‘Modus Operandi’: Chinese Firm’s Trail of Debt, Labour Exploitation in Serbia

Rafiul Bux used to earn $300 a month as a mechanic in India. He also worked in Kuwait repairing air conditioners, but left because of the working conditions. Then he saw an ad for a New Delhi recruitment agency called M&S International.

There, an agent told him he could work in Serbia for the extravagantly-named China Energy Engineering Group Tianjin Electric Power Construction, or CEEG TEPC for short.

The post was offering $700 a month, a significant sum for 37-year-old Bux, who had a wife and two young sons to support. “In order to support my family and earn money I wanted to come to Serbia,” Bux said in a statement to the Serbian police, seen by BIRN.

The agency fee, however, was $3,500, saddling him with a bank loan; then there were the working and living conditions he encountered in Serbia, the lack of medical support, the unpaid salaries, and the fact his passport was held by his employer for months on end.

Bux is one of 14 Indian nationals who have given statements to police this year based on a complaint filed on their behalf by NGO Astra, which, among other things, works to prevent human trafficking.

Following media reports, CEEG TEPC paying off the debts of 11 of them, including Bux, and flew them back to India on February 4, but that has not stopped prosecutors from launching a case based on Astra’s complaint. The three others are living at an undisclosed location in Serbia.

Nothing has been proven yet, but documents examined by BIRN in consultation with experts point strongly to a case of organised labour exploitation, only a few years after the first such accusations were made against CEEG TEPC concerning the alleged human trafficking of Vietnamese nationals.

And that’s not the only stain on the company’s record. Since setting up in Serbia in 2018 as part of China’s mammoth Belt and Road initiative, CEEG TEPC has been sued by at least 25 different Serbian companies seeking compensation totalling 3.3 million euros. So far, courts have ordered the Chinese firm to pay 2.5 million euros, BIRN can reveal, and in at least one case the Serbian government had to mediate.

Since March 4, the company’s bank account has been blocked over a debt of 4.9 million euros, according to the database of National Bank of Serbia, NBS.

Experts say the extent of wrongdoing raises major questions of the government’s own handling of foreign investment in the country.

“I think this all confirms that certain investors or employers were favoured, that the state authorities did not do their job, and that a scheme of law-breaking, actually very clearly and transparently, led to the massive exploitation of workers with many elements that indicate they are victims of human trafficking,” said Mario Reljanovic, a research associate at the Institute of Labour Law in Belgrade.

Tomoya Obokata, the United Nations Special Rapporteur on contemporary forms of slavery, told BIRN that neither CEEG TEPC nor the Serbian government had answered a letter that he and three other UN special rapporteurs sent in January 2022 regarding the previous case of the Vietnamese workers.

“We are certainly concerned because the Serbian government is primarily responsible for investigating these allegations, prosecuting and punishing whether these allegations are true and protecting the victims,” Obokata said, adding that the evidence so far points to at least forced labour in the case of the Vietnamese as well as the Indians.

“There is a disturbing trend in your country and it is up to the Serbian government to do something about it,” he told BIRN. “If the Serbian authorities are not doing that, they should be held liable as a country and as a government for facilitating labour exploitation and human trafficking.”

Working without work permits

Both the Vietnamese and the Indians were brought in to work for CEEG TEPC at the Zrenjanin site of a tyre factory operated by Chinese tyre giant Shandong Linglong, a major supplier to the European car industry and whose presence in Serbia is heavily subsidised by the Serbian state.

According to evidence seen by BIRN, CEEG TEPC falsely classified the Indian workers as ‘posted workers’, i.e. employees of other company sent to carry out services in another country on a temporary basis.

It was on this basis that they entered Serbia in June and September 2022, despite the fact they had no contract with CEEG TEPC or any other company at that point. One ‘temporary residence’ document seen by BIRN said it had been issued according to an “agreement on business and technical cooperation”, which only applies in cases of ‘posted workers’.

According to Article 19 of the Serbian Law on Employment of Foreigners, that would require the Indians to have been employed by CEEG TEPC or some other company for at least a year prior to coming to Serbia.

Once in Serbia, the Indians were put to work without work permits; there is no record of any Indian citizens working for CEEG TEPC in 2022 in Serbia’s National Employment Service.

“If those workers started working before they obtained ‘work permits’ that is illegal and it should be investigated by the [Labour] Inspectorate,” said Stefan Pekic, a lawyer specialising in corporate and labour law with regards migrant workers.

In an interview with BIRN, Bux said he arrived in a group of 10 in June 2022 and worked at the Linglong site until August 2023. Similarly, in January 2022, Serbia’s Labour Inspectorate found that 318 Vietnamese had been working for CEEG TEPC without work permits at the Linglong site and filed a misdemeanour complaint.

“That means this is not an isolated incident, but a modus operandi,” said Reljanovic. “If the workers were not registered, that also means they [CEEG TEPC] didn’t pay taxes for them in Serbia. That’s something the institutions need to investigate.”

CEEG TEPC obtained working permits for six Indians in 2023, on a ‘posted workers’ basis. Bux said that “around 70” other Indians were already working at the Linglong site when he arrived.

Reljanovic said there were grounds to investigate possible corruption.

“The question arises – who reviewed the documentation and gave consent for the issuance of the work permit when the conditions were obviously not met? It is the same fraudulent scheme that involved someone in the NSZ [National Employment Service], identical to the one for the Vietnamese workers.”

Another Indian worker, identified by the initials B.P., told police that in spite of the conditions – the hours and being made to work even when sick – he  continued to work for CEEG TEPC having been told that he would not be given the money for a return ticket or previous unpaid salaries.

“The whole time I had on my mind the fact that I have indebted myself and that I have to work to repay them,” the 28-year-old said in his statement to police, seen by BIRN.

Obokata, the UN Special Rapporteur, said such fees amount to exploitation.

“They should not be paying that; it should be employers who should be paying for all of this, and governments to monitor these practices,” he told BIRN.

The Serbian embassy in India did not respond to a request for comment. Neither did the Serbian police’s Department for Foreigners, which issues residence permits, the NSZ or the Labour Ministry.

BIRN emailed CEEG TEPC at its public inquiries address but the messages bounced back; its listed phone numbers also did not work, and no one answered the intercom at the villa that the company rents in the elite Dedinje suburb of Belgrade. Its official, registered address is the address of the accounting agency it works with.

Contracts more illegal than legal

The contracts the Indians signed, once they were already in Serbia, are highly problematic.

“The illegalities in the employment contract are such that it is easier to count what is legal than what is not,” Reljanovic told BIRN.

The two-year contract stipulates that the Indians are expected to work “regular” hours of 10 hours per day, 26 days per month. That amounts to 260 hours per month, 68 hours more than the legal limit under Article 4 of the Serbian Labour Law, including overtime.

“So even with overtime it’s too much,” said Reljanovic. “And that’s not even overtime; it’s labelled in the contract as regular working hours.”

The contract states that any overtime – above the 10 hours per day of ‘regular’ work – would be compensated at the same rate, which is also illegal under Serbian law which requires a 26 per cent bonus for overtime pay.

The contract also includes a two-month probation period after which the employer, if not satisfied with the employer’s performance, has the right to cut his or her salary, which is again illegal under Serbian law. Point 6 stipulates that CEEG TEPC retains the first month’s salary as a deposit to be returned only at the end of the contract. This is also illegal, Reljanovic told BIRN.

To make matters worse, when there wasn’t much work on at Linglong, CEEG TEPC effectively ‘rented out’ its workers to other Chinese companies operating in Serbia, without filing any of the necessary paperwork, BIRN has found.

According to statements given to police, in August last year, at least eight Indians – including B.P. – were sent by CEEG TEPC to work on another Serbian state-backed project – a high-speed rail line between the northern cities of Novi Sad and Subotica.

B.P. told police he worked for China Railway International, CRI.

Others told police that on January 31, 2023, CEEG TEPC managers demanded they sign a document stating they were actually employed by a Subotica-based company called LYQ d.o.o., that their salaries had been paid in full, and that their contracts were officially terminated.

The Indians refused and told police that they were physically assaulted.

Bux said CEEG TEPC was trying to cover its tracks having sent them to work on the rail line in Subotica.

“China Energy Company asked us to sign this paper to avoid their problems,” he told BIRN.

According to BIRN’s findings, LYQ d.o.o. was founded in January 2023 by Chinese citizen Tang Hengzhen and registered at the same address as the workers from Vietnam and India.

In his statement to BIRN, Bux mentioned a Chinese boss, “45 or 50 years old”, whom he referred to as “Mr Guy” and said was in charge of the Indians.

Bux said Mr Guy ignored their complaints about their living conditions, drove them to Subotica to work on the rail line, and who held his passport from November 2023 until February 4, when Bux flew back to India.

Workers ‘rented out’ elsewhere

Mr Guy’s phone number, given to police by the Indian workers, can be found in the Serbian business registry as the contact number of LYQ d.o.o.

The number did not work when BIRN tried it. Nor did the number registered under Hengzhen as LYQ’s official owner.

According to NGO Astra, which is representing the workers, on February 1 a Belgrade lawyer called Dejan Grujic approached the Indians with ‘power of attorney’ documents that he urged them to sign, saying they would get back the money owed to them under the condition they end any contact with the media or NGOs.

Grujic is listed in the Serbian business registry as representing LYQ d.o.o.

Astra complained to Belgrade Chamber of Lawyers, accusing Grujic of violating their code of ethics. Contacted by BIRN, Grujic declined to comment, saying to do so would violate the code of ethics.

If the Indians were indeed ‘rented out’ to other companies, it is another sign of “slave-owning behaviour”.

“If they have been sent to Serbia [as posted workers] to do a temporary job with some employer [CEEG TEPC], they cannot be moved to other employers,” he said. “For me it is just another indicator of the position similar to slavery and not behaviour that is in accordance with the law.”

Debts and court disputes

Financially, CEEG TEPC reported earning very little in the way of profit in Serbia.

In the last available financial report, for 2022, auditors said the company was exposed to credit, market and liquidity risks. They also said they were unable to vouch for the accuracy of certain documents provided by CEEG TEPC.

Indeed, since 2018, the company had been sued by at least 25 Serbian firms for unpaid services totalling 3.3 million euros, according to court data collected by Checkpoint, a portal that gathers publicly available information concerning business entities.

According to media reports, on August 25, 2022, the Serbian government mediated in a dispute over 5.5 million euros that a subsidiary of Serbian Alpha Technics said it was owed by CEEG TEPC.

Alpha Technics did not respond to BIRN questions with regards how the dispute was resolved.

Another company, Belgrade-based ToiToi told BIRN that CEEG TEPC was late in paying for the cabins and toilets that ToiToi provided “for the site in Zrenjanin” – a reference to the Linglong tyre factory.

A representative of Elektroistok-izgradnja d.o.o., who spoke on condition of anonymity, said the company had problems with payment for the expertise it provided to CEEG TEPC concerning a project in Bor, eastern Serbia.

“After that experience we stopped working with them,” the representative said.

Also in Bor, the company Opstanak plus sued CEEG TEPC over a failure to pay for concrete and equipment.

“When someone does a job, it is common decency to pay him for that job,” a representative told BIRN.

CONCLUSION

The operations of Chinese companies in Serbia (as well as other countries in the Western Balkan region) are often non-transparent, and in a significant number of cases, they are characterized by violations of the host country's labor rights regarding the treatment of workers (often hired from third countries - India, Vietnam, Nepal, etc.). In a specific case, the media investigated the operations of the Chinese company China Energy Engineering Group Tianjin Electric Power Construction, or CEEG TEPC, engaged in infrastructure and other projects worth tens of millions of euros. According to the information from the text, the company's operations are highly problematic, including when it comes to multimillion-dollar debts to other companies in Serbia.

Representatives of the authorities and relevant institutions do not respond to journalistic questions that are of interest to the public (such as why court judgments regarding debt recovery are not enforced, etc.), which clearly leads us to the conclusion that this is another contentious contract whereby the provisions protect the Chinese company from judgments execution, while domestic companies unsuccessfully attempt to enforce their claims.

This text clearly indicates the need for additional caution by domestic companies when doing business with Chinese companies in the Western Balkans region, necessitating the engagement of legal experts who will thoroughly examine the contract provisions and attempt to protect their rights.

One of the most common problems regarding the operations of Chinese companies in the Western Balkan countries is the disregard for human rights concerning employed workers (especially those from third countries). This issue is most frequently encountered by workers from third countries in Serbia (at least according to the highest number of media reports), but it is assumed that the situation is not much better in other countries in the region. Due to such treatment of workers, additional engagement of trade unions and the NGO sector in the region is necessary to help workers employed in Chinese companies and prevent abuses of the host country's labor legislation by Chinese companies.