Category: Bosnia and Herzegovina

In the era of modern business, where strengthening of existing businesses and encouraging startups is a GDP must, improving the investment environment is common sense, and compliance should serve the benefit of it all, one should stop and wonder at the sight of what we call “twisted compliance.”

This newly found tool of local authorities designed to increase the budget may also be defined as compliance without logic, created when authorities start to twist the implementation of laws and regulations on business entities for the purpose of collecting monetary fines. So what essentially should be aimed at protecting business entities in a certain market becomes the opposite. Thus, as if the complex administrative environment and legislative parallelism was not enough, businesses in Bosnia and Herzegovina are now facing yet another challenge – whether to comply with this twisted compliance or not.

We have all been witnesses to local authorities being unable to understand the specifics of some business or some transaction; however, solutions have been reached with good argument and the sheer persistence of business representatives in the market. What we are seeing now, however, is not a lack of understanding but the obvious and planned imposition of inapplicable duties to business entities, which are thus offered two options: to comply with provisions not designed for them or pay the fine for noncompliance. This threat to legal certainty in the market, and the inevitable growth of the problem, must be dealt with by the entire business and legal community by forcing the judicial system (i.e., misdemeanor courts) to take on a much more serious role beyond its current pale, confirmative, and merits-free behavior, and stop administrative authorities from implementing this twisted compliance.   

The most recent example of how twisted compliance works is the vivid activity of the Federal Market Inspection in controlling implementation/compliance with Bosnia & Herzegovina’s Art. 11.6. of the Law on Internal Trade and Art. 2.3. of the Law on Price Control. These two provisions introduced a requirement that business entities involved in retail prepare and maintain two rulebooks: one on sale conditions and one on price forming. 

According to Art. 11.6. of the Law on Internal Trade, “the trader is obliged to determine written rules about sales conditions (price, way of payment and handover, beneficiations, etc.) and make them available to the buyer in an appropriate way, as well as abide by the same.” Obviously, the trader has to make the conditions of sale accessible not exclusively “to buyers”, but “to a/any buyer”, in which way the meaning and purpose of this provision is made clear – that a trader is obliged to conduct its business in a transparent way with any buyer. However, it is not obliged to have more buyers and therefore it is not required to have general rules of sale accessible to a wider range of buyers if it does not engage in retail. Wholesaling companies should be therefore exempted from having to adopt a rulebook on sale conditions if adequate provisions are made part of their (for instance) Distribution Agreements. 

The second provision, Art. 2.3. of the Law on Price Control, requires that “companies and natural persons … determine rules about the price forming, abide by the determined way of price forming, and display a price list or an individual price at a place visible for the consumers, as well as comply with such displayed price.” The clear mention of consumers in this article should be sufficient to conclude that it refers to retail prices, and is therefore not relevant to wholesalers. 

However, even though both of these provisions serve as the legal basis for imposing a duty on retail business entities to maintain a rulebook on sale conditions and a rulebook on price forming, we have seen a number of wholesale business entities being fined for non-compliance with them. And those who have challenged the matter in court have experienced pale, indifferent, and merits-free decisions by the judges, who have taken as stronger evidence any submissions made by the representatives of administrative authorities. Appeals were drafted and second instance courts asked to correct the flaws of their colleagues from lower instances as well – mostly with no success. 

In the meantime, the Federal Market Inspection is continuing with its controls of business entities, and some are starting to implement the non-applicable provisions and adopt said rulebooks anyway – i.e., adopting a rulebook on price forming even if there are no consumers to which it would be applicable since the entity is not a retailer. Such formal compliance, or imposition of twisted compliance, cannot be seen as an acceptable solution. New issues and new problems are going to arise out of this, as the formal introduction of essentially unnecessary acts such as these rulebooks have, among other things, generated competition issues.

Indeed, the price forming for wholesale entities is now colliding with the simplified and inapplicable rulebook on sale conditions and rulebook on price forming created for retail business. However, that would be yet another topic and our word count has just elapsed.  

By Emina Saracevic, Partner, and Harun Novic, Associate, Saracevic Gazibegovic Lawyers

This Article was originally published in Issue 4.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The unique political and administrative landscape of Bosnia and Herzegovina has resulted in far too many legislative levels and regulations for a country of its size.

Unsurprisingly, then, Bosnia and Herzegovina currently has four laws on litigation procedure: The Law on Litigation Procedure before the Court of Bosnia and Herzegovina, two laws adopted on entity levels (the Law on Litigation Procedure of the Federation of Bosnia and Herzegovina and the Law on Litigation Procedure of Republika Srpska), and the Law on Litigation Procedure of Brcko District (a self-governing administrative unit). When it comes to alternative dispute resolution methods in Bosnia and Herzegovina, there are three laws on mediation in place: the Law on Mediation Procedure of Bosnia and Herzegovina, the Law on Mediation Procedure of the Federation of Bosnia and Herzegovina, and the Law on Mediation Procedure of Republika Srpska. Otherwise, apart from the vivid regulatory set-up of litigation and the rarely used mediation option, Bosnia and Herzegovina still does not have a separate piece of legislation regulating arbitration, which, at the moment, remains merely a section of the litigation laws.

Nonetheless, for quite a while now, arbitration has been the most widespread alternative method for settling disputes, and its significance continues to grow, as long-lasting and exhausting litigations are something that disputing parties, especially legal entities, seek to avoid. Efficiency, the ability to choose professional arbitrators, flexibility, informality, and confidentiality of the procedure are just some of the advantages that make arbitration a preferable method for dispute resolution, especially when it comes to commercial disputes. The adoption of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards back in 1958 had a crucial impact on the development and growth of international arbitration. Bosnia and Herzegovina is one of the Convention’s 156 contracting parties.

Arbitration in Bosnia and Herzegovina is governed by the Law on Litigation Procedure of the Federation of Bosnia and Herzegovina, the Law on Litigation Procedure of Republika Srpska, and the Law on Litigation Procedure of the Brcko District. Each of these laws contains only 20 articles dedicated to arbitration, all regulating the validity of the arbitral agreement and certain aspects of the procedure (i.e., appointing and challenging the arbitrators, obtaining court assistance in processing evidence, and the adoption, form, and annulment of the arbitral award). In all three laws, these provisions are almost identical. On the other hand, the recognition and enforcement of foreign arbitral awards is regulated by several articles in the Law on Resolving Conflict of Laws with Regulations of Other Countries in Certain Relations of Bosnia and Herzegovina. In addition, particular aspects of arbitration in certain special cases are regulated by other laws. 

In other words, in light of the scattered and poor regulatory framework of arbitration in Bosnia and Herzegovina and the virtual ignorance of its value as a dispute resolution tool, it is clear now more than ever that Bosnia and Herzegovina is in need of drastic legislative improvements and a coherent approach to this issue.

The United Nations Commission on International Trade Law adopted the Model Law on International Commercial Arbitration, which provides an excellent starting point and guide to many legislatures in the process of adopting or improving their arbitration legislation. A total of 73 countries have adopted arbitration laws relying upon the Model Law, including many of the countries surrounding Bosnia and Herzegovina with which it shares more or less the same legal heritage, such as Croatia, Serbia, Montenegro, Slovenia, and others.

While it is perhaps unnecessary to say that arbitration is an important option for participants in legal transactions, it is worth noting that its impact on the state itself is also potentially tremendous, even though unrecognized, due to the fact that its use inevitably contributes to an unburdening of courts. Overloaded courts, as is the case with many in Bosnia and Herzegovina, aggravate litigation procedures and burden the state budget. Thus, it is in the interest of the state to promote arbitration and encourage the parties to agree on its use. However, the mind set of politicians and legislators is just not there yet. 

Further development of arbitration in Bosnia and Herzegovina depends on the adoption of a single legislative act governing arbitration in a unified, detailed, and comprehensive manner. Despite its importance, it would not be a demanding task, in light of the Model Law and the positive examples from other jurisdictions.

Stakeholders in Bosnia and Herzegovina, from representatives of the civil society itself to the competent ministries and judicial authorities, should take positive action and initiative to pass the law on arbitration at all relevant levels, or even just one single level, applicable to all – by far the best model.    

By Adis Gazibegovic, Managing Partner, and Saida Porovic, Associate, SGL – Saracevic & Gazibegovic Lawyers

This article was originally published in Issue 3.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The past half year has been a tumultuous one for Bosnia and Herzegovina (BH). Labor reforms, which strike at the very heart of the socio-economic structure of every nation, are under way in both entities of BH – the Federation of Bosnia and Herzegovina (FBH) and Republika Srpska (RS). The adoption of new labor legislation was prompted by the Reform Agenda for BH 2015-2018, the implementation of which is an imperative in BH’s search for EU integration. 

The situation was especially turbulent in FBH. The old Labor Law in FBH was passed in 1999 and since then has undergone many amendments. As stated in the Reform Agenda for BH 2015-2018, the labor regulatory framework was not flexible enough, and the Government of FBH found that it was necessary to harmonize the law to a greater extent with the Directives of the European Union, international conventions such as the European Social Charter (revised), and conventions of the International Labour Organization.

The Parliament of FBH adopted the new Labor Law of FBH under urgent procedure and passed it on July 31, 2015, through its House of Representatives, just a day after it was passed by the House of Peoples. Besides meek criticism by the opposition and a protest organized by the Association of Independent Trade Unions of BH, there was no stronger defiance in respect to the new labor law – at least in comparison to situations in other countries (e.g., this year’s protests in France aimed against labor reforms). The new Labor Law came into force on August 20, 2015, and the social partners braced themselves for its impact and the arduous process of collective bargaining. Meanwhile, some delegates of the House of Peoples argued that the law was adopted contrary to rules of procedure, so the Constitutional Court of FBH was called upon to determine the regularity of the law’s passing. On February 17, 2016, just as the new General Collective Agreement was signed and ready to be published in the Official Gazette of FBH, and as employers began adapting their internal acts to the new Labor Law, the Constitutional Court of FBH ruled that the law had, indeed, been adopted contrary to proper rules of procedure. As a result, the old Law became valid again, the new Law could be re-adopted by the House of Peoples (this time by proper procedure), and the new General Collective Agreement no longer had its legal ground. 

This put those employers which had already adapted their internal acts to comply with the new law in an unfortunate position. Fortunately, this situation of legal uncertainty was resolved in relatively short order as the new Labor Law of FBH, adopted with the same text of the law from 2015, finally came into force on April 14, 2016.

Upon the Law’s (re)entry into force, the social partners agreed to sign the new General Collective Agreement with the same text as the one signed in February 2016, and it came into force on June 23, 2016.

The aim of the new labor legislation was, among other goals, to raise the competiveness of the local economy by liberalizing the labor laws but also to provide additional workers’ rights which had previously been provided for only by collective agreements, plus some that had not previously existed at all. 

The new Labor Law of FBH introduced many innovations, such as provisions prohibiting discrimination, harassment, and psychological workplace bullying; enabling work outside the employer’s premises; affecting representativeness of trade unions; altering the general manager status (i.e., it is no longer required for a general manager to conclude an employment contract); obliging an employer to deliver a copy of the mandatory insurance application to employees; requiring that medical examinations be conducted; altering the duration of annual leave; altering the maximum duration of an employment contract for a definite period, and many more. 

The new General Collective Agreement for the territory of FBH also introduced some new elements into the labor-regulation landscape of FBH. Many employees’ rights that were defined by the previous general collective agreement were delegated to be defined by branch or individual collective agreements, an employer’s internal acts, or employment contracts. 

Despite the arduous process of passing the Labor Law, it has yet to prove that its provisions are adequate for BH’s socio-economic environment. As with any major reform, only time will tell to what extent it turns out to be a success or failure.

By Emina Saracevic, Partner, and Harun Novic, Associate, Saracevic & Gazibegovic Lawyers

This Article was originally published in Issue 3.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.