this decision, the court rejected twelve proposals requesting a review of Lex Agrokor and its conformity with the Constitution. The Constitutional Court's decision was not unanimous. Three out of the full panel of thirteen judges dissented; expressing their opinion that a significant number of Lex Agrokor provisions were not in line with the Croatian Constitution.
In its decision, the Constitutional Court stated that the provisions of Lex Agrokor did not constitute a violation of ownership rights or entrepreneurial and market freedoms. In its explanation, the Constitutional Court stated that entrepreneurial and market freedoms are not absolute, but rather that they can be limited by law provided that there is a legitimate goal and that the limitation is proportional to the goal to be achieved. As to the legitimate goal, the Constitutional Court accepted the Government's view that the adoption of Lex Agrokor was aimed at, among others, preserving the stability and viability of Croatia's economy, protecting and preventing the bankruptcy of various involved market participants and preventing the loss of jobs. Ultimately, the Constitutional Court determined that the limitations envisaged by Lex Agrokor are proportional to the legitimate goal.
The Constitutional Court also accepted the Government's view that Lex Agrokor was needed to prevent an escalation of Agrokor's problems. Namely, it accepted the Government's position that the existing legal framework containing pre-bankruptcy and bankruptcy proceedings was, by virtue of its legal nature, dynamics and duration, inadequate and ineffective and thus inapplicable in this case. Consequently, the Constitutional Court considered that in such circumstances the adoption of Lex Agrokor was necessary to attain the legitimate goal.
With this ruling the Constitutional Court cleared the legal avenue for completion of the state-administered debt restructuring of the food processing and production giant Agrokor. The only question that now remains unanswered is whether all the stakeholders will accept the settlement that has been offered to them.