HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements...Montenegro

# 					2023 Investment Climate Statements: Montenegro			

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													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  Openness To, and Restrictions Upon, Foreign Investment                    -  Policies towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment Agreements and Taxation Treaties                    -  Bilateral Taxation Treaties 
                  -  Investment Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Anti-Trust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights (IPR) 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange Policies 
                  -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Additional Resources   
                  -  Climate issues 
                -  9. Corruption                    -  Resources to Report Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs 
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics 
                -  14. Contact for more information 

## EXECUTIVE SUMMARY

Montenegro relies on a narrow tax base with an economy centered on three sectors, and the government largely focuses its efforts on developing tourism, energy, and to a lesser extent, agriculture. The tourism sector officially accounts for about 25 percent of GDP, although some analysts believe it accounts for over one third when considering the grey economy. In the energy sector, the most important project in the transmission system was the construction of a two-way underwater electricity cable to export power to Italy, which included the development of a 433-kilometer-long tunnel approximately 1,200 meters below the Adriatic Sea surface. The project cost 800 million euro and began operation in December 2019. There are several other ongoing energy projects, including the controversial ecological reconstruction of the coal-fired thermal plant in Pljevlja in partnership with People’s Republic of China (PRC) company Dongfang Electric Corporation that began in April 2022, as well as the development of a 55-megawatt wind power plant in Gvozd, a project supported by the European Bank for Reconstruction and Development (EBRD).

According to the Central Bank of Montenegro (CBCG), foreign direct investment (FDI) in 2022 totalled to €1.15 billion. Although no one source country dominates FDI, significant investments have come from Serbia, Russia, Germany, Switzerland, UAE, Turkey, Italy, and the United States, with other investments coming from Cyprus, the Netherlands and Austria. Montenegro has one of the highest public debt-to-GDP ratios in the region, but this ratio has been declining over the last two years thanks to strong growth and repayments, dropping from a high of 105 percent in 2020 to about 73 percent in April 2023. Infrastructure development remains a government priority. The most visible current project is the Bar-Boljare highway, Montenegro’s first modern highway which is designed to better connect the more developed south with the relatively underdeveloped north of the country. The highway, the first and most expensive portion of which was built by the China Road and Bridge Corporation and became operational in July 2022, has been widely criticized as a textbook example of PRC “debt trap diplomacy”. The completion of the full four-stage project continues to pose challenges to Montenegro’s fiscal position, given limited room to finance the construction of the three remaining sections.

The pandemic hit Montenegro’s economy hard, with the unemployment rate reaching 24 percent by the end of 2021, although it has since dropped to 16 percent at the end of 2022. In addition, gross domestic product (GDP) declined by 15.3 percent in 2020, the biggest drop in Europe. The country enjoyed a strong recovery in 2021, however, with the government announcing a GDP growth rate of 14 percent for the year, one of the highest in Europe. GDP growth was 6.9 percent in 2022, led by private consumption and a better-than-expected tourism season. Economic recovery will continue to face challenges, however. Developments in Ukraine and Russia, two of Montenegro’s main sources of tourists and together accounting for about 16 percent of total arrivals and over 20 percent of tourism spending in 2021, will threaten economic growth as the country will likely struggle to compensate for their absence during the 2023 tourism season.

In 2022, Montenegro began implementing a wide-ranging economic reform program known as Europe Now, which eliminated all individual health care contributions, almost doubled the minimum wage, increased pensions, and introduced a system of progressive taxation. The economic impact of these ambitious new measures will take time to become clearer. However, analysts have attributed Montenegro’s 20 percent increase in consumption and an inflation rate of over 17 percent in 2022 to the reforms, coupled with a huge inflow of Russian and Ukrainian citizens as the result of Russia’s war of aggression against Ukraine. Montenegro has not yet joined the Open Balkan Initiative, previously known as “Mini-Schengen,” a project championed by Serbia, Albania, and North Macedonia and designed to facilitate trade, services, and movement of people throughout the Western Balkans. Montenegro continues to grapple with rule of law concerns, including corruption and organized crime.

As the 29th NATO member and the long-standing EU-accession front-runner, Montenegro plays a pivotal role in a volatile region still struggling to fully embrace Euro-Atlantic values and susceptible to malign foreign influence.  This has been a central theme since the country’s first transition of power in 30 years following the narrow victory of a broad but disparate coalition of civic, moderate, and radical pro-Serb and pro-Russian parties in the August 2020 national elections. Since then, two successive coalition governments have lost votes of no confidence in the parliament, first in February and then in August of 2022. Voters elected a political newcomer in the country’s presidential runoff election held on April 2, 2023, ending the 32-year rule of Europe’s longest serving leader. After a long-standing political impasse, snap parliamentary elections were called for June 11, 2023.

 

							Openness To, and Restrictions Upon, Foreign Investment					

### Policies towards Foreign Direct Investment

Montenegro regained its independence in 2006, and since then, the country has adopted an investment framework that in principle encourages growth, employment, and exports. Montenegro, however, is still in the process of establishing a liberal business climate that fosters foreign investment and local production. The country remains dependent on imports from neighboring countries despite its significant potential in some areas of agriculture and food production. Although the continuing political transition has not yet eliminated all structural barriers, the government generally recognizes the need to remove impediments to remain competitive, reform the business environment, open the economy to foreign investors, and attract further FDI.

In general, there are no distinctions made between domestic and foreign-owned companies. Foreign companies can own 100 percent of a domestic company, and profits and dividends can be repatriated without limitations or restrictions. Foreign investors can participate in local privatization processes and can own land in Montenegro generally on the same terms as locals. Expropriation of property can only occur for a “compelling public purpose” and compensation must be made at fair market value. There have been no known direct expropriations of foreign investments in Montenegro. However, the government in 2022 activated a bank guarantee during an unresolved dispute being heard by the Montenegrin commercial court, an action the U.S. investor has alleged to be an indirect expropriation. In addition, long-standing property restitution cases dating back to WWII remain unresolved. International arbitration is allowed in commercial disputes involving foreign investors.

Registration procedures have been simplified to such an extent that it is possible to complete all registration processes online. In addition, bankruptcy laws have been streamlined to make it easier to liquidate a company; accounting standards have been brought up to international norms; and custom regulations have been simplified. There are no mandated performance requirements.Montenegro has enacted specific legislation outlining guarantees and safeguards for foreign investors. Montenegro has also adopted more than 20 other business-related laws, all in accordance with EU standards. The main laws that regulate foreign investment in Montenegro are: the Foreign Investment Law; the Enterprise Law; the Insolvency Law; the Law on Fiduciary Transfer of Property Rights; the Accounting Law; the Law on Capital and Current Transactions; the Foreign Trade Law; the Customs Law; the Law on Free Zones; the Labor Law; the Securities Law; the Concession Law, and the set of laws regulating tax policy. Montenegro has taken significant steps in both amending investment-related legislation in accordance with global standards and creating necessary institutions for attracting investments. However, as is the case with other transition countries, implementation and enforcement of existing legislation remains weak and inconsistent. While Montenegro has taken steps to make the country more open for foreign investment, some deficiencies still exist. The absence of fully developed legal institutions has fostered corruption and weak controls over conflicts of interest. The judiciary is still slow to adjudicate cases, and court decisions are not always consistently reasoned or enforced. Montenegro’s significant grey economy impacts its open market, negatively affecting businesses operating in accordance with the law. Favorable tax policies established at the national level are often cancelled out with taxes introduced by different municipalities on the local level.

To better promote investment and foster economic development, the government adopted in December 2019 a new Law on Public Private Partnerships and established the Montenegrin Investment Agency (MIA), merging the Montenegrin Investment Promotion Agency (MIPA) and the Secretariat for Development Projects. MIA seeks to promote Montenegro as a competitive investment destination by facilitating investment projects in the country. Together with the Privatization and Capital Investment Council, MIA promotes investment opportunities in various sectors of the Montenegrin economy, primarily focusing on the tourism, energy, technology, and agricultural sectors. These two institutions will maintain an ongoing dialogue with investors already present in Montenegro and, at the same time, seek to promote future projects and attract new investors to do business in Montenegro. MIA is also the state agency that leads the controversial Economic Citizenship Program, which started on January 1, 2019, and was designed to accelerate Montenegro’s economic development by creating new tourism, agriculture and processing capacities and create new jobs, especially in the underdeveloped northern part of the country. The program was intended to last three years and be available for up to 2,000 applicants. Thus far, almost 800 applications have been submitted, of which 166 have been approved, bringing about €310 million in investments into the country and about €70 million into the budget. In December 2021, the program was extended until the end of 2022, but it was abolished at the end of 2022 after strong opposition from European Commission officials who cited risks of money laundering, tax evasion, financial terrorism, corruption, and the influence of organized crime. More information is available at https://mia.gov.me.

### Limits on Foreign Control and Right to Private Ownership and Establishment

Montenegro’s Foreign Investment Law, which was adopted by the Parliament in 2011, establishes the framework for investment in Montenegro. The law eliminates previous investment restrictions, extends national treatment to foreign investors, allows for the transfer and repatriation of profits and dividends, provides guarantees against expropriation, and allows for customs duty waivers for equipment imported as capital-in-kind. There are no limits on foreign control and right to private ownership or on establishing companies in Montenegro. There are no institutional barriers to foreign investors, including U.S. businesses. As an aspiring EU Member State, Montenegro monitors and implements best practices regarding foreign investments, according to government officials, but the country still has no screening mechanism for inbound foreign investment in Montenegro. In December 2021, the Embassy hosted a presentation to Montenegrin officials by the U.S. Department of Treasury on the U.S. government’s Committee on Foreign Investment in the United States (CFIUS) investment screening mechanism. Montenegrin officials have stated the Government’s intention is to have a screening mechanism in place by the end of 2023, but limited progress has been made due to political instability, personnel turnover, and limitations in current Montenegrin law.

### Other Investment Policy Reviews

The WTO secretariat conducted its first review of Montenegrin trade policies and practices in April 2018 (https://www.wto.org/english/tratop_e/tpr_e/tp469_e.htm).

The American Chamber of Commerce (AmCham) in Montenegro prepares a biannual Business Climate Report (BCR), an assessment of issues on which the Government needs to take action to improve the country’s business environment. The most recent 2021-2022 edition was the seventh BCR to date, and recommends that the Government tackle the grey economy, improve public procurement procedures, address weak labor legislation, and correct inconsistencies in the implementation of existing laws. More information is available at http://www.amcham.me/advocacy/publications/

The White Book is the most recognized publication of the Montenegrin Foreign Investors Council. It is published every year and its main goal is to help the improvement of the business environment in the country through various recommendation provided by the Council’s members. All reports are available on the following website: http://mfic.me/activities/white-book

Other useful links:https://www.business-humanrights.org/en/latest-news/?&search=Montenegro&language=enhttps://ejatlas.org/country/montenegro

### Business Facilitation

**The Central Register of the Business Entities (CRPS) is responsible for business registration procedures. The register maintains an electronic database of registered business entities, and contracts on financial leasing and pledges. The process to register a business in Montenegro takes an average of 4-5 working days. The minimum financial requirement for a Limited Liability Company (LLC) is just EUR 1 (USD 1.1), and three documents are required: a founding decision, bylaws, and a copy of the passport (if an individual is founding a company) or a registration form for the specific type of company. Samples of all documents are available for download at the CRPS website. Montenegrin law permits the establishment of six types of companies: entrepreneur, limited liability company, joint stock company, general partnership, limited partnership, and part of a foreign company.**

All included in the business activities need to open a bank account. Once a bank account is established, the company reports to the tax authority in order to receive a PIB (taxation identification number) and VAT (Value Added Tax) number. For classification of companies by size, based on number of employees, the government’s definition is as follows: (i) small enterprises (from one to 49 employees), (ii) medium-sized enterprises (from 50 to 249) and (iii) large enterprises (more than 250 employees).

### Outward Investment

While the Montenegrin government is very active in attracting and inviting foreign investors to do business in Montenegro, the government is not as dedicated to promoting outward investments. There are no government restrictions to domestic investors for their investments abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

Montenegro signed the Central European Free Trade Agreement (CEFTA) in July 2007. The agreement has been signed by seven other countries (Albania, North Macedonia, Moldova, UNMIK/Kosovo, Croatia, Serbia, and Bosnia and Herzegovina). A free trade agreement with Turkey has been in force since March 2010. Montenegro had a free trade agreement with Russia, but the agreement is not currently in force, nor are the free trade agreements with Kazakhstan and Belarus, which have a customs union with Russia. In 2011 Montenegro signed a free trade agreement with Ukraine and with the European Free Trade Association (EFTA) countries (Switzerland, Norway, Iceland, and Liechtenstein).

Montenegro has not signed a Bilateral Investment Treaty (BIT) with the United States.

The United States restored Normal Trade Relations (Most-Favored Nation status) to Montenegro in December 2003.  This status provides improved access to the U.S. market for goods exported from Montenegro.  Montenegro has also been designated as a beneficiary developing country under the U.S. Generalized System of Preferences (GSP) program which expired on January 1, 2021. As a result, Montenegrin imports entering the United States that were eligible for duty free treatment under GSP up to December 31, 2020 (jewelry, ores, stones, and various agricultural products) are now subject to regular duties.

### Bilateral Taxation Treaties

Montenegro does not have a double taxation treaty with the United States. On March 1, 2018, Montenegro’s Parliament approved the Foreign Account Tax Compliance Act (FATCA) agreement between the governments of Montenegro and the United States. Implementation of FATCA will help the countries better track and report tax evasion.The country has signed 43 taxation treaties with various countries on income and property, which regulate double taxation. The treaties in force are with following countries: Albania, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Italy, Ireland, India, Korea, Kuwait, Latvia, North Macedonia, Malaysia, Moldova, Malta, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovak Republic, Slovenia, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, and the United Arab Emirates. Treaties with Spain and Qatar are pending.

### Investment Treaties

Investment treaties seek to ensure a stable framework for investment and better use of economic resources. They define the conditions for investments, allowing free transfer of funds, the right of subrogation, compensation in the event of expropriation and settlement of disputes between investors and countries, including the settlement of disputes between the countries themselves.Montenegro has 24 BITs in force, and more than half have been concluded with the EU member states. Additional information can be found at https://www.gov.me/clanak/ostali-sporazumi

Montenegro joined the Inclusive Framework on BEPS in December 2019. More information available at**https://www.oecd.https://www.oecd.org/tax/beps/search/?term=montenegro/tax/beps/search/?term=montenegro**

							3. Legal Regime					

### Transparency of the Regulatory System

The main law governing foreign investment, the Montenegrin Law on Foreign Investment, is based on the national treatment principle, which is a basic principle of GATT/WTO that prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation. All proposed laws and regulations put forth by the government are published in draft form and open for public comment, generally for a 30-day period.Regulations are often applied inconsistently, particularly at the municipal level. Many regulations conflict with other regulations, or are ambiguous, creating confusion for investors. As noted in the American Chamber of Commerce’s (AmCham) biannual Business Climate Survey conducted in 2020, many municipalities lack adequate detailed urban plans, complicating investment plans. Some municipalities have made efforts to speed up procedures in order to improve the business environment for investors. While at the national level there are fewer obstacles for investments and other activities, many larger-scale projects involve both local and national authorities, and it is often necessary to work with both administrations in order to complete a project. AmCham members surveyed are dissatisfied with the duration of the court proceedings (79.5 percent) and unequal implementation of the law (63.6 percent). At the same time, over 70 percent of AmCham member companies surveyed believe that conditions for doing business when it comes to the duration of the court proceedings, and unequal implementation of the laws have not changed in the past two years.Foreign investors are subject to the same conditions as domestic investors when it comes to establishing a company and making an investment. There are no other regulations in place which might deprive a foreign investor of any rights or limit the investor’s ability to do business in Montenegro. The Law of Foreign Investments is currently fully harmonized with World Trade Organization (WTO) rules.In 2004, the Parliament established an Energy Regulatory Agency, which maintains authority over the electricity, gas, oil, and heating energy sectors. Its main tasks include approving pricing, developing a model for determining allowable business costs for energy sector entities, issuing operating licenses for energy companies and for construction in the energy sector, and monitoring public tenders. The energy law mandates that in the energy sectors, when prices are affected by monopoly positions of some participants, business costs will be set at levels approved by the Agency. In those areas deemed to function competitively, the market will determine prices. The price of gasoline is set nationally every two weeks and is uniform across all petrol stations.The Agency for Electronic Communication and Postal Services (known by its Montenegrin acronym EKIP) was established by the government in 2001. It is an independent regulatory body whose primary purpose is to design and implement a regulatory framework and to encourage private investment in the sector. In March 2021, EKIP prepared a “Study on the Strategy for the Introduction of 5G Mobile Communication Networks in Montenegro”.  In December 2021, the Government adopted the “Roadmap for the Introduction of 5G Mobile Communication Networks” and in December 2022, EKIP held a spectrum auction for the radiofrequencies from the 700MHz, 3.6GHz and 26GHz bands, which will allow telecom companies to expand the 5G and upgrade their 4G networks.While there is a full legal and regulatory infrastructure in place to conduct public procurement, U.S. companies have complained in numerous cases about irregularities in the procurement process at the national level and maintain there is an inability to meaningfully challenge decisions they believe were erroneously taken through the procurement apparatus. In other cases, the system delivers appropriate outcomes, though in a complex and time-consuming way. Public procurement is conducted jointly by the Public Procurement Directorate, the Ministry of Finance (as the main line ministry for the procurement area), and the State Commission for Control of Public Procurement Procedures in the protection of rights area. The Public Procurement Directorate began operations in 2007 while the State Commission for the Control of Public Procurement Procedures was established in 2011. The State Commission takes decisions in the form of written orders and conclusions made at its meetings. The decisions are made by a majority of present members. The State Commission’s Rules of Procedure specify the method for this work. The revised Law of Public Procurement entered into force in December 2019. The Administrative Court oversees cases involving public procurement procedures.

The Montenegro State Audit Institution (SAI) is an independent supreme audit institution for verification of the entire government’s financial statements, including state-owned enterprises.  The audits are made publicly available on the SAI’s website (http://www.dri.co.me/ ).  Accounting standards implemented in Montenegro are transparent and consistent with international norms. In addition, various international companies that conduct accounting and auditing procedures are present in the country.

More information on whether Montenegrin Government publish or consult with the public about proposed regulations is available at https://rulemaking.worldbank.org/en/data/explorecountries/montenegro/

### International Regulatory Considerations

Montenegro is a candidate country for membership to the EU, with accession negotiations launched on June 29, 2012. All 33 negotiating chapters have been opened, while three are provisionally closed. Montenegro is currently taking steps to harmonize its regulations and accepted best practices with those of the EU, as part of the negotiation process.

The government has not notified the WTO of any measures that are inconsistent with the WTO’s Trade Related Investment Measures (TRIMs), nor have there been any independent allegations that the government maintains any such measures.

### Legal System and Judicial Independence

Montenegro’s legal system is of a civil, continental type based on Roman law.  It includes the legal heritage of the former Yugoslavia, and the State Union of Serbia and Montenegro.  As of 2006, when the country regained its independence, Montenegrin codes and criminal justice institutions were applicable and operational.  Montenegro’s Law on Courts defines a judicial system consisting of three levels of courts: Basic, High, and the Supreme Court.  Montenegro established the Appellate Court and the Administrative Court in 2005 for the appellate jurisdiction in criminal and commercial matters, and specialized jurisdiction in administrative matters.  The specialized Commercial Court has first instance jurisdiction in commercial matters. Apart from those, there are also specialized Misdemeanors Courts.The Basic Courts have first instance jurisdiction in civil cases and criminal cases in which a prison sentence of up to 10 years is possible.  There are 15 Basic Courts for Montenegro’s 23 municipalities.  Two High Courts in Podgorica and Bijelo Polje have appellate review of Basic Court decisions.  The High Courts also decide on jurisdictional conflicts between the Basic Courts.  They are also first instance courts for serious crimes where prison sentence of more than 10 years is specified.  The Podgorica High Court has specialized judges and department who deal with organized crime, corruption, war crimes, money laundering, and terrorism cases.According to the Law on Courts, there is just one Commercial Court based in Podgorica.  The Commercial Court has jurisdiction in the following matters: all civil disputes between legal entities, shipping, navigation, aircraft (except passenger transport), and disputes related to registration of commercial entities, competition law, intellectual property rights (IPR), bankruptcy, and unfair trade practices.  The High Court hears appeals of Basic Court decisions, and High Courts’ first instance decision may be appealed to the Appellate Court which is also a second instance court for decisions of the Commercial Court. The Supreme Court is the third (and final) instance court for all decisions.  The Supreme Court is the court of final judgment for all civil, criminal, commercial, and administrative cases, and it acts only upon irregular (i.e., extraordinary legal remedies).  There is also the Constitutional Court of Montenegro, which checks constitutionality and legality of legal acts and acts upon constitutional complaints in relation to human rights violations.  The Commercial Court system faces challenges, including weak implementation of legislation and confusion over numerous changes to existing laws; development of a new system of operations, including electronic communication with clients; and limited capacity and expertise among the judges as well as a general backlog in cases. Over the last several years, the adoption of 20 new business laws has significantly changed and clarified the legislative environment.  Recently adopted legislative reforms improved the efficiency and effectiveness of court proceedings, a trend which is already visible through the introduction of Public Enforcement Agents.

### Laws and Regulations on Foreign Direct Investment

In order to attract foreign investment and to lead interested investors through the process, the government established the Montenegrin Investment Agency (MIA) (https://mia.gov.me/) and the Privatization and Capital Investment Council https://www.gov.me/cyr/vlada-crne-gore/savjet-za-privatizaciju-i-kapitalne-projekte). These organizations aim to promote Montenegro’s investment climate and opportunities in the local economy, with a focus on the tourism, energy, infrastructure, and agriculture sectors.

### Competition and Anti-Trust Laws

In 2013, the Agency for Protection of Competition was established as a functionally independent entity after the *Law on Protection of Competition**entered into force* and the Central Register of Economic Entities registered the law. The area of free market competition, regulated by the law, represents the area that has direct and significant impact on economic development and investment activity, by raising the level of the quality of goods and services, thus creating the conditions for lower prices and creation of a modern, open market economy. This, in turn, provides Montenegro with the possibility to participate in the single market of the EU and in other international markets.

### Expropriation and Compensation

Montenegro provides legal safeguards against expropriation with protections codified in several laws adopted by the government. There have been no known cases of direct expropriation of foreign investments in Montenegro. However, the government in 2022 activated a bank guarantee during an unresolved dispute being heard by the Montenegrin commercial court, an action the U.S. investor has alleged to be an indirect expropriation. In addition, Montenegro has outstanding claims related to property nationalized under the Socialist Federal Republic of Yugoslavia. A number of unresolved restitution cases involve U.S. citizens. The cases are in various stages of adjudication and have languished for over a decade.

At the end of 2007, Parliament passed the new Law on Restitution, which supersedes the 2004 Act. In line with the law, three review commissions have been formed: one in Bar (covering the coastal region); one in Podgorica (for the central region of Montenegro); and one in Bijelo Polje (for the northern region of Montenegro). The basic restitution policy in Montenegro is restitution in kind, when possible, and cash compensation or substitution of other state land when physical return is not possible.In addition, Montenegro provides safeguards from expropriation actions through its Foreign Investment Law. The law states that the government cannot expropriate property from a foreign investor unless there is a “compelling public purpose” established by law or based on the law. If an expropriation is executed, compensation must be provided at fair market value plus one basis point above the London Interbank Offered Rate (LIBOR) rate for the period between the expropriation and the date of payment of compensation.

### Dispute Settlement

#### ICSID Convention and New York Convention

Montenegro ratified its ICSID Convention membership in 2012, and the country fully enforces the Convention.

#### Investor-State Dispute Settlement

Montenegro does not have a bilateral investment treaty with the United States. There are several individual American investors involved in public procurement and construction cases that are in various stages of dispute resolution with the government.**

#### International Commercial Arbitration and Foreign Courts

Dispute resolution is under the authority of national courts, but it can also fall under the authority of international courts if the contract so designates. Accordingly, Montenegro allows for the possibility of international arbitration. Various foreign companies have other bilateral and multilateral organizations providing risk insurance against war, expropriation, nationalization, confiscation, inconvertibility of profit and dividends, and inability to transfer currency; these are the Multilateral Investment Guarantee Agency (MIGA of the World Bank), U.S. Development Finance Corporation (USDFC), U.K. Exports Credit Guarantee Department (ECGD), Slovenia Export Corporation (SID), Italian Export Credit Agency (SACE), French Export Credit Agency (COFACE), and Austrian Export Financing Group (OEKB). In 2012 Montenegro became a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention).

Montenegro is a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral awards since December 2006.

**Montenegro has taken steps to improve court-system inefficiencies, which frequently result in long and drawn-out trials. Procedural laws have been amended in the last few years to improve efficiency of the proceedings in line with the standards of the European Convention of Human Rights. It should be noted that most complaints that go to the European Court of Human Rights against Montenegro concern Article 6 of the Convention – the right to a fair trial in a reasonable time. Civil appellate procedures have been simplified as part of an effort to eliminate the possibility of long appellate procedures, which was common in the past. In addition, Montenegro has passed the Law on the Protection of the Right to a Fair Trial in a Reasonable Time, which enables the court to award compensation for an excessively long trial and introduces a series of controlling mechanisms during the trial itself. In 2011, Montenegro adopted the Law on Public Bailiffs, which subsequently improved the procedure to enforce civil judgments.**

### Bankruptcy Regulations

The Bankruptcy Law, adopted in 2011, mandates that debtors are designated insolvent if they cannot meet financial obligations within 45 days of the date of maturity of any debt obligation. However, the law still offers some latitude for restrictive measures and discretionary government interference. Bankruptcy is criminalized in Montenegro and a responsible officer in a business entity who caused bankruptcy and damage to another person by irrational spending of assets or their bargain selling, by excessive borrowing, undertaking disproportional obligations, recklessly concluding contracts with insolvent entities, omitting to collect claims in time, by destroying or concealing property or by other acts which are not in compliance with  prudent business practices shall be punished by a prison term from six months to five years.

							4. Industrial Policies					

### Investment Incentives

The Ministry of Economic Development, in cooperation with the World Bank Group (WBG), has created an Investment Incentives Inventory, which provides a comprehensive list of available financial and non-financial support programs for the private sector as well as domestic and foreign investors offered by the Government of Montenegro. This initiative is part of the WBG-supported Regional Investment Reform Agenda, whose objective is the development of commonly accepted investment standards for the Western Balkans region in order to improve the attractiveness of the region for regional and other foreign investors. Montenegro’s goals are to leverage this program to spur a higher inflow of investments and achieve a higher level of entrepreneurship, trade and job creation.

The inventory contains data on 40 incentive measures that are available to domestic and foreign investors through various support programs intended for the private sector. The MIA oversees the incentive program implementation. More information is available on the Agency’s website (https://mia.gov.me/investment-incentive-inventory/).

### Foreign Trade Zones/Free Ports/Trade Facilitation

In 2004, Montenegro adopted the Law on Free Zones, which offers businesses benefits and exemptions from custom duties, taxes, and other duties in specified free trade zones. The Port of Bar is currently the only free trade zone in Montenegro.  All free zone users have many benefits provided by the law and other regulations (import free of customs duties, customs fees and VAT; storage of goods in a duty-free regime for an unlimited period of time; low corporate tax, simplified procedures) in addition to the use of infrastructure, port handling services, and telecommunication services.

All regulations relating to free trade zones are in compliance with EU legal standards. Complete equality has been guaranteed to foreign investors in reference to ownership rights, organizing economic activities in the zone, complete free transfer of profit and deposit, and the security of investments. More information is available at http://www.lukabar.me/ 

### Performance and Data Localization Requirements

The government does not impose any performance requirements as a condition for establishing, maintaining, or expanding an investment. There is a defined package of incentives offered to foreign investors, including duty exemptions for imported equipment.

AmCham Montenegro and the Foreign Investors’ Council announced that Montenegro has improved and liberalized its business environment due to amendments to the Law on Foreigners.  This law addressed previous requirements placed on hiring practices. According to revisions to the law, businesses no longer need to prove that there are no local citizens of the required vocational profile that are available for a particular job before the company decides to hire a foreigner.

The government does not use “forced localization,” the policy in which foreign investors must use domestic content in goods or technology. The only exception is an agreement with a Chinese company that is constructing the country’s first national highway. The agreement for this project, which is currently the largest infrastructure project in Montenegro, requires that 30 percent of the labor contract be engaged locally.

							5. Protection of Property Rights					

### Real Property

In 2002 Montenegro enacted the Law on Secured Transactions and established a collateral registry at the Commercial Court in 2003. The registry’s operational guidelines have been drafted and approved by the Commercial Court. The main goal of the Law on Secured Transactions is to establish a clear and transparent framework for property transactions. In 2004, Montenegro adopted a new Law on Mortgages by which immovable property may be encumbered by security interest (mortgage) to secure a claim for the benefit of a creditor who is authorized, in the manner prescribed by the law, to demand satisfaction of the claim by foreclosing the mortgaged property with priority over creditors who do not have a mortgage created on that particular property, as well as over any subsequently registered mortgage, regardless of a change in the owner of the encumbered immovable property. The Real Estate Administration has taken progressive steps over the last few years to improve the quality and service provided in the registry, though additional improvements are needed.

### Intellectual Property Rights (IPR)

The acquisition and disposition of IPR are protected by the Law on the Enforcement of Intellectual Property Rights, which entered into force in 2006. The law provides for fines for legal entities of up to EUR 30,000 (approximately USD 37,000) for selling pirated and/or counterfeited goods. It also provides ex-officio authority for market inspectors in the areas mentioned above. An additional set of amendments to the existing Law on the Enforcement of Intellectual Property Rights were adopted over the last several years (beginning in 2006) in line with the EU regulations, and it is expected to bring more efficiency in implementation as well as a multifunctional approach to property-rights protection. In 2005, the Montenegrin Parliament adopted the Regulation on Trade-Related Aspects of Intellectual Property Rights (TRIPs) Border Measures that provides powers to customs authorities to suspend customs procedures and seize pirated and counterfeit goods. Statistics on seizures of counterfeit goods is published by the Revenue and Customs Administration and available on their webpage https://www.gov.me/upravaprihoda Montenegro’s Penal Code penalizes IPR violations, allows ex-officio prosecution, and provides for stricter criminal penalties; however, copyright violation is a significant problem in the outerwear and apparel market, and unlicensed software can be easily found on the general market. The Law on Optical Disks was adopted in 2006; it requires the registration of business activity when reproducing optical disks for commercial purposes and provides for surveillance of optical disk imports and exports, as well as imports and exports of polycarbonates.

The Montenegrin Intellectual Property Office is the competent authority within the state administration system for the activities related to industrial property rights, copyrights, and related rights. The Intellectual Property Office was established under the Regulation on Organization and Manner of Work of the State Administration in 2007, and officially started working on in 2008.At the end of 2007, the Customs Administration signed a Letter of Intent for acceptance of Standards to be Employed by Customs for Uniform Rights Enforcement (SECURE) Standards, adopted by the World Customs Organization (WCO), to promote the efficient protection of IPR by customs authorities.Montenegro is not on the Special 301 Watch List. Montenegro is not listed in the notorious market report. However, the sale of pirated optical media (DVDs, CDs, software) as well as counterfeit trademarked goods, particularly sneakers and clothing, is widespread. According to the 2017 joint survey of Business Software Alliance and the International Data Corporation (IDC), the software piracy rate in Montenegro is among the highest in Europe constituting 74 percent of the market, two percentage points below the 2015 study. Enforcement is slowly improving as customs, police, and judicial authorities obtain the necessary tools, but institutional capacity and public awareness is still limited.

To further improve intellectual property protection, AmCham Montenegro established an IPR Committee in April 2009, which currently operates under the Grey Economy Committee. The main goal of the committee is to work closely with the Montenegrin institutions which deal with IPR, to increase public awareness of the importance of intellectual property protection, and to help the Government of Montenegro strengthen its administrative capacities in this field. More information about the committee’s activities can be found on AmCham’s website http://www.amcham.me/.

Montenegro became a member of the World Intellectual Property Organization (WIPO) in 2006, with more information available on the WIPO’s website http://www.wipo.int/members/en/details.jsp?country_id=193

***Resources for Rights Holders***Contact at the U.S. Embassy in Montenegro: Walter Andonov, Political and Economic Deputy Chief +382 20 410 500

							6. Financial Sector					

### Capital Markets and Portfolio Investment

The banking sector in Montenegro is fully privatized with 11 privately owned banks operating in the country. The banking sector operates under market terms. Foreign investors can get credit on the local market, and they have access to a variety of credit instruments since the majority of the banks in Montenegro belong to international banking chains.

The largest foreign banks are OTP (Hungary) operating as CKB in Montenegro, Erste Bank (Austria) and NLB (Slovenia). The remaining, smaller foreign banks do not belong to large international groups. A new set of banking laws have been adopted and some of the existing laws have been amended to improve regulation of the banking sector, provide a higher level of depositor safety, and increase trust in the banking sector itself. The Law on the Protection of Deposits has been adopted to bring local legislation on protecting deposits up to European standards. In accordance with the law, a fund for protecting deposits has been established and deposits are guaranteed up to the amount of EUR 50,000 (approximately USD 55,000).

Until 2010, Montenegro had two stock exchanges. After a successful merger, only one stock operates under the name Montenegro Stock Exchange (MSE). The turnover of the MSE in 2022 included 1,618 transactions, totaling EUR 156 million, a 235 percent increase over 2021.

In December 2013, the Istanbul Stock Exchange purchased 24.38 percent of the MSE (www.montenegroberza.com). Three types of securities are traded: shares of companies, shares of investment funds, and bonds (old currency savings bonds, pension fund bonds, and bonds from restitution.) The MSE is organized on the principle of member firms, which trade in their own names and for their own account (dealers) in the name and for the account of their clients (brokers). Members of the MSE can be a legal entity registered as a broker under the Law on Securities provided, they meet conditions laid down by the Statute of the Stock Exchange. In addition, members may include banks and insurance companies, once approved by the Commission for Securities to perform stock exchange trade. MSE currently has 5 stockbrokers.

### Money and Banking System

According to Central Bank of Montenegro, the banking sector remained solvent and liquid. Total bank assets amounted to EUR 6.4 billion at the end of 2022, an increase of EUR 1.07 billion, or 20 percent over the previous year. Loans make up the dominant share of bank balance sheets, amounting to EUR 3.84 billion at the end of 2022, a 14.28 percent increase over 2021. Non-performing loans accounted for 6.2 percent of the total. In 2021, the latest data available, lending activity grew by 13.9 percent over 2020, while the interest rate dropped to 5.66 percent due to increased competition.

Montenegro is one of a few countries that does not belong to the Euro Zone but uses the Euro as its official currency (without any formal agreement). Since its authority is limited in monetary policies, the Central Bank, in its role as the state’s fiscal agent, has focused on control of the banking system and maintenance of the payment system. The Central Bank also regulates the process for establishing a bank. A bank can be founded as a joint-stock company and acquire the status of a legal entity by registering in the court register. An application for registration in the court register must be submitted 60 days from when the bank is first licensed.

On March 1, 2018, Montenegro’s Parliament approved the Foreign Account Tax Compliance Act (FATCA) agreement between the governments of Montenegro and the United States.

### Foreign Exchange and Remittances

#### Foreign Exchange Policies

The Foreign Investment Law guarantees the right to transfer and repatriate profits in Montenegro. Montenegro uses the Euro as its domestic currency. There are no other limitations placed on the transfer of foreign currency.

### Remittance Policies

There are no difficulties in the free transfer of funds exercised on the basis of profit, repayment of resources, or residual assets. The Central Bank of Montenegro publishes statistics on remittances as a proportion of GDP, with the latest data available indicating that in 2020 remittances accounted for approximately 12.3 percent of GDP.

### Sovereign Wealth Funds

There are no sovereign wealth funds in Montenegro.

							7. State-Owned Enterprises					

Since the beginning of the privatization process in 1999, nearly 90 percent of formerly state-owned enterprises (SOEs) have been privatized. The most prominent SOEs still in operation include the Port of Bar; Montenegro Railways; Airports of Montenegro; Plantaze Vineyards; the national electricity provider Elektroprivreda Crne Gore (EPCG); several companies in the tourism industry, including Ulcinjska and Budvanska Rivijera; and national air carrier ToMontenegro that had its inaugural flight in June 2021; and most recently, the Niksic Steel Mill that was purchased by EPCG in December 2022. All these companies are registered as joint-stock companies, with the government appointing one or more representatives to each board based on the ownership structure. All SOEs must provide an annual report to the government and are subject to independent audits. In addition, SOEs are listed and have publicly available auditing accounts on the Montenegrin Securities Commission’s website www.scmn.me. Political affiliation has been known to play a role in job placement in SOEs.

In August 2021, the Government of Montenegro established a new state entity known as Montenegro Works that is to have financial and administrative oversight over all SOEs. While it has established a board of directors, hired a management team, and received two years of funding from the Government, its operations remain in their infancy, and it has not yet received approval from Parliament for its long-term objectives and operations.

### Privatization Program

The privatization process in Montenegro is currently in its final phase. The majority of companies that have not yet been privatized are of strategic importance to the Montenegrin economy and operate in such fields as energy, transport, and tourism.

Further privatization of SOEs should contribute to better economic performance, increase the competitiveness of the country, and enable the government to generate higher revenues (while lowering its outlays), which will enhance capital investments and reduce debts.The Montenegrin government is the main institution responsible for the privatization process. The Privatization and Capital Investment Council was established in 1996 to manage, control, and implement the privatization process as well as to propose and coordinate all activities necessary for the non-discriminatory and transparent application process for capital projects in Montenegro. The prime minister of Montenegro is the president of the Privatization and Capital Investment Council. More information about the council, the privatization process, and the actual privatization plan is available on the council’s website https://www.gov.me/cyr/vlada-crne-gore/savjet-za-privatizaciju-i-kapitalne-projekte.

							8. Responsible Business Conduct					

While there are several good examples of companies undertaking responsible business conduct (RBC) in Montenegro, practices are still developing and are not adopted evenly across the private sector. The government, together with various business organizations, non-governmental organizations, and the international community, organizes events in order to promote and encourage RBC. Since last year, efforts have focused on introducing the RBC concept in the education system. The promotion of RBC through the media has also been used as an effective tool as the media can play a pivotal role in raising awareness about RBC initiatives.The concept of corporate social responsibility (a term that preceded RBC) features regularly on the agenda of many companies in Montenegro. The most recent survey showed that large private companies and associations are, indeed, more engaged in RBC activities, whereas small companies cited the lack of knowledge about RBC and the lack of support and interest from clients as the main reasons for not participating.

### Additional Resources  

Department of State

- Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/ )
- Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/ )
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/ )
- U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ( https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/ )
- Xinjiang Supply Chain Business Advisory ( https://www.state.gov/xinjiang-supply-chain-business-advisory/ )

Department of the Treasury

- OFAC Recent Actions ( https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions )

Department of Labor

- Findings on the Worst Forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  )
- List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods )
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab )
- Comply Chain ( https://www.dol.gov/ilab/complychain/ )

 

### Climate issues

**Montenegro is a country with relatively low per capita greenhouse gas emissions, producing 1.8 tons of CO2 per person, compared to a world average of 4.8 tones per person, according to the most recent available data. In 2015, the Government adopted its National Strategy in the Field of Climate Change by 2030. Montenegro in December 2022 increased its nationally determined contributions (NDC) target to decrease greenhouse gas emissions under the Paris Agreement from 35 percent to 55 percent below 1990 levels by 2030, but the government has not introduced any new policies or programs to achieve these climate goals. The Government is also developing a national energy and climate plan, as well a strategy on air quality management.

							9. Corruption					

Corruption and the perception of corruption are significant problems in Montenegro’s public and private sectors.  Corruption routinely places high on the list of citizen concerns in opinion polls, in addition to risks cited by foreign investors.  Montenegro placed 65th out of 180 countries in the Transparency International (TI) 2022 Corruption Perception Index list. An improved legal framework to help combat corruption and organized crime has been in force since the adoption of the Law on Prevention of Corruption in 2014 and the Law on the Special State Prosecution in 2015.  The government has also taken substantial steps to strengthen the Rule of Law, including the establishment of a special police unit focused on corruption and organized crime, the creation of an Agency for the Prevention of Corruption, the creation of an independent Office of the Special State Prosecutor that handles major cases including organized crime and corruption, and the appointment of the Chief Special State Prosecutor.  In line with these laws, the Special Prosecution, the Special Police Team, and the Agency for Prevention of Corruption became operational in 2015 and 2016.  In 2015, Montenegro’s Parliament adopted the Law on the Confiscation of Proceeds from Criminal Activities, which provides for expanded procedures for the freezing, seizure, and confiscation of illicit proceeds.  It also authorizes the creation of multi-disciplinary financial investigation teams.  In February 2019, a multi-institutional operational team for fight against commercial crime was founded. The Head of Crime Police presides over the team, and it consists of representatives of the police, Customs Authority, Tax Authority, and Administration for Inspection Affairs. A focus of the team’s work is on the prevention, investigation, and fight against misuse in commercial activity.  In 2105, the Parliament also adopted the Law on the Center for Training of the Judiciary and State Prosecution which created a new independent judicial training institute, with greatly expanded powers and autonomy.  The adoption of the Law on Courts in 2015 has created one centralized Special Department for Organized Crime, Corruption, War Crimes, Terrorism and Money Laundering in the Podgorica High Court.

Over the past year, the government has made some progress in the fight against corruption. The Special Prosecution initiated several high-level corruption investigations which resulted in arrest of former Supreme Court President and former Commercial Court President. Further arrests in the past year include former board members of state company Plantaze as well as a senior prosecutor in the Office of the Special Prosecutor.

The government encourages state institutions and the private sector to establish internal codes of conduct.  They are encouraged to have ethical codes, as well as obliged to have preventive integrity plans.

Montenegro is a signatory to the UN Anti-Corruption Convention. It also succeeded to the OECD Convention on Combatting Bribery, formally signed by the State Union of Serbia and Montenegro prior to Montenegro’s independence. To date, no foreign firms have lodged complaints against the government under any of these agreements. Several U.S. firms have specifically noted corruption as an obstacle to direct investment in Montenegro, and corruption is seen as one of the typical hurdles to be overcome when doing business in the country.

Corruption is most pervasive in Montenegro in the government procurement sector. The purchase and sale of government property takes place in a non-transparent environment with frequent allegations of bribery and cronyism.

In December 2020, the government established the High-Level National Anti-Corruption Council. The members of the Council were the Deputy Prime Minister and Minister of Finance and Social Welfare, as well as representatives of the academia and the NGOs MANS and Institute Alternativa. The Council’s task was to collect documentation related to all suspicious government activities, and then submit any questionable findings to the relevant authorities, including the Prosecutor’s Office in all cases where there is a suspicion of corrupt activities and damage to the budget of Montenegro. However, in January 2022, due to the political instability facing the country, the NGO representatives and several other Council members left the body, after which it was dissolved. After the change of Government, in January 2023, a new body called the National Council for Fight against Corruption was formed consisting of Prime Minister, several ministers, heads of the judiciary and prosecution, and other highest-level officials. So far only few Council sessions have been held and this body has not proved as efficient tool in combatting corruption. In light of scheduled snap Parliamentary elections in June 2023, further changes in relation to this body are expected.**

### Resources to Report Corruption

Contact at government agencies responsible for combating corruption:Vladimir NovovicChief Special Prosecutor for Fighting Organized Crime, Corruption, War Crimes and Terrorism and Money LaunderingOffice of the Special State ProsecutorEmail: specijalno@tuzilastvo.me

Jelena PerovicDirector, Agency for the Prevention of CorruptionEmail: kabinet@antikorupcija.me

MANS (Network for Affirmation of the NGO sector) is a non-governmental organization that fights against corruption and organized crime in Montenegro. The NGO is engaged in investigating concrete cases of corruption and organized crime, monitoring the implementation of legislation and government policy, providing free legal aid to citizens, CSOs, media and businesses, developing law and policy proposals and analysis, and conducting advocacy campaigns.Vanja CalovicExecutive DirectorMANS (Network for Affirmation of NGO sector)Email: mans@t-com.me; Website: www.mans.co.me

							10. Political and Security Environment					

Montenegro has a multi-party political system with a mixed parliamentary and presidential system.  The country’s political picture was turned upside down following the August 2020 national elections, which unexpectedly resulted in the toppling of the former ruling Democratic Party of Socialists (DPS) by a broad coalition of civic and pro-Serb parties. While this transition of power ended nearly 30 years of DPS rule, it ushered in a period of political turmoil. Despite high public expectations for change, the coalition government of Zdravko Krivokapic could deliver only limited reform results, feeding dissatisfaction and disappointment across the political spectrum, leading to a February 4, 2022 no confidence vote. After nearly three months of bargaining that followed, parliament on April 28, 2022 voted in a new government led by Dritan Abazovic, the leader of the same centrist party that had launched the no confidence vote, and who had served as Deputy Prime Minister in the outgoing government. The new cabinet was a so-called “minority” government, as the parties that joined it did not hold a majority of seats in the parliament, but instead relied on the support of the opposition DPS, although DPS did not formally participate in the cabinet.

Despite the long talks required to form it, and the expansion of the cabinet from 12 ministries to 18 so that all the participating parties could share in the spoils, the Abazovic government almost immediately fell into internal disagreements much like its predecessor. To the surprise of many observers and despite clear threats from DPS that doing so would bring down his government, Abazovic on August 3, 2022, signed a framework agreement with the Serbian Orthodox Church. This act inflamed long standing questions of national identity and drew strong opposition from members of his own cabinet as well as the DPS, precipitating an August 20 no-confidence vote that toppled Abazovic’s cabinet. The fall of Abazovic’s government, after just over 100 days in office, returned the country to political uncertainty. The Abazovic government continues to operate under a “technical mandate”, with new parliamentary elections called for June 11, 2023.

Former Prime Minister Milo Djukanovic, who was elected President of Montenegro in April 2018 for a five-year term, will complete his term of office on May 21, 2023. Djukanovic, Europe’s longest-serving leader, lost an April 2 presidential run-off election to Jakov Milatovic, a political newcomer who served as Minister of Economic Development in the Krivokapic government and is one of the founders of the newly formed Europe Now movement. Many analysts believe Europe Now will likely ride the momentum of the Milatovic victory to a strong performance in the planned parliamentary elections, giving it a good chance to become the largest party in Parliament, replacing DPS in that role.

							11. Labor Policies and Practices					

Montenegro’s total labor force consists of approximately 224,000 people with over 55,000 workers, or close to 25 percent of the labor pool, employed in the public sector.  The unemployment rate was 20 percent as of December 2022, according to the country’s Unemployment Agency. As a result of the Europe Now economic reform program that took effect in January 2022, the minimum wage almost doubled from EUR 250 to EUR 450 per month, which also led to the increase of the country’s average salary from EUR 537 to EUR 727 per month, as of January 2023. One of the reform program’s goals was to tackle the informal economy, estimated at almost 30 percent of GDP, with large numbers of workers officially earning only the minimum wage but receiving additional payments in cash out of sight of the tax authorities.

According to AmCham Montenegro, finding skilled middle managers represents a serious challenge for its member companies, and many foreign companies choose instead to hire foreigners for skilled positions. To tackle youth unemployment, Montenegro is prioritizing efforts to improve practical job skills, including English language training and digital literacy. However, university students in Montenegro obtain little or no practical work experience while studying for their bachelor’s degree. It is widely mentioned in business circles that Montenegrin young adults prefer public sector work to private companies, which offer higher salaries. 2019 was marked by the intensive work on the Labor Law in a form of a dialogue among social partners regarding disputable legal solutions and the new Labor Law has been adopted in December 2019.

Over the past few years, private sector employment has increased, and total employment in the public sector (including SOEs) has decreased.  Employment in Montenegro is led by three major sectors: tourism, maritime and offshore jobs (including on cruise ships or freighters), and manufacturing.The new Montenegrin Labor Act introduced important employment regulations. The maximum duration of a fixed-term contract has been extended from 24 months to 36 months. Employers that employ more than 10 employees must adopt an internal general policy which lists positions and sets out job descriptions. Part-time positions cannot be for fewer than 10 hours per week, except for the GM/CEO. Full-time positions are 40 hours per week. Minimum statutory annual leave is 20 working days for regular jobs and 30 working days for jobs with severe conditions where full-time work hours are reduced from 40 to 36 hours per week. As of October 2019, Sunday became a non-working day for trade shops in Montenegro. Employees who have a six-day long work week are entitled to a minimum of 24 working days of annual leave. Employers are obliged to adopt an annual leave plan prior to April 30 each calendar year for the current year. Employers are not allowed to compensate employees for unused annual leave, except in the case of employment termination that occurs before the employee has consumed his or her entire annual leave allowance for the given year. Should an employer’s operations be shut down, employees can receive 60 percent of their average salary earned over the previous six months, but not less than the minimum wage, for a maximum period of four months within a given calendar year.The new Labor Law contains an explicit provision stating that an employer may only pay salaries to the employee’s bank account. Employment may not be terminated during pregnancy or maternity/ parental leave, except in case of a serious breach of work duties. Maternity leave may be taken for 365 days, beginning 28 days prior to childbirth. In cases in which employees claim unlawful termination, the employee must initiate proceedings before the Agency for Peaceful Resolution of Labor Disputes or before the Centre for Alternative Dispute Resolution. After doing so, the employee may initiate court proceedings against the employer. Court proceedings must be initiated within 15 days from the end of the mandatory mediation. The statute of limitations for monetary claims arising out of employment is four years from the date on which the obligation became due. Claims for payment of pension and disability insurance contributions are not subject to any statute of limitations.The procedure for determining a breach of work duties has been adjusted, now allowing for dismissal for breach without having to first conduct disciplinary proceedings in the following cases: (i) if the employee’s behavior is such that he/she cannot continue to work for the employer (e.g. coming to work intoxicated; drinking or using narcotics during work; refusing to undergo a medical examination to determine intoxication; abusive, offensive, or inappropriate behavior towards customers or employees, etc.); (ii) if the employee knowingly provided inaccurate data during the hiring process; (iii) abuse of sick leave; (iv) failure to return to work after the end of unpaid leave.The Law on Peaceful Resolution of Labor Disputes was adopted in 2007. It introduces out-of-court settlements of labor disputes.

The Law on the Employment of Nonresidents took effect in 2009 and mandates the government to set a quota for nonresident workers in the country. In December 2020, the Government established a quota 20,454 work permits for foreigners in 2021. Procedures for hiring foreign workers were simplified, and taxes for nonresident workers have been significantly decreased to help domestic companies that are experiencing problems engaging domestic staff, particularly for temporary and seasonal work.

The Law on Foreigners in Montenegro came into force in 2015. At the beginning of 2016, amendments suggested by AmCham Montenegro and other business organizations (including the Montenegrin Employers’ Federation, Montenegrin Chamber of Economy, Montenegro Business Alliance, and Montenegrin Foreign Investors Council) were adopted that improve and liberalize Montenegro’s business environment.  According to changes to the law, businesses are no longer required to provide official records proving that the company was unable to hire Montenegrin nationals with the required skills before hiring foreigners.

Changes were made to the Law on Pensions and Care of Invalids in 2017, including gradually increasing the age of retirement from 65 to 67 years (for both men and women) by 2042. These revisions are designed to eliminate anticipated shortfalls in the pension fund. The amended Law on Pensions and Care of Invalids which improves the conditions for retirement and harmonization of pensions, and increases the minimum pension was adopted in July 2020. The new Law improves the conditions for retirement, because one quarter of the period of service that was the most unfavorable for future retirees is excluded from the accounting period.

Until 2008, there was only one trade union confederation at the national level in Montenegro, the Confederation of Trade Unions of Montenegro (SSCG). SSCG is the successor of the former socialist trade union and inherited the property, organizational structure, and rights to participation in the tripartite bodies on the national level. As of 2008, a new confederation, the Union of Free Trade Unions of Montenegro (USSCG), split away from SSCG.

All international labor rights are recognized within domestic law, such as freedom of association, the elimination of forced labor, child labor employment discrimination, minimum wage, occupation safety and health, as well as weekly working hours.

							12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs					

Montenegro, through the State Union of Serbia and Montenegro, became eligible for OPIC programs in July 2001, and it is eligible for DFC financing. DFC is currently not active in Montenegro. Prior to the establishment of the DFC, OPIC activities in Montenegro included: insurance for investors against political risk, expropriation of assets, damages due to political violence and currency convertibility, and insurance coverage for certain contracting, exporting, licensing, and leasing transactions. See the “Guide to Partnering with U.S. International DFC for more information on DFC programs: https://www.dfc.gov/sites/default/files/media/documents/DFC_Partner_Guide.pdf_Guide.pdf

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

 

 

 

							14. Contact for more information					

Walter AndonovPolitical and Economic Deputy ChiefU.S. Embassy MontenegroSt. Dzona Dzeksona 2, 81000 Podgorica+382 20 410 528Email: andonovwb@state.gov

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### On This Page

                    -  EXECUTIVE SUMMARY 
                    -  Openness To, and Restrictions Upon, Foreign Investment                        -  Policies towards Foreign Direct Investment 
                      -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                      -  Other Investment Policy Reviews 
                      -  Business Facilitation 
                      -  Outward Investment 
                    -  2. Bilateral Investment Agreements and Taxation Treaties                        -  Bilateral Taxation Treaties 
                      -  Investment Treaties 
                    -  3. Legal Regime                        -  Transparency of the Regulatory System 
                      -  International Regulatory Considerations 
                      -  Legal System and Judicial Independence 
                      -  Laws and Regulations on Foreign Direct Investment 
                      -  Competition and Anti-Trust Laws 
                      -  Expropriation and Compensation 
                      -  Dispute Settlement                          -  ICSID Convention and New York Convention 
                        -  Investor-State Dispute Settlement 
                        -  International Commercial Arbitration and Foreign Courts 
                      -  Bankruptcy Regulations 
                    -  4. Industrial Policies                        -  Investment Incentives 
                      -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                      -  Performance and Data Localization Requirements 
                    -  5. Protection of Property Rights                        -  Real Property 
                      -  Intellectual Property Rights (IPR) 
                    -  6. Financial Sector                        -  Capital Markets and Portfolio Investment 
                      -  Money and Banking System 
                      -  Foreign Exchange and Remittances                          -  Foreign Exchange Policies 
                      -  Remittance Policies 
                      -  Sovereign Wealth Funds 
                    -  7. State-Owned Enterprises                        -  Privatization Program 
                    -  8. Responsible Business Conduct                        -  Additional Resources   
                      -  Climate issues 
                    -  9. Corruption                        -  Resources to Report Corruption 
                    -  10. Political and Security Environment 
                    -  11. Labor Policies and Practices 
                    -  12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs 
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics 
                    -  14. Contact for more information 

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#### The Lessons of 1989: Freedom and Our Future