Category: Montenegro

“Immediately after gaining independence in 2006, Montenegro set EU accession and the integration process as one of its foreign policy priorities,” says Jovovic, Mugosa & Vukovic Managing Partner Vanja Mugosa. “It started membership negotiations with the EU in 2012 and has so far opened all 33 negotiating chapters, three of which have already been temporarily closed: Chapter 25 (Science and Research) in 2012, Chapter 26 (Education and Culture) in 2013, and Chapter 30 (External Relations) in 2017.”

Mugosa reports that, “although one of the youngest countries in Europe, Montenegro is today a leader in European integration.” Vukmirovic Misic Managing Partner Lana Vukmirovic-Misic seconds that, pointing to the latest European Commission Report, published on October 6, 2021, according to which, “Montenegro’s commitment to the goal of European integration is regularly stated as the country’s top priority and this mostly translates to policy decisions, as well.”

There are still hurdles along the way, though. According to Vukmirovic-Misic, “it is important to emphasize that Montenegro is the first country to start negotiations under the ‘new approach to negotiations’, which is much more complex because the key Chapter 23 (Judiciary and Fundamental Rights) and Chapter 24 (Justice, Freedom, and Security) are opened at the beginning of the negotiation process and will remain open until the end. These two chapters have the role of ‘controller of negotiations’ and, in case of a standstill, the entire negotiation process can be called into question.” Mugosa reports that, in terms of the current status, “negotiations for Chapters 23 and 24 are still ongoing, as is the verification of compliance with the final benchmarks for their closure.” In particular, according to Vukmirovic-Misic, the ‘point of tension’ is Chapter 23, with the 2021 EU Report stating that “Montenegro has made limited progress overall in this area and is only moderately prepared to apply the EU acquis. Constant concerns regarding this field have been expressed by EU officials and it remains an important area with great space for improvement for Montenegro.”

And “Montenegro has been explicitly warned that further accession shall depend on visible progress on the rule of law,” Vukmirovic-Misic says, pointing out that the initial “closing benchmark dates for each chapter were determined throughout the process of accession, all ranging from 2013 to 2017 and, therefore, have all expired.” Mugosa is equally uncertain: “Having in mind the duration of the integration process so far, as well as that of other countries in the region, it can be said that neither realistic deadlines nor a conclusion about the duration of negotiations can be drawn by analogy – it depends, from state to state, on the specifics of the process itself and the readiness of the legal system and other institutions to support it.”

The Grind Is There…

“Montenegro is constantly working on harmonizing its legislation with EU acquis,” according to Vukmirovic-Misic, who points to 157 laws being adopted between 2016 and 2020, as part of the government’s Programs of Accession to the EU.

While “key legislation in all negotiating areas has been largely adopted and harmonized with EU law,” Mugosa explains that “this is a long-term process, harmonization continues and new regulations or their amendments are still being adopted, depending on the requirements of the European Commission.” According to him, some of the most significant regulations passed are the Company Law, the Law on Public Procurement, and the Law on Capital Markets, with “all legislation concerning the field of competition” having been harmonized. And he expects several more laws or relevant amendments by the end of the current year: Law on Prevention of Money Laundering and Terrorism Financing, amendments to the Criminal Code, Law on the Origin of Property, Lustration Law, Lobbying Law, amendments to the Law on Free Access to Information, Law on Personal Data Protection, and amendments to the Law on Judicial Cooperation in Criminal Matters with EU Member States.

It is also “necessary for Montenegro to achieve visible and measurable results in the implementation of these laws,” Mugosa adds. “Therefore, the implementation of regulations and the creation of the necessary infrastructure for their implementation is something that awaits us in some areas and will perhaps be a more complex process than the harmonization of regulations, which is mostly completed.”

… Yet More is Needed

Vukmirovic-Misic points out that “the European Commission, in its EU Report 2021, states that the most important legal acts it expects are a Public Administration Reform and changes regarding the judiciary system.” She stresses the importance of regulating the financial market, including: “the Law on Payments, the Law on Credit Institutions, and the Law on Recovery of Credit Institutions, which have been subject to changes and new legal solutions in the past few years. It is of great importance to establish good solutions in these areas, in order to protect the financial market.” She agrees that the Law on Prevention of Money Laundering and Terrorism Financing should be a priority, as should the Law on Electronic Documents, the Law on Electronic Communications, and the Law on Information Security.

Mugosa, on the other hand, focuses on the “point of tension” mentioned earlier – Chapter 23. “Montenegro has been in the so-called ‘acting position status’ for quite a while, which significantly complicates the work of institutions in the judicial system,” he explains. “Namely, the Montenegrin Parliament has not yet elected a certain number of members of the Judicial and Prosecutorial Councils. The election of members of the Judicial Council has been awaited for more than three years, and that of the Prosecutorial Council for half a year.” In terms of what led to this, he points to “the impossibility of securing the required 3/5 majority for the election in Parliament, while the ruling majority cannot agree on the choice of members for the Prosecutorial Council.” To make matters worse, “the Constitutional Court and the Supreme Court work with significantly reduced capacities. The Constitutional Court should have seven judges, and currently has five, and that number will be further reduced soon, due to retirement. Having in mind the rules for functioning and the decision-making procedure of the Constitutional Court, the work of this court will, consequently, be blocked. The Supreme Court, which should have 17 judges, currently only has six – due to different interpretations of the provisions on the retirement of judges, which have led to a large number of resignations and dismissals.”

Spirits Are High

According to Vukmirovic-Misic, the Centre for Democratic Transition found that accession to the EU is supported by over 60% of citizens, “of which almost a third consider that Montenegro is moving as fast as circumstances allow and expect for the country to become a member of the Union by 2025, with more than half believing that young people would benefit from joining that community.” Mugosa, in turn, points to a survey of the General Secretariat of the Government of Montenegro carried out this year, “on the attitudes of citizens on European integration and the process of Montenegro’s accession to the EU, [which] showed that 73.8% of Montenegrins support accession to the European Union strongly or to some extent.”

“The high level of support among citizens and political parties, at the moment, supports the thesis that Montenegro will become a member of the EU whenever it meets all the criteria necessary for full membership,” concludes Vukmirovic-Misic.

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.

NSTLAW has advised the EBRD on preparing a Business Re-organisation Assessment for Montenegro.

According to NSTLAW, “this assessment focusses on the re-organization procedure according to Montenegrin legislation. In this way, the bank and investors are informed about what they can expect when investing in a company in reorganization. According to the assessment, the average duration of business reorganization in Montenegro is from six to nine months. Further, according to the data available from the website of the Commercial Court in 2020, there were 437 initiated bankruptcy proceedings, while there is no indication of the number of initiated re-organization proceedings.”

NSTLAW’s team included Partner Nenad Stankovic, Junior Associate Jelena Zivkovic, and Legal Trainee Teodora Markovic.

“The word that best describes recent times in Montenegro is uncertainty,” according to BDK Advokati Partner Luka Popovic.

That uncertainty, Popovic says, “is not just on account of the pandemic. There has been some political turmoil in the country – a most peculiar situation where the government does not have the clear support of the parliamentary majority.” Popovic reports that this has led to a major legislative slowdown in 2021, with the pace being picked up only by the end of the year.

“The final days of 2021 saw a comprehensive tax reform taking place,” he says. “The government issued a new program called Europe – Now, that sought to increase the net wage in Montenegro.” The new minimum wage, Popovic says, is EUR 450, but the funds for this came directly by cutting taxes: “Healthcare contributions are no longer an obligation for employers. Instead, healthcare will be funded directly from the budget, and the tax cut difference that employers got will be funnelled towards their employees.”

Also, an untaxable part of one’s earnings has been introduced and the country swapped its proportional taxation system to a progressive one. “This means that businesses no longer have a flat 9% tax rate, but are facing a bracketed one – of 9%, 12%, and 15% – based on their income.” Popovic feels this is a most sensitive area to be regulated, seeing how it could affect Montenegro’s allure as an investor-friendly destination.

“The state has lost a major source of revenue – so it will now have to find the money elsewhere to fund the healthcare system,” Popovic continues. “It will be great if the government’s prediction is right and the revenue from other sources proves sufficient to offset this loss.” If that does not work, Popovic says that the country might have to go deeper into debt or increase taxes. “If further tax reform shuffles the tax rates some more – that will only lead to a greater sense of unpredictability, which is not good for business.”

The government has decided to extend the program of economic citizenship, set to expire by the end of 2021, for another year, according to Popovic. “This enables foreign citizens to apply for a Montenegrin citizenship, based on an investment in a pre-approved tourism project,” he says. “The program is yet to justify expectations in terms of the number of applicants, most likely due to the ongoing pandemic – so extending it is a good thing.” Popovic reports that the EU does not see this program in a fair light, “mostly due to previous experiences with Cyprus and Malta, but it should not damage the relations between Montenegro and the Union.”

The pandemic, Popovic says, highlighted the fact that “Montenegro does not have a well-diversified economy. Still, tourism aside, I think the energy sector might prove rather fruitful in the upcoming period.” He says the government repeatedly stated that renewable energy was a major goal, but that more effort from their side is required: “Preparation of tender procedures, urban-planning documentation, and other preparatory activities for such projects must be more efficient. There are several potentially valuable projects and the only thing needed right now is government action. Investors are ready to move in, but they cannot do all the heavy lifting themselves.”

Finally, Popovic says Montenegro could potentially become more welcoming for digital nomads. “All of those who have the option of remote work could be a valuable source of income for the country,” he says. “This is something which has already been realized in Croatia – with the country banking on its Adriatic coast being inviting for many – and is a credible path forward for Montenegro as well.”

“The word that best describes recent times in Montenegro is uncertainty,” according to BDK Advokati Partner Luka Popovic. 

That uncertainty, Popovic says, “is not just on account of the pandemic. There has been some political turmoil in the country – a most peculiar situation where the government does not have the clear support of the parliamentary majority.” Popovic reports that this has led to a major legislative slowdown in 2021, with the pace being picked up only by the end of the year.

“The final days of 2021 saw a comprehensive tax reform taking place,” he says. “The government issued a new program called Europe – Now, that sought to increase the net wage in Montenegro.” The new minimum wage, Popovic says, is EUR 450, but the funds for this came directly by cutting taxes: “Healthcare contributions are no longer an obligation for employers. Instead, healthcare will be funded directly from the budget, and the tax cut difference that employers got will be funneled towards their employees.”

Also, an untaxable part of one’s earnings has been introduced and the country swapped its proportional taxation system to a progressive one. “This means that businesses no longer have a flat 9% tax rate, but are facing a bracketed one – of 9%, 12%, and 15% – based on their income.” Popovic feels this is a most sensitive area to be regulated, seeing how it could affect Montenegro’s allure as an investor-friendly destination.

“The state has lost a major source of revenue – so it will now have to find the money elsewhere to fund the healthcare system,” Popovic continues. “It will be great if the government’s prediction is right and the revenue from other sources proves sufficient to offset this loss.” If that does not work, Popovic says that the country might have to go deeper into debt or increase taxes. “If further tax reform shuffles the tax rates some more – that will only lead to a greater sense of unpredictability, which is not good for business.”

The government has decided to extend the program of economic citizenship, set to expire by the end of 2021, for another year, according to Popovic. “This enables foreign citizens to apply for a Montenegrin citizenship, based on an investment in a pre-approved tourism project,” he says. “The program is yet to justify expectations in terms of the number of applicants, most likely due to the ongoing pandemic – so extending it is a good thing.” Popovic reports that the EU does not see this program in a fair light, “mostly due to previous experiences with Cyprus and Malta, but it should not damage the relations between Montenegro and the Union.”

The pandemic, Popovic says, highlighted the fact that “Montenegro does not have a well-diversified economy. Still, tourism aside, I think the energy sector might prove rather fruitful in the upcoming period.” He says the government repeatedly stated that renewable energy was a major goal, but that more effort from their side is required: “Preparation of tender procedures, urban-planning documentation, and other preparatory activities for such projects must be more efficient. There are several potentially valuable projects and the only thing needed right now is government action. Investors are ready to move in, but they cannot do all the heavy lifting themselves.”

Finally, Popovic says Montenegro could potentially become more welcoming for digital nomads. “All of those who have the option of remote work could be a valuable source of income for the country,” he says. “This is something which has already been realized in Croatia – with the country banking on its Adriatic coast being inviting for many – and is a credible path forward for Montenegro as well.”

Vacant Supreme Court Justice positions, as well as the inability to appoint a Minister of Justice, is affecting the justice system and Montenegro’s EU integration prospects, says Vukmirovic Misic Managing Partner Lana Vukmirovic Misic.

“At the moment, the judicial system is experiencing major challenges,” Vukmirovic Misic begins. “In July and August, due to amendments in the Pension Law, the judicial council decided to terminate the power of 23 judges, leaving only 6 judges in power in the Supreme Court. Such composition is not sufficient for the judicial decision-making process, therefore, the court is unable to decide the majority of cases,” she notes.

According to Vukmirovic Misic, “since July, the position of Minister of Justice is vacant, and the Interior Minister is undertaking its duties, which in addition to the incomplete composition of the Judiciary Councils adds more complexity to the appointment process of judges.” She says that this is heavily influenced by the overall political situation in the country.

“Overall, such challenges in the judicial system and the inability to appoint Minister of Justice is also influencing the prospects of the EU Accession in the coming years,” she says.

With regards to legislative updates, Vukmirovic Misic points out that the Parliament’s activities have been very low. “The government does not enjoy the support from the parliamentary majority. Therefore, any legislative proposals are difficult to move forward.” She says, that some of the crucial legislation, including tax laws, have not passed public debates before they were sent to Parliament. “Tax-related legislative updates, if adopted, should be in force from January 2022, which leaves a very short time for businesses to adjust to new requirements.”

Despite ongoing challenges, Vukmirovic Misic notes: “The market is slowly waking up compared to last year and even though it has not reached the pre-pandemic level, we are still optimistic about the future.” According to her, the market has seen several big transactions in the field of TMT, such as the sale of Delta City and 4iG’s acquisition of Telenor, soon to be finalized. “Another recent transaction was signing of the contract for construction of Kotor-Lovcen cable car with Leitner Consortium,” she adds.

Digital nomads, cyber risk insurance, and an ever-growing energy sector – these are the hottest topics in Montenegro right now, according to CMS Partner Milica Popovic.

“The most interesting topic in Montenegro right now are digital nomads,” Popovic begins, “and the fact that the government has canceled the requirement that businesses pay for healthcare.” She reports that, from a business standpoint, this has attracted attention from foreign investors to open up shop in Montenegro. “I would expect that the final legal framework dealing with digital nomads in Montenegro will end up looking like the one in Croatia,” Popovic continues, indicating that it is expected for this to occur in 2022. “In Croatia, digital nomads are not required to pay any income tax but, on the flip side, must not work for Croatian employers.”

As another interesting development, Popovic underlines an increase in the number of legal questions regarding insurance matters. “This is not a highly visible topic, but there has been an uptick in legal matters dealing with professional liability insurance and cyber risk insurance,” she says.

On the one hand, professional liability insurance, according to Popovic, has mostly to do with the increase in the number of large infrastructural projects that are currently in development. “A great number of foreign investors, contractors, and subcontractors have come to Montenegro to work on these – especially in the energy sectors,” she says. “And they are all required to obtain appropriate insurance, so the uptick in this area is logical.”

On the other hand, Popovic says that cyber risk insurance is becoming an inevitability. “It might, at first, appear that many businesses in the region are not fully aware of all the cyber threats out there – but the pandemic has made sure that awareness gets raised,” she says. “I expect the cyber risk insurance sector to grow even more, and for us to witness an increase in cooperation between large insurance companies and IT companies, such as Google, Microsoft, or Apple.”

Popovic foresees that all business sectors that rely on IT solutions will, at one point, be forced to form their own cyber risk assessment teams. “The market is becoming more and more aware of the immediate risk that cyber-attacks represent – and is preparing to react,” Popovic says. “Once there is a realization of a cyber risk – you have to be ready to react within hours.”

Finally, on insurance, Popovic adds that there was an increase in the number of legal questions surrounding business interruption policies as well. “The key question a lot of clients ask was if there was a legitimate business interruption situation in the case where countries have applied restrictive measures to combat the pandemic – mostly in the hospitality industry.” She says that, ultimately, the answer to that question was ‘no’, but that an increase in work occurred nonetheless.

In conclusion, Popovic highlights a steady trend of growth in the energy sector of Montenegro. “There is a markable growth, especially in solar and wind power, with a few wind and solar power energy parks under construction.” Additionally, Popovic says that a fact-finding study on Montenegro’s energy supplies on the seaside should be completed in near future. “We are expecting to see the results of this study by the end of the year – it should provide information on whether Montenegro has any oil reserves at its disposal.”

Change is brewing in Montenegro. The country finds itself exposed to both unprecedented internal and external factors, turning the gears and taking Montenegro in an uncharted direction. The COVID-19 pandemic has, for the last eighteen months, been putting pressure on economies, health systems, and the people themselves, forcing humanity to combat a deadly adversary through measures unseen in modern history. Montenegro was no exception and had to adjust to the new situation adopting preventive measures in order to mitigate the negative effects of the pandemic. An external factor, the virus, was not the only thing that shook things up for the Montenegrin people. There has been a large upset in the political scene, with the parliamentary election being narrowly won by the opposition, removing the Democratic Party of Socialists from power. The new government is faced with many challenges, including continuing the development of the energy sector through innovative and appropriate legislative, regulatory, and strategic action.

The previous Government had adopted the third socio-economic package, as the means of reducing the negative effects of the pandemic, ensuring that energy companies in Montenegro are willing to invest over EUR 1 billion, of which EUR 734.6 million within the next four years, in order to improve the state of the energy sector. Three state-owned companies, Elektroprivreda Crne Gore, Crnogorski Elektrodistributivni Sistem, and Crnogorski Elektroprenosni Sistem, will be the largest investors in the following period. Investments, such as new photovoltaic panels on the roofs of households, increasing the amount of solar energy harvested, and reducing other, less efficient and environmentally harmful, ways of producing energy have been announced. Additionally, the construction of new solar (Briska Gora), wind (Gvozd), and hydro (Komarnica) power plants have been planned and announced.

Another topic of high importance is the construction of small hydropower plants. In December 2020, the procedure of approving the construction of these plants has been halted, while the previously concluded concession contracts are under revision. For example, the approval process for the construction of the Slatina hydropower plant, in the Kolasin municipality, has been stopped until the contract can be reviewed. The Government established a task group with the sole purpose of reviewing said contracts. On December 29, 2020, just twelve days after the group was formed, concession contracts for seven small hydropower plants have been terminated. The construction of small hydropower plants remains a burning topic not just in Montenegro but in neighboring countries as well, especially in Serbia.

The European Union has adopted a policy of reducing and hopefully eliminating carbon dioxide emissions. Montenegro, a country seeking EU membership, has to adapt its coal-dependent energy-producing facilities. A new energy strategy is underway, which will focus on renewable energy sources and look to achieve a complete coal phase-out. The Montenegrin National Energy and Climate Plan (NECP), once completed, will prescribe a deadline by which the coal phase-out will have to be achieved. The legal basis for the development and adoption of the NECP was included in the Law on Energy in July 2020. However, this will be a difficult task to accomplish. One of the largest power plants and thus largest producers of electricity is the thermal power plant in Pljevlja, which is coal-fired. This makes TTP Pljevlja, consequentially, a major carbon dioxide emitter. Shutting down TTP Pljevlja would mean a significant strain on the state’s budget, as many people would lose their jobs, prices would go up for both citizens and companies, and the stability of the entire system would be endangered, at least until new, climate-neutral, capacities have been constructed (the previously mentioned solar and hydropower plants and wind farms). As a token of its commitment, Montenegro joined the Powering Past Coal Alliance (PPCA), which promotes coal phase-out and the transition to clean energy, and announced it would stop using coal by 2035 at the latest.

However, things are not going smoothly, as TTP Pljevlja has breached the 20,000 operating hours allowed under the coal opt-out mechanism, which resulted in the conduction of an infringement procedure against Montenegro. Innovative new projects, designed to further improve the energy sector, such as the construction of the first floating solar power plant, have attracted attention from foreign investors.

Entering the new decade, Montenegro has shown serious dedication to improving its energy sector and participating in the global attempt to reduce harmful emissions by transitioning to clean and renewable energy sources in the future. Hopefully, the planned changes will actually be implemented, and Montenegro will serve as a shining example for the other regional countries.

By Igor Zivkovski, Partner, Zivkovic Samardzic

This Article was originally published in Issue 8.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Even with the political situation in the country being turbulent, Montenegro has a lot to look forward to, especially given the success of this year’s tourism season, according to Vujacic Law Partner Jelena Vujisic.

“The turbulence of the times is to be expected, given that the recent political change of the ruling party has been the first of its kind in the past thirty years,” Vujisic says. Milo Djukanovic’s party lost the parliamentary majority in the last elections and has since been in the opposition. Still, irrespective of the political friction, Vujisic believes that the “people of Montenegro are done being yanked around by political clashes – they are more prone to focus on their own matters.”

Speaking of the new government, Vujisic reports that there hadn’t been much legislative action in the past few months. “Given that it was a time of summer recess of sorts, for the legislative bodies, there is nothing much new to report on,” she says. “The main focus of the new government has been – as it has stated on many occasions – the path to EU accession. All of the negotiation chapters have been opened and a major push is expected to close them all soon, and become a part of the European family.” 

The one thing that is constantly being discussed is, as Vujisic reports, the amendment to the framework regulating the Council of Prosecutors. “Still, even with all of the talk surrounding the matter, no concrete movement has happened yet,” she says.

“The tourism sector has been our shining star this year,” Vujisic continues, reflecting on the Adriatic country’s economy. “It has outperformed all of our expectations and has, in some ways, been even better than 2019!” With 2020 hitting Montenegro hard, Vujisic says that this year has, so far, been a “thread of good fortune. The atmosphere surrounding the economic projections is most positive.”

Finally, Vujisic reports that all the other sectors of the economy have been business as usual, as of late. “All of the major projects that have been in motion are still ongoing and it would appear that some have even sped up,” she says. “This, in spite of the still-ongoing pandemic, is a very good sign. We may even be looking at a complete bounce-back for next year!” Vujisic concludes on a positive note.

Even though it’s been a year since its parliamentary elections, the outcome still seems to be the talk of the town and the biggest influence on business in Montenegro, according to Schoenherr Partner Slaven Moravcevic. 

“The new government, that was formed in December of 2020, is still getting its grips on things, somewhat,” Moravcevic says. “The governmental change has created a new dynamic that has, without a doubt, reflected on the investment atmosphere.” 

Moravcevic reports that the new government is still “taking stock” meaning that some ongoing investment transactions – especially those that had the Montenegro state as a counterparty, have grinded to a halt. On the other hand, Montenegro is still an attractive investment destination for foreign investors. “This, by and large, is reflected the most on the real estate, energy, and tourism sectors, but others are impacted as well,” Moravcevic says. “The government is trying to create an operational framework for itself and this has affected beginnings of several large projects.” 

What is noticeable, Moravcevic says, is an increase in arbitration disputes – some even including the Montenegrin state – that could reflect on the economy, going forward. “There have been several arbitration proceedings initiated by investors, that attracted the attention of other investors” Moravcevic reports. “Several large projects have halted, with investors waiting out the entire situation in the country.”

Finally, Moravcevic says that it is difficult to predict when will the new government kick it up a gear and re-energize the investment climate of the Balkan country. “It is very difficult to make any projections and predictions, especially when it comes to the direction the government will take,” he says. “What we can notice, however, is that the entire region – Croatia, Serbia, North Macedonia – has bounced back economically, to an extent, following the pandemic in 2020. Life has found a way forward and, with the latest vaccination efforts, it is likely to pick up speed,” Moravcevic concludes.

 

Despite its diverse terrain and impassable regions, Montenegro has made remarkable progress in developing its infrastructure and transport network over the last couple of years.

One of the most important infrastructural projects in Montenegro is the construction of the Bar-Boljare highway. The highway is part of Corridor 11, which will link Serbia and Montenegro with the European Union countries, and will expand from Timisoara in Romania, through Vrsac, Belgrade, Cacak, Pozega, and Podgorica, to Bar, and eventually will be connected to Bari, in Italy, across the Adriatic Sea.

Also, another infrastructure project being considered is a section of the Adriatic-Ionian highway that would be the fastest connection between Eastern and Western Europe, and which – together with the Bar-Boljare highway – would significantly contribute to the development not only of Montenegro but of the entire region.

In February 2017, the Government of Montenegro adopted the Railway Development Strategy for the Period 2017-2027. The main goal of the Strategy is to develop the entire railway system, integrating it into the Single European Railway Area (SERA). The overall goal of SERA is to revitalize the railway sector and make European railways more innovative and competitive compared to other models of transport. One of the main goals of Montenegro is to develop a railway system that is market-oriented and sustainable, and which facilitates the development of the country’s economic and tourism sector.

As Montenegro has 288.2 kilometers of coastline on the Adriatic Sea, maritime transportation has a significant role in the country’s economy, tourism, and everyday life. There are six ports in Montenegro currently open for international traffic: Bar, Budva, Kotor, Port Kumbor-Portonovo, Tivat, and Zelenika. These ports are important centers not only of maritime traffic of Montenegro, but also of the entire Adriatic coast. A significant contribution to inland maritime transport is the ferry, that transports passengers on the domestic route from Lepetani to Kamenar (Boka Kotorska).

In terms of air transportation, pursuant to the Law on Concessions on October 11, 2019, the Government of Montenegro has adopted a concession act to sell the concessions for Montenegro’s Tivat and Podgorica International Airports to the competitively-selected best bidder, who will establish and register a legal entity with a seat in Montenegro for performing the concession activity. The subject of the concession is the construction, reconstruction, modernization, maintenance, and use of the Airports of Montenegro. On December 25, 2020, the Government of Montenegro announced its decision to close indebted flag carrier Montenegro Airlines at the end of December and set up a new air carrier, ToMontenegro, which should become operational in 2021. Montenegro Airlines had been struggling with financial problems for many years, and the COVID-19 pandemic and associated restrictions on movement were the final blow.

The COVID-19 pandemic has had a negative effect on transportation and infrastructure all around the world, and Montenegro is no exception. The Government of Montenegro adopted measures regarding transportation restrictions in order to contain the spread of COVID-19 infections.

Consequently, there has been a significant decline compared to previous years in the area of transportation of passengers and goods, affecting road, air, rail, and maritime transport. The situation has had an extremely negative impact on Montenegro’s economy – especially in the tourism sector, which has suffered unfathomable damage.

Due to the COVID-19 pandemic all of the Government of Montenegro’s attention has been focused on preventing the transmission of the virus and preserving human health, while minimizing the negative consequences of the COVID-19 pandemic on the country’s economy. Therefore, all planned infrastructure and transportation projects have been significantly slowed down.

Bearing all circumstances in mind, it may be a while before Montenegro is able to return to the path of economic development it was on before the pandemic struck.

By Igor Zivkovski, Partner, Zivkovic Samardzic Law Office

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.