Blagaic versus Erste Bank: A Croatian Investment Court Case Precedent

Total Croatia News

Croatian bureaucracy is hard enough to deal with, but a court case started today which deals with a more hidden layer – Vicenco Blagaić versus Erste Bank. 

Whenever we talk about investment projects in Croatia, three factors usually come to mind as the main cause of obstruction: bureaucracy and its renowned slowness along with even more renowned expectation of a “reward” for pushing the project forward, shady Croatian consultants and entrepreneurs that have their own personal gain in mind and of course, some foreign investors who talk the talk but cannot walk the walk. But what are you supposed to do as an investor when your project is obstructed by a bank, and a subsidiary of a large foreign bank at that?

That is what happened to Vicenco Blagaić, known in Croatia as the founder of Croatia Boat Show and Croatian Dream project. Whatever your personal opinion about this entrepreneur, one thing is certain; the treatment he received from Erste Bank leaves us wondering whether any large project is safe once the “big financial guns” turn on you.

His ordeal started back in 2010, and the reason we are writing about it now is the fact that the Split County Court just held the first hearing in the State Attorney’s Office case against Erste Bank on November 30, 2015 meaning that wrongdoings in this case were recognized by the highest institutions in Croatia. Erste Bank is accused of leaking sensitive business information to the media causing financial damage now totaling over €65 million according to Vicenco Blagaić.

Back in 2010, just as Profectus Group was getting ready to finalise the sale of one of their projects on island Šolta, an in-depth analysis of their financial state and loan obligations of all companies owned by Blagaić was published in The sale fell through since published classified information opened a can of worms with IGH’s other banks and creditors, but that’s just the tip of the iceberg and it soon became clear that Ernst, or at least its highest positioned directors in Croatia, has its eyes on the Croatian Dream project. Even with IGH out of the picture, Blagaić managed to obtain all necessary permits and changes in the county master plan and suddenly, the project no one was considering to be feasible or even possible, became very “interesting” to those in power. Interesting enough to obstruct its development in every possible way until the company is ruined and the project can be taken over by the bank.

Erste Bank started obstructing the process by failing to pay out the pre-approved €2 million loans in 2011 and refused to issue letters of intent in 2012 and 2013 preventing the entry of two sizeable international investors into the Croatian Dream project with whom the contracts were already signed. According to Blagaić, these actions prevented Blagaić and Profectus group from paying back all the loans and removing mortgages on properties owned by the company so that they can move forward in their largest project, above mentioned Croatian Dream in Župa Dubrovačka. 

Cooperation with Erste Bank was flawless until this series of incidents, first loans were taken out in 2006 for the organization of the annual Croatia Boat Show and when it comes to payments, according to Blagaić, Profectus was never a day late. Everything seemed ideal until the arrival of two new bank directors in 2010 and Blagaić flat out accused them of racketeering, sending objection letters to headquarters in Croatia and Austria. Until today, several meetings have been held in Croatia and Austria in the attempt to resolve this situation, but every progress made was, according to Blagaić, sabotaged again in Zagreb so criminal charges against the bank were his very last resort.

After his own ordeal and after finding out he was not alone when it comes to problems with Erste Bank, Blagaić formed a group called “Be careful who you bank with” as a pun on their widely recognized adverts “Who are you banking with”. More than 100 other business owners came to him with similar stories where the bank was obstructing projects taking properties that were considerably more valuable that the loans taken from the bank.

Considering that the Croatian State Attorney’s Office did indeed end up charging Erste Bank and that the hearing was today, we can safely say something fishy was going on and hopefully we’ll know what soon enough. Decision of the County Court in Split to indict Erste Bank was the first case in Croatian history where a financial institution is formally accused of questionable business dealings with the goal of financially destroying a client. We asked Erste Bank’s PR department whether they wish to comment on the case, and as expected received an answer that they cannot comment on an ongoing court case.

Today’s court hearing was open for public, and Blagaić had a chance to present his case before the judge along with the Bank’s representative, attorney Vladimir Terešek. Interest for the hearing was quite large with representatives of all Croatian media present along with Vilibor Sinčić, president of Živi Zid who also showed up to support Blagaić in his fight against Erste Bank: “This is the first case in Croatia in which a business bank is indicted and that is a very good sign telling us that the time when banks in Croatia thought they could do as they please is finally behind us. We know what happened with the Swiss Franc, we know about the Hypo Bank scandal, Reiffeisen Zadruga case and now we have a new one where Erste Bank was stealing projects away from people. You can be sure our party will talk about this in the Croatian Parliament” Sinčić commented.

Representative of Erste Bank was a bit more talkative in court than their PR department: “Investigative teams were not able to determine exactly who committed the criminal act of sharing confidential client information, and whether the act was committed by a responsible person or by, for instance, a cleaning lady that got her hands on some confidential documents… This is why this case is a precedent in Croatian judiciary practice” Vladimir Terešak from Erste Bank stated in his brief address.

It is still unclear when this court case will continue, but we will definitely follow it so anyone out there with a business idea can walk into a bank feeling a little bit safer not worrying whether they are just another hurdle they have to jump over in an already tough business environment in Croatia.


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