Category: Bosnia and Herzegovina

Due to the complex constitutional structure of Bosnia and Herzegovina (composed as it is of two entities, Republika Srpska (RS) and Federation of BiH (FBiH), and the Brcko District), logistics, transportation, and shipping matters are regulated on the state level, entity level, and – in FBiH – cantonal administrative level.

In general, although legislation in Bosnia and Heregovina (BiH) is not yet highly developed, recent changes and amendments show improvement, as BiH aims to align its legislation with EU standards (in particular under the terms of the BiH Stabilization and Association Agreement, which requires the country to complete that process by the middle of 2021). Consequently, a new Customs Policy Law was adopted to simplify the procedure of export and import (although for that law to be fully implemented a new Law on Value Added Tax also needs to be adopted). It should be noted that BiH has certain strategic advantages when it comes to the free movement of goods, as it has a solid network of free trade arrangements.

On the other hand, BiH’s complex structure has led to a lack of legislative uniformity when it comes to logistics, transportation, and shipping, and the existence of three different public postal companies with different procedures and practices, two state railway companies (divided on a territorial basis), and similar complexities inevitably leads to more time spent in “processing” than on actual transport.

FBiH, RS, and BiH have adopted a Transport Strategy to develop the local economy and social environment by securing the sustainable growth of the transport system and developing a system that will improve the mobility of goods and people and ensure physical access to markets, jobs, and education, as well as achieving other social and economic needs.

Logistics, transport, and shipping in BiH is carried out by both public and private (national and international) companies. Three public postal carriers exist in BiH – Posta Srpske, BH Posta, and HP Mostar – in addition to a number of private companies. Unofficial numbers suggest there are around 180 registered transporters.

There are approximately 25 thousand kilometers of roads in BiH, out of which only 200 are highways. A spotlight has recently been directed on the expansion of the highway network, and several new sections are currently under construction.

The Sava River, which is open for international sailing and acts as a border, has valuable economic potential, especially in the view of navigation and provision of conditions for the economic movement of goods. The main ports in BiH are Brcko, Samac, and Brod.

Four airports are currently operational in BiH. The main one is the Sarajevo International Airport, but the airports in Tuzla, Mostar, and Banja Luka are also considered to be of significant value to BiH logistics, transportation, and shipping. Currently, work is in progress to expand the Sarajevo International Airport by adding another terminal due to increased traffic, both in goods and people, and the airport in Tuzla has been recently renovated. Interestingly, BiH did not have control over its air space above ten thousand meters due to insufficient capacity, so that control was given to Croatia, Serbia, and Montenegro. Only on December 5, 2019 did BiH take control over of most of its high airspace, and significant income is expected due to the amount of flights through BiH’s airspace.

Although its potential is not being wholly realized, there are more than one thousand kilometers of railways in BiH, with 57% in FBiH, 40.4% in RS, and 2.6% in Brcko. Certain initiatives have been launched to reconstruct existing railway lines and further develop the railway network.

Even though BiH is showing improvements in all fields regarding logistics, transportation, and shipping, it seems that there is a lot more to be done in order to be on par with other EU countries.

By Indir Osmic, Head of Public Sector Matters, and Stefan Cosovic, Junior Associate, CMS Sarajevo

This Article was originally published in Issue 6.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

“Politically, we’re seeing a continuation of last year – even though the Federation of Bosnia & Herzegovina still has no government, at least the Bosnian Council of Ministers got formed,“ Says Olodar Prebanic, Partner at Prebanic & Jusufbasic-Goloman in Sarajevo. “This is a reflection of the situation in the entire country – the legislative pipeline is frozen, and there are no significant acts being passed on a Federal level.”

Thing are running a bit smoother in Republika Srpska, he says, due to the local government there being formed almost immediately following the 2018 elections. “There have been laws enacted in Republika Srpska that are already paying dividends in terms of easing the doing of business – including, first and foremost, the law that enabled legal entities to be incorporated electronically.“ Still, there are constant political clashes, and Prebanic states that “just recently the Canton of Sarajevo saw its government fall apart.“

Prebanic points out that, even though there are hurdles to long term strategic growth in the country, there is a “positive movement – especially with some projects that possess the capacity to create further value.“ In terms of construction projects, he says, “Sarajevo is seeing a strong boom, a few motorway projects – towards the Adriatic and another towards Serbia – have come unstuck after a lengthy tender process. Also, there is a large thermal power plant project in Tuzla, which I believe to be one of the biggest projects yet.“

In addition, Prebanic reports, “one of the most significant projects yet to take place in Bosnia & Herzegovina – the carbohydrate research related to oil and gas – is in the final stages of its tender process. This holds a lot of potential for economic growth and development and has the potential to spill over to other sectors of the economy.“

According to Prebanic, “it is expected that this year will bring an end to the ongoing conflict between lawyers and public notaries in the Federation,” which he believes would provide a much more conducive environment for doing business. Still, he concedes, this would require «a whole lot of legislative changes, most notably in terms of cadastral and notary laws.“

Finally, he refers to recent charges that have been brought against the Prosecutor General of Bosnia & Herzegovina. “While these charges are secret, I can say that they have to do with irregularities in performing the duties of the Prosecutor General, illegal expenditures, and having unauthorized personnel conduct investigations.“ Prebanic thinks that these proceedings are a good thing and a sign that “it is possible to criticize the work of the highest state bodies and to hold them accountable.“

“The Council of Ministers for Bosnia & Herzegovina was finally formed, after more than a year, following the elections that took place in October of 2018,“ says Partner Davorin Marinkovic of Banja Luka-based Dimitrijevic & Partners. “We can finally expect some processes to get unstuck, especially those related to infrastructure projects funded by international credits, such as the Corridor 5C motorway.“

When it comes to legislation, Marinkovic feels that the most important things impacting the ease of doing business occur on a lower level. “The entities of Bosnia & Herzegovina – Republika Srpska and the Federation of Bosnia and Herzegovina – have the most influence, through their legislative endeavors. Republika Srpska has a leg up here, due to having  entity government formed immediately following the 2018 elections, so things are running a bit more smoothly there.“

Marinkovic feels that despite the slow economic growth in Bosnia & Herzegovina, the country has a lot of potential. “Infrastructure and energy are in a position to boom. There are a lot of plans and ideas for development, but the problem is just that – they’re still in the idea stage.“ He feels that the highest of hopes are in the renewable energy sector, mainly wind parks and hydropower plants. “Other than that, things have been pretty quiet – there have been some consolidations in the telecommunications sector, some takeovers, but nothing much beside that.“

Baros, Bicakcic & Partners has successfully persuaded the High Commercial Court in Banja Luka to upheld the decision of the District Commercial Court obliging Addiko Bank to pay firm client Vucko d.o.o. Jahorina a total of over BAM 1 million in damages, interest, and court costs.

Vucko Jahorina is a luxury hotel on the Jahorina mountain and ski resort in Bosnia and Herzegovina.

According to Baros, Bicakcic & Partners, “the court found that [Addiko Bank] was unjustly enriched at the expense of the loan beneficiary by miscalculating interest, even though it was not a loan with a CHF currency clause, therefore, the court obliged the bank to pay interest it had unreasonably calculated and collected.”

The Baros, Bicakcic & Partners team was led by Partner Predrag Baros.

Less than a month after entering Slovenia, Andersen Global has entered into a collaboration agreement with Banja Luka-based Sajic in Bosnia and Herzegovina.

Sajic becomes the fourth firm in the region to sign a collaboration agreement with Andersen Global in the last month, following Miro Senica and Attorneys in Slovenia (as reported by CEE Legal Matters on October 28, 2019), Kallay & Partners in Croatia, and JSP in Serbia.

Sajic was founded by Managing Partner Aleksandar Sajic in 2003 and now includes four partners and almost 20 lawyers. Its agreement with Anderson Global expands the latter’s coverage to include nearly 65 countries around the world.

“Collaborating with Andersen Global enhances our service offerings and extends our cross-border reach,” said Sajic. “The organization’s global platform allows us to expand our capabilities and bring the benefits of a global firm to our clients.”

“The addition of Sajic provides us with a formidable solution in the region that will enable our firm to compete with the top firms in the region,” said Mark Vorsatz, Andersen Global Chairman and Andersen CEO. “Aleksandar and his team already have solid working relationships with our other legal firms in the region … and we will continue to add quality groups that embrace our values and bolster our ability to provide seamless, best-in-class client solutions worldwide.”

Sajic has successfully represented a photographer, Zivan Vanja Panic, in a copyright infringement case heard by the Sarajevo Municipal Court.

According to Sajic, the dispute involved the publication of a 1988 photo of a famous musician from the former Yugoslavia who was the frontman of one of the most popular music groups at the time. The defendant downloaded the photo, which had been taken by Panic, a citizen of the Republic of Serbia, with an analog camera, from Google’s Internet imaging platform and published it, without stating the author’s name. 

According to Sajic, “the court issued a judgment recognizing the plaintiff’s rights which were violated by one of the largest media companies in BiH. Namely, the defendant published the plaintiff’s photograph without authorization. Consequently, the court awarded damages of approximately EUR 4000 for violations of the author’s moral and economic rights.”

Sajic reports that “although this is a first instance court decision, it is very important to note that this decision is also one of the first decisions taken by the courts in Bosnia and Herzegovina regarding the protection of copyright in photography, especially considering the specificity of the case, and therefore making Bosnia and Herzegovina one of those countries whose courts consistently protect the author’s rights.”

The Sajic team was led by Senior Associate Ognjen Bogdanic.  

“Things on the state level have been rather stagnant because the government on the state level has not been formed yet, but much buzz was created around the Federation of B&H Government’s proposed new Law on Contributions and new Income Tax Law,” says Mirna Milanovic-Lalic, Partner at the Mirna Milanovic-Lalic i Jasmina Suljovic Law Firm in Sarajevo.

The proposed Income Tax Law increases the income tax from 10% to 13% and introduces a new tax on dividends, which MIlanovic-Lalic says is “causing an uproar” in the business community.

The IT Industry has been vocal about its opposition to the proposed legislation, as “it is a fast-growing industry, with IT companies employing a number of people with well above the average salaries, who will be affected by the new law,” she explains. Milanovic-Lalic says that the government will see how the new law actually affects IT companies before considering making additional changes. “I am sure the government will engage to see if they can in any way accommodate specific requests from IT companies,” she says, “but it is unlikely that they will be given special treatment.” 

According to Milanovic-Lalic, because the proposed Income Tax Law will tax parts of salaries that have not been taxed in the past, the opposition is insisting that a minimum salary is ensured, “so that employers do not use the new law to the disadvantage of employees.” Milanovic-Lalic herself does not believe the government would introduce a minimum wage, saying that it “would be unfavorable to the business community and would be seen as a constraint that burdens employers.”

When it comes to BiH’s proposed Law on Contributions, which includes social security insurance, she notes, the major difference from the current system will be a lowering of the cumulative percentage of contributions from 41.5% to 32.5%, which will be payable against the gross amount of the salary, including payments that were previously exempt.

Eventually, Milanovic-Lalic says, both laws will affect business in the country, with “some companies looking for alternative business models, alternative arrangements, or alternative destinations, and a more favorable environment.” She points out that doing business remains challenging, and unfortunately, she says, no market “can satisfy everybody.”

The Maric & Co Law Firm has represented former employees of Aluminij d.d. Mostar in an ethnic discrimination case against the company and the Government of the Federation of Bosnia & Herzegovina.

Aluminij d.d. Mostar is a Bosnian aluminum manufacturing company headquartered in Mostar, Bosnia and Herzegovina. In 2017 it reported revenues of EUR 249.41 million and its total exports amounted to EUR 171 million, making it the third-largest exporter in the country. It is 44% owned by the Government of Bosnia and Herzegovina, with the Government of Croatia owning another 12%. As a result of mounting debts, primarily to power supplier Elektroprivreda HZ HB, the company’s power supply was terminated, and in July 2019 it was decided that Aluminij would enter bankruptcy proceedings. It has also faced allegations, that, as reported by Amnesty International, during the civil war of 2002-2005, the company “…pursued a policy of ethnic discrimination, the effects of which continue to be felt, and elements of which continue to be practiced” leading the company to “…become a company with an overwhelmingly ethnic Croat workforce.”

According to Maric & Co., the firm’s success in the meant “the employees were entitled to total damage compensation in the amount of approximately BAM 1 million.” The firm’s team was led by Partner Ezmana Turkovic.

Maric & Co has successfully prepared a joint notification of concentration between South Korea’s LG Electronics Inc, and its client Lufthansa Technik AG and filed it to the Bosnian Competition Council.

According to Maric & Co, “the Bosnian Competition Council has decided that the concentration is compatible with the market.”

The firm’s team was led by Partners Dzana Smailagic-Hromic and Ezmana Turkovic.