Category: Montenegro

The transportation sector is one of the most important factors for a country’s progress. Montenegro’s transportation sector has been transforming over the past few years towards the goal of harmonizing its infrastructure and services with European Union regulations. The Transportation Development Strategy of Montenegro for 2019-2035 (the “Strategy”) was adopted to regulate the guidelines and plans for future projects as well as to present the current state of the transportation sector in Montenegro. The Strategy aims to improve transportation in Montenegro and thus significantly enhance both tourism and business.

Montenegro has approximately 7,000 kilometers of roads, with approximately 1,850 kilometers of main and regional roads. Currently the main roads connecting major urban centers have only single carriageways with one lane per direction. There are no freeways in Montenegro.

In October 2015, however, construction of the Bar-Boljare freeway began. This freeway will contribute to the opening of many opportunities and further realization of the potential of Montenegro’s northern region by providing a better and faster connection between it and the central and southern parts of the country and safer and more efficient transportation for people, services and goods.

The railway transportation sector has shown considerable progress in the past decade, with over 48% of Montenegro’s railway infrastructure rehabilitated, and overhauling work on remaining segments either ongoing or planned. Montenegro’s railway network consists of three mostly electrified, standard gauge railway corridors with a total length of 150 kilometers. These railways connect the Port of Bar with Podgorica and Serbia, the cities of Podgorica and Niksic, and Podgorica with Albania. Continued Improvement of railway infrastructures will increase rail efficiency and attract additional ridership.

For Montenegro, it is very important that air transportation is well developed, because of many tourists coming from around the world every year. Air transportation in Montenegro is facilitated by international airports in Podgorica and Tivat, but expansion and upgrades are necessary for each to cope with increasing seasonal air traffic. Montenegro also has airports for general aviation in Berane, Zabljak, and Niksic. There is an initiative to open an airport in Ulcinj in the future.

The most significant sector of transportation in Montenegro is maritime transportation. Montenegro has implemented 70% of the EU directives and regulations regarding maritime transportation. The ports in Montenegro are the Port of Bar, the Port of Kotor, the Port of Adria, and the Port of Zelenika.

Since 2006 the Port of Kotor has specialized in cruising tourism, becoming one of the busiest destinations in the Mediterranean. Reconstruction and equipping of the Port of Zelenika is planned in order to make it open to more international traffic, with an emphasis on the tourist-passenger segment. The Port of Bar has been partially privatized – that part renamed the Port of Adria – and the Government of Montenegro has been trying to valorize the remaining part. The Port of Bar currently operates significantly below its capacity because there are major barriers for port usage, such as limited access by road and railway plus non-competitive costs.

The only intermodal station between railway and maritime transportation in Montenegro is established in the Port of Bar. Improvements in the Port of Bar will be achieved by improving that railway connection, expanding the gates and passenger terminal, better valorizing certain port services, and valorizing the port as a new cruising destination.

Also, it is important to emphasize that maritime companies Crnogorska Plovidba JSC and Barska Plovidba JSC plan to revitalize the Montenegrin merchant fleet by acquiring new ships as soon as market conditions permit. In order to further develop shipping in Montenegro and the traditional connection between Montenegro and Italy, it is necessary to renew the maritime Bar-Bari-Bar line.

Developing an efficient transportation system is necessary for the ensuring both economic and social prosperity in Montenegro. The country is currently planning a major overhaul of its road and railway networks, the expansion of its air transportation system, and the further valorization of its maritime system.

By Igor Zivkovski, Partner, Zivkovic Samardzic Law Office

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.

The new Labour Act (OGM, no. 74/19) (Zakon o radu) (“Labour Act“) entered into force in Montenegro on 8 January 2020, replacing the 2008 Labour Act (OGM, nos. 49/08, 26/09, 88/9, 26/10, 59/11, 66/12, 31/14, 53/14 AND 4/18) (“2008 Labour Act“).

Montenegro adopted the regulation to harmonise its legislation with the EU acquis in line with its obligations under the Stabilisation and Association Agreement with the European Union. The new act also complies with the recommendations of the International Labour Organisation ratified by Montenegro.

Most important changes

Below is a summary of the most important novelties under the Labour Act:

• Monetary claims from employment

A limitation period for monetary claims from employment has been finally introduced, as there was no such limitation period under the 2008 Labour Act.

The Labour Act now prescribes that monetary claims from employment shall become statute barred four years from the day the obligation was created.

For monetary claims from employment which arose as of 23 August 2008 until the entry into force of the Labour Act, the limitation period is four years from the date of effectiveness of the Labour Act. There is no statute of limitations for claims regarding contributions for pension and disability insurance.

• Internal organisation and systematisation of workplaces

Employers with more than 10 (ten) employees must enact an internal organisation and systematisation of workplaces (“Systematisation“) within six months from the entry into force of the Labour Act. A fine of EUR 2,000 – 20,000 will be imposed in case of failure to do so. The 2008 Labour Act mentioned this document but failed to prescribe the obligation to enact it. Now, even some employers with Systematisations in place will have to harmonise them with the Labour Act. Namely, the newly enacted provisions of the Labour Act now prescribe that professional qualification requirements, as a special condition for the establishment of employment, may be set within the range of a maximum two levels of education in the Systematisation. Currently applicable Systematisations often set much broader ranges of education levels to encompass a greater pool of potential employees.

• Public announcement of vacant positions

As with the 2008 Labour Act, employers are obliged to notify the Employment Bureau about any open positions. However, as a novelty under the new Labour Act, the Employment Bureau shall make a public announcement about the vacant position only at the request of the employer.

• Collective bargaining agreements

A General Collective Bargaining Agreement, harmonised with the Labour Act, will be concluded within one year. Until then, the current General Collective Bargaining Agreement is to be applied, except for provisions dealing with labour relations, salary, compensations and other remunerations, termination of employment agreements and disciplinary procedures, and conditions of work of labour unions. Branch and employer bargaining agreements are still effective, except for provisions regulating the disciplinary procedure, which will not be applicable as of the day of enforcement of the Labour Act. Those agreements are also to be harmonised within one year, otherwise they will be considered out of force once this deadline for harmonisation expires. Additionally, employer bargaining agreements must be registered with the Ministry of Labour. It is important to note that employment agreements must contain a reference to bargaining agreements being applied with the employer.

• Fixed-term employment agreements

The maximum duration of fixed-term employment agreements is extended from 24 to 36 months. The period in which an employee is temporarily assigned to the employer via an agency for the assignment of employees is also included in the 36-month period. However, the duration of internships and extensions of the term of employment due to pregnancy, maternity leave, parental leave, adoption and foster leave are expressly excluded from the 36-month period. This limitation of the term is not applied to employment agreements with directors and to agreements with an agency on assignment of employees or to employment agreements with athletes. Additionally, fixed-term employment agreements must contain the basis for the conclusion of such an agreement.

• Annexes to employment agreements

The reasons for offering annexes to employment agreements prescribed in the General Collective Bargaining Agreement are now also incorporated in the Labour Act. In addition, the Labour Act now prescribes that an offer for an annex may be made in other cases when there is an agreement between the employer and the employee. This is a major improvement, as in the past it was not clear whether an annex might be offered for reasons other than those prescribed in the law, collective bargaining agreements and employment agreement.

• Work time

It is specifically prescribed that the work time limit for part-time employment agreements, which cannot be less than one quarter of full-time employment agreements, is not applicable for employment agreements with directors.

The total work time, including overtime work, cannot exceed 48 work hours per week on average within a four-month period, with the maximum total work time being 50 work hours per week. Under the Labour Act, overtime work can be determined in collective bargaining agreements up to a maximum of 250 hours annually.

• Dispute resolution

Employees who believe that their rights from employment were violated must submit an initiative for amicable settlement of the dispute before the Agency for Amicable Settlement of Labour Disputes or the Centre for Alternative Dispute Settlement before they can initiate proceedings before the competent court. The employer must accept the amicable dispute settlement procedure. This obligation is not prescribed for employees whose employment was terminated.

• Disciplinary procedure

The provisions in the General Collective Bargaining Agreement regulating the disciplinary procedure against employees are now transposed to the Labour Act in a more simplified form for both employees and employers. The Labour Act regulates which disciplinary measures can be applied in the event of minor and serious breaches of work duties. For minor breaches, a warning or monetary fine of 20 % of the employee’s monthly salary for one to three months may be imposed against the employee. For serious disciplinary breaches, the following measures can be imposed against the employee: (i) monetary fine of 20 % to 30 % of the salary for the period of up to four months; (ii) conditional termination of employment; and (iii) termination of employment. Conditional termination implies the possibility of termination if the employee commits another serious breach of work duty within six months.

The Labour Act outlines the specific cases in which the employer can terminate the employee without the need to conduct the disciplinary procedure.

• Termination of employment

In case of termination of employment by mutual agreement, the exact date of termination must be determined in the agreement. The mutual agreement is legally effective only after it has been certified by a notary, court or municipal authorities. If the employee initiates the termination, the notice of termination must be delivered to the employer at least 30 days prior to the day stated as the day of termination. The 2008 Labour Act prescribed a shorter, 15-day deadline, and did not prescribe the explicit obligation of the employee to compensate the employer if he or she fails to observe the deadline which is now incorporated into the Labour Act. The employee’s notice of termination must also be certified by one of the above-mentioned authorities.

• Collective layoff

The collective layoff procedure is applied in case of the planned layoff of at least 20 employees within 90 days. Contrary to the 2008 Labour Act, which prescribed only the obligation to notify the employees and their representatives and other authorities, the Labour Act prescribes the duty to initiate consultations with the labour union or the employees (or their representatives) and to notify the Employment Bureau about the consultations. In addition, the employer cannot employ another person in the position deemed redundant for a period of six months.

• Delivery of documentation

Special rules have been finally prescribed for the delivery of warnings, notifications, invitations for oral hearings, and decisions. The Labour Act envisages personal delivery in the premises of the employer or at the address of residence or permanent residence of the employee. It is important to note that the Labour Act also prescribes the obligation of the employee to notify the employer about a change of address within three days. If the aforementioned documents could not be delivered in this manner, the employer will prepare a written note, and the documents will be published on the employer’s noticeboard, after which they are considered to be delivered upon the expiry of eight days.

• Penalty provisions

A greater number of offences is prescribed than previously under the 2008 Labour Act. However, the offences are prescribed in two Articles with different fines depending on gravity. The fines range from EUR 2,000 – 20,000 and from EUR 1,000 – 10,000 for legal entities, EUR 200 – 2,000 and EUR 100 – 1,000 for responsible persons in legal entities, and EUR 500 – 5,000 and EUR 500 – 6,000 for sole traders.

• Miscellaneous

The right to annual vacation cannot be substituted with monetary compensation, except in case of termination of employment.

While the 2008 Labour Act only defined the agreement for performance of work from home, the Labour Act recognises the agreement for performance of work outside the premises of the employer. The employment under this kind of agreement encompasses both the performance of work from home and remote performance of work.

If the employer does not pay the salary or compensation in full by the due date, it is obliged to hand over a salary statement, which is now an enforceable document, by the end of the month.

The Labour Act also prescribes new rules with regard to the employer’s bankruptcy, agencies for assignment of employees, etc.

Application

The new legislation is applicable to rights and obligations of employees arising from or based on employment provision dealing. However, provisions dealing with agreements for temporary and occasional work will be applied six months from the date of entry into force of the Labour Act and certain provisions will apply only following Montenegro’s accession to the European Union.

Secondary legislation will be enacted within six months. Until then, current regulations will apply as long as they are not in contradiction with the Labour Act.

It is important to note that procedures for exercising and protecting the rights of employees initiated before the entry into force of the Labour Act will be completed under the regulations which were in force prior to its effectiveness. However, procedures regarding the right of payment under certain claims in case of bankruptcy proceedings will be completed under the new Labour Act.

By Marija Vlajkovic, Partner, and Petar Vucinic, Associate, Schoenherr

Claims from Loan Agreements are generally secured by establishing a mortgage over a certain property on the basis of a Mortgage Agreement or a Pledge Statement.

Establishing a mortgage over the land for the purpose of securing a contractual claim for land on which an object will be constructed in the future represents a scenario that often occurs in practice. In these cases, the mortgage debtor often argues that the mortgage does not extend to the object, once it is constructed, while the mortgagee creditor often argues the opposite.

Competent Montenegrin courts took different approaches on this question, resulting in frequent reversals on appeal and cases being returned for retrial, until the Montenegrin Supreme Court issued a final ruling on the issue of mortgage extensiveness, giving guidance to lower courts.

According to the Supreme Court of Montenegro, if a mortgage is established on land on which an object or objects is/are subsequently constructed, even though the mortgage is not registered on those objects with the competent authority, the mortgage will extend to the newly-built objects. That means an established mortgage on the land extends to objects which are built on that land, in accordance with Art. 309 para. 2 of Montenegro’s Law on Ownership Rights. If the value of the land increases for the duration of the mortgage, the mortgage also applies to the improvement of the land.

Mortgage extension is the legal principle by which a mortgage extends to all improvements on and increases in the value of the land (or property in general) that occur after the mortgage is established, such as adaptations, upgrades, reconstructions, new plantings, and so on. The mortgage is related to the property and not to the person, so that where there is a change of ownership on the mortgage-burdened property, the mortgage continues to exists for the new property owner as well, since the same property represents the legal instrument for the initially-secured debt.

An ownership right to the land under the object cannot exist separately from the ownership rights to the object itself, so after the construction of the object and its appertaining geodetic registration, the mortgage extends to the object (and all of its parts), in accordance with the principle of mortgage extension.

A mortgage on a newly-built object is established by law, and any decision of the competent authority on mortgage registration has only declaratory significance, since it defines an already-existing legal situation. In essence, in the event of a dispute over the determination of the mortgage extension, the court would only be required to determine whether the mortgage exists in accordance with Article 309 para. 2 of the Law on Ownership Rights, and not whether mortgage was registered in the Land Registry. As, by definition, objects that are erected on land after a mortgage is registered could not have been included in that mortgage agreement, the value of the property is improved through the construction of new objects, and the mortgage is automatically transferred to all improvements of property.

To accept the opposite view – that a mortgage established on land does not extend to subsequently-constructed buildings on that land – would lead to an undermining of the legal (as well as economic) interests of the mortgage creditor, who, in accordance with the principle of mortgage extension, claims the right to establish a mortgage as an instrument of security over the newly-constructed object.

To conclude, in Montenegro, where land on which an object is constructed is burdened by mortgage, that mortgage extends to objects that are subsequently constructed on the land and registered in the Land Registry.

By Ana Lukovic, Head of Real Estate, and Milena Roncevic Pejovic, Head of Montenegro Practice, independent attorneys at law in cooperation with Karanovic & Partners

This Article was originally published in Issue 6.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Serbia’s Doklestic, Repic & Gajin has announced a new correspondent office in Montenegro, in cooperation with the four-person Danilo Radulovic Law Firm in Podgorica.

According to a DR&G press release, this is a step in the firm’s regional expansion following the recent establishment of the Lex Adria alliance of independent law firms in the Adriatic region (as reported by CEE Legal Matters on October 24, 2019).

Danilo Radulovic holds a law degree and an MBA from the University of Montenegro. He is a seasoned lawyer specializing in commercial and business law. Prior to starting his legal practice in Podgorica in 2013, he spent seven years at Hypo Alpe-Adria Leasing, including two as Head of Legal. DR&G Partner Slobodan Doklestic describes Radulovic as “a great lawyer with substantial experience in all areas of commercial and business law in Montenegro.”

Lawyers in Montenegro are talking about the Montenegro Economic Citizenship Program these days, says Vukmirovic Misic Managing Partner Lana Vukmirovic.

Vukmirovic says that the demand for economic citizenship in Montenegro is growing – “the country is becoming particularly attractive for investors from Asia and Middle East,” she says – and the program is expected to offer “respectable projects and programs to kick off with the first applicants by the end of the year.”

Vukmirovic says that Montenegro is awaiting a new Company Law and a new Labor Law –  both representing significant improvements over previous regimes. Several attempts have been made to adopt similar laws in the past, but the drafting process was extended following feedback and comment from labor unions, employers’ associations, and other corporate players.

Vukmirovic explains that “our current Company law is not as detailed as it should be,” and that, under the new law, “some things will be better regulated and [it] will have some impact on the economy.” She also expects positive things from the Labor Law, reflecting “explicit discussions” about a statute of limitations for employee claims and increased protections for workers, specifically employees hired through agencies and employees on maternity leave. Ultimately, she says, the new Labor Law will bring “more detailed regulation for the employers and a greater level of certainty for the employees.” 

Jones Day has advised Societe Generale in connection with the sale of its majority stake in the share capital of Societe Generale Montenegro, a company listed on the Montenegrin Stock Exchange, to OTP Bank Nyrt. Schoenherr advised Societe Generale on matters of Montenegrin law, while CMS advised OTP.

The closing of this transaction is expected to take place in the coming months, subject to the granting of clearances from the relevant regulators (including the banking, antitrust, and market authorities), and the relevant third party consents.

According to Jones Day, “Societe Generale Montenegro will be part of the cooperation agreement signed between Societe Generale and OTP Bank Nyrt. that encompasses the provision of mutual services in various fields (including, but not limited to investment banking, capital markets, financing cash, and liquidity management). The cooperation agreement includes Hungary and will soon be extended to Croatia and Bulgaria. Albania, Moldova and Serbia will join once the transactions will have closed.”

The Jones Day team was led by Partner Alexandre de Verdun and included Partners Florent Bouyer, Eric Barbier de La Serre, Philippe Goutay, Olivier Haas, and Emmanuel de La Rochethulon, Counsel Eileen Lagathu, and Associates Edouard Fortunet, Delphine Sauvebois-Brunel, Jonas Van den Bossche, Adrien Starck, Gillan Saleh, Olga Goncharska, Pierre Larcher, and Yann Davie.

Schoenherr’s Belgrade-based team was led by Partner Matija Vojnovic, and included Partners Vojimir Kurtic and Srdjana Petronijevic, Attorneys at law Dusan Obradovic, Bojan Rajic, Jovan Barovic, and Marija Drazic, and Associates Luka Veljovic, Mina Mihaljcic, Tamara Cakarevic, and Magdalena Petreska.

CMS’s team advising OTP was led by Partner Eva Talmacsi, supported in Budapest by Partner Dora Petranyi, Senior Associates Dora Czegledi, Zoltan Poronyi, Szabolcs Szendro, and Peter Toth, Associate Adam Takacs, and trainee lawyer Dora Altziebler; in Montenegro by Partners Marija Tesic, Milica Popovic, Radovanovic Rasko, Attorneys at Law Anja Tasic, Ksenija Ivetic Marlovic, Marija Marosan, Ksenija Boreta, Nebojsa Pejin, Nenad Kovacevic, and Tamara Samardzija, and Associate Mina Radonjic; and in Kyiv by Partner Olexander Martinenko, Senior Associate Nataliya Nakonechna and Associate Mykola Heletiy.

Editor’s Note: CEE Legal Matters learned that the deal closed as planned in July, 2019, following clearance from the necessary competition authorities. 

The article was subsequently amended to revise Schoenherr’s team.