Category: Montenegro

Despite the constitutional crisis in Montenegro, there is still a steady inflow of diverse foreign direct investments, and the country’s GDP is expected to increase, yet Harrisons Head of Montenegro Milan Keker remains cautious.

“Montenegro is going through a severe constitutional crisis,” Keker points out. “Politics is a driving force permeating every layer of society, so the continued lack of consensus in parliament puts everything on hold.” He adds that “the war in Ukraine obviously does not add to the positive side of the equation, and bleak – albeit well-deserved – feedback from the EU regarding the country’s accession and harmonization process obviously pressures businesses nationwide.”

“Montenegro’s situation is peculiar since it is the smallest country in the former Yugoslavia, which became independent quite recently,” Keker continues. “It is quite obvious that the time since the country became independent was not utilized by the political elites to establish proper institutions that would secure the continued defense of the social contract. This became quite obvious since the elections in 2020 when the equilibrium of political power shifted for the first time in decades.”

According to Keker, this has an undeniable impact on businesses. “Still, we see a steady inflow of foreign direct investments, which are critical for Montenegro,” he says. “At this time, this factor is mainly driven by our geopolitical location and the fact that the country is still cheap, welcomes investments, and actually depends on them.” However, he notes, “we are, of course, cautious with forecasts about 2023. I hope that the institutional crisis will be resolved at the latest by the end of the second quarter of 2023, as there will be general elections by that time.”

In terms of legislative updates, Keker reports that, in the last two years, the Parliament worked in a permacrisis mode. “There were many months without any significant piece of legislation being discussed, except the COVID-19 related regulations,” he says. “This year was marked with a reshuffle of the government in the first half of the year creating a loose majority in the parliament. Legislative processes suffered as comprehensive legal reforms, albeit urgently necessary, are missing,” he explains. “Even in cases where such comprehensive reforms were attempted, such as the introduction of the ‘Europe now’ social program, their practical implementation showed planning deficiencies.”

Generally, “we are in the process of harmonizing our laws with EU law,” Keker says, “but we don’t do it properly, because there is an inherent misunderstanding of the factors which should be taken into consideration when transposing certain legal concepts to this jurisdiction. These factors include differences in mentality, culture, size of the market, its development, habits of the population, and so on.”

As for the transactional trends, Keker notes that “there is an interesting shift to Western Europe and American capital being injected into the Montenegrin economy. Traditionally, Russian, Ukrainian, and Middle-Eastern capital prevailed over the last 10 years, but now it seems to be changing.” According to him, there is also an increase in the influx of Israeli capital which traditionally operates in Belgrade. “BIG fashion recently acquired the largest mall in the country and is also looking at others,” he notes. “We also still see a lot of investments in the coastal area, mainly into hospitality and residential apartments for sale.”

Lastly, Keker highlights that a GDP growth of 3% is expected in the country for 2023. “It seems optimistic and, given the irrational public spending, overall, we shouldn’t be so hopeful.”

After the Parliament of Montenegro adopted Law on amendments to the Law of Foreigners and introduced legal framework for digital nomads earlier in August 2022, further activities were undertaken in order to establish the practical applicability of the adopted legal framework.

Following the amendments of the Law on Foreigners, Ministry of Interior enacted Rulebook on detailed conditions and method of issuing a residence permit for digital nomads („Rulebook for residence permit “), on 28 November. In addition, Ministry of Foreign Affairs enacted Rulebook on detailed conditions on issuing long stay visa (visa D) („Rulebook for visa D“).

The above Rulebooks were the requirement for implementation of the legal framework for digital nomads.

The Rulebook for residence permit and the Rulebook for visa D stayed with the definition of digital nomad presented in the Law of Foreigners, stating that digital nomad is a foreigner who is employed or performs work electronically for a foreign company or their own company, that is not registered in Montenegro.

The Rulebook for residence permit specifies that for the application to obtain residence permit for digital nomad valid proof of personal income, is the proof of means in the year preceding the year in which the request is submitted, and which cannot be less than three minimum wages in Montenegro. Furthermore, the Rulebook for residence permit clarifies that the proof of accommodation is evidence on ownership of a property in Montenegro, notarized lease agreement or confirmation of accommodation issued by the company, legal entity or entrepreneur registered to provide accommodation services.

On 12 December, the Parliament of Montenegro adopted a set of tax laws which are waiting to be published and which should enable the tax exemption on turnovers, generated by digital nomads.

By Dajana Drljevic, Junior Associate, JPM Jankovic Popovic Mitic

A governmental crisis with a country-wide impact is preventing Montenegro from moving forward at a pace, both in terms of legislation and investments, according to Prelevic Law Firm Senior Lawyer Marko Ivkovic.

“After almost three decades, Montenegro saw a change in government recently; however, things have not been a smooth ride since,” Ivkovic begins. “Although significant steps were taken in the fight against corruption after the change of government, the current situation is unstable – we have a technical government running the country, and elections are to take place soon,” he explains. The date of the elections is still unclear – it is expected to be sometime in the first quarter of 2023, most likely.”

Focusing on the work of the technical government, Ivkovic explains that it is not in a position to accomplish much. “The technical government is not in a position to move forward on critical matters, such as important tenders and major projects, including the EU accession work,” Ivkovic says.

“To move things forward, we would need to hold elections and have a stable government, which is a challenge. Not to mention that holding these elections might be problematic too – the Constitutional Court of Montenegro, which is the only court with jurisdiction in electoral matters, is lacking judges, and the parliamentary parties cannot agree on who should be named to the bench to fill the gaps,” he reports. “Without a functioning court, there can be no judicial recourse during the elections.”

Moreover, it would appear that the government would have to make some tough decisions – and soon. “The EU is pushing for Montenegro to close out the citizenship-by-investment program, which has been in place for some time now,” Ivkovic reports. “Due to the EU requirements, the program is likely to end soon,” he explains.

Finally, given such political turmoil, it does not come as a surprise that there aren’t many state-supported projects in development. “The biggest greenfield project of note is probably the development of the Velika Plaza beach in Ulcinj, which is the biggest sand beach in Montenegro and one of the biggest ones in Europe,” Ivkovic reports. “The government has announced a huge investment initiative there, and investors are being invited.”

Generally, he says the most vibrant developments are “within the tourism and hotel sectors, which have traditionally been the strongest for Montenegro, but even these have not seen much new action.” In conclusion, Ivkovic says “the wait-and-see mindset is dominant with investors and lawyers alike – we are all waiting to see what will happen next.”

Komnenic & Associates has advised KrolBay DOO Podgorica in the development of Phase II of the five-star hotel located in Boka Bay to be operated by Hyatt. Schoenherr reportedly advised Hyatt on the deal.

According to Komnenic & Associates, “from 2023, the hotel will operate as Hyatt Regency Kotor Bay consisting of 206 rooms and 48 villas.”

Komnenic & Associates’ team included Managing Partner Milos Komnenic and Junior Associate Desanka Kotlaja.

Komnenic & Associates has advised BIG Shopping Centers special purpose vehicle City Mall DOO on its acquisition of the Podgorica City Mall shopping center.

According to Komnenic & Associates, the “acquisition and target are linked to the recent acquisition of the  Delta City shopping center (as reported by CEE Legal Matters on March 8, 2022) and the efforts of our client to expand the overall location and connect what are currently two separated units.”

BIG is an Israeli Stock Exchange-listed company that operates and manages 26 shopping centers and malls in Israel, with a presence in the US, Serbia, and France as well.

The Komnenic & Associates team was led by Partner Milos Komnenic.

Komnenic & Associates has advised Sunny Estates on the acquisition of the former Hotel Galeb location in Ulcinj from the Roksped Group. 

According to Komnenic & Associates, a five-star hotel is to be developed at that location in the next four years, for an investment of approximately EUR 80 million.

Sunny Estates is a Golden Group project company, investing in hotels in Montenegro.

Roksped is a Montenegrin company specializing in wholesale import and export.

In Montenegro, the Law on protection of personal data is still in power, and was last amended on April 3, 2017 („LPPI“).

In the meantime, on May 25, 2018, the European Union’s General Data Protection Regulation („GDPR“) entered into power, a new legal frame that determines the manner of using personal data of European Union’s citizens, such as the name, surname, Personal ID no, email address, phone number as well as access to different websites, i.e. data not only related to the person itself but also how to identify it.

GDPR should be obligatory for Montenegro, considering our practice of aligning our legal frame with the European Union’s, and considering GDPR itself prescribes that legal and natural entities outside of the European Union are subject to the rules of GDPR if they offer goods and services to the residents of European Union and/or monitor the behavior of EU residents within EU territory.

One of the goals of GDPR is that the level of private data protection should be the same within all EU territory.

Until this date – the LPPI has not been aligned with the GDPR.

An interesting occurrence in the days leading up to the local elections in Montenegro held on October 23, 2022, is sending SMS messages to numerous citizens by different political parties. A number of questions arise in this situation: (i) where have the political parties received the citizen’s numbers from, (ii) is the right to citizen’s privacy at stake here, (iii) is a phone number a private data, as well as others.

Today’s advanced technology allows us to save an NN’s phone number with the help of apps used daily and with one „click“ have the name / surname / photo of exactly that person. Citizens received SMS messages with content and link on which it’s necessary to click to review content, i.e. which leads to a certain page. Here we can speak of the common responsibility of operators and political parties which manage the page on social networks (fan page) – so-called „joint controllers“. In this case, the citizens have a right to demand from both the political parties and operators, information on which data they collect through links sent in the SMS messages, the manner of collecting data, and authorization to even collect personal data and share it with others.

Illegal actions of one and the other could result in responsibility for immaterial damages to the citizens. Let us remember the case of the illegal publication of private data of citizens which did not respect COVID-19 isolation rules – in this case, the court awarded citizens a righteous remuneration.

Article 26 of GRPR’s Preamble states that, to determine whether a natural person is identifiable, account should be taken of all the means reasonably likely to be used, such as singling out, either by the controller or by another person to identify the natural person directly or indirectly. To ascertain whether means are reasonably likely to be used to identify the natural person, account should be taken of all objective factors, such as the costs of and the amount of time required for identification, taking into consideration the available technology at the time of the processing and technological developments.

Therefore, is a phone number / prepaid number a part of our identity and only ours, or, can it be used by all of those to whom we have never voluntarily provided our number with nor signed consent for use in purposes other than processing, and especially not in the purpose of leading political campaigns?

Of course, operators can process our data for the purpose of providing service, i.e. conclusion and execution of subscription agreement, and if used for any other purpose i.e. sharing of information, they must receive our consent to it. This is also determined by the Law on electronic communications and LLPI. The same is for political parties – our phone numbers in operator’s data bases can be used by those operators to provide service, and, collecting data by political parties, with the purpose of leading election campaigns, without our consent is simply – illegal.

Citizens can simply determine whether political parties are able to determine their identity, based on the data they have collected about them, – by filling a request and enquiring whether the controller is managing their private data. If the data controller does not act in accordance with the request, the citizens may submit a request to the supervisory body i.e. Agency for protection of private data („Agency“). Agency has a wide scope of authorization to act in accordance with the LLPI, among others, to also access private data collections and means of electronic data processing.

Having in mind all previously stated, citizens should not so easily tolerate breaches of their privacy. On the contrary, if they have not consented to processing of their private data, they should request information from both operators and political parties with whom their data is shared: (i) why is private data shared, (ii) which private data is shared / exchanged, (iii) how and based on what are they collecting data, i.e. to use all legally available means to stop illegal processing, alongside a request for righteous remuneration for breach of their privacy.

If commercial entities claim to be socially responsible, they should have aligned their business operations with GDPR, not awaiting alignment of local regulation, thereby justifying the trust, given by the citizens, to process data fairly and in accordance with the law. Research coming from reputable sources, claims that consumer trust is the most important factor in achieving success in business and politics, and that investing in data protection leads to increased profits.

Breach of LLPI leads to scandals and distortion of reputation with the public, which directly impacts the loss of trust and professional ruin.

By Ivan Milosevic, JPM Jankovic Popovic Mitic, and Alma Karadjuzovic Djindjinović, Senior Associate at JPM Partner in Montenegro

The Ministry of Ecology, Spatial Planning, and Urbanism of Montenegro („Ministry“) enacted a Rulebook on closer criteria for the assessment of requests for the issuance of urbanistic-technical conditions for the construction of facilities for the production of electricity from renewable sources of the sun and other renewable sources (“Rulebook”). The Rulebook entered into force on the day of its publication in the Official Gazette of Montenegro, i.e., on 12 October 2022.

The Rulebook was enacted following the recent changes in the Law on Spatial Planning and Construction of Montenegro („Law“) in August 2022, which were passed to encourage the construction of facilities producing electricity from renewable sources of the sun and other renewable sources. The Law prescribes that, until the enactment of the general regulation plan of Montenegro, the Government of Montenegro may enact urbanistic-technical conditions upon obtaining the opinions of state authorities responsible for environmental protection, agriculture, and forestry, as well as the opinions of the authorities responsible for the protection of cultural assets on which the land is located and the legal entities responsible for the conditions of connection to the infrastructure.

The Rulebook envisaged that the competent state authority for spatial planning shall assess the request for the issuance of urbanistic-technical conditions for a solar, wind, or hydro powerplant, which is built independently, based on the following criteria: (i) it has the power of at least 1MW, (ii) that a study of the measurement of the sun, wind, or the hydrological regime of watercourses has been provided, (iii) that the powerplant is not built on agricultural land I-IV category i.e. on forests land, (iv) that the powerplant is not built in protected areas, (v) that an access road is secured. 

Furthermore, as an exception from the above criteria prescribed for independent objects, the competent authority shall assess the request for urbanistic-technical conditions for the solar powerplant which is built on another object based on the following criteria: (i) the powerplant has a maximum power of 1MW, (ii) it is built in accordance with the law, (iii) the study of the measurement of the sun has been provided.

Each of the above-mentioned criteria is awarded one point. Consequently, in accordance with the requests for the issuance of the urbanistic-technical conditions for (i) the independent object – solar, wind, or hydro powerplant which fulfills all five criteria (awarded with five points), i.e. for (ii) the solar powerplant built on another object which fulfills all three criteria (awarded with three points), the competent authority shall prepare the proposal of the act on the issuance of urbanistic-technical conditions. Accordingly, the urbanistic-technical conditions shall be issued by the Government of Montenegro.

By Lana Vukmirovic Misic, Managing Partner, and Milica Komar, Senior Associate, JPM Montenegro Partner

To comply with the highest European standards and safety conditions – Law on amendments to the Law on payment transactions (“Law”) has been adopted in the Parliament of Montenegro on 29 September 2022. Free movement of capital and full compliance with the Payment Service Directive 2 (“PSD2”) were main reasons for adopting the Law which shall ensure that the provisions of payment services in Montenegro are regulated in the same way as in the member states of the European Union.

PSD2 is a revised payment services directive whose main objective is to encourage innovation, support increased competition and transparency across European payment market. Directive does not substantially change the conditions for granting and maintaining authorization as payment institutions.

The biggest impact and main contribution of the PSD2 on the banking and payment sector is the recognition of new entities – Third Party Payment Service Providers (“TPP”) and enabling completely new types of services. Accordingly, banks should open their IT system to such new entities using Application Program Interfaces (“API”) when a customer initiates a transaction through them.

Hence, the Law introduces new payment services: payment initiation service and account information service. In countries that have already implemented PSD2, these payment service providers are mostly IT companies. By introducing such services, the provider is allowed to provide the payer with the assurance that the payment has been initiated in order to induce the payee to transfer the goods or supply the service without unnecessary delays. The payer can be also provided with a complete overview of his financial situation from all owned accounts. With the introduction of new payment services, the market of payment services is opened to new providers of these services – Payment Initiation Service Providers (“PISP”) ​​and Account Information Service Providers (“AISP”).

The adopted Law also provides an attractive option for business transactions which is the possibility to reserve cash funds on the payer’s payment account when the payer has given consent for the exact amount of funds to be reserved.

The Law aims to provide greater safety standards to protect the confidentiality and integrity of personalized security data of users of payment services using Strong Consumer Authentication (“SCA”). The Law prescribes that the payment service provider is obliged to apply reliable verification of customer authenticity when the payer: (i) access his payment account with an online connection; (ii) initiates an electronic payment transaction, or (iii) executes any action from a distance that may mean risk in terms of payment fraud or other forms of abuse.

Payment service providers and electronic money institutions that on the day of entry of the Law have approval for providing payment services, respectively authorization for the issuance of electronic money issued in accordance with the Law on payment transactions (“Official Gazette of Montenegro”, No. 62/13) are obliged to harmonize their act and business with the provisions of the Law and inform the Central bank, no later than six months from the date when the Law enters into force. The Law shall enter into force 12 months after its publication in the “Official Gazette of Montenegro”.

By Lana Vukmirovic Misic, Partner, and Dajana Drljevic, Junior Associate, Vukmirovic Misic Law Firm in cooperation with JPM Jankovic Popovic Mitic

PLK Advokati has advised Montenegrin media companies Daily Press and Televizija Vijesti on the sale of a 51% stake to United Media. Schoenherr reportedly advised United Media.

According to PLK Advokati, the shares not sold were “invested in the newly established companies as non-cash capital, in parallel with the acquisition deal.”

PLK Advokati’s team included Partners Djordje Kuzmanovic, Luka Prelevic, and Stefan Lucic.

The Daily Press and Televizija Vijesti in-house team was led by Aleksandar Sukiban.