Category: Bosnia and Herzegovina

Although Bosnia & Herzegovina is relatively small, and despite the ongoing COVID-19 crisis, Bojana Bosnjak-London, Partner in the Corporate/M&A practice of Maric & Co in Sarajevo, reports that her team has been busy, noting that they were “lucky to land quite a few good deals.”

Specifically, Bosnjak-London points to the agreement signed in April by Aluminij Industries d.o.o., the Bosnian subsidiary of Israel’s M.T. Abraham Group, to restart production. According to her, with over 1,000 employees, Aluminij Industrie used to among the most influential aluminum producers in the region, but production was shut down last year due to growing debt. The recent deal, Bosnjak-London reports, followed lengthy negotiations between M.T. Abraham and the government. “Things are now looking very good,” she says. “Some of the employees have already been re-hired, and production is expected to start soon.”

The firm also recently advised Shandong International, and its Bosnian subsidiary SDHS-CSI BH Banja Luka, on the Banja Luka-Prijedor-Novi Grad highway construction project: the first concession for a highway construction project in the country.

Finally, Bosnjak-London says, the firm is providing ongoing advice to the Fortenova group, which was formed from Agrokor. “They have 11 subsidiaries here and we are advising them on all the settlement implementation issues that are coming up,” Bosnjak-London says, explaining that a settlement was achieved following the procedure of extraordinary administration imposed on Agrokor, which included the transferring of the company’s business activities to the new group.

“There is not much to report in terms of trends since the market is pretty much dead,” Bosnjak-London says. “We benefited from a trend of Middle-Eastern investors looking at the country, but that was last year, and while losing that is slightly compensated by Chinese activity, with the pandemic we are not overly-optimistic about the general attractiveness for investors.” Her practice’s pipeline keeps her busy. “M.T. Abraham should be a long term project and Fortenova will also likely continue to supply work for a few years.” Beyond that, she says, the firm is “probably looking at quite a lot of restructuring and insolvency work in the near future – we are not really expecting too much in terms of FDI, irrespective of how much it is needed.”

Indir Osmic has made Local Partner at CMS Sarajevo.

Osmic, who joined CMS in 2011, graduated from the University of Sarajevo in 2008, and obtained his Master’s degree at the American University, Washington College of Law in 2013.  

According to CMS, during his time at CMS, Osmic “has helped develop the Energy and Tax practice areas at CMS Sarajevo. He has become an invaluable team member and a trusted team leader for numerous deals, including the CEE Deal of the Year 2018 (KPA Unicorn).” According to the firm, “he has continuously received excellent feedback from his clients in the fields of corporate law, financial law, real estate law, energy, compliance, and tax law. Moreover, he has also shared his expertise in many publications and represented CMS as a speaker at numerous conferences.”

Bosnia and Herzegovina (BH) is a contracting party to the Energy Community. As such, it has undertaken the obligation to align its energy sector legislation and transpose the Third Energy Package in the gas sector, among others. Such alignment in the gas sector requires the adoption of state and entity-level legislation to ensure unbundling, third party access, the liberalization of the wholesale market, end-consumer protection, and adequate interconnectivity.

However, almost 15 years after the Energy Community Treaty, BH still remains far away from complying with its requirements in the gas sector. One of the structural problems is the lack of state-level legislation. To date, the legislation regulating the gas sector exists only at the level of the entities (Federation Bosnia and Herzegovina (FBH) and Republic of Srpska (RS)) but not at the level of BH, although the deadline for adopting a state-level Law on Gas expired in 2017. 

Currently, the FBH continues to apply the 2007 Regulation on the Organization and Regulation of the Gas Sector in Federation of Bosnia and Herzegovina which regulates the organization, rules, and conditions for carrying out energy activities in the natural gas sector, the rights and duties of natural gas sector participants, the separation of the system operator’s activities, third party access to the natural gas system, and the opening of the natural gas market. The Regulation is outdated and fails to transpose any key principles of the gas acquis. Additionally, there is no gas regulator in the FBH.

As opposed to the FBH, RS enacted its entity-level Law on Gas in 2018, transposing the unbundling and certification requirements and relevant provisions on capacity allocation, transparency, and congestion management from the Third Package.

In order to meet the requirements of the Third Energy Package, it is necessary to regulate gas sector topics at the level of BH. Due to the ongoing lack of alignment with the acquis in the gas sector, BH is in a serious and constant breach of its commitments as a contracting party to the Energy Community Treaty. The lack of state-level legislation, which has long been an issue of concern to the Energy Community Secretariat, has resulted in the initiation of several infringement cases against BH and poses a significant obstacle to the development of the gas sector at a national and regional level, thus jeopardizing the achievement of the key objectives of the Energy Community Treaty.

Why is BH still missing state-level legislation in the gas sector? Formally, because the FBH and the RS cannot reach the consensus necessary to adopt a state-level Law on Gas. The reasons for this, as in many similar cases in the past, lead us to chicken and egg dilemma. The roadmap set by the Secretariat and the relevant BH and entity-level authorities outlines the need to adopt a state-level Law on Regulator of Electricity and Natural Gas, Transmission, and Electricity Market (the “Law on Regulator”) and a state-level Law on Gas. The RS has withheld its approval for the adoption of a state-level Law on Regulator and has instead adopted an entity-level Law on Gas, giving its entity level authorities the competences which should properly be delegated to the state-level authorities. On the other hand, the FBH does not provide the consensus necessary for the adoption of a state-level Law on Gas.

The development of the gas sector and much-needed construction of new gas infrastructure in order to ensure the security of supply and diversification of gas routes and sources, the modernization and adequate maintenance of existing gas infrastructure, the management of gas price competitiveness, and the standardization of key gas topics, remain hostage to the political relations between the two entities.

Hopefully, this crisis will not last much longer and entities will find a way to overcome the disputes and enable further development of the gas sector.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Petar Mitrovic, Partner, and Amina Dugum, Senior Associate, independent Attorneys at Law in cooperation with Karanovic & Partners

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Maric & Co has successfully represented the interests of Swietelsky Baugesellschaft m.b.H in the Constitutional Court of Bosnia & Herzegovina in appellate proceedings regarding a tax dispute against the country’s Office for Indirect Taxation.

According to Maric & Co, “the issue that many taxpayers faced was that when they were entitled to a tax refund from the OIT, instead of refunding the VAT, the OIT would order a full review of the taxpayer, and the taxpayer would not receive the refund for the entire time the review was being made, in addition to the time it would take to resolve any potential disputes. When the VAT refund was finally made, the OIT did not pay the interest for the period that the payment was delayed.”

In the Swietelsky Baugesellschaft case, Maric & Co reports, the Constitutional Court “on June 4, 2020, adopted a judgment which overturned the judgment of [court of lower instance] and established a ‘violation of [the] property rights of the appellant as protected by Article II/3.k of the Constitution of Bosnia and Herzegovina and Article 1 of the Protocol to the European Convention, the violation of which was committed by the  rejection of the request of the appellant for payment of interest for delayed payment of VAT refund, by arbitrary application of the legislation, and therefore it cannot be concluded that the interference with the appellant’s property rights was ‘legal’ in accordance with Article 1 of the Protocol 1 to the European Convention.’” 

As a result, Swietelsky Baugesellschaft was awarded over BAM 3 million in interest.

Maric & Co described the decision of the Constitutional Court of Bosnia and Herzegovina as being “of historical significance for taxpayers in Bosnia and Herzegovina and … a first step for changing the long-term injustice they were subjected to. This decision represents a turning point in the relationship of the Office for Indirect Taxation and taxpayers, [and] also of the Administrative Disputes Department of the Court of Bosnia & Herzegovina, which many times in the past accepted standpoints of the OIT as the supreme authority when it comes to tax issues.”

The Maric & Co. team was led by Managing Partner Branko Maric.

Maric & Co has successfully represented the interests of Swietelsky Baugesellschaft m.b.H in the Constitutional Court of Bosnia & Herzegovina in appellate proceedings regarding a tax dispute against the country’s Office for Indirect Taxation.

According to Maric & Co, “the issue that many taxpayers faced was that when they were entitled to a tax refund from the OIT, instead of refunding the VAT, the OIT would order a full review of the taxpayer, and the taxpayer would not receive the refund for the entire time the review was being made, in addition to the time it would take to resolve any potential disputes. When the VAT refund was finally made, the OIT did not pay the interest for the period that the payment was delayed.”

In the Swietelsky Baugesellschaft case, Maric & Co reports, the Constitutional Court “on June 4, 2020, adopted a judgment which overturned the judgment of [court of lower instance] and established a ‘violation of [the] property rights of the appellant as protected by Article II/3.k of the Constitution of Bosnia and Herzegovina and Article 1 of the Protocol to the European Convention, the violation of which was committed by the  rejection of the request of the appellant for payment of interest for delayed payment of VAT refund, by arbitrary application of the legislation, and therefore it cannot be concluded that the interference with the appellant’s property rights was ‘legal’ in accordance with Article 1 of the Protocol 1 to the European Convention.’” 

As a result, Swietelsky Baugesellschaft was awarded over BAM 3 million in interest.

Maric & Co described the decision of the Constitutional Court of Bosnia and Herzegovina as being “of historical significance for taxpayers in Bosnia and Herzegovina and … a first step for changing the long-term injustice they were subjected to. This decision represents a turning point in the relationship of the Office for Indirect Taxation and taxpayers, [and] also of the Administrative Disputes Department of the Court of Bosnia & Herzegovina, which many times in the past accepted standpoints of the OIT as the supreme authority when it comes to tax issues.”

The Maric & Co. team was led by Managing Partner Branko Maric.

Bosnia & Herzegovina’s Maric & Co. is reporting that it has been selected as a member of a preferred service provider panel for the INA Grupa companies, within the MOL Group program of external legal services.

The INA Grupa companies include Energopetrol d.d. Sarajevo and Holdina d.o.o. Sarajevo.

A scandal shaking the pharmaceutical market of Bosnia and Herzegovina for several years now related to the unlawful delisting of foreign medicines manufacturers has moved to a silent but almost thriller-tense phase as the country awaits the Court of Bosnia and Herzegovina’s final decision. The current countdown was preceded by a unique crisis in 2018, when two subsidiaries of foreign pharma giants that had been delisted decided to fight back, even as a number of smaller players liquidated their companies and withdrew from the market. 

The background of the story is heavily related to the organization of the BiH health care system, which reflects the country’s administrative division and is governed by the Federation of Bosnia and Herzegovina’s (FBH) and Republic of Srpska’s (RS) Ministries of Health. These ministries implement their representative entity’s Laws on Medicines, with an additional level of complexity arising from the existence of yet another administrative division – the ten Cantons in FBH, each with its own Ministry of Health. These ministries create the lists of medicines financed by public funds (i.e., health insurance funds). These health insurance funds implement mandatory health insurance based on the principles of solidarity, mutuality, and equality. Use of the benefits of the compulsory health insurance is conditioned upon payment of the contribution for health insurance. Funds collected from the contributions are then used to finance the lists of medicines available to citizens on the basis of a MD prescription.

The FBH List of Medicines, which includes the pharmaceutical names of the medicines rather than their trade names or their manufacturers, serves as a basis for the Cantonal lists. Those Cantonal lists, however, are created from applications made by the manufacturers which produce the pharmaceuticals required by the FBH list. Hence, the Cantonal Lists consist of specific trade names of medicines and their manufacturers, which is where the plot starts to develop. 

The procedure for the adoption of the Cantonal Lists provides that the applicants need to meet the criteria defined by The Rulebook on Closer Criteria for Placement and Elimination of Medicines from the Lists of Medicines, and usually, once medicines are placed on the list, they remain there until the criteria for elimination from the list are satisfied. Country of origin is not listed as a criterion for being admitted to the list – or for being delisted. This, however, did not prevent the Government of Canton Sarajevo, the economic leader and capital of Bosnia and Herzegovina, from delisting most of the foreign manufacturers from the Positive Lists of Medicines in the renewal process that took place in 2016. The exclusion of foreign manufacturers was justified by the Government of Canton Sarajevo by the existence of sufficient applications to the list by domestic manufacturers with the same pharmaceutical products, and the fact that nearly 40 million euros were allocated from the Cantonal Health Insurance Fund to foreign manufacturers in the previous year. The absurdity of this justification is related to the fact that it is contrary to relevant legislation, which states that regardless of how many applicants with the same pharmaceutical product appear, or how much money they earned in the past year, if they meet the prescribed criteria, they must be placed on the list. The rationale of this legislative solution was to provide the citizens funding the list with greater choice, instead of being limited to a specific manufacturer chosen by the Cantonal Government.

The Cantonal Government misinterpreted Article 9 of the Law on Medicines of FBH supporting the domestic pharmaceutical industry, which says that “…it is obligatory to also include domestic pharmaceutical industry medicines…, in addition to medicines of originators as well as foreign pharmaceutical industry medicines.” Unfortunately, it was incorrectly interpreted to create a sort of descending exclusive list, with domestic manufacturers coming first, and with foreign originators (and then, finally, foreign generic manufacturers), turned to only if the domestic manufacturers lacked the specific pharmaceutical product required by the FBH List.

The consequence of this interpretation was the delisting of a great amount of medicines present on the market for decades and used by the very contributors to the funds, many for chronic conditions, who now being denied their traditional therapy.

Several cases were initiated before the Competition Council against the Cantonal Government and the Federal Ministry of Health.     Due to contradictory decisions by the Competition Council, the matters were taken to the Court of Bosnia and Herzegovina and are pending.

By Emina Saracevic, Partner, Saracevic & Gazibegovic Lawyers

This Article was originally published in Issue 7.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Maric & Co has advised Shandong International and its Bosnian subsidiary SDHS-CSI BH Banja Luka on the Banja Luka-Prijedor-Novi Grad highway construction project.

Maric & Co describes the highway infrastructure project, that is “worth over EUR 300 million, [as] the single biggest investment in highways in Republika Srpska and Bosnia and Herzegovina in the past couple of years.” According to the firm, “it is also the first time highway construction is being carried out under a concession arrangement in Bosnia and Herzegovina, since all existing highways have been constructed by state-owned public companies who are operating them without a concession.”

The Maric & Co team was led by Managing Partner Branko Maric and included Partner Bojana Bosnjak-London, Senior Associate Slaven Dizdar, and Associate Nebojsa Maric.

“All activities in Bosnia & Herzegovina in the past two months have had to do with the state of emergency caused by the crisis, as they will for the foreseeable future,“ says Dino Aganovic, Head of Legal and Compliance at Heta Asset Resolution in Sarajevo. Nonetheless, he says, as dangerous as the virus is, he believes in being cautious about the steps taken to address it. “I must admit that I’m a bit of a skeptic when it comes to complete shutdowns,“ he says. “The global economy is sliding into a recession that is bound to impact poorer societies in terrible ways. We need to be thinking about the future as well, not just the present.“

Aganovic notes that, although Bosnia & Herzegovina is relatively small, it is nonetheless “so complex a web of different jurisdictions and legislative frameworks, [and with] three and a half million people, living as parts of two entities, with over ten cantons.“ As a result, he says, “sometimes the different approaches to the outbreak yield ridiculous results – like one of the entities having a curfew and the other not, so if you want to go from point A to point B you sometimes have to go around some territories otherwise you’d get a fine!“ Of course, such differences also cause variations in PPE requirements and similar matters.

Aganovic says that a number of economic stimulus measures – so-called “Corona Laws“ – have been enacted. “However, the business sector has not taken to them so well and there are clear signals they were not enough, and that they were ushered into effect too late.“ Bosnia & Herzegovina has negotiated a EUR 330 million loan from the IMF to battle the economic harms of the crisis, but Aganovic reports that there is “a feeling that the loan is only there to secure the income of those working in the public sector – not to put out the fires in the economy country-wide.“

“The pandemic has fully fleshed out the corruption that exists in Bosnia & Herzegovina,“ Aganovic continues, pointing to what he calls the “extremely expensive and non-transparent public procurement“ of respirators that turned out to be “unusable in ICUs.“ In his opinion, that particular story was just the tip of the iceberg. “We have local elections scheduled for October, so the citizens will have an opportunity to try and get their voices heard.“

In the meantime, Aganovic says that “the courts have pretty much been locked down for the past two months, and pieces of legislation of questionable legality, from a constitutional perspective, have been passed to regulate the issues of deadlines for court proceedings by freezing them.“ He sighs. “I think that legal professionals will have their hands full taking care of the mess the crisis has caused. We’re likely to see an increase of NPL transactions as well as a mountain of work in settling contractual and employment disputes, and I wouldn’t be too surprised to see the country itself sued more than a few times.“

Maric & Co has advised the European Investment Bank on a loan to Intesa Sanpaolo Bank in Bosnia and Herzegovina.

According to Maric & Co, “out of the EUR 60 million loan, EUR 25 million is aimed to fund further SME activities in Bosnia & Herzegovina and the rest will be directed towards environmental protection, energy efficiency, knowledge economy and infrastructure, health, and education.”

Maric & Co’s team was led by Senior Partner Branko Maric.