Serbia Business explores the competitiveness of Doing Business in Serbia
Interview with Mr.Nikola Jankovic, Senior Partner, Jankovic Popovic Mitic Law firm ” JPM”
Mr. Nikola Jankovic
Law Office ‘Janković, Popović & Mitić’ has for 20 years been providing adequate legal assistance to numerous companies in Serbia and abroad. Period of the first M/A transactions at all in Serbia (Messer Griesheim from Germany took over Tehnogas from Belgrade). The correctness of our decision to engage in the business law found its confirmation after the changes in the year 2000, rendering of the Privatization Act and more significant entry of the foreign investors into the market of Serbia. The first wave of the changes included adoption of a number of the new laws which were supposed to bring Serbia closer to creation of the market economy and integration into the European market. The ultimate goal of all these changes in the business environment in Serbia is to make Serbia recognizable as a country with market economy, open borders and ready to join the competition on the EU market. Serbia is an agricultural country and maybe this sector is the one having the best chances of expediting the country’s penetration into the World market and creation of the new employment opportunities. Analysis of the obstacles will lead to the conclusion that we are faced with a long process of elimination thereof, which should result in the change of the concept of development of Serbia from the consumer and import oriented to the production and export oriented expansion model. Through compliance with the EU legal heritage, local companies will, observing the local regulations, also observe the EU regulations, without actually being aware of doing so.
Serbia-business.eu: Jankovic Popovic Mitic Law Firm (JPM) is one of the first law firms in Serbia, you are now celebrating 20 years of work on the market, can you tell us something about the starting of the law practice considering the fact that you are specialized in commercial and trade law?
JPM was formed in 1991, the year which cannot be considered the optimum year for the beginning of engagement in advocacy, especially the advocacy focused on commercial law. Less than 12 month thereafter, Yugoslavia was encountered with the sanctions imposed by the UN, which resulted in blocking of the foreign investments and all legal business operations with the foreign countries. Under the circumstances, JPM primarily engaged in representation of the clients within the commercial disputes and supported mainly the foreign companies within the procedure of their adjustment to the new (almost impossible) conditions of operating.
That was also the period of the beginning of application of the new, i.e. first Yugoslav corporate law. Therefore, it can be justifiably claimed that JPM is the first law office in Serbia which was established subject to the “business law firm” concept, i.e. the concept of providing legal services in all sectors of business/commercial law. These sectors included corporate law, trade law, real estate law, labor law, commercial disputes and intellectual property law. Over the years, and especially after the year 2000, the diversification among our departments has become more precise and the departments have been formed for banking and finance, competition law, energy law, PPP, etc.
The first significant boom in this type of advocacy was in the years 1996-1997 following rescinding of the sanctions on account of the war at Croatia and Bosnia, up to imposing sanctions on the account of war at Kosovo and Metohia. That was the period of the first M/A transactions at all in Serbia (Messer Griesheim from Germany took over Tehnogas from Belgrade). The correctness of our decision to engage in the business law found its confirmation after the changes in the year 2000, rendering of the Privatization Act and more significant entry of the foreign investors into the market of Serbia.
Serbia-business.eu: Your clients are coming from different business sectors, can you give us impressions on business environment in Serbia, did Serbia reform the business regulations environment enough?
In 2000, soon after the democratic changes, Serbia has, with the intention of breaking up with the past, stepped on the road of reforms in almost all areas.
The first wave of the changes included adoption of a number of the new laws which were supposed to bring Serbia closer to creation of the market economy and integration into the European market. First of all, we would like to point out that the Privatization Act from 2001 announced the change of the concept of privatization in Serbia. The said Act introduced the Privatization Agency the aim of which was to operatively manage the process of privatization. Today, the privatization process is at the final stage. Over the previous years a significant step forward has been made in restructuring of the public enterprises, which has resulted in improvement of their financial performances.
The second wave of the changes was marked by continuation of the activities on adoption of the new acts, such as the Companies Act, which has integrated the EU Directives in its original wording, while the intention of the Act on Litigation Proceedings and the Act on the Executive Procedure has been to expedite and increase the efficiency of the litigation proceedings. Besides the said Act, also the Energy Act has been adopted as well as many other Acts.
By the end of 2009 and the beginning of 2010, rendering of the Act on the Courts introduced reforms of the legal system, which, unfortunately, have not been free from numerous omissions in the process of re-election of the judges and public prosecutors.
At this second stage in bringing Serbia closer to the European and the World standards, the Government of the Republic of Serbia has undertaken a very important project, known as the “regulations guillotine”, the ultimate aim of which has been to simplify the legislation, which, in the long run, should lead to increase of competitiveness through reduction of the administrative barriers in operations. This project, although appearing to bear a note of a specific and serious change, has failed to yield the appropriate results. We can only expect that the Serbian Government will, through its activities, in deed simplify its legislation, however, not at the costs of the quality and clearness, since these are the principle pre-conditions for easier application of the regulations.
As opposed to the numerous weak points of the business environment in Serbia, as a bright example of a successful reform of an administrative authority, we can mention the Commercial Registers Agency. Establishing of this institution has been a big step forward towards simplification of the procedure of incorporation of the companies owing to joining of the Court and municipal registers at a central location.
The ultimate goal of all these changes in the business environment in Serbia is to make Serbia recognizable as a country with market economy, open borders and ready to join the competition on the EU market.
Serbia-business.eu: In your opinion what are the key competitive advantages of Serbian market, what are the main obstacles for doing business?
It is undisputed that Serbian economy has the potential and certain advantages over the countries within the region, however, more stable economic conditions need to be created for activation thereof.
Of course, the most important advantages are human resources – low cost and qualified labor, natural resources and favorable geographic position, close to the EU market. The areas we can count on are both energy and agriculture. Serbia is an agricultural country and maybe this sector is the one having the best chances of expediting the country’s penetration into the World market and creation of the new employment opportunities.
As a significant advantage over the countries within the region and the EU countries, I would like to point out the more favorable profit tax and the value added tax.
The weak points of the Serbian business environment include, first of all, the inherited nationalization policy, arbitrary interference of politics with the economy, administrative obstacles, deficiencies in the legal and tax system, very low level of quality of the institutions and slow reforms of legal regulations. The weak points also include the infrastructural obstacles, unregulated proprietary rights over the construction land and the high level of corruption.
Overcoming of these obstacles and creation of a sound business environment require cooperation between the Government and the companies, with the Government providing assistance to the companies and the companies operating in a socially accountable manner.
Analysis of the obstacles will lead to the conclusion that we are faced with a long process of elimination thereof, which should result in the change of the concept of development of Serbia from the consumer and import oriented to the production and export oriented expansion model.
Serbia-business.eu: Ongoing Serbian reform path to EU integration and announced EU candidature is expected to influence the business environment with a great number of EU regulations which will be implemented and have supranational authority over Serbian legal system * e.g. Competition policy & directives regulating the market* , in what sense will this aspect generate better business climate in Serbia?
By execution of the Stabilization and Association Agreement, Serbia has undertaken the obligation of complying its legislation with the EU laws. Our ultimate goal is the EU membership, when all EU regulations will become binding and directly applicable in Serbia.
Although it is clear that we cannot, within several years the association procedure takes, make up for 60 years of undisturbed development of the EU, we are aware of the fact that compliance of our legislation with the EU regulations is the imperative and the only way of increasing the legal security and attracting the foreign investors.
Analysis of the existing legal regulations and proposing of the new legal solutions in compliance with the EU standards have resulted in rendering of numerous regulations – e.g. the new Companies Act which should become effective in February next year, Customs Act, Act on Foreign Currency Operations, new Bankruptcy Law which should improve efficiency of the bankruptcy proceedings , Consumers protection Act, Financial Leasing Act and the new Competition protection Act rendered in 2009. All these Acts have been rendered for the purpose of initiation of the reform which would lead to liberalization of business operations, introduction into Serbian legislation of the terms widely accepted in the business practice all over the world, all for the purpose of ensuring expedient beginning of the foreign investors’ activities in Serbia. From the very beginning it has been clear that these are only some reforms, since the beginning of engagement into business activities includes also the activities of many other Court and administrative authorities on which the beginning of the business operations of a company depends.
The process of joining the EU will certainly have a great impact on the development of the business environment in Serbia. Opening of the market towards the EU will increase competition and cause appearance of the companies from EU countries on Serbian market.
Gradually, the number of the companies which are not, at least indirectly, in contact with the EU countries companies, will be reduced.
Through compliance with the EU legal heritage, local companies will, observing the local regulations, also observe the EU regulations, without actually being aware of doing so.
Unfortunately, the legal reform also has its dark side – many new regulations have been rendered at random and the provisions of the foreign regulations have been taken over without any criticism whatsoever, which is not always the best solution. The general conclusion is that, so far, the quantity has been given priority over the quality within the process of compliance with the EU regulations.
Serbia-business.eu: Will EU accession reform process influence the bigger interest of FDI investment projects in key driving sectors like energy and infrastructure * e.g.PPP regulations*?
The process of cancellation of the outdated regulations and simplification of the complicated procedures has been delightedly welcomed by the foreign investors. Creation of a high quality and predictable national business environment is decisive in ensuring the necessary foreign investments, since the business community expects formulation of a clear economical policy.
Serbia is undergoing the transition with the growing inflow of direct foreign investments, particularly after 2005.
Rendering of the modern acts as the consequence of joining the EU has had and will have the effect on the foreign investments inflow, being of inappreciable significance for economical recovery of Serbia.
In 2006, the Government of the Republic of Serbia adopted the “Incentives Strategy for Foreign Investments Development” recognizing private – public partnerships as a good mechanism for ensuring financing of infrastructure construction and maintenance and rendering of services, traditionally deemed public activities, through financial cooperation with the private sector.
PPP projects originating from the concessions granted by the Republic of Serbia to the foreign investors have proved to be an excellent connection between the Government and the foreign investor with the required capital, knowledge and technologies.
Serbian legislation does not provide for general rules governing PPP. With the exception of the Concessions Act and, to a certain extent, the Act on Utility Activities, the issue of PPP is mainly indirectly governed by and managed in compliance with various regulations. The steps taken by the Government so far are promising. However, the existing legal frame should be systemized with a clear list of all opportunities offered to the foreign investors, especially to the investors considering PPP as the method of entering the Serbian market or as the method of further expansion of their activities on the Serbian market. Adoption of the Act on PPP is recommended as well as compliance of other Acts therewith and establishing of a separate governmental body in charge of initiation and supporting of the pilot programs and standardization of PPP procedures.
That is the only way to create a favorable climate for FDI placement and ensuring of continuation of reformative processes, eagerly awaited by the business community, both in the country and in the world.
Serbia-business.eu: Has the law office JPM been ready for the reform of the legal and business environment in Serbia and to what extent can its activities be of assistance to the government?
Law Office ‘Janković, Popović & Mitić’ has for 20 years been providing adequate legal assistance to numerous companies in Serbia and abroad.
Besides our principal activity, we are also focused on finding solutions to numerous legal issues arising as the consequence of the transition in Serbia and application thereof, all for the purpose of permanent improvement and rendering of the top quality services to our clients.
Our Office is the founding member of the American Chamber of Commerce and the member of Foreign Investors Council (FIC). Attorney at Law, Ms. Milica Subotić has, for almost three years, been successfully presiding the Legal Board of FIC, and a number of JPM attorneys at law are the members of the FIC working committees.
For the purpose of constant monitoring of the legislation changes resulting from the compliance with the EU regulations, we often organize seminars and lectures from various fields of the law and in 2009 and 2010 we organized the panel on competition protection and the round table on public procurements in order to mark the first anniversary of rendering of the new Public procurement Act.
Worth mentioning is also the fact that JPM, together with another 5 leading law offices in Serbia, has become a part of the „Pro bono network“ providing free of charge legal assistance to all organizations of the civil society requiring such assistance.
In connection with our Office 20th anniversary celebration and participation in the process of compliance of local legislation with the EU regulations, on September 16th a presentation will be held at Hyatt Hotel, under sponsorship of our Office and our partner law firms, CHSH Cerha Hempel Spiegelfeld Hlawati from Austria and Alber&Geiger from Germany. The reputable speakers will deliver lectures on the manner of rendering of the acts and resolutions in EU, on the impact of EU regulations on Serbian laws, with the special stress on the competition protection , state aid and telecommunications , as well as the lecture on lobbing at the EU bodies.
So, we can conclude that JPM is more than ready to follow the process of implementation of the EU legislation in Serbian regulations , contribute to this exceptionally important process and is looking forward to this new challenge.
Serbia-business.eu: Does JPM prepares for EU harmonization steps and influences on business environment in Serbia, and what would be your overall recommendation to business sectors when it comes to preparation for new hierarchy of legislation?
Of course, all of us working in Serbia have to be prepared to, in a very short period, begin with more or less direct application of the EU regulations.
JPM has formed the department for the EU-Law, currently consisting of Mr. Sasa Vracar, Attorney at Law, educated in Germany where he graduated from the law school and became the member of the Stuttgart Bar, the young colleague, Mr. Andrija Petrovic who, having completed his studies in Belgrade, also completed the post-graduate studies in Germany at the Europa-Institut, University of Saarland with specializations in World Trade Law and European Economic Law, and spent the last year practicing at our partner offices from Brussels and Berlin, Alber&Geiger, specialized in the EU Law and providing support to the companies in lobbing before the EU authorities.
Our second partner in this new field is our Austrian partner office, CHSH Cerha Hempel Spiegelfeld Hlawati, with the offices in CEE countries, especially in the countries being the “new EU members“ – Hungary, Slovakia, Romania and Bulgaria, the experiences of which can be of tremendous assistance in our better understanding of the process of Serbia’s joining the EU and of the requirements set before our companies in terms of timely adjustment to the new conditions of operating.
Our third partner in this new challenge are our colleagues from Serbia Business, who will, by their knowledge and experience in the field of project financing and economy in general, contribute to the successfulness of this project.
