Category: Bosnia and Herzegovina

A lull in the markets and legislative activity, due to political and global concerns, is offset by high foreign finance confidence and high foreign investor interest in Bosnia and Herzegovina, with client-driven ESG projects a particularly bright spot, according to Attorney-at-Law Andrea Zubovic-Devedzic, a Partner of CMS Reich-Rohrwig Hainz.

“The current political setup remains intricate in light of the upcoming general elections,” Zubovic-Devedzic begins. “In general, the situation has always been complex over the past years but, considering the pandemic, war, and economic conditions, we are facing a distinct challenge. So, everyone is waiting to see what the next months will bring, in terms of political and economic changes.”

Despite that general feeling, Zubovic-Devedzic highlights a recent winner in Bosnia and Herzegovina. “At the end of 2021, we achieved the equivalence of standards in banking between BiH and the EU,” she explains. That was followed by the “very strong regulator reaction on the issue of Russian banks in the country, with temporary administration proceedings, and their swift offload, which did a lot to ensure that the overall banking system and the markets weren’t too badly affected.” It all raised the confidence that “foreign financiers have in the Bosnian banking sector, despite the global situation: we’ve seen over ten deals involving financing in the financial sector in BiH happen so far this year,” she says, “and we’re barely past the halfway mark.”

“We’re also seeing a fundamental shift of the M&A market,” Zubovic-Devedzic reports. “Unlike previous years, there are fewer regional M&A transactions involving local subsidiaries. The market’s being driven by direct investments,” she points out. “Foreign partners, that have been cooperating with local businesses for some time now, decided to opt for equity investments – whether a controlling or a significant stake in local companies.”

Most of these investments relate to industry and production, historically one of the country’s strong points, according to Zubovic-Devedzic. “This could well become a trend,” she says, “with the investors further securing their supply chain and streamlining quality control, while also bringing in capital, know-how, and further improvements in corporate governance and structures.” This is important, she notes, “as it creates a chain reaction, opening up markets for other local players, securing exports, and moving everyone closer to alignment with the requirements of EU legislation.” The one downside to the markets becoming more integrated? “With the worldwide workforce shortage, we’re seeing a significant spill out of our workforce into other countries. If no remedies are implemented, we’re just years away from facing the same workforce issues of Western economies,” she says.

“There is also an increasing interest in renewable energy,” Zubovic-Devedzic adds. “Recently, certain restrictions were imposed on the development of small hydropower plants, mostly on environmental impact grounds. And the project for a massive thermal power plant is faltering, for both objective and contractual reasons. Accordingly, the focus has shifted to solar and wind energy, with increased financial institution activity on financing such projects.”

“We still haven’t developed an ESG framework,” Zubovic-Devedzic points out, “but it’s on the agenda of the banking sector, which is definitely having a spillover effect in other sectors.” Looking back, she says “compliance used to be unpopular and often considered cumbersome.” Compared to those GDPR early days, she notes that clients already know about ESG and willingly seek and engage in that conversation. “When initiatives come from the business side – it’s much easier and more efficient to answer those needs because the change is not perceived as imposed – the market changes swiftly as a result. There are fewer gaps between local and international markets now, and the butterfly effect is more direct, so local players understand they either get on board or face negative impacts.”

Bosnia and Herzegovina does not have a foreign investment screening regime comparable to those now emerging in the European Union in light of the EU FDI Screening Regulation. However, it operates an authorisation system covering the defence and media sectors.

Legal basis

Regulated on multiple levels, due to the country’s political and administrative structure:

• Bosnia and Herzegovina (state level) – Foreign Direct Investments in BiH Policy Act (Official Gazette of BiH, nos. 4/1998, 17/1998, 13/2003, 48/2010 and 22/2015) (“FDI

Policy Act”), which sets out rules on the state level;

• FBiH – FBiH Foreign Investments Act (Official Gazette of FBiH, nos. 61/2001, 50/2003 and 77/2015), which sets rules in the entity of FBiH; and
• RS – RS Foreign Investments Act (Official Gazette of RS, no. 21/2018), which sets out rules in the entity of RS.

Filing requirement

Under the FDI Policy Act, a direct foreign investment is an investment into a newly established company/institution or into an existing domestic company/institution, which may be in cash, in-kind and in rights.

In addition, the RS Foreign Investment Act specifies the following forms of foreign investments:

• establishment of a legal entity fully owned by a foreign investor;
• establishment of a legal entity jointly owned by a foreign and domestic investor;
• investing into an existing legal entity;
• special forms of

The filing regime encompasses all transactions in the relevant sectors.

Relevant sectors

The defence sector, and in specific production (and sale in FBiH) of arms, ammunition, explosives for military use and military equipment, as well as the media sector, and in specific media activities (terrestrial broadcasting of TV and radio content). 

Process and timetable

Competent authority: Government (on state-level), as well as:

• in the FBiH: Ministry of Energy, Mining and Industry (defence sector) and the FBiH Ministry of Traffic and Communications (media sector);
• in the RS, Ministry of Trade and Tourism and/or the RS Ministry of Energy and Mining (defence sector), and RS Ministry of Transport and Communications (media sector).

Mandatory filing requirement: Yes

Filing deadline: There is no deadline prescribed for the foreign investor to make the filing.

Responsibility for filing: The foreign investor is obliged to notify a foreign investment and procure its approval.

Sanctions: There are no specific penalties within the applicable rules.

Length of the proceedings: The Government is obliged to decide on the proposal no later than 60 days since the date of the receipt of the complete request.

By Danijel Stevanovic, Partner at Moravcevic Vojnovic i Partneri in cooperation with Schoenherr

Resolving the political deadlock in one of the Bosnian entities, tackling inflation, and a shortage of workers are among the most recent challenges in Bosnia and Herzegovina, according to Partner Zlatan Balta of Legal Partners, in cooperation with Deloitte Legal.

“The political atmosphere in Bosnia and Herzegovina remains strongly influenced by the upcoming general elections in October 2022,” Balta begins. “The specific political structure of the country adds additional complexity to the matter – we have weighty discussions on introducing amendments to the electoral law and the Constitution of the Federation of Bosnia and Herzegovina in order to resolve the political deadlock therein. Just a few days ago, we had large demonstrations with thousands of people in Sarajevo protesting electoral changes by the Office of the High Representative.”

“The Bosnian economy was hit hard by current global events,” he explains. “We have the highest inflation rate in the region, with transportation, energy, and food prices drastically increasing. The country has a problem of semiskilled or mid-skilled labor emigrating to Western European countries – recently this trend also includes highly skilled workers from the IT sector who, despite having a decent income, chose to relocate due to the political climate and better opportunities abroad.” Consequently, he notes, there is a shortage of workers in sectors such as construction, with construction companies having to rely on foreign workers for some projects.

“However, aside from the inflation, the Bosnian economy is improving compared to previous years,” Balta points out, adding that the main projects carried out in the past few months include infrastructure and energy. “The largest infrastructure projects in the country included investments in highways and, recently, a tender was announced for the construction of one of the largest tunnels in Europe, the 10.5-kilometer Prenj tunnel.” Additionally, he says, the EBRD is financing large projects in public transportation in Sarajevo.

“Energy remains our largest export product, and there are quite a few energy projects underway,” Balta adds. “The project of the Tuzla power plant seems likely to fail, with General Electric withdrawing and the Chinese contractors left hanging, but still, there are many, mostly privately funded, wind and solar park projects in the pipeline, as well as two hydroelectric power plants.” Notably, he says that Bosnia and Herzegovina’s IT and tourism sectors are also developing rapidly.

Overall, “Bosnia and Herzegovina is a good place to invest, especially in keeping with the near-shoring trends resulting from recent global events. The country has a great location close to the EU, a good workforce, and lower costs, which makes it a great choice for establishing manufacturing plants, for EU companies, for example.” Despite the challenges, “the vast majority of foreign investors are happy with their investment in Bosnia and Herzegovina,” Balta points out.

According to Balta, there are also some developments in the tax regime. “There were recent amendments to the VAT rulebooks of the authority,” he notes. “The new regime introduces an obligation for foreign transport companies to register and pay VAT when transiting the country. Additionally, foreign digital service providers have to pay VAT for streaming services purchased by users in Bosnia and Herzegovina, and have recently begun registering for this obligation.”

Balta highlights the backlog in legislative activities. “Republika Srpska is a bit more flexible and quicker in terms of adopting legislation, however, the Federation still faces some challenges,” he says. “There are many amendment proposals – on enforcement proceedings, on administrative proceedings, on energy, electricity, and renewable energy sources, and also the personal income tax and the contributions law.” Unfortunately, “some of the existing laws are very old school (lacking implementation of electronic signatures, requiring the filing of hard copies of documents, etc.) and the proposed amendments look to resolve some of those issues, but it is not clear when they will be adopted, mostly due to the upcoming elections” he concludes.

Feeling the repercussions of global economic issues, Bosnia & Herzegovina finds itself in a more or less usual position in unusual times – with an upcoming general election this fall and swaths of legislative developments seeking to reshuffle the landscape in which lawyers operate, according to Dimitrijevic & Partners Partner Stevan Dimitrijevic.

“As it is everywhere else, global economic developments have not failed to hit Bosnia & Herzegovina too,” Dimitrijevic begins. Even with BiH being less exposed to the overall migration of businesses and people due to the Ukrainian crisis when compared to its neighboring countries or others hit by the developments, it is still feeling the ramifications of the war in Ukraine.

“The EU-imposed sanctions on Russia have spilled over to our markets as well and we are scrambling to make sure our clients remain compliant in every way,” Dimitrijevic continues. “We as lawyers are left in a bit of a no man’s land with respect to what we can and cannot do, because we have to be completely clear what constitutes behavior that is compliant with the sanctions and what does not – where only recently we saw the explicit exclusion of legal services in the explanations related to the sixth package of EU sanctions. This was expected.” The citizens of Bosnia & Herzegovina have also felt the consequences of the overall crisis, with the “average consumer basket cost going up by 10.2%,” he reports.

Furthermore, Dimitrijevic says the political situation in the country is “complex, as it is so often. We have general elections upcoming this autumn and the tensions between the government and opposition parties are reaching a high point.” He also reports there has been a significant number of “challenges made to the role of High Representative Christian Schmidt. Schmidt is still attempting to implement certain rules and regulations, but is facing a lot of opposition from the Republika Srpska part of the country,” he says.

Speaking of new laws and regulations, there are proposed changes in several areas. “There is a new bankruptcy law in the Federation of Bosnia and Herzegovina, which updated the overall framework with modern instruments to be implemented in settlements with creditors,” Dimitrijevic reports. “Also, the law on pension insurance in the same part of the country has been updated, so that unmarried couples can also benefit from spousal coverage.”

However, what’s most interesting is the new law on fiscalization enacted in Republika Srpska. “This has always had a strong opposition from the lawyers and the private sector as such,” Dimitrijevic stresses. “The bar association feels that lawyers should be exempt from fiscalization on grounds of privacy. While the government agrees with this point, it was not included in the law itself but was left to be specified in delegated acts and bylaws.” Still, Dimitrijevic feels that the independence of lawyers will remain a concern: “giving the government the competence to decide who falls under the auspices of the law and who doesn’t is a less than ideal situation.”

Finally, going over the most interesting deals of late, Dimitrijevic mentions a few. “The formerly regionally owned laboratory Konzilijum was sold to Medicover, where we have assisted one of the sellers. Also, the UNIS factory in Derventa was sold via an asset deal – in the wind-down procedure of this former giant – to Fructa Trade,” he reports. “We are, of course, witnessing various projects developing renewable energy across the country”. With Bosnia & Herzegovina offering a nice environment to work in, he says “IT developers are expected to be moving here in high numbers, reflecting the growth of the IT sector.” The IT sector, Dimitrijevic concludes, “is performing admirably, in stark contrast to those business sectors suffering from international supply chain issues, like construction. Also, Bosnia & Herzegovina and all countries in the region should anticipate the impact of the distorted supply chain, as it is not unrealistic to see, in the near future, the relocation of some of the production activities closer to the consumers, placing them in the region instead.”

Sajic has successfully represented the interests of Elektroprenos BiH in a commercial dispute worth over BAM 30.5 million with Elektroprivreda Hrvatske Zajednice Herceg Bosne before the Republika Srpska Supreme Court.

According to Sajic, EHZHB sued Elektroprenos BiH for over BAM 30.5 million, based on its investment in “electricity transmission in the period from 1992 to February 28, 2006, which became an integral part of the [Elektroprenos BiH] business during its establishment.”

“The Higher Commercial Court in Banja Luka upheld the decision of the District Commercial Court in Banja Luka rejecting the Plaintiff’s claim as unfounded, and the Supreme Court in Banja Luka ruled on May 17, 2022, deciding in accordance with the extraordinary legal remedy, i.e., the revision declared by the plaintiff, and issued a verdict rejecting the revision as unfounded,” the firm announced.

The Sajic team included Managing Partner Aleksandar Sajic and Attorney Tijana Banjac.

Corporate restructuring and transformations, such as status changes, are part of the business cycle of companies and represent their natural way of growing, adapting to changes in the market and exploring new business opportunities.

The importance of status changes, especially from the perspective of protection of shareholders (but also employees, creditors and other stakeholders) and the need to create a legal framework governing the implementation of status changes of resident companies of different Member States, was recognized at the European Union level. Thus, in 2005, Directive 2006/56/EC on cross-border mergers was adopted, and repealed in 2017, with the adoption of the Directive 2017/1132 on certain aspects of company law. The procedure for cross-border mergers is regulated within a special section of the latter Directive, which regulates the respective matter in the EU in a uniform way. The creation of a single legal framework for cross-border mergers has resulted in increased mergers in the EU and the European Economic Area (“EAA”): the number of cross-border mergers increased by 173% between 2008 and 2012, showing that the Directive has significantly increased cross-border activities. Consistent implementation of the Directive in national legislation differentiates the competencies of national authorities, determines national law, optimizes the costs of cross-border mergers, and protects shareholders and third parties.

Taking into account the specifics of the constitutional order of Bosnia and Herzegovina, and that the business operations of companies is regulated at the entity level, the issue of the applicable legal framework and in general the possibility of implementing status changes of companies based in different entities arises. Additional questions arise if the companies participating in the status changes are subject to special regulations (depending on the activities they are engaged in), either at the state (e.g. telecommunications, air transport, etc.) or entity level (e.g. financial activities, insurance activities, etc.).

Thus, for example, in the event that companies are participants in the merger of companies engaged in financial activities, there will be an obligation to obtain prior approval from the regulator (Banking Agency), for both (or more) companies.

The current legislation in the FBiH recognizes and separately defines three types of status changes: mergers, acquisitions and divisions. In the literature and other legislation (e.g. Republika Srpska) there is another type of division of status changes – merger (where the merger, and merger with the incorporation are differentiated) and division, which can also occur in several variations, i.e. as (i) division with merger, (ii) division with incorporation or (iii) division with merger and division with incorporation. Hereinafter, the term “merger” will be used in reference to the merger status change (incorporation of a successor company) and an acquisition status change (merger with a successor company).

The procedure for merging companies is different in the FBiH and RS. Therefore, if the companies participating in the merger have their registered office in two different entities, each of the companies is obliged to follow the prescribed steps according to the legislation of the entity of which it is a resident. There may be some inconsistencies and practical obstacles in implementing all legal guidelines (e.g. in FBiH companies compile a Reorganization Plan containing a written auditor’s report, while in RS they compile a contract subject to independent audit; in RS independent auditors of merging companies are appointed by the court in an out-of-court proceeding, while in the FBiH companies elect auditors, etc.). However, the decisive criterion for resolving disputed issues (i.e. whether to adapt to the legislation of FBiH or RS) would in this case be the address of the head office of the successor company.

In essence, although mergers of companies based in different entities are not explicitly regulated, there are no legal obstacles to conduct such process. Undoubtedly, a single regulation regarding status changes in both entities would facilitate and increase the number of status changes of companies. However, the option left to companies with the aim of “facilitating” the merger procedure is to change the registered office before initiating a status change. Consequently, the participating companies would have their registered office in the same entity, and the same merger procedure would apply to the participating companies. If, on the other hand, a change of registered office would cause disproportionate difficulties (e.g. the need to obtain additional approvals / permits if the company is subject to special regulations), companies would most likely decide to skip this step and follow the merger procedures prescribed by entity regulations.

In addition to special restrictions and rules prescribed for companies participating in status changes (if they exist due to the type of activity in which the company is engaged), it is necessary to take into account the regulations on market competition, which are prescribed at the BiH level.

Thus, for example, the companies participating in the merger, which do not belong to the same group or are not under the same ultimate control, will be required to report the intended change to the Council of Competition if*:

a) the total annual income of all participants in the merger generated by the sale of goods and/or services on the world market is BAM 100,000,000 according to the closing accounts in the year preceding the merger; and

b) the total annual income of each of at least two companies participating in the merger realized by selling goods and/or services on the market of Bosnia and Herzegovina is at least BAM 8,000,000 according to the closing accounts in the year preceding the merger, or if their joint share in the relevant market exceeds 40%.

*If the companies participating in the merger are financial institutions or (re)insurance companies, special provisions of the Competition Act of BiH shall be applied for the calculation of their total income.

In addition to the legal implications that should be considered, the merger procedure may have significant tax repercussions. E.g. if the participants in the merger are registered VAT payers, it is necessary to perform a detailed check whether the factual situation meets the conditions for non-taxable transfer of all or part of the taxpayer’s property. If this is not the case, the transfer of one taxpayer’s assets to another would be considered VAT taxable supply in BiH, resulting in a potentially significant increase in costs.

Furthermore, from the aspect of corporate income tax, it is important to determine whether there is the continuity in taxation, in which case the tax liability would be determined as if there was no status change.

As far as the organizational presence is concerned, upon completion of the status change of the merger, the successor company will have its registered office in one of the entities. However, if the successor company intends to retain employees and continue to operate in another entity, it is necessary to establish a form of organizational presence in that entity as well (e.g. a branch). Therefore, the question of the purposefulness of cross-entity merger arises, because the same has a purpose only if the predecessor company will completely cease to exist in one entity. But on the other hand, status changes are generally aimed at expanding the market and opening possibilities for new business opportunities.

The lack of a single legal framework for cross-entity mergers makes it difficult for companies to grow and expand naturally in the market, and results in additional costs on the part of shareholders. The need for uniform regulation of the subject matter in a way that will protect employees, founders, as well as other stakeholders is increasingly noticeable, and activities with the competent authorities should be intensified to initiate its creation.

The potential for status changes, as facilitators of economic development, in Bosnia and Herzegovina due to the existence of legal and procedural barriers is unfortunately still undiscovered.

By Aida Hamur, Attorney at Law, Legal Partners

Zlatan Balta has joined Legal Partners, in cooperation with Deloitte Legal, as the leader of its legal practice in Bosnia & Herzegovina.

Specializing in competition, corporate/M&A, and dispute resolution, Balta joined from CMS, where he had been working since 2012, first as a Senior Associate, between 2012 and 2016, and later as an Attorney at Law, between 2017 and 2022. He holds an LLM degree in EU Business Law from Lund University and an LLB degree from Sarajevo University.

“I am delighted to join Legal Partners, in cooperation with Deloitte Legal,” commented Balta. “Addressing the complex business issues clients nowadays face requires the dedicated attention of legal, financial, accounting, and tax professionals. I look forward to working with the broader Deloitte network to develop and bring practical solutions to the pressing needs of our clients and to further strengthen the position of Legal Partners, in cooperation with Deloitte Legal, as a full-scope law firm.

With 2022 being an election year for Bosnia, there is not a lot of market activity, according to BB Legal Partner Nenad Baros. There are crypto-related legislation updates on the horizon, however, and the market has settled down following the sale of Sberbank assets in the country to local banks.

“Every two years Bosnia & Herzegovina faces an election cycle,” Baros begins. “Two years ago we had local elections and in October of this year we will be voting on members of parliament.” As Baros explains, every time an election comes around the market experiences “a few months of little to no activity.”

On the plus side, Baros also reports that the market has settled down following bank runs in late February. “When the war in Ukraine started, there was a lot of uncertainty on the market which prompted people to quickly withdraw their assets. Further, the two Sberbank entities present in Republika Srpska and the Federation of BiH were taken under control of the banking agencies and quickly sold to local banks,” he says. 

As Baros explains, the two Sberbank banks were sold to Nova Bank, in the Republic of Srpska, and to Prevent Group’s Asa Bank, in the Federation of BiH. “Although there was a lack of transparency in the purchasing process as well as the existence of a disputable legal basis for the expropriation of the rights of a foreign investor on the bank’s shares, this transactions has, ultimately, led to a resurgence of market trust and stability,” Baros says. “The two banks were of a mid-market size, but by no means negligible – their sale calmed things down quite a bit.”

Finally, talking about proposed legislative updates, Baros points to the draft law for regulating cryptocurrencies. “There is a proposal being debated currently about introducing a regulatory framework for cryptocurrencies in Republika Srpska. Under this proposal, the Securities and Exchange Commission would have a critical role on the market, especially when it comes to preventing anti-money laundering and control over the participants in the cryptocurrency market,” Baros reports.

So far, Baros reports that the reactions have been split, with many being skeptical as to the ability of the Securities and Exchange Commission to efficiently monitor the market. “On the other hand, I – as many others – feel that having a framework in place is much, much better than having none. This may be a good first step, especially given the problems that cryptocurrency market participants have had, operating without a clear regulatory frame in Bosnia & Herzegovina,” he adds. “I hope that the proposed solution will take into account all the specifics of this market and will not introduce excessive formal barriers that could ultimately result in more harm than good. Anyway, it would be more than interesting to see how this will work in practice”, Baros says in conclusion.

Baros Bicakcic & Partners and Bojovic Draskovic Popovic & Partners have successfully represented Viaduct d.o.o. in an ICSID claim against Bosnia and Herzegovina.

According to BB Legal, Viaduct owned a 99% stake in a local company that won the concession to build two hydropower plants on the Vrbas river in Bosnia and Herzegovina but was never allowed to build the actual plants, with their rights eventually expropriated. The EUR 40 million claim, according to the firm, was for loss of profit.

“What makes this case particularly interesting,” BB Law Partner Nenad Baros commented, “is that this was one of the first, if not the first, disputes in the region which involved third party funding,” with the Partner saying an undisclosed fund invested EUR 3 million in the case.

The BB Law team included Baros, Partner Feda Bicakcic, and Associate Todor Duvnjak.

The BD2P team was led by Partner Uros Popovic and included Partner Marija Bojovic and Senior Associate Stefan Golubovic.

According to Ibrahimovic & Co Managing Partner Adi Ibrahimovic, “the EU’s engagement with Bosnia and Herzegovina has gone through sporadic periods of intensifying cooperation and uncertain situations,” leading Dimitrijevic & Partners Partner Davorin Marinkovic to summarize the current status as: “frankly speaking, the public perception is that nobody actually knows.”

According to Nedzida Salihovic-Whalen, independent attorney at Law working in cooperation with CMS-RRH Vienna, Bosnia and Herzegovina received the status of a potential candidate in 2013, with the SAA being signed in June 2008 and coming into force on June 1, 2015. Marinkovic explains that in May 2019, the Commission adopted the Opinion and an accompanying analytical report, which sets out 14 key priorities. These are, according to Maric & Co Senior Partner Branko Maric, a required step “for the Commission to recommend the opening of EU accession negotiations with Bosnia and Herzegovina.” Marinkovic adds that “in December 2019, the Council of the EU welcomed the Opinion and called on the Commission to focus its annual reports for Bosnia and Herzegovina, starting with the 2020 report, on the implementation of those key priorities.”

With the EU accession process consisting of seven stages and “given the fact that Bosnia and Herzegovina is still in this phase of EU accession, a realistic timeline is hard to determine as it depends on a variety of factors,” Maric says. According to him, “in its 2020 assessment of Bosnia and Herzegovina [the EU determined] that the country ‘is overall at an early stage regarding its level of preparedness to take on the obligations of EU membership and needs to significantly step up the process to align with the EU acquis.’” This leads Marinkovic to argue that “there is an overall impression that today the accession is more distant than ever,” especially since “this pessimism goes both ways.” Ibrahimovic echoes the difficulty in identifying any realistic timeline and notes that “it seems unlikely that the fundamental reforms required to adapt to European standards will happen in the near future.” And Salihovic-Whalen grounds this feeling by explaining: “The most important condition for further steps towards EU membership is the successful harmonization of legislation and the implementation of reforms. It is a never-ending lengthy process which is demanding especially for the entities that are required to transpose a large number of EU regulations.”

The Complexity of BiH’s Set-Up

Marinkovic explains that, “due to the specific position of Bosnia and Herzegovina as a post-conflict country under something that may be considered an international tutorship, there has been strong involvement of the international community in drafting new legislation through technical assistance projects. In some cases, it was purely transmission of the directives, without really understanding the meaning of the words, and the ultimate result is that neither the public nor private sectors were mature enough for some pieces of legislation.”

Maric explains that BiH’s “political structure is very complex, and the harmonization process covers all structural levels of the state.” He notes that the “harmonization required by the EU has two separate dimensions: one regulates the harmonization of a complete body of the state’s legislature (state, entity, and cantonal levels) with that of the EU, while the other regulates matters of internal harmonization, with the goal of making legislation and case law uniform across entity lines.”

In terms of legislation, Ibrahimovic says that “many laws in Bosnia and Herzegovina have been harmonized, some of which are the law on residence and stay of foreigners, labor law, election law, and so on.” Salihovic-Whalen adds that “progress has been made so far in the area of customs legislation, on visas, border management, and asylum and migration, and in the areas of intellectual, industrial, and commercial property rights.” Marinkovic also points to competition, environment, energy, public procurement, consumer protection, data protection, and the judiciary as areas that were “fully and partially harmonized.” Regarding the second dimension, on internal harmonization, Maric notes, however, that “case law lacks consistency … Ultimately, it was concluded by the 2021 Report of the Commission that Bosnia and Herzegovina needs to establish a judicial body to ensure the consistent interpretation of the law and harmonization of case law across the country.”

On the Docket

“The most important reforms are related to an independent and effective judiciary and civil service, in order to create a positive environment for business,” says Marinkovic.

On the latter, Ibrahimovic explains that “Bosnia and Herzegovina is at an early stage with public administration reform, with very slow progress on ensuring a professional and depoliticized civil service and a coordinated countrywide approach to policymaking. To guarantee a professional civil service, civil service procedures must be based on merit principles and free from political interference. However, in practice, the situation is still significantly different.”

On the former, Salihovic-Whalen points to the European Commission emphasizing that BiH “requires systemic reforms in important segments of the Rule-of-Law, such as the judiciary, and it is crucial that such reforms are primarily in the interest of the state and its citizens.” Ibrahimovic notes that “court proceedings are still very unpredictable, lengthy, and uneven in decision-making. It is clear that, without the reform process of these areas, there is no legal certainty.” Marinkovic adds that “enforcement of contracts is extremely slow, and this is quite discouraging for the business community and foreign investments.”

Mixed Feelings – or Simply Mixed Numbers

Ibrahimovic explains that, when it comes to joining the EU, “public perception in Bosnia and Herzegovina is always an ungrateful topic, due to diverging data on each issue.” Indeed, he points to two conflicting surveys – one from the Bosnian Directorate for European Integration and one from the Balkan Barometer. While the first shows a drop in support for membership between 2016 and 2018, from 76% to 56%, the second indicates that the number of people assessing membership as ‘good’ increased from 33% in 2016 to 47% in 2019. Salihovic-Whalen, however, reports that the Directorate for European Integration conducted a public opinion poll in October 2020, which concluded that “in the event of a referendum on membership in the European Union, 75.6% of respondents would vote to join the EU.”

Salihovic-Whalen provides some nuance as to the thinking behind the different responses. According to her, respondents of the October 2020 poll identified “the guarantee of lasting peace and political stability (33.2%), freedom of movement of people, goods, and capital (26%), and respect for laws and regulations (18.4%)” as the main reasons for supporting accession. “Respondents who do not support BiH’s accession to the EU cited the fear of higher living costs and taxes as the most common reason (41.7%).”

“The public opinion regarding the accession of Bosnia and Herzegovina has been shaped by the centrifugal and centripetal forces of Euroskepticism and Europhilism,” Maric explains, adding that “the overall drag of the accession process casts a shadow of disappointment on both Bosnian and EU institutions.” Marinkovic too says that “fatigue of the general public about the topic is progressively increasing, or, to put it in other words, people are less interested in the debate about joining the Union as nobody really expects it will actually happen.”

At the end of the day, Maric believes that “the predominant mindset remains, however, supportive. Although some discrepancies in support exist across entity lines, the majority of all three chief ethnic groups remains pro-European.” Salihovic-Whalen concludes that “BiH and its citizens share the goals, values, and principles of the EU, are determined to develop society on the system of values and achievements of European democracies, and aspire to be an integral part of modern European political, economic, and security structures.”

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.