BDK Advokati has advised Turkish Net Holding subsidiary Net Montenegro on a casino concession agreement with the Government of Montenegro.
Net Holding is a Turkish company operating in the gaming, lottery, hotel management, and real estate development sectors.
According to BDK Advokati, “the ten-year concession is granted for the new Starlit Casino, located within Merit Starlit Hotel & Residence in Budva.”
The BDK Advokati team included Senior Partner Luka Popovic.
A huge new infrastructure project, a historical first USD-denominated bond issuance, and potentially transformative news on price controls and concessions make for interesting times in Montenegro, according to JPM & Partners Senior Partner Lana Vukmirovic Misic.
“We live in very interesting times,” Vukmirovic Misic begins, highlighting a massive infrastructure project Montenegro has embarked on: the second phase of the Bar-Boljare highway, estimated to exceed EUR 600 million. “The government announced that construction shall begin after the preliminary design (for which the tender is ongoing),” she notes, “but financing remains an issue. Their intention is to finance most of it through the budget – a tall ask – but more details will follow once negotiations open. It’s possible the constructor of the first phase, the CRPC, will return but one thing is certain: the project is on the map for banks, financiers, constructors, and consultants.”
Of equal importance and a historical first, Montenegro has recently issued USD-denominated state bonds. “The purpose of the USD 250 million bond issuance was to pay for national development projects and repay existing commitments,” Vukmirovic Misic says, “but it also highlighted Montenegro’s effort to include new investors in the country’s financing structure. A hedging agreement for the currency swap, to protect against currency risks, was also put in place, with the only outstanding issue being a lack of transparency on the budgeting side, in terms of spending this money.”
There’s also an ongoing discussion regarding the consumer price control mechanism, Vukmirovic Misic reports, “with the government proposing to limit the margins for both wholesale and retail for mostly food products. That was the initial idea, at least, as there was strong opposition from the business community on account of targeting a very wide range of goods.” While the government went back to the drawing board, the initiative led to some uncertainty in the segment, she says, “with retailers hoping for something similar to the Croatian model, targeting a narrower range of basic goods.”
Similarly complicated is the government’s position on the concession agreement for the Brskovo mine, which stalled due to NGO and local community pressure, as Vukmirovic Misic points out, “with the commission appointed to investigate having already recommended terminating the agreement. The government is now assessing the related risks, including grounds for termination and the potential for investment disputes under international arbitration.” Perhaps lower on the agenda, but of no less concern according to her, “the proposal, if not handled thoughtfully, risks undermining investor confidence and raising questions about the rule of law in Montenegro.”
Finally, Vukmirovic Misic reports of renewed fintech optimism after Montenegro aligned with the PSD2 Directive. “We expect the National Bank to issue the first licenses for payment initiators in May – previously a significant holdback for local start-ups. This is a good signal for the regulatory environment. The new alignment will help a lot, with smaller barriers to entry, less of a gray zone for start-ups, and some of the related risks being eliminated for payment services intermediaries and platforms. The bank data should become more transparent as well, which could be used to generate more fintech project ideas,” she points out. “All this should boost investments in the start-up and IT industry – which have been doing very well – with consistent growth over the past years (at 23% in 2022), elevating them to an important pillar of our GDP.”
Montenegro’s Law on Games of Chance (the “Law”) was enacted in 2004 and has undergone multiple amendments since. The most recent ones came into effect on 1 January 2024. The aim of the amendments, as stated by the competent authorities, is to ensure a sustainable regulatory system for organising games of chance via the internet or other telecommunication means, as well as to generate additional revenue from these activities.
This objective is to be achieved through measures aimed at establishing a variable concession fee for the organisation of online games of chance, a provision not envisaged in the prior legal framework in this area. Another measure to achieve the set goal is to introduce a ban on participation in foreign games of chance via the internet and other telecommunication means for which bets are paid on the territory of Montenegro.
To achieve these objectives through the proposed measures, several amendments to the Law have been proposed and adopted:
The new legislative solution has not escaped scrutiny from interested market participants, especially regarding the controversial Article 68f. There has been particular attention in the public sphere to the reactions of associations of gaming organisers, which, through various reviews, have questioned the justification, sustainability and legality of the provision stipulating that payments for organising games of chance over the internet can only be made through payment cards or at the premises where games of chance are organised.
In response to the reaction of the association of gaming organisers, a petition was initiated, gathering over 25,000 signatures. An initiative was subsequently submitted to the Montenegrin Parliament to repeal Article 68f. In addition, another initiative was lodged with the Constitutional Court of Montenegro to review the constitutionality of Article 68f.
The competent authorities are currently processing these initiatives. Meanwhile, legal experts and the general public eagerly await more answers to these legally and practically intriguing questions in the coming period.
By Ana Ivanovic, Attorney at Law, Schoenherr
On 28 December 2023, the Agency for the Protection of Competition of Montenegro (the “Agency”) adopted a decision regarding its finding that the pricelist adopted by the Association of Tourist Agencies of Montenegro (the “Association”) concerning services provided by the tourist agencies amounts to a restrictive agreement by object under the Montenegrin Competition Law.
In particular, the Montenegrin Agency concluded that the pricelist determined the prices for services provided by the tourist agencies which led to prevention, limitation, and distortion of competition in the relevant market in Montenegro. The pricelist is, therefore, null and void.
In its decision, the Agency prohibits the further application of the said pricelist. The Agency has also ordered the Association to submit to the Agency the methodology for determining prices of the relevant services as well as to publish the Agency’s decision on its website.
The Montenegrin Agency is not entitled to directly issue fines in relation to competition law breaches as that is in the court’s jurisdiction in Montenegro. It, therefore, remains to be seen whether the Montenegrin Misdemeanour Court will follow up with a fine concerning the agreement.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
By Bojana Miljanovic Hussey, Partner, Mladen Vujic and Jovana Dordevic, Associates, and Jelena Vucinic, Junior Associate, Karanovic & Partners
Schoenherr has advised the Montenegro Chamber of Commerce on its eKomora digitalization project, including the execution of the partnership agreement – following a successful public procurement tender – with a consortium comprising Axians Crna Gora, Crnogorski Telekom, Montex Elektronika, Cikom, and WinSoft.
According to the firm, the primary objective of the project is to digitally transform the Chamber of Commerce’s internal systems and operations. “Encompassing a wide spectrum of services, the project will enable all business entities in Montenegro to access and obtain official documents from various state authorities online, facilitate electronic payments and document execution, and provide online participation in events, seminars, and various educational initiatives, among other offerings.”
The Chamber of Commerce is, according to Schoenherr, the largest business organization in the country – including businesses and companies in Podgorica whose mission is to develop and further the interests of local companies and businesses in Montenegro.
The Schoenherr team included Attorneys at Law Ana Ivanovic and Luka Veljovic.
The new year started early for Montenegro, or at least it feels that way according to PLK Advokati Founding Partner Stefan Lucic, who points to significant recent policy shifts aligning Montenegro more closely with the EU and NATO and to the ambitious economic reforms spearheaded by the country’s newly elected prime minister.
“It’s a pivotal moment for Montenegro,” Lucic begins. “The new government, which came into power at the end of October 2023, marks a major shift in our political landscape,” he says. According to him, the new government proclaims its heavy orientation towards strengthening ties with the EU. “We’re already witnessing the implementation of key tax and economic reforms just a month into their tenure.”
Lucic also stresses that new Prime Minister Milojko Spajic proclaimed his vision towards significant legislation reforms. “Spajic is not new to government roles; he was a part of the administration before the last one – during that time, he initiated several tax and social reforms. Under his leadership, we’re expecting significant reforms in taxation and social contributions.” Such reforms tend to affect the most vulnerable categories of society, while, specifically, Lucic mentions that “the minimum wage is set to increase by 20-25% – this echoes similar reforms from two years ago.”
Shifting focus to look more ahead, Lucic says he believes ”2024 looks promising. Montenegro is increasingly being viewed as a stable country in Europe – we anticipate a surge in investments, especially in the sectors of tourism and energy.” And, focusing on the banking sector, he shares that it is “doing well and will be a focus in the coming months. Moreover, the government itself is likely to get multi-million loans from local, private banks, which are reported to be highly liquid and cooperative.”
As for the real estate and construction sector, Lucic highlights: “We finally have a draft of the general spatial plan for Montenegro, which is crucial for major state projects, including highways, winter tourism projects, and the energy sector.” Further, he reports “significant movement on renewable energy, particularly in wind and solar parks. The government has the authority to issue urban-technical conditions for these projects – we’re talking about around 4,000 megawatts already approved, which is a massive capacity that should be developed in the next couple of years,” he explains.
However, not everything looks to be a smooth sail. “Our main economic challenges have arisen in the production sectors. Tourism remains our mainstay, but agriculture has been struggling,” he shares. “We hope the new government will bring us closer to EU standards in these sectors. However, specifics on plans for agriculture and production are yet to be outlined.”
Finally, Lucic shares a few key updates to the country’s overall legal landscape. “There’s been a notable shift in the judiciary. The Constitutional Court, which was blocked for the last couple of years, is now functional with the appointment of a new judge; we’re also seeing movements in criminal matters and promises for enhanced focus on finance and economic development,” he says. “In 2024, we expect changes in the pension system, particularly regarding the retirement age, which is proposed to be set at 65 years for both men and women. As for the winter season, there’s room for improvement in our winter tourism projects, and we’re optimistic about the growth potential,” Lucic concludes on a high note.
n November 2023 the Government of Montenegro proposed amendments to the CIT Law (Proposal).
Currently undergoing public debate, the Proposal is designed to bring the Montenegrin tax framework in line with EU tax legislation, particularly focusing on the EU Council’s Directive 2009/133/EC. This directive outlines a unified taxation system applicable to mergers, divisions, asset transfers, and share exchanges involving companies from different EU member states. The proposed changes will also accommodate the transfer of registered seats from one member state to another, with application deferred until Montenegro’s accession to the EU.
The primary objectives of the Proposal extend beyond alignment with EU standards, as it seeks to introduce changes and enhance harmony between the CIT Law and other legislative provisions, thereby mitigating the potential for abuse.
In its broader scope, the Proposal aims to foster greater cohesion between the CIT Law and other legislative frameworks.
The public debate period is until 12 December 2023, providing stakeholders with an opportunity to engage in the discourse. If approved, the Proposal will enter into force on 1 January 2024.
Some of the key changes that the Proposal introduces:
The Proposal contemplates a change in the definition of capital gain, deleting a clarification that the capital gain may result only from the transfer “with consideration”. The Proposal now aims at expanding the scope of the transactions subject to capital gains tax by envisaging that capital gains represent an income realised from sale or other transfer of assets (regardless of whether it was made with consideration or not).
Under the Proposal, the tax authority will be enabled to adjust the selling price of assets to the market value of assets if the sale price is lower than the market in transactions between related but also unrelated parties.
The Proposal advocates for the removal of specific subsidies from the CIT Law. However, it is important to note that this adjustment is not an elimination of subsidies altogether but rather addresses the duplication of subsidies. These subsidies are already provided for in other laws such as Personal Income Tax Law.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.
By Branimir Rajsic, Senior Consultant, and Aleksa Tomanovic, Junior Associate, Karanovic & Partners
Radovanovic Stojanovic & Partners has advised Polish Tuplex Group member TI Holding on the acquisition of all shares in Montenego’s Materia. Komnenic & Partners represented a private stakeholder in the sale of Materia.
The Tuplex Group is a plastics distributor in Central and Eastern Europe currently present in Poland, Bulgaria, Croatia, the Czech Republic, Romania, Serbia, Slovakia, Slovenia, and Montenegro.
Materia is a wholesaler and retailer of graphical materials with its seat in Podgorica, Montenegro.
The RSP team was led by Partner Sasa Stojanovic and Attorney at Law Djordje Vicic and included Partners Nikola Cincovic and Anja Tasic, Attorney at Law Zivko Kovacevic, and Associate Irina Petrovic.
The Komnenic & Partners team included Managing Partner Milos Komnenic and Junior Associate Jovana Petrovic.
The world has seen a significant shift towards sustainable energy sources in recent years. One of the most promising and rapidly growing sectors in the renewable energy industry is offshore wind parks. These structures that use the power of wind over the open seas are quickly gaining popularity as part of the global effort to combat climate change. This article will explore the global trend of offshore wind parks and shed light on Montenegro’s potential in this eco-friendly energy source with a special focus on fixed-bottom wind parks.
A fixed-bottom offshore wind park consists of wind turbines that are attached to the seabed using steel or concrete foundations. There are three types of fixed-bottom offshore wind parks. The first are monopile foundations, which are designed for shallow depths (0-30 meters) and involve driving a single pile into the seabed. They are cost-effective and widely used. The second are tripod fixed bottom foundations, which are suitable for transitional depths (20-80 meters). These structures feature three legs connected to a central shaft, providing stable support for the turbine base and allowing shallower seabed placement compared to monopiles. The third type are jacked foundations, also suitable for transitional depths. They consist of a framework with three to four fixing points driven into the seafloor.
These innovative structures represent a significant shift towards sustainable energy sources globally. Countries across Europe have enthusiastically embraced offshore wind power as part of their combat against climate change. Pioneers in this field, such as the UK, Germany and Denmark, have made substantial investments in offshore wind infrastructure, showing impressive numbers of offshore wind park projects. The UK has 224 offshore wind park projects, Germany has 190 and Denmark has 123. According to data collected by WindEurope, wind energy generation in Europe has shown steady growth, increasing from 370 TWh in 2018 to 489 TWh in 2022, while electricity demand has concurrently decreased from 2,960 TWh in 2018 to 2,830 TWh in 2022, a remarkable trend that highlights the increasing utilisation of offshore wind parks throughout Europe. Montenegro has positioned itself to align with this recently emerging trend.
Following the European trend, offshore wind parks must be located either in territorial waters (14 nautical miles) or in exclusive economic zones (200 nautical miles) of their host country. The Montenegrin Water Act specifies, among other things, that the exclusive economic zones are regulated through agreements with neighbouring countries. As Montenegro currently lacks such agreements, offshore wind parks can only be constructed within its territorial waters. This situation has proven advantageous, considering the main challenge for neighbouring European countries is constructing stable foundations in deeper waters.
In each case, the location of an offshore wind park must be chosen so as not to pose a threat to the environment, marine habitats or migrating birds. It also should not intersect with other human infrastructure, such as electrical and telecommunications cables or major maritime routes. This is of particular significance given that a complex approval process precedes the construction phase.
Another key question is the property rights framework for the land on which the offshore wind park is to be constructed. Territorial waters in Montenegro, classified as natural resources, are state-owned under the State Property Act. Consequently, for the use of state property, specifically the seabed and subsoil in this case, the Concessions Act is applicable. To utilise the seabed and subsoil, a concession agreement must be signed with the relevant state authority. In general, a concession is granted to the investor based on the annual government or local self-government plan through a public bidding procedure. The competent body for deciding on the concession grant depends on the duration of the concession period. If a concession is granted for up to 30 years, the decision is made by the Government of Montenegro. However, the National Assembly of Montenegro is competent to decide on the granting of concessions with a duration longer than 30 years but not exceeding 60 years. Therefore, once the concession agreement is signed in accordance with the relevant provisions of the Concessions Act, property rights are resolved.
Once property rights have been resolved, the construction process can begin. The Act on Spatial Planning and Construction of Structures does not specifically recognise offshore wind parks as construction projects, but recognises wind parks under the category of complex engineering structures. Consequently, offshore wind parks are likely to be classified as complex engineering structures, subjecting their construction phase to procedures outlined for complex engineering projects.
As an offshore wind park yet to be built in Montenegro, there are various legal uncertainties that need to be addressed. All matters must be precisely regulated within the contractual framework. In this regard, the International Federation of Consulting Engineers (FIDIC) is currently developing a contract tailored for offshore wind park projects, addressing their unique characteristics. While the 1999 FIDIC Yellow Book has traditionally been used, due to the complexity of offshore wind park projects, the FIDIC has initiated work on a new standard contract form expected to be ready by the end of 2025.
With Montenegro working on its first RES Act and three new construction-related acts, combined with its geographical location, the recent launch of a day-ahead energy market (the third in the Balkans) and the Montenegro-Italy submarine power cable installation, the country presents an exceptional opportunity for constructing the first offshore wind park in this part of Europe. Given these developments, Montenegro has demonstrated its readiness and commitment to energy development and its significant untapped potential for offshore wind parks along its coastline.
By Ivana Panic, Partner, and Luka Veljovic, Attorney at Law, Schoenherr
BDK Advokati has advised sustainable infrastructure fund Alcazar Energy on its acquisition of the 118-megawatt Bijela wind farm project in Montenegro. Karanovic & Partners advised project developers Simes Inzenjering and Sistem MNE on the sale.
According to Karanovic & Partners, the sellers will remain on board and continue to support and work on the development of the Bijela project. “With an estimated value of the investment at EUR 200 million, Bijela is expected to become one of the largest wind farms in the region and represents a significant milestone for Montenegro on its road to increasing the stake of clean, green energy in overall energy production.”
“This grand-scale project has attracted the attention of several prominent financial institutions, which have shown interest in providing financing for the further development and construction of the project. Construction itself is expected to commence in early 2025,” Karanovic reported.
“We are excited to announce our new partnership with Alcazar Energy to complete the development of Bijela and bring it to construction,” Simes Inzenjering Manager Slaven Milic commented. “This collaboration combines the experience of Simes Inzenjering and Sistem MNE in developing other complex projects in Montenegro with Alcazar Energy’s expertise in catalyzing early vintage renewable energy projects, bringing foreign direct investment, project finance, as well as industrial and technical expertise.”
The BDK team was led by Senior Partner Luka Popovic and included Partner Milan Dakic.
The Karanovic & Partners team was led by Partner Petar Mitrovic and included Senior Associate Sandra Perisic and Associate Jelena Tripkovic.