Category: Montenegro

Montenegro first introduced a State aid control framework in 2011 in preparation for initiating the EU accession process. Almost ten years later, as the candidate country currently furthest along its accession journey, Montenegro has largely harmonized its State aid framework with the EU acquis. Still, the current level of enforcement and transparency leave a lot of room for improvement.

Competences Switch

In 2018, the competences of the Montenegrin Agency for Protection of Competition (APC) were expanded to include State aid control, in addition to its prior mandate to enforce the Montenegrin competition laws. This rectified one of the most significant flaws of the initial Montenegrin State aid control framework, namely, that the previous regulator, the State Aid Control Commission, was an arm of the Ministry of Finance, which brought into question its independence and the effectiveness of State aid control.

Combining the enforcement of competition and State aid control rules within one body is a solution some other countries in the region have chosen as well (including Croatia, before it joined the EU, and North Macedonia and Croatia). Potential logistics benefits aside, this approach should be beneficial in a jurisdiction such as Montenegro, which has less experience or track record with State aid control, and where further enforcement in the area can build upon the foundation of the antitrust and mergers enforcement history of the authority.

In its newest 2019 Progress Report, the European Commission highlights that the switch of competences to the APC is an improvement but recognizes that the building up of the APC’s State aid enforcement record is of great importance going forward. Montenegro’s progress in this area was confirmed in June 2020 by the official opening of Chapter 8 negotiations – the final Chapter in the country’s accession process – further cementing its frontrunner status.

Enforcement

By the end of 2019, the APC opened its first two ex post investigations into aid already granted to the Montenegrin national airline and into Adriatic Marinas, the operator of the Porto Montenegro marina, which had not been notified to and cleared by the regulator.

In 2018 and 2019, the Montenegrin Government seems to have paid out direct grants totaling EUR 12.7 million to Montenegro Airlines without receiving a green light from the regulator. The APC is now looking into the compatibility of these grants with the law. The main issue is that Montenegro Airlines is an undertaking in difficulty, which had already received restructuring aid totaling EUR 35.6 million as part of a 2012 Restructuring Plan; these new rounds of direct grants could thus be in breach of the one time last time rule according to which an undertaking in difficulty cannot receive restructuring aid, i.e., be rescued more than one time in a ten-year period.

In the Adriatic Marinas case – which was opened after the European Commission’s Montenegrin Delegation inquired about the aid in question – the APC is investigating whether relief of a utilities debt in the amount of EUR 5.6 million provided by the Municipality of Tivat constituted aid incompatible with the law.

Stepping Up the Game

These cases are surely a step in the right direction and are a sign of the APC’s readiness to take on bigger cases that involve important market players and high amounts of aid. In the upcoming period, the APC will also need to prioritize its advocacy activities, as stakeholders, and in particular entities that can act as aid grantors, have a rather low level of awareness and familiarity with State aid rules, which leads to grantors failing to notify the regulator about the aid. Similarly, a lack of third-party complaints that could significantly help the authority’s investigative efforts is also evident. Now that Chapter 8 has finally been opened, the APC will likely be under more pressure to step up its game and work towards realizing the European Commission’s recommendations in this area.

By Rasko Radovanovic, Partner, and Anja Tasic, Senior Associate, CMS

This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Harrisons Podgorica office has advised Aer Rianta International on its five-year duty-free concession to run retail stores at the Tivat and Podgorica airports in Montenegro. 

Financial details of the transaction were not disclosed.

Aer Rianta International is a Dublin-based owner and manager of duty free and duty paid retail outlets in Europe, Middle East, Asia Pacific, and the Americas. The company opened its first duty free shop at Shannon Airport in 1947. It currently employs over 3,000 people worldwide and manages a turnover in excess of USD 1 billion.

According to Harrisons, the company’s two stores, which will be branded “Montenegro Duty Free,” will open before the end of the year. According to the firm, “this concession represents an important step in Aer Rianta’s re-entering into the Balkans region. Within Europe, ARI also operates duty free shops at airports in Dublin, Cork, Larnaca, and Paphos.“ 

Harrisons‘ team consisted of Consultant Goran Martinovic, Senior Associate Milan Keker, Lawyer Ivan Pejovic, and Associate Aleksandra Bujkovic. 

The Law on Amendments to the Energy Act entered into force on 14 August 2020. It encompasses a set of changes aiming to simplify the existing procedures and to promote the development of the Montenegrin energy sector, especially in the context of the pending alignment of Montenegrin laws with the EU’s acquis, as required under the negotiation chapter no. 15.

• Renewable energy sources

  The principal aim of the Amendments is to enable the further expansion of the energy produced from renewables. The legislator stipulates the adoption of a new National Energy and Climate Plan (replacing the existing Energy Development Strategy) that will define the sources and scope of use of energy produced from renewables, based on the General Guidelines for Energy Policy and other relevant legislation referring to energy efficiency and the reduction of greenhouse gas emissions. The Ministry of Economy will determine the calculation methods of (i) total energy consumption for traffic purposes, (ii) energy produced in hydropower and wind power farms, (iii) the impacts of biofuels, bioliquids and comparable fossil fuels on the emission of greenhouse gases, and (iv) energy produced in heat pumps.

  By February 2021, the Ministry of Economy and the Energy and Water Regulatory Agency of Montenegro (“REGAGEN”) will adopt a set of documents relating to the energy produced from renewables and the calculation methods of different shares of energy in the total energy production. Furthermore, within the same deadline, the National Energy and Climate Plan and the Action Plan for Development and Usage of the Distant Cooling and/or Heating and High-Efficiency Cogeneration will be adopted. 

• Bilateral electric energy market

  A bilateral electric energy market has been introduced. It is a market in which the purchase and sale of electric energy is performed without intermediaries, i.e. solely by the two market participants concluding a bilateral electric energy purchase and sale agreement.

• Project of mutual interest

  A project of mutual interest is designated as a particular type of project that connects Montenegro with one or more contracting parties of the Energy Community and/or one or more EU Member States and which is in their mutual interest and implemented voluntarily, without being on the list of projects of interest of the Energy Community.

• Regulatory allowed revenue, prices and charges

  The application for determining the regulatory allowed revenue, prices or charges to the transmission/distribution system operator, gas storage operator, liquefied natural gas (“LNG”) facilities operator, and market operator will be submitted under the procedures determined by REGAGEN not later than within four months before the expiration date of the valid decisions on the determined prices. The entities concerned will make the applications for determining the regulatory allowed revenue and prices or charges on the grounds of (i) energy quantities, and (ii) business plans for the next regulatory period with accompanying clarifications of the differences to the achievements from the previous period. 

• Energy licences

  In contrast to the previous legal solution, REGAGEN might issue licences for performing energy-related activities on request of a business entity or a natural person who can prove that it employs staff possessing adequate professional certificates or provides evidence of a signed contract with a natural person with an adequate professional certificate or a legal entity that has staff possessing the necessary professional certificates for technical management, maintenance, exploitation and operation of energy facilities.

  The list of the energy activities which might be performed without a licence has been extended to (i) managing gas facilities for own purposes, and (ii) production, distribution and supply of thermal energy for distant cooling and/or heating. 

• Self-generation of renewable electricity

  The Energy Act provides that the end customer who produces electric energy from renewables or high-efficiency cogeneration for its own needs with the occasional transfer of the produced surplus to the distribution system, in the plants of installed power that do not exceed the value of connected power of the end customer, has the right to (i) consume the produced electric energy for its own needs, and (ii) store and sell the surplus, individually or through aggregation with other customers.

• Guarantee of origin

  The issuing authority, the register, and the contents of the guarantees of origin have been amended to achieve compliance with the widely accepted European practices. The guarantee of origin is envisaged as an electronic document, and the register of guarantees of origin has been transferred from REGAGEN to the market operator.

  The Amendments provide that the Government will adopt detailed conditions and the manner of issuing, transferring, using and withdrawing the guarantees of origin by November 2020. Furthermore, the market operator will adopt the rules on the guarantees of origin by May 2021. 

• Organised sale and purchase on the electric energy market

  The Amendments specify that the organised electric energy market will include (i) balancing electric energy market, managed by the transmission system operator, and (ii) electric energy market stock exchange managed by a legal entity established under Montenegrin corporate law. The list of electric energy market participants is correspondingly extended to include (i) a stock exchange that matches the supply and demand of electric energy and does not own its handover point (which will be fully functional by March 2021), (ii) a closed distribution system operator that purchases electric energy to cover losses of the closed distribution system, to satisfy its own needs and to supply the end customers in a closed distribution system, and which possesses its own handover point, and (iii) other entities temporarily connected to the transmission or distribution system for functional testing during the functional test.

• Connection to transmission or distribution system

  The main modification concerning the connections to the transmission or distribution system is the replacement of the consent to connection with a particular connection contract. In addition, a set of new rules concerning the construction of the connection infrastructure at own expense and the temporary connection to the electricity or gas transmission or distribution system of have been introduced.

• Expected digitalisation

  The Amendments provide that by August 2022 the following registers and records will be available in electronic form: (i) licence register; (ii) energy permits register; (iii) register of guarantees of origin; (iv) register of the privileged producers; (v) electric energy distribution operator’s records; (vi) market operator’s records; (vii) gas transmission system operator’s records; (viii) system operator for gas storages’ records; (ix) LNG system operator’s records; and (x) records of the competent local authorities in charge of the distribution and supply of the thermal energy for distant cooling and/or heating.

By Slaven Moravcevic, Partner, Luka Veljovic, Associate, and Ana Vukcevic, Attorney at Law, Schoenherr

Montenegro is continuing to develop its energy sector by creating appropriate legislative, regulatory, institutional, and financial frameworks to encourage greater investment from the private sector. As part of this process, Montenegro is moving towards harmonizing its energy legislation with that of the European Union, the Energy Community, the World Energy Council, and the International Energy Agency, recognizing energy as a pillar of the country’s overall, sustainable, and long-term stable development, with evident positive macro-economic effects.

Also, the Law on Amendments to the Law on Energy (the “Law”) is expected to be adopted in 2020. The Law will simplify and shorten the procedure for connecting users’ facilities to the electricity system, and to specify the legal framework for the stock-exchange-form of electricity trading. The Law will also clarify the provisions governing the pursuit of gas and thermal energy sources and set out more favorable conditions for the production of electricity from renewable sources.

To achieve the goal of developing the energy sector it is also necessary to maintain, rehabilitate, and moderate the existing infrastructure and create new infrastructure for the production, transmission, and distribution of energy, based on the principles of the fulfilling international technical standards, improving energy efficiency, reducing losses, making better use of renewable energy, and decreasing the negative impact on the environment.

According to official data, Montenegro has significant coal reserves and potential renewable energy sources including hydro-power, wind, biomass, thermal energy, and solar radiation, while possible oil and gas reserves are still in the exploration phase.

Montenegro produced more than 60% of its electricity from renewable energy sources in the last two years. The main sources of renewable power generation in recent years have been the Piva and Perucica hydropower plants.

The Electric Power Industry of Montenegro is planning to invest a total of EUR 700 million in the construction of new renewable energy capacities, as well as in the reconstruction of other power plants in accordance with environmental standards.

The plan for the period from 2020 to 2024 is divided into three development directions. The first refers to the diversification of existing electricity production, with a continuous increase in the share of renewable energy sources, through the construction of the Gvozd wind farm and Briska Gora solar power plant. The second consists of the construction of new hydroelectric power plants, which primarily refers to the Komarnica hydroelectric power plant and the reconstruction of five existing hydroelectric power plants owned by the EPCG. The third direction includes the improvement of the operation of the Pljevlja thermal power plant (“TPP Pljevlja») and the environmental standards in that city.

TPP Pljevlja is the first Montenegrin condensing thermal power plant designed with two units, although only one unit has been built. In September 2019, the Government of Montenegro halted the construction of the second unit of the TPP Pljevlja for environmental reasons, after which the EPCG decided to reconstruct the first unit of TPP Pljevlja, which should be completed by 2022. This improvement should ensure that all emissions and products of combustion of coal and chemical processes in the production of electricity will be below the permitted limits, in accordance with the regulations of Montenegro and strict EU directives.

It is also important to emphasize that new energy supply capacities have progressed with the launch of the 50 MW Mozura wind farm, Montenegro’s second largest, and with the issuance of several licenses to build and operate solar power plants, including a large 250 MW solar plant at Briska Gora, which will be one of the largest in Europe. Also, closing the deal for the construction of a 100.8 MW commercial wind farm in Brajici is expected to occur soon.

In 2019, Montenegro managed to produce electricity for ten consecutive days exclusively from renewable energy sources, joining a small group of countries in the world to have done so.

Montenegro will be able to produce 100% of its electricity from renewable energy sources in the near future if it continues to develop in this manner, and this development of the energy sector will be a good influence on other countries in the region.

By Igor Zivkovski, Partner, Zivkovic Samardzic Law Office

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.

Working outside of the employer’s business premises deeply conflicts with the traditional concept of the working environment based on the worker’s physical presence in a determined workplace. Nevertheless, exponential technological progress and globalisation trends have changed widely accepted notions about employment and placed work productivity above any other employment indicator. Therefore, the employee’s physical presence in the employer’s business premises has ceased to be a decisive condition for their inclusion in the organisation and processes. Furthermore, the COVID-19 crisis has demonstrated the significance and benefits of remote work and anticipated its expansion in the years to come.

Although Montenegrin labour laws already regulate remote work, many employers have been forced and rushed into the unplanned switch from traditional to remote work. Moreover, as the idea of remote work is relatively new in the Montenegrin labour market, the lack of relevant practice has increased employer’s risks of breaking the laws and left many employees uncertain about their rights and obligations.

The Montenegrin concept of remote work

Article 42 of the Montenegrin Labour Act envisages a special employment arrangement for work performed outside of the employer’s business premises. The scope of this employment agreement includes work activities directly deriving from the employer’s registered business activity, but also any other work activity which might be related to it. This employment structure might be implemented through two different modalities:

1. telecommuting (or remote work); and

2. work from home

Telecommuting refers to an employment arrangement where the work activities are performed using various information technologies (such as the internet, e-mail, telephone). Therefore, this employment arrangement encompasses the possibility of working from any place in the world and corresponds primarily to those business activities unaffected by frequent travel and which do not require the use of any additional materials and/or resources (apart from the information technologies).

On the other side, work from home occurs when an employee is performing their working duties mostly and continuously from their residence (regardless of whether the employee is the owner or a tenant). The institute of work from home is designed to accommodate the needs of those whose work might be performed remotely, but still requires the use of certain materials and/or machinery which cannot be rapidly and efficiently transferred from one place to another.

The most distinctive and attractive element of working outside of the employer’s business premises is the high degree of autonomy and the ability to freely organise one’s daily working schedule. Therefore, many tend to confuse and misinterpret the employment agreement for the performance of work activities outside of the employer’s business premises with similar labour law institutes, such as self-employment or the performance of so-called “free professions” (e.g. artists). The Montenegrin legislator clarifies that the performance of work activities outside of the employer’s business premises is a pure employment relationship, as it firmly reflects the position of legal subordination, i.e. a situation where the employee cannot refuse to perform their working duties and/or to comply with the employer’s other requirements. Therefore, an employee who performs work outside of the employer’s business premises still enjoys all labour and social rights and benefits deriving from the employment agreement and the applicable laws.

What to keep in mind

In March 2020, the independent, non-governmental organisation Montenegrin Employers Federation [Unije poslodavaca Crne Gore] issued an nonbinding opinion for its members that in case of extraordinary circumstances (such as COVID-19), remote work might be introduced solely based on the employer’s internal decision, which will be communicated to the employees.

Nevertheless, in the regular procedure, work performed outside of the employer’s business premises will be regulated by a special employment agreement. Apart from the standard elements of an employment agreement, it must contain at least the following information:

1. specification of the work activities and a clear description of how the work will be performed;

2. detailed work conditions and a mechanism by which the supervision of the work performed will be conducted;

3. the use of the employee’s equipment and resources for work purposes and compensation for such expenses;

4. compensation for all other expenses concerning the work performance; and

5. other rights and obligations deriving from the special circumstances of the employee’s work.

The employer is expected to keep special records of all employment agreements for work performed outside of the employer’s business premises. It also has a duty to notify the labour inspection about all employees performing their work in such a manner. The labour inspection can prohibit such work if (i) there is an imminent danger to the employee’s life and health, and (ii) the performance of the work activities outside of the employer’s business premises might endanger the environment and/or public health.

By Luka Veljovic, Associate, Ana Vukcevic, Attorney at Law, and Dejan Boric, Attorney at Law, Schoenherr

The new Montenegrin Companies Act (“Official Gazette of Montenegro”, no. 65/20) [Zakon o privrednim drustvima] (“Companies Act”), which entered into force on 11 July 2020, is an innovative and thoroughgoing codification of Montenegrin Corporate Law. The legislator opted for a comprehensive legal instrument which, compared to the previous law, contains more detailed and exhaustive rules determining the establishment, management, restructuring, termination and functioning of business entities.

The explanatory note accompanying the draft proposal of the new Companies Act accentuated three essential aspects of its rationale: (i) the need to eliminate those obstacles posed by the previous legal framework, created primarily by the principle of deregulation, which could not be adequately applied in the Montenegrin legal system; (ii) the harmonisation of Montenegrin law with European acquis communautaire; and (iii) the attempt to create a more reliable business and investment environment.

State-of-the-art legal solutions

The Companies Act, which contains 333 Articles compared to only 98 in the previous law, introduces several cornerstone changes:

No more company stamps

Business entities in Montenegro are no longer required to use ink stamps. Nevertheless, this provision is still expected to be scrutinised in the bylaws and legal practice.

Envisaged electronic registration

While the registration procedure of business entities within the Central Register of Business Entities (“CRBE”) remains mostly the same, the legislator created a space for further modernisation of the CRBE’s functioning by stipulating the possibility of submitting the registration application or any other document electronically.

Also, the deadline for the CRBE to decide on the registration application is shortened to just three days.

Piercing the corporate veil

The institute of piercing the corporate veil is strengthened with the introduction of a special right of the company’s creditors to seek the determination before the court of legal grounds for the application of this institute and the collection of their claims from shareholders who have committed unlawful acts. This legal action might be used if two criteria are simultaneously met: (i) the creditor’s claims are mature, and (ii) the claims cannot be settled by the company itself.

Procuration

The institute of procuration is reintroduced into Montenegrin Corporate Law as a form of power of attorney, granted by the competent body depending on the type of business entity, authorising one or more natural persons to conclude legal transactions and take other legal actions in the company’s name and on its behalf.

Special duties towards the company

The law explicitly enumerates the range of persons owing special duties to the company and stipulates that this range may be extended to other persons by virtue of the articles of association or statutes. The special duties towards the company are (i) the duty of care, (ii) the duty to report transactions/actions in which there is a personal interest, (iii) the duty to avoid conflicts of interests, (iv) the duty to keep business secrets confidential, and (v) the duty to abide by the prohibition of competition. Special lawsuits are introduced in case of the breach of each of the aforementioned duties.

Corporate share capital

The Companies Act introduces a clear differentiation between the concepts of share capital and net share capital, which is defined as the difference between the value of the company’s assets and liabilities. It is also clarified that nonmonetary stakes are composed of either objects or rights and, in comparison to the previous law, the new Companies Act indicates that work or services as forms of the nonmonetary share capital are possible only in those business entities incorporated as partnerships or limited partnership.

Two-tier management system

The new Companies Act introduces the possibility for all Montenegrin joint-stock companies (“JSC”) to adopt either a unicameral or bicameral (two-tier) corporate structure. JSCs which opt for a one-tier management system are required to establish a management structure composed of at least a shareholders’ assembly, a board of directors and an executive director. Alternatively, JSCs which adopt a two-tier management system will have a corporate structure composed of a shareholders’ assembly, a supervisory board and a management board.

The board of directors (in one-tier companies) or supervisory board (in two-tier companies) must have at least three members, except for public JSCs where the relevant board must have at least five members. Furthermore, the Companies Act stipulates that one-third (or one-fifth in public JSCs) of members of the board of directors or supervisory board must be independent board members. There is no requirement for independent board members of the management board.

Public interest companies

The new Companies Act also introduces the concept of a public interest company, which can be established either as a JSC or a limited liability company (“LLC”). Those companies are defined as business entities issuing securities and other financial instruments on the regulated market in Montenegro or abroad, at the request of the issuer.

Corporate bodies of LLCs

Public LLCs and LLCs that fall into the category of large companies in terms of the accounting laws must have the corporate bodies of a JSC.

Also, the new Companies Act stipulates that the shareholders’ assembly and the executive director are the obligatory bodies of the LLC. The only exception to this rule is an LLC composed of a sole member, which is under the legal obligation to appoint only the executive director.

Miscellaneous

The new Companies Act introduces many other peculiarities regulating Montenegrin business entities, such as:

• all business entities are required to have a registered e-mail address;

• the executive director must submit quarterly reports on the company’s business activities to the board of directors;

• the term of board members does not have to be renewed each year and can be set to four years per term automatically;

• the shareholders’ pre-emptive rights in the LLC may be excluded by the articles of incorporation or statutes;

• electronic participation in shareholders’ assemblies is specifically regulated;

• withdrawal and exclusion of LLC’s shareholders are strictly prescribed; etc.

What to expect?

As the new Companies Act has introduced many substantial changes to Montenegrin Corporate Law, all business entities are expected to undertake several steps to adjust their operations to the requirements of the newly established legal framework. Final and transitory provisions of the new Companies Act envisage that:

1. JSCs and public LLCs and/or large LLCs (as per the applicable accounting laws and regulations) are required to harmonise their organisational structure and register such changes in the CRBE by 11 April 2021;

2. JSCs that have ordinary shares with different nominal values are required to equalise the nominal values of all ordinary shares in such a manner that the proportional participation in the company’s share capital will be preserved by 11 July 2021;

3. all other business entities registered in the CRBE are obliged to harmonise their organisational structure and register such changes in the CRBE by 11 January 2022;

4. sole traders and partnerships which are currently not registered in the CRBE are required to register by 11 April 2021; and

5. sole traders which are currently registered in the CRBE are required to harmonise their business activities and submit a new registration application to the CRBE by 11 January 2021.

Business entities that do not comply with these requirements can face several sanctions, which in certain cases could also result in their deletion from the CRBE’s record of business entities, following the procedure of a judicial liquidation.

By Slaven Moravcevic, Partner, Petar Vucinic, Associate, and Luka Veljovic, Associate, Schoenherr

The new law about legal entities/Law of The Companies was adopted at the Official Gazette No. 65/20 on the 03.07.2020 and is in force since the 16.07.2020/ when it was introduced in Montenegro.

The law complies in most aspects with EU directives of the European Union, which was the main reason of modifying the existing one which was applied on legal entities doing business on Montenegrin teritorry.

Namely, it was noticed that a part of the regulation was not compliant with EU standards, and therefore a change was made in the existing legislation. Generally, existing organizational entities have been retained  and have not been changed, except in the aspect of establishing foreign companies, where now there is no more obligation that authorised person needs to have Montenegrin citizenship, but can also have foreign citizenship.

The liability of legal entities has remained the same, and they are liable with the own property, while the founder is responsible up to the amount of the founding capital, unless a criminal action for which a criminal sanction has been threatened is involved, as well as the eventual restitution.

Concept of people in relation with entity is especially emphasized because of the possible conflicts of interest related to people with that kind of social status might have. Alongside, the term of necessary attention in managing entities related to third persons has been implemented.

The concept of keeping a business secret with people working in a legal subject is emphasized, and judical protection is offered in case of infringement. The category of compliance with the non-compete obligation has been introduced, along with offered juridical protection, which until now was necesary contracted with each and every one of emplyees if necessary.

As far as importation of non-financial capital in entities goes, it will have to be arranged in accordance with the accounting law. Non-financial property has to be estimated by an authorized apprasier and that report is a part of the founding file. This property is published to the registration authority.

As for keeping minutes at company assemblies, in the future notary will keep minute, and a document as such will be avalible to the person who has expressed interest in it, in order to achieve certain legal rights.

In the times to come, all companies will be obliged to regularly keep records of company assemblies at the official registry.

The process of changing the founding capital, reduction, increase, or a change of any kind in a company/transformation-restructuring has been especially highlighted, meaning that any one of those changes has to be stated in the books by an authorized accountant and authorized apprasier, and those reports are a constituent part of the file to the registratory

These changes were made specifically to secure potential creditors.

The process of liquidation of companies is clearly defined and third persons are given the possibilty to be notified about all changes in companies.

The possibility of cross-border merging of companies is introduced and regulated by the same law.

Finally, the intention of the new law is to try to give a better overview of various procedures which are typical for companies, reorganization, merging, liquidation and other, and third persons, the state and employees are given the possibility to protect their rights with a more trasparent procedure.

The law is modern, but implementation and practice will show the quality of this law.

By Sasa Vujacic, Partner, and Daniel Vujacic, Assistant, Vujacic

Milena Pejovic, the Head of the Montenegro practice at Karanovic & Partners, has been promoted to Partner at the firm.

Pejovic graduated from the Faculty of Law at the University of Podgorica. Prior to joining Karanovic & Partners in 2011, she spent seven and a half years at the Prelevic Law Firm.

According to Karanovic & Partners, “with vast experience in corporate and commercial legal advisory, [Pejovic] advises clients on corporate and commercial legal matters and also focuses on banking and finance, taxation, and employment matters as well as real estate projects, with particular focus on hospitality. In her practice, she has assisted many clients in entering the market and establishing and maintaining a presence in Montenegro. With over 15 years of professional experience and nearly 10 years cooperating with the Karanovic & Partners team, Pejovic has been very successful in heading our Montenegrin practice. She was constantly doing a great job to increase our visibility, build our reputation and establish long-term cooperation with the key stakeholders.”

“The current political situation in Montenegro could be described as turbulent,” begins Jelena Bogetic, Associate at BDK Advokati, as “the recent amendments to the country’s Freedom of Religion act have spurred a lot of controversy and backlash from the public.”

According to Bogetic, “the Act prescribes that all religious objects which belonged to the Montenegrin state before 1918, and the ownership of which was inscribed to the religious community without a proper legal basis, will be treated as state property.” According to her, “this issue, probably, affects the Serbian Orthodox Church the most.”

The government of Montenegro reacted fast and hard to the new coronavirus, locking the country down and at one point even publishing lists with the names and addresses of people who were infected and had to remain in isolation. “This initial move, while motivated by a desire to put pressure on people to stay safe and keep each other in check, sounded like it crossed data protection legislature lines,” Bogetic says. She mentions that “there are NGOs that have initiated a constitutional review procedure to see if this decision was, in fact, legal – this procedure is due to end soon, and we’re all waiting for the results of it.”

Still, Montenegro showed some impressive results, Bogetic says, at least for a while. “We actually had a few weeks without any newly infected people and without any active cases,” she says, but she admits that the country’s good fortune eventually changed. “The government made a hard turn after its health protection measures proved effective, and it opened up the borders to EU member states and some other states in the region.” As a result, the COVID-19 infection numbers went back up, but Bogetic still thinks that the “government reacted timely and properly.” At the time of writing, Montenegro has 933 active cases, with 330 recovered persons and 24 deaths.

The subject moves away from the pandemic. “An interesting legislative change is the new Corporations Act,” Bogetic reports. The new Act, she says, contains “a lot of improvements compared to the old law – it introduces a two-tier corporate structure, the concept of independent members of the board of directors, and regulates white-collar crime in a much more detailed fashion,” which she believes adds more legal safety. “The Act allows for a much clearer path to suing a company, imposes a duty of care on management, and regulates situations which may present a conflict of interest … a lot was done with this Act!”

Montenegro, like its Balkan neighbors North Macedonia, Serbia, and Croatia, is in an election year. “The upcoming August elections only add to the fire,” Bogetic continues. The COVID-19 crisis still ongoing, and she worries that a change in government might have adverse effects on the country’s fight against the pandemic. “If the government were to change,” she says, “I think that the transition process might slow the battle against the crisis down, but if the current structure remains in place, existing measures aiming to protect the public health and the economy would continue to be applied seamlessly.”

“The political situation in Montenegro reflects all the complexities that most Western democracies face at the moment,“ says Vladimir Radonjic, Managing Partner of Radonjic & Associates in Podgorica. “It feels like, in the past few months, since we began battling the crisis, politics has really taken a back seat.“ He says that this may change, though, as the pandemic weakens and a new normal emerges on the horizon.

More specifically, Radonjic says that Montenegro’s recent Freedom of Religion Act of 2019 has “particularly shaken up the political landscape of Montenegro and pushed other important issues, such as reforming election laws and improving the economy, to the background.“ He says that all of this disincentivizes foreign investment, “which should cause concern, given that FDI is one of the pillars of our economy.“

“Montenegro has spent the better part of recent years harmonizing with the EU legislative framework,” Radonjic reports, noting that “with respect to this, a whole plethora of new legislation occurred – a new PPP Act, a new Companies Act is in the process of adoption, and the like.“ Radonjic says that these new laws should serve to imbue foreign investors with “a sense of security and predictability.“

While these are positive steps forward, he says, the “entire Montenegrin business atmosphere must be free from political tensions and conflicts as well.“

As Montenegro generates about 25% of its GDP from tourism, the effects on that industry are of real significance to the country’s economic health. “I think it safe to assume that the economy will take a big hit in 2020, but it is still difficult to predict as to how big, at this point,“ Radonjic says. “Big hotels on the seaside have been forced to delay their decisions about whether or not to open the season to the back half of June. So, even if the season does open, it will be rather short, in comparison to previous ones.“

Overall, though, Radonjic reports that the government has announced “three sets of measures to combat the economic downturn, two of which are currently being implemented, with the third on its way.“ He says that he feels these measures should “prove to be an adequate reflection of the current status of the Montenegrin economy.“

Finally, Radonjic reports that lawyers “have adjusted to the crisis in a relatively quick fashion,” and “firms are keeping up their workloads and have made the transition to remote work quite successfully.“ He says that this more flexible method of doing legal work, will “definitely mark the decade ahead.“