EN   EN EN 
EN   EN  EUROPEAN COMMISSION 
Brussels, 9.11.2010 
SEC(2010) 1334 final 
  
COMMISSION STAFF WORKING DOCUMENT 
ANALYTICAL REPORT  
 
  
accompanying the 
 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 
 
Commission Opinion on Montenegro's appl ication for membership of the European 
Union 
  
{COM(2010) 670 final} 
EN 2  EN TABLE OF CONTENTS 
A. Introduction................................................................................................................ .. 4 
a) Application for membership ........................................................................................ 4 b) Relations between the EU and Montenegro................................................................. 5 c) Contents of the Analytical Report................................................................................ 8 B. Criteria for membership ............................................................................................... 8 1. Political criteria .......................................................................................................... .. 8 
1.1. Democracy and the rule of law .................................................................................... 9 1.1.1. Parliament.............................................................................................................. ......... 10 
1.1.2. The executive ........................................................................................................... ...... 12 
1.1.3. Public administration................................................................................................... ... 14 
1.1.4. Judicial system ......................................................................................................... ...... 16 
1.1.5. Anti-corruption policy.................................................................................................. .. 20 
1.1.6. Civilian oversight of security forces .............................................................................. 22 1.2. Human rights and the protection of minorities .......................................................... 23 1.3. Regional issues and international obligations............................................................ 31 1.4. General Evaluation..................................................................................................... 33 2. Economic Criteria ...................................................................................................... 36 2.1. Economic Developments ........................................................................................... 36 2.2. Assessment in terms of the Copenhagen Criteria ...................................................... 38 2.2.1. The existence of a functioning market economy ........................................................... 38 2.2.2. The capacity to cope with competitive pressu re and market forces within the Union... 45 
2.3. Genaral evaluation ..................................................................................................... 49 3. Ability to assume the obligations of membership...................................................... 49 3.1. Chapter 1: Free movement of goods .......................................................................... 50 3.2. Chapter 2: Freedom of movement for workers.......................................................... 52 3.3. Chapter 3: Right of establishment and freedom to provide services ......................... 55 3.4. Chapter 4: Free movement of capital......................................................................... 56 3.5. Chapter 5: Public procurement................................................................................... 58 3.6. Chapter 6: Company law............................................................................................ 60 
EN 3  EN 3.7. Chapter 7: Intellect ual property law........................................................................... 61 
3.8. Chapter 8: Competition policy................................................................................... 63 3.9. Chapter 9: Financial services ..................................................................................... 65 3.10. Chapter 10: Information society and media............................................................... 68 3.11. Chapter 11: Agriculture and rural development......................................................... 70 3.12. Chapter 12: Food safety, veteri nary and phytosanitary policy .................................. 73 
3.13. Chapter 13: Fisheries.................................................................................................. 75  
3.14. Chapter 14: Transport policy ..................................................................................... 77 3.15. Chapter 15: Energy .................................................................................................... 79 3.16. Chapter 16: Taxation.................................................................................................. 81 3.17. Chapter 17: Economic and monetary policy.............................................................. 84 3.18. Chapter 18: Statistics.................................................................................................. 8 5 
3.19. Chapter 19: Social policy and employment ............................................................... 87 3.20. Chapter 20: Enterprise and industrial policy.............................................................. 90 3.21. Chapter 21: Trans-European networks....................................................................... 92 3.22. Chapter 22: Regional policy and coordi nation of structural instruments .................. 94 
3.23. Chapter 23: Judiciary an d fundamental rights ........................................................... 96 
3.24. Chapter 24: Justice, freedom and security ............................................................... 102 3.25. Chapter 25: Science and research ............................................................................ 106 3.26. Chapter 26: Education and culture........................................................................... 107 3.27. Chapter 27: Environment ......................................................................................... 109 3.28. Chapter 28: Consumer and health protection........................................................... 113 3.29. Chapter 29: Customs Union..................................................................................... 116 3.30. Chapter 30: External relations.................................................................................. 118 3.31. Chapter 31: Foreign, secur ity and defence policy.................................................... 120 
3.32. Chapter 32: Financial control................................................................................... 121 
3.33. Chapter 33: Financial an d budgetary provisions...................................................... 124 
3.34. General evaluation ................................................................................................... 125 
Statistical Annex .............................................................................................................. ...... 128 
EN 4  EN A. I NTRODUCTION  
a) Application for membership 
Montenegro presented its application for memb ership of the European Union on 15 December 
2008. Subsequently, on 23 April 2009, the Counc il of the European Union requested the 
Commission to submit its opinion on this applica tion, in line with the procedure laid down in 
Article 49 of the Treaty on European Union, which states: ‘ Any European State which 
respects the values referred to in Article 2 and is committed to promoting them may apply to 
become a member of the Union. The European Pa rliament and national Parliaments shall be 
notified of this application. The applicant Stat e shall address its applic ation to the Council, 
which shall act unanimously after consulting the Commission and after receiving the consent 
of the European Parliament, which shall act by  a majority of its component members. The 
conditions of eligibility agreed upon by the Eu ropean Council shall be taken into account. ’ 
Article 2 states that ‘ the Union is founded on the values of respect for human dignity, 
freedom, democracy, equality, the rule of law and respect for human rights, including the 
rights of persons belonging to minorities. These values are common to the Member States in a 
society in which pluralism, non-discrimination,  tolerance, justice, solidarity and equality 
between women and men prevail. ’ 
This is the legal framework within which the Commission submits its Opinion1 and the 
present analytical report.  
The Feira European Council in June 2000 had ac knowledged that Western Balkan countries 
participating in the Stabilisation and Associatio n Process were 'potential candidates' for EU 
membership. The European perspective of these countries was further confirmed by the Thessaloniki European Council in June 2003 wh ich endorsed the "Thessaloniki Agenda for 
the Western Balkans”. This agenda remains th e cornerstone of the EU policy towards the 
region. 
The European Council of December 2006 renewed the EU's commitment " that the future of 
the Western Balkans lies in the European Union"  and reiterated that "each country's progress 
towards the European Union depends on its indi vidual efforts to comp ly with the Copenhagen 
criteria and the conditionality of the Stabili sation and Association Process. A country's 
satisfactory track-record in  implementing its obligations under a Stabilisation and 
Association Agreement (SAA), including trade re lated provisions, is an essential element for 
the EU to consider any membership application".  At the Sarajevo EU-Western Balkans 
ministerial meeting on 2 June 2010, the EU re iterated its unequivocal commitment to the 
European perspective of the Western Balkans and that the future of thes e countries lies in the 
European Union. 
In line with the Treaty requirements, the current  assessment is made in terms of the conditions 
of eligibility laid down by the European Council. In Copenhagen in June 1993, the European Council concluded that:  
"Accession will take place as soon as a coun try is able to assume the obligations of 
membership by satisfying the economi c and political conditions required. 
                                                
 
1 COM(2010)670 of 09.11.2010. 
EN 5  EN Membership requires: 
that the candidate country has achieved stability of institut ions guaranteeing democracy, the 
rule of law, human rights and respec t for and protection of minorities; 
the existence of a functioning market economy , as well as the capacity to cope with 
competitive pressure and market forces within the Union; the ability to take on the obligations of memb ership including adherence to the aims of 
political, economic and monetary union". 
The Union’s capacity to absorb new members, while maintaining the momentum of European 
integration, is also an important consideration in  the general interest of both the Union and the 
candidate countries. 
In December 1995, in Madrid, the European Council referred to the need "to create the 
conditions for the gradual, harmonious integrati on of [the applicant] c ountries, particularly 
through the development of the market economy , the adjustment of their administrative 
structures and the creation of a stab le economic and monetary environment".  
The Stabilisation and Association Process (SAP ) conditionalities were defined by the Council 
on 31 May 1999 and included co-operation with th e International Crimin al Tribunal for the 
Former Yugoslavia (ICTY) and regional co-operation. These conditions are a fundamental element of the SAP and are integrated into the Stabilisation and Association Agreement 
(SAA) with Montenegro, which en tered into force in May 2010. 
In December 2006, the European Council agreed that "the enlargement strategy based on 
consolidation, conditionality and communication, combined with the EU’s capacity to 
integrate new members, forms the basis for a renewed consensus on enlargement" . 
In the present Opinion, the Commission analyses Montenegro’s application on the basis of the 
country’s capacity to meet the criteria se t by the Copenhagen European Council of 1993 and 
the conditionality of the Stabilisation and Asso ciation process. Montenegro's track-record in 
implementing its obligations under the Stab ilisation and Association Agreement (SAA), 
including trade related provisions , is also being examined.  
In line with the renewed consensus on enlargement, this Opinion also identifies key policy 
areas likely to require particular attention in  the event of the accession of Montenegro and 
provides initial impact estimates with regard  to the policies and sectors concerned. The 
Commission provides more detailed  impact assessments for these policy areas at later stages 
of the pre-accession process. In addition, an accession treaty for Montenegro would involve a 
technical adaptation of the EU institutions in the light of the Treaty on the European Union.  
b) Relations between the EU and Montenegro 
Montenegro declared its i ndependence on 3 June 2006, following a referendum held on 21 
May 2006. In June 2006 the EU decided to establis h relations with Montenegro as a sovereign 
and independent state. All EU Member Stat es recognised Montenegro's independence. 
In October 2007 a Stabilisation and Association Agreement  between the European 
Communities and their Member States and Montenegro
2 and an Interim Agreement on trade 
and trade-related matters were signed. The Interim Agreement entered into force in January 
                                                 
2 OJ L 108, 29.4.2010, p. 1. 
EN 6  EN 2008 and the Stabilisation and Association Agreement in Ma y 2010 after its ra tification by the 
parties.  
Political dialogue meetings at ministerial leve l between the EU and M ontenegro have been 
held since February 2007. Po licy dialogue between the European Commission and 
Montenegro has been taking place since th e country's independence. Annual inter-
parliamentary meetings between representati ves of the European Parliament and the 
Parliament of Montenegro have been held since 2006.  
The entry into force of the Stabilisation and Association Agreement entails significant new 
obligations and engagement for the country in th e areas of justice, freedom and security, free 
movement of workers, right of establishment, fr ee movement of capital and services as well 
as on transport, audiovisual and telecommuni cations. Many of these commitments have 
already been part of the European Partne rship with Montenegro. Furthermore, the 
Stabilisation and Association Agreement provi des for close cooperation between the EU and 
Montenegro in a number of EU  policy areas. In most coope ration areas Montenegro has 
committed to gradually introduce EU acquis  in its legislation and cooperate with the EU on 
joint policy objectives.  
Montenegro has overall smoothly implemente d obligations under th e Stabilisation and 
Association Agreement, including its trade-re lated provisions and has contributed to the 
sound functioning of the various joint institution s under the agreement. Two meetings of the 
Interim Committee took place in February  2008 and May 2009. Meetings of its 
Subcommittees were held in 2008, 2009 and 2010. The Stabilisation a nd Association Council 
met in June 2010 in Luxembourg. The first m eeting of the Stabilis ation and Association 
Parliamentary Committee was held in September 2010 in Brussels3.  
Montenegro participates in the economic dialogue betwee n the Commission, EU Member 
States and potential candidate countri es. This dialogue aims at preparing  potential candidate 
countries for participation in the multilatera l surveillance and economic  policy co-ordination 
currently in place in the EU as  part of the Economic and Monetary Union. In this framework, 
since 2006, Montenegro presents an annual Economic and Fiscal Programme (EFP).  
A European Partnership  with Montenegro was adopted by the Council in January 20074.  
Visa liberalisation for Montenegrin citizens wa s granted by the Council after consultation of 
the European Parliament, as of 19 December 2009. It applies to holders of biometric passports 
travelling to the Schengen area. This decision was based on substantial progress in the areas 
of justice, freedom and security and fulfilme nt of the specific conditions set out in the 
roadmap for visa liberalisation. An agreemen t on readmission between the European Union 
and Montenegro is in force since January 2008. 
Montenegro signed the Energy Community Treat y in October 2005 subsequently becoming a 
full member of the Energy Community of S outh East Europe. Montenegro signed the 
European Common Aviation Area (ECAA) agreement in June 2006. 
In June 2008 the Government of Montenegro a dopted the National Programme for Integration 
of Montenegro in the European Union for th e period of 2008-2012. This document represents 
                                                 
3 The rapporteur for Montenegro is Mr. Charles Tannock. 
4 OJ L 020, 27.1.2007, p. 1. 
EN 7  EN a national plan for the adoption of the acquis , providing for short-term and medium-term 
priorities.  
The EU is, with CEFTA, the main trading part ner of Montenegro. In 2009, the international 
crisis reduced the openness of the country from  100 to 64% of GDP ratio. Trade integration 
with the EU, however, remained high.  
40% of Montenegrin imports worth €533 million, came from the EU (45% from CEFTA), 
mostly consisting of road vehicles, petrol eum and refined petrol eum products, electrical 
machinery, industry machinery, textiles, meat  and meat products an d electricity. 48 % of 
Montenegrin exports worth €130 m illion, went to the EU (46% to CEFTA), mainly made up 
of non-ferrous metals, iron and steel, cork, and wood, and textiles. The trade deficit of 
Montenegro with the EU amounted to €520 million in 2009. 
The share of EU investments to Montenegro st ood high, reaching in the same year a pick of 
almost 80% of total FDI. 
Montenegro has been a CEFTA member since 2007 and the negotiations for its accession to 
WTO are in a final stage. 
Montenegro has received EU financial assistance  since 1998. Overall, between 1998 and 
2010 the EU committed over €408.5 million to Montenegro. From 1998 to 2006, Montenegro benefited from EU CARDS assistance wo rth €277.2 million. Since 2007, CARDS has been 
replaced by the Instrument of Pre-Accession Assistance (IPA), under which Montenegro has 
received assistance worth €131.3 million from 2007 to 2010.  
The CARDS programme in Montenegro focu sed on development and infrastructure, 
institutional building and technical assistance to  comply with the priorities of the European 
Partnership. Reconstruction assistance and emergency and humanitarian relief was also 
provided. 
The IPA programme focuses on key political cr iteria such as judicial reform, public 
administration reform and institutional building,  fight against corruption and organised crime. 
Financial support is also being provided to civil society. As regards the economic and other 
membership criteria the IPA programme concentrates on supporting reforms and 
strengthening the administrative capacity in areas such as the internal market, environment, transport, statistics, education, employment and social inclusion. Montenegro participates in 
four cross-border cooperation programmes w ith neighbouring Western Balkan countries 
(Albania, Bosnia and Herzegovina, Croatia and Serbia). It also participates in the IPA 
Adriatic cross–border programme  with Member States and th e trans-national cooperation 
programmes: "South–East Europe" and "Med iterranean" under the European Regional 
Development Fund. 
IPA assistance is currently centr ally managed by the EU Delega tion. Montenegro is preparing 
for decentralised management of IPA funds. IP A assistance builds on a number of strategic 
documents, such as the European Partnership a nd the SAA priorities; these are reflected in 
Multi-annual Indicative Planning Documents and the Multi-annual Indicative Financial 
Frameworks. 
The Stabilisation and Association Agreement opened up Montenegro's participation in EU 
programmes. Montenegro actively participates in three EU programmes: the 7th Framework 
Programme for research and technological de velopment, in the Entrepreneurship and 
EN 8  EN Innovation Programme (EIP) and the Culture Program me. IPA funds are used to meet part of 
the costs of participation in the three programmes. 
c) Contents of the Analytical Report 
The analytical report takes account of the conclusions of the European Council in 
Copenhagen in 1993 and subsequent Europ ean Council conclusions. The report:  
Describes the relations between Montenegro and the Union; 
Analyses the situation in respect of the pol itical conditions established by the European 
Council (democracy, rule of law, human  rights, protection of minorities);  
Assesses the country’s situation and prospe cts in respect of the economic conditions 
established by the European Council (functioning market econom y, capacity to cope with 
competitive pressure); Addresses the question of the cap acity of the country to adopt the obligations of membership, 
i.e. the total body of EU legislation as expres sed in the Treaty, the secondary legislation, as 
well as the policies of the Union ( acquis of the European Union); 
In line with the December 2006 European C ouncil conclusions, provides initial impact 
estimates in the fields of freedom of movement  for workers (chapter 2), agriculture and rural 
development (chapter 11), regional policy and c oordination of structural  instruments (chapter 
22), and financial and budgetary provisions (chapt er 33). These have been identified as the 
main policy areas likely to require particular attention in case of Montenegrin accession.  
In assessing Montenegro's situation in respect of the economic criteria and its capacity to 
assume the obligations of the acquis , the Commission has also estimated the progress which 
could reasonably be expected in the years ahea d, before possible accession, taking account of 
the fact that the acquis itself will continue to develop.  
The Commission has drawn on a number of information sources: answers given by the 
Montenegrin authorities to a detailed ques tionnaire and additional follow-up questions, 
consultations with the EU Delegation in Monten egro, reports of expert  missions, reporting by 
the Member States’ Embassies in Podgorica, assessments by interna tional organisations 
(including the Council of Eur ope, OECD, OSCE, IMF, World Ba nk), as well as local and 
international non-governmental organisations.  
This Opinion has been prepared following a methodology similar to that  used in previous 
Opinions with some adaptations reflecting the elements included in the 2006 'renewed 
consensus on enlargement'. The Commission organised a number of expert missions in 
Montenegro concentrated mainly in the fields covered by the political criteria. This approach allowed for an assessment of the administrativ e capacities of Montenegri n institutions and of 
the way legislation is implemente d. It also helped to better identify remaining challenges and 
priorities for future action. The Commission has analysed both the present situation and the 
medium-term prospects. For the purpose of this  Opinion and without prejudging any future 
date of accession, the medium-term perspective ha s been defined as a period of five years. 
B. C
RITERIA FOR MEMBERSHIP  
1. POLITICAL CRITERIA  
The European Council in Copenhagen in 1993 set a number of political criteria for accession 
to be met by applicant countries. A country must  have achieved ‘stab ility of institutions 
EN 9  EN guaranteeing democracy, the rule of law, hu man rights and respect for and protection of 
minorities’. In the case of the Western Balkans the conditions defined by the Stabilisation and 
Association Process are also a fundamental el ement of EU policy, which will be assessed in 
this report. These include regional coopera tion, good neighbourly relations and compliance 
with international obliga tions, such as cooperation with th e UN International Tribunal for the 
former Yugoslavia (ICTY). 
The political criteria established in Copenhagen are derived from the fundamental values on 
which the EU is founded, as set out in Artic le 2 of the Treaty on European Union. These 
principles are emphasised in the Charter of  Fundamental Rights of the European Union. 
Article 6(1) of the Treaty states that: ‘ The Union recognises th e rights, freedoms and 
principles set out in the Charter of Fundamen tal Rights of the European Union of 7 December 
2000, as adapted at Strasbourg, on 12 December 2007, which shall have the same legal value 
as the Treaties ’.  
The assessment set out below examines the main ways in which public authorities are 
organised and operate and the situation with rega rd to protection of fundamental rights. It is 
not confined to a formal description but seek s to ascertain the way in which democracy and 
the rule of law actually function in practice.  
1.1. Democracy and the rule of law 
Montenegro declared its independence on 3 June 2006, following a referendum held on 
21 May 2006, in line with the Constitutional Char ter of the State Union of Serbia and 
Montenegro. The result exceeded the 55%5 threshold needed to validate a positive result as 
decided by political consensus in Montenegro, in line with recommendations by the European 
Union.  
The Constitution was adopted by parliament in Octobe r 2007. It defines Montenegro as a 
civic state, establishes the framework for parliamentary democracy and guarantees the 
independence of the judiciary. It  sets out the rules for respec t of human and minority rights 
and prohibits capital punishment. It provides m eans to guarantee civilian control over the 
armed and security forces and intelligence services. 
Alignment of Montenegro’s legislation with  the Constitution has almost been completed. 
However, the deadline set by the Law on impl ementation of the constitution for adopting 
legislation harmonising the legal system with the new constitution was extended for a fourth 
time in April 2010 until the end of 2010. Harmonisation of legislation on election of 
municipal councillors and Members of Parliament is still pending. 
The Constitution is broadly in li ne with European standards. However, in a number of areas 
the legal framework allows for political interference by parliament, notably in the judiciary and prosecution and election of the Ombudsman. Implementing provisions of these laws are 
still needed. Furthermore, the constitutional provision on ‘proportionate representation’ of 
national minorities in public se rvices needs to be clarified. 
Overall , establishment of the legal and institu tional set-up required for an independent 
country is almost complete. Rati fication in Montenegro of inte rnational instruments to which 
the State Union of Serbia and Montenegro ac ceded has been completed. Political consensus 
                                                
 
5 In this referendum, 55.5% supported independence and 44.5% voted against. 
EN 10  EN on state-building is becoming stronger. The Co nstitution is, overall, in line with European 
standards.  
1.1.1. Parliament 
Parliament  is made up of a single chamber with 81 members elected by direct, universal 
suffrage for four years. The Law on election of councillors and Members of Parliament 
provides for proportional representation (fo llowing the d’Hondt method, with candidates 
drawn from ranked lists of coa litions). Montenegro is regard ed as a single constituency. 
The last parliamentary elections  held in March 2009 were assessed by OSCE-ODIHR as 
having met almost all international standards,  however, some shortcomings remained. The 
Law on election of municipal councillors and me mbers of parliament is not yet harmonised 
with the Constitution. The electoral framework provides for free and fair elections. However 
the legal framework has inconsistencies and ambiguities while the mechanism in place for processing election-related compla ints is deficient. Allegations  of election-related criminal 
activity are not properly followed up by law en forcement bodies. As a result broad public 
confidence in the election process remains limite d. Electoral registers are overall accurate. 
However there is a need for their audit in  a transparent and c onsensual manner. The 
constitutional requirement of 2-year residence of  citizens to obtain the right to vote in general 
elections raises concerns from the point of view of universal suffrage. Financing of electoral 
campaigns is covered by the 2008 Law on Financi ng of Political Parties. While this brought 
about an improvement over the former law as re gards reporting and auditing, issues relating to 
transparency and accountability remain. Amendments and supplements to the law on election of municipal councillors and members of parliame nt have been drafted but they have not been 
adopted yet. These amendments aim to implem ent the constitutional commitment to authentic 
representation of minorities. A two-thirds majority  vote in parliament will be needed to adopt 
them.  
The Speaker of Parliament is elected for a f our-year mandate during the first session of the 
newly elected parliament. The parliament can di ssolve itself by a majority of all its members. 
Members enjoy parliamentary immunity. Ther e are 11 standing parliamentary committees. A 
temporary committee has also been established to  monitor the privatisat ion process. Two of 
the committees are chaired by a Member of Parl iament from the opposi tion, the remainder by 
members from the ruling coalition.  
Each Member of Parliament, lik e the government, has the right to  make legislative proposals. 
Laws are normally adopted after three readi ngs. The first reading is in the relevant 
committees, while the second and third are be fore the plenary, comprising, respectively, a 
general debate on the rationale, objectives and essential elements  of the proposed legislation 
and a detailed debate, article by article, before final adoption. There is a fast-track procedure 
for urgent bills, which may also be applied to  adopt legislation aiming at harmonisation with 
the EU acquis . Laws are generally adopted by a simple majority vote of the Members of 
Parliament present. More than half of th e total number of MPs must be present.  
Since independence, parliament has shown incr easingly intensive legislative activity which 
has allowed Montenegro to put in place a mode rn legislative and institutional framework in 
line with European standards. However, parl iament's capacity to ensure high quality 
legislation compatible with EU acquis  has generally remained limited and needs to be 
enhanced. 
EN 11  EN A total of 24 political parties took part in the parliamentary elections of March 2009, eight of 
them individually and the other 16 in seven pre- election coalitions. Ten political parties are 
currently represented in parliament. 
Parliament is strongly committed to Europ ean integration, on which there is political 
consensus in Montenegro. In particular , in December 2007 it unanimously adopted a 
resolution on fulfilment of obligations under the Stabilisation and Association Agreement 
followed, in October 2008, by a resolution on accel eration of Montenegro’s integration into 
the EU which paved the way for Montenegro’s  application for EU membership. In March 
2008, parliament set up a Nationa l Council for European Integr ation (NCEI) as a strategic 
advisory body with broad partic ipation of civil society, gove rnment, the judiciary and the 
opposition. This body’s role is to monitor the European integration process, including 
implementation of the Stabilisation and Associ ation Agreement (SAA). The NCEI is chaired 
by an opposition Member of Parliament. It is the body where the country’s consensus on EU 
integration is most often expressed. However,  the NCEI does not meet regularly and its 
administrative capacity remains limited. The NCEI's role needs to be further developed.  
Parliament is assigned with ensuring the co mpatibility of new legislation with the EU acquis . 
These checks fall under the responsibility of th e Committee for International Relations and 
European Integration, which also has overall responsibility for rela tions with the EU. A 
Department for European Integration has been set up in parliament’s administration to support 
the committee in this role. However, the department has not yet been appropriately staffed and does not yet fulfil its tasks. Parliament ther efore follows the statements of compatibility 
of new legislation with the EU acquis  provided by the government. Impact assessments of 
new legislation and of the means available to  the government to implement and enforce it 
should be examined more syst ematically when passing laws. 
Parliament's role of oversight and control of the government is exercised mainly by means of 
parliamentary questions addressed to the govern ment, to one or more ministers and to the 
Prime Minister. The Prime Minister appears in th e Parliament and replies to oral questions on 
a monthly basis. Regular reporti ng on progress in the European integration process is ensured 
at both committee and plenary level. Interpellati ons, votes of confidence and establishment of 
committees of inquiry are also allowed. Howe ver, despite recent trends to improve the 
situation, the full ar ray of oversight t ools is not used. 
Administrative capacity and other resources required for professional, efficient and 
transparent work by parliament, including expe rt support are overall very limited. There is a 
lack of office space and other facilities, including for MPs.  Staff and expert support for 
committees are rudimentary, often comprising ju st one staff member as committee secretary. 
Efforts have recently been made to strength en parliament’s admi nistrative and expert 
capacity. There is strong commitment, notabl y by the Speaker and parliament’s Secretary-
General, to upgrade parliament ’s administration. A Rulebook on Internal Organisation and 
Systematisation of the Parliament Administratio n was adopted in July 2010 with the aim to 
reduce overlapping and streamline parliament’s work, notably on EU-related matters. Parliament’s research centre has already starte d to offer information and analysis to MPs. 
However, financial and other constraints need to  be addressed. Training  of existing staff and 
recruitment of competent new staff needs to be given priority.  
Parliament’s working methods are based on its rules of procedure. The current rules were 
adopted in December 2009 to take into acco unt adoption of the Constitution. While these 
EN 12  EN rules are broadly respected, the possibilities for government oversight they offer are not fully 
used.  
Overall , electoral standards in Montenegro are br oadly satisfactory. Th e last parliamentary 
elections held in March 2009 met almost all international standards, but some shortcomings 
remained. Outstanding OSCE/ODIHR recomme ndations on how to improve the electoral 
framework and its implementation need to be followed up. These include harmonising the 
electoral framework with the Constitution an d improving it by means of codification and 
addressing the existing gaps and ambiguities, clarifying the powers of the State Election 
Commission and strengthening its professionalism by establishing a secretariat and a legal 
department. At the same time, the issue of voter rights and voter lists needs to be addressed in 
a transparent manner, taking into  account the inconsistency of data on citizenship. Issues 
related to limitation of voter rights to citizens w ith at least two years residence in Montenegro 
also need to be addressed, while mechanisms for processing election-related complaints and investigating allegations of election-related cr iminal activity need to be strengthened. The 
mechanisms to control the financing of el ectoral campaigns need to be enhanced. 
Since the country's independence in 2006 there have been significant improvements in the 
functioning of parliament. The overall commi tment of parliamentary parties to respect 
parliamentary rules and to hold c onstructive policy dialogue, in particular on EU integration, 
remains a solid basis for further democratic deve lopment. However, further efforts are needed 
to make parliament more effective as a legi slative and oversight body and to strengthen its 
administrative capacity. Parliament’s capacity to scrutinise draft legislation against the EU acquis  and the means available to implement it need to be further developed. There is a need 
to reform and depoliticise electoral admi nistration. The National Council for European 
Integration has yet to achieve its full potenti al. Parliament can play a stronger role in 
European integration, notably by developing information and communication activities. It 
plays a key role in the dialogue between the state and civil society. This role can be further 
developed. 
1.1.2. The executive 
The President of Montenegro is elected by direct, unive rsal suffrage for a five-year term of 
office, renewable once. The President represents Montenegro nationally and abroad, calls parliamentary elections, proposes to parliament  the Prime Minister-des ignate, the President 
and judges of the Constitutional Court and the Ombudsman, appoints and dismisses ambassadors and other diplomatic represen tatives upon government proposal and grants 
amnesty and performs other duties laid do wn by the Constitution. The President is 
Commander-in-Chief of the armed forces on the basis of decisions of the Defence and 
Security Council (which c onsists of the President as chair, the Prime Mi nister and the Speaker 
of parliament). The President is impeachable  for any violation of the Constitution in 
exercising his duties. Impeachment procedures are initiated by parliament (by at least 25 
members) and decided upon by the Constituti onal Court. If the Constitutional Court 
establishes a violation, parliament may impeach the President.  
The current President is Filip Vujanovi ć, elected in February 2003 (as President of the 
Republic of Montenegro within the State Union of Serbia and Monteneg ro) and re-elected in 
February 2008 as President of Montenegro. 
The decision on appointment of the Prime Mini ster is taken by parlia ment on a proposal by 
the President. Parliament approves the com position of the government and its programme, on 
EN 13  EN a proposal by the Prime Minist er-designate. All government members, including the Prime 
Minister, enjoy functional immunity but are accountable to parliament.  
The current government  is led by Prime Minister Milo Đukanović. Following the March 
2009 early parliamentary elections, the current government was appointed by parliament in 
June 2009. It has three Deputy Pr ime Ministers and 15 minister s, one of whom is female. 
They include a new Minister for EU Integr ation and one Minister  without Portfolio.  
The government’s powers, intern al organisation and working pr ocedures are regulated by the 
Constitution, the Law on public administration, the Decree on the government and the rules of procedure of the government. The government, li ke all other state b odies, is under the 
obligation to provide access to information on its work pursuant to the Law on free access to information. 
The government holds executive power in the count ry. It is responsible for implementation of 
Montenegro’s internal and foreign policy and imp lements legislation. It plays a key role in 
adopting policy guidelines and strategy papers and in steeri ng the country’s reforms. 
The Ministry for European Integration (MEI), which replaced the Secretariat for European 
Integration in June 2009, is responsible for c oordination on European integration matters. In 
line with the rules of procedur e adopted by the government in July 2009, all laws proposed by 
the government and sent to parliament have to be accompanied by a statement and table of 
conformity with the EU acquis . The statement and table of conformity are established by the 
lead ministry responsible for the draft law in question. The MEI has the role of verifying them 
both. 
The EU integration process is given high priority by the government, as shown by the 
prominence of EU-related legisl ation in the proposals presen ted to parliament. Overall 
coordination falls under the respon sibility of the Minister for Eu ropean Integra tion. Individual 
ministries have specifically de signated officials re sponsible for European  integration. Overall 
government policy and the main strategic dir ections regarding European integration are 
decided by the government collegium  for European integration headed by the Prime Minister, 
while day-to-day coordination takes place with in the Commission for European Integration 
headed by the Minister for European Inte gration. Seven inter-dis ciplinary groups are 
responsible for coordination on SAA- and acquis -related issues. The Ministry of Foreign 
Affairs coordinates the political  aspects of the European in tegration proces s, including 
ministerial political dialogue. Coordination of  EU affairs within the government is strong. 
Montenegro has two levels of government ─ central and municipal. There are 21 
municipalities. The Constitution s tipulates that the right to local self-government  is one of 
the basic rights of the citizen. Municipalities are autonomous legal entities. All municipalities 
are members of the Union of Municipalities. This body contributes to  the decentralisation 
process under a memorandum of cooperation si gned with the government at the end of 2006. 
However, local governments remain weak. 
The Committee for Coordination of Local Self-Government Reform (CCLSGR) was 
established in February 2007. It is made up of representatives of the Ministry of Finance, 
Ministry of the Interior and P ublic Administration, Union of M unicipalities and five selected 
municipalities (a rotation system is applied). This committee facilitates institutional dialogue 
and cooperation and coordination between central and local governments. Under the umbrella 
EN 14  EN of the CCLSGR, three commissions have been established: for international cooperation, for 
fiscal decentralisation and for administrative decentralisation. 
The government work programme is the main strategy paper for plan ning and monitoring 
purposes. There are also sectoral strategies an d work programmes as well as ministries’ work 
programmes. The legislative programme is pa rt of the government work programme. When 
preparing new legislation, the government genera lly involves stakeholders, including civil 
society and international organisations. However,  new legislation has not always been based 
on a clear identification of priorities and needs.  Cost-benefit analyses, impact assessments and 
systematic preparations for implementation of legislation are rarely carried out.  
Government decisions, including on submission of legislative proposals to parliament, are 
taken in weekly sessions. Government sessions are prepared by two government 
commissions, one covering economic policy, fina ncial affairs and the political system, the 
other internal and fore ign policy. There is also an Executi ve Council consisting of the Prime 
Minister and the three Deputy Pr ime Ministers and attended by the Secretary-General of the 
government and other ministers responsible for the items on the agenda. The Executive 
Council decides on policy prioritie s of the government and arbitr ates in cases of conflicts 
between ministers. Central coordination of  decision-making is becoming increasingly 
effective. The quality of consultations with st akeholders, including civ il society, needs to be 
improved and the cross-sectoral consistency of legislative proposal s strengthened. Further 
efforts will be needed to improve the quality of legislation and increase legislative drafting capacity
. 
Overall , Montenegro has an institu tional system of government in stitutions that functions 
overall smoothly. A good system for planning the work of the government and inter-
ministerial consultation is now in place. The activities linking the annual work plan with 
strategic priorities are particularly useful . Decision-making by the government is, overall, 
adequate, as is inter-ministeria l coordination. However, the capacity in ministries to develop 
policies and draft laws remains insufficient and there is not always a link with budget 
estimates and impact assessments on new legisl ation. The quality of c onsultations with all 
stakeholders, including civil society, needs to be  improved and the cross-sectoral consistency 
of legislative proposals st rengthened. Further efforts will be needed to improve the quality of 
legislation and increase legisl ative drafting capacity. The gove rnment should further develop 
its capacity to ensure consistency and monitor implementation of laws closely.  
With regard to local self-gove rnment, adoption of the Law on te rritorial organisation and of 
the amendments to the Law on local finances and to sectoral laws is still pending. Altogether, 
decentralisation is at an ear ly stage. There are serious concerns about the lack of 
administrative capacity, corruption and ineffi ciency at municipal level. Establishing 
transparent and fully accountable  administrations at local leve l, capable of managing their 
new powers, in particular the new fiscal competences, remains a key challenge.  
1.1.3. Public administration 
A comprehensive legal framework for the public administration has been largely put in place. 
Public administration in Montenegro is under the responsibility of the Ministry of the Interior 
and Public administration. Since 2009, the Deputy Pr ime Minister responsible for the political 
system has been charged with the coordi nation of public administration reform. A 
Government Council for Administrative Reform  was established in 2010. A strategy aiming 
to introduce European principles a nd standards is being prepared.  
EN 15  EN The current set-up of the public administratio n consists of 17 mini stries, 16 independent 
authorities, 2 secretariats, 10 institutes, 6 dir ectorates and 2 agencies. These 53 bodies have a 
total of 11,625 posts6. While strengthened, the overall cap acity of the administration remains 
weak. 
The Law on civil servants and state employees re gulates issues related to  the status of civil 
servants and state employees including recr uitment and termination employment, function, 
rights, obligations and duties, performan ce appraisal, promotion and evaluation and 
professional training. 
Civil servants and state employees are recruited following public announcements of 
vacancies. However, a merit system for recr uitment and promotion is neither clearly 
enshrined in the legislation, nor applied in pr actice. There are no clear , uniform criteria for 
selecting candidates. Ther e is no recruitment pa nel involved in the fina l stages of selection 
and heads of administrative bodie s empowered to take the fina l selection decisions are not 
required to give reasons for their choice.  The Appeal Commission's control over the 
recruitment decisions is very limited. Tests ar e inadequate and examination requirements are 
waived regularly. This allows for political in terference and nepotism in  the appointments and 
promotions and undermines the quality and efficiency of the public administration. 
The procedures to ensure the accountability , openness and transparency of the public 
administration include administrative inspections and financial and judicial checks by courts. 
They also allow recourse and appeals to hi gher administrative bodies such as the Ombudsman 
and the Administrative Court. Inspections ar e supervised under the responsibility of the 
Administrative Inspecto rate in the Ministry of the Inte rior and Public Administration. Its 
capacity needs to be significantly improved in order to perform its control function 
adequately.  
The Administrative Court functions well. It has full jurisdiction to review administrative acts, 
including by the central state administration and municipalities, but no jurisdiction to review 
acts by the government. However, administrative justice must be  strengthened, including by 
improving enforcement of decisions  by the Administrative Court. 
The Constitutional Court may evaluate the cons titutionality and legality of administrative 
decisions.  
On the basis of the Ombudsman ’s recommendations, the government adopts binding 
conclusions which public administration bodies are required to implement. The 
recommendations are broadly followed.  
The basic principles of political neutrality and impartiality, a code of ethics for civil servants 
and the principle of li ability in the event of  misconduct are set out in the legislation. Civil 
servants bear disciplinary responsibility in case of violation of the standards and rules laid down in the code of ethics. However, disciplin ary provisions are inefficiently implemented in 
practice.  
There is no comprehensive, regulatory fram ework to monitor corru ption and conflict of 
interest through consistent internal controls. Th e legal and institutional framework needs to be 
                                                
 
6 This figure does not include local self-government, the education and health sectors and some public 
enterprises which are financed partly or fully from the national budget. 
EN 16  EN significantly improved, so as to strengthen accountability and respect for rule of law within 
the public administration, in particular in  areas such as tax administration, public 
procurement, urban planning and licensi ng in local administration and customs. 
The Human Resources Management Authority (HRMA) is responsible for monitoring 
implementation of public administration legisl ation, publishing vacancies and administering 
the human resources registry. However, its le gally binding decisions are often ignored by 
public administration bodies. Its legal mandate and capacity need be strengthened in order to 
allow it to fulfil its role of monitoring implementation of the legislation and ensuring consistent human resources management acr oss the administration. Training programmes 
under the responsibility of the HRMA have impr oved. However, training must intensify in 
order to strengthen the effici ency and overall capacity of the public administration. 
External auditing has a sound legal basis in Mo ntenegro, where its independence is provided 
for by law. The State Audit Institution (SA I) was established in 2004 and became a member 
of the European Organisation of Supreme Au dit Institutions (EUROS AI) in 2008. It has 
started to contribute  to sound public finance manageme nt and to enhance the public 
administration’s accountability. Capacity for au diting budget execution a nd internal financial 
control must be improved. In the long term, the SA I needs to develop its capacity further. This 
would enhance its role as an institutional driver for improvements in the public administration. 
In line with the principles of openness and transparency, the Law on free access to 
information stipulates that legal and natural pe rsons have the right to access to information 
held by state authorities and entities exerci sing public functions. This law provides a good 
basis for transparency, but its implementa tion needs to be considerably improved.  
Overall , the public administration remains weak  and highly politicised. The general 
administrative framework, including the Law on general administrative procedure and the 
Law on civil servants and state employees need s to be reviewed and adapted to European 
standards and principles. Admini strative procedures are cumbersome and time-consuming and 
must be simplified. Transparency needs to  be improved by facilitating access to public 
information including on economic govern ance and allocation of  public assets.  
Significant efforts are still necessary by Mont enegro to establish a sound and accountable 
public administration free of politicisation. The quali ty of legislation and of decisions and acts 
produced by the public administration needs to be  considerably improved. This is inextricably 
linked to improving the quality, capacity and e xpertise of public servants, with the aid of 
merit-based recruitment and promotion and cont inuous training. Further considerable efforts 
to strengthen administrative capacity to deal wi th future EU accession obligations are needed.  
1.1.4. Judicial system (See also Chapte r 23 – Judiciary and fundamental rights) 
The judicial system is organise d as a three-instance court sy stem. It consists of 15 basic 
courts, two High Courts , an Appellate Court  and a Supreme Court . It also includes two 
Commercial Courts and an Admi nistrative Court. Judicial powe r is exercised by 252 judges 
supported by 49 bailiffs and 1 073 administrative staff. 
The basic courts act as first instance and have  jurisdiction over criminal, civil and labour 
matters and also over enforcement proceedings . The High Courts act as first instance on 
criminal offences punishable by imprisonment of more than ten years and on cases of 
organised crime and corruption. They act as se cond instance on appeals against decisions by 
EN 17  EN the basic courts. The Commercial Courts act as c ourts of first instance on commercial matters, 
including disputes between Mont enegrin and foreign companies. 
The Appellate Court has jurisd iction over the whole territory of Montenegro to decide on 
appeals against first-instance decisions by th e High Courts and the Commercial Courts and 
resolve conflicts of jurisdiction between basi c courts, High Courts a nd Commercial Courts. 
The Administrative Court has jurisdiction to deci de on administrative disputes and on 
extraordinary legal remedies in misdemeanour proceedings.  
The Supreme Court is the highest  court in Montenegro. It ensu res uniform application of the 
law by the courts. It acts as the third-instan ce court on appeals against decisions by the High 
Courts, the Appellate Court and the Administrative Court. It de cides on extraordinary legal 
remedies against decisions by other courts and on issues of territo rial jurisdiction. It is made 
up of a President and 22 judges. The President of the Supreme Court is elected by parliament 
for five years. The Presiden t of the Supreme Court is ex officio  the President of the Judicial 
Council. 
The Constitutional Court consists of seven j udges who are elected by parliament by simple 
majority for a period of nine years. It decides on the conformity of laws with the Constitution 
and with ratified international agreements and on whether the President has violated the Constitution.  
The Judicial Council is the body administering the j udiciary. It has a President and nine 
members. The President of the Supreme Court is  the President of the Council. Four of its 
members are judges elected by the Conference of  Judges, two are eminent lawyers nominated 
by the President of Montenegro, and two ar e members of parliament appointed by the 
parliament. The Minister of Justice is also  a member. The Judicial Council is the body 
responsible for selection, appointment, prom otion, dismissal and disciplinary measures 
concerning judges.  
The public prosecution  broadly follows the structure of  the court system. Each Public 
Prosecution Office is headed by a public pr osecutor assisted by one or more deputy 
prosecutors. A Special Prosecution Office for fi ghting organised crime,  corruption, financing 
of terrorism and war crimes has been establ ished within the Supreme Public Prosecutor’s 
Office. There are a total of 86 prosecutors, of  whom 17 are public prosecutors and 69 deputy 
public prosecutors. 
Public prosecutors, including the Supreme Pub lic Prosecutor, are appointed by parliament, 
acting on a non-binding recommendati on by the Prosecutorial Council. 
The Prosecutorial Council is appointed by par liament on a proposal by the Supreme Public 
Prosecutor’s Office. It has a President and ten members. Six of its members are chosen from 
among public prosecutors and deputy public prosecu tors, one is a professor of law, two are 
eminent lawyers in Montenegro and one is a repr esentative of the Ministry of Justice. The 
Supreme Public Prosecutor is President of  the Prosecutorial C ouncil. The Council is 
responsible for appointment, promotion, dismi ssal and disciplinary measures concerning 
deputy prosecutors.  
All parliament decisions on appointments in the judiciary are taken by simple majority. 
Montenegro has pursued judicial reform steadily, resulting, overall, in some sound 
achievements. The Strategy on Judicial Reform  covering the period 2007-2012 provides for 
EN 18  EN actions aiming to improve the performance of the judiciary in the light of the constitution of 
2007. Efforts for its implementation must be intensified.  
The independence of the judiciary, the autonom y of public prosecution and the principle of 
the natural judge are provided for in the Cons titution. However, serious concerns exist over 
the independence of the judiciary, as the lega l framework leaves room for disproportionate 
political influence. Although judge s are appointed by the Judicial Council, th e majority of its 
members are appointed by parliament and the g overnment. All Public Pr osecutors are elected 
by parliament. Deputy Public Prosecutors are no minated by the Prosecu torial Council, which 
itself is elected by parliament. Legislation also provides for excessive accumulation of 
authority in the persons of the President of the Supreme Court and of  the Supreme Public 
Prosecutor who are also appointed by simple ma jority in parliament. The President of the 
Supreme Court combines the presidency of th e Judicial Council and of the three-member 
Commission on Judicial Appointment s with the authority to mana ge and schedule the work of 
the Conference of Judges. Appointment of th e Supreme Public Prosecutor by parliament 
raises additional concerns due to the hierarch ical structure of the prosecution service. 
The selection and appointment procedure for judges and prosecutors is under the 
responsibility of the two corres ponding councils. The criteria for se lection of new entrants to 
the judicial system leave room for discreti on by the Judicial Council and thus undermine 
transparency in the selection process. No unified  selection procedure exists for entry into the 
system. There is no legal obligation to appl y written, anonymous tests and no weighting of 
individual criteria, including of written exams. Both the in dependence and the quality of the 
judiciary are weakened by the absence of a fully-fledged merit-based career system. 
Prosecutors are appointed by parliament for a te rm of five years with  the possibility of re-
election. They are also dismi ssed by parliament. The Prosecut orial Council, whose members 
are likewise appointed by parliament, decides on the appointment, promotion and dismissal of 
deputy public prosecutors. The criteria for di smissal and disciplinary proceedings are not 
transparent, creating a risk of  discretionary implementation.  
The accountability of the judiciary is ensured by means of the m onitoring role of the Judicial 
Council and its role in  disciplinary proceedings. A code  of ethics was adopted by the 
Conference of Judges in 2008. The Judicial Council has set up a commission to monitor 
compliance with the code of ethics for judges in  particular. No disciplinary proceedings have 
been initiated so far for breaching the code. For prosecutors, disciplinary proceedings are 
carried out by parliament, on a proposal by th e Prosecutorial Council, while for deputy 
prosecutors the proceedings are conducted by the Prosecutorial Council. The system needs to 
be strengthened to increase transparency and to  ensure proper implementation of the code of 
ethics. An Office for reporting of corruption ha s been set up within the Judicial Council. A 
track record on fighting corruption in the judici ary has started to be established. However, 
corruption and conflict of  interest rules are not sufficiently  monitored. As a result, corruption 
in the judiciary is perceived as widespread. Accountability in  the judiciary needs to be 
improved.  
Impartiality of judges is ensured by random a llocation of cases and by  conflict of interest 
rules and disqualification provi sions established by law. Ho wever, the rules for random 
allocation are not sufficiently sound and do not  guarantee genuinely random allocation of 
cases, especially in small courts.  
EN 19  EN Both judges and prosecutors enjoy functional immunity. The lifting of immunity for judges 
and deputy prosecutors falls within the compet ence of the Judicial  Council and of the 
Prosecutorial Council respec tively, while parliament can  lift the immunity of public 
prosecutors. The President of the Supreme Court has full immunity which can be lifted only by parliament.  
The efficiency of the judici ary has improved since 2008. This includes the adoption of major 
amendments to criminal procedures and substa ntive legislation as well as capacity upgrading 
and reductions in the back log of unresolved cases.  
Implementation of the new Criminal Procedure Code (CPC) and of the amendments to the 
Criminal Code will contribute to a more effectiv e administration of justice. The new criminal 
legislation simplifies pre-trial proceedings  and introduces plea bargaining, summary 
proceedings and instruments such as reverse burd en of proof for property of suspicious legal 
origins and extended confiscation of criminal assets. However, the new Criminal Procedure 
Code entered into force in August 2010 only as  regards organised crime and corruption as 
well as war crimes. Its general use has been  postponed by one year. The capacity of public 
prosecutors to implement the new legislation and to ensure guidan ce and coordination of 
police and other law enforcement agencies will be  critical to improve efficiency. Montenegro 
must fully engage in sound implementation of the CPC and provide the necessary means to 
ensure it. 
Montenegro has taken measures to reduce the backlog of cases. Data presented by the 
Montenegrin authorities suggest a year-on-ye ar reduction of over 75% at the beginning of 
2010. Yet, there are concerns regarding the soundne ss of the approach and the transparency of 
the methodology used.  
The Constitution guarantees access  to justice, the right to a fair and public trial within a 
reasonable time and the presumption of innocen ce. Support for victims is provided for in the 
Criminal Procedure Code and the Penal Code . The Law on the right to trial within a 
reasonable time is not being implemented effectiv ely, as almost all complaints are rejected on 
procedural grounds . Long duration of court proceedings remains a cause for concern. The 
constitutional provision on the ri ght to legal remedy does not fully  comply with Article 13 of 
the ECHR. Enforcement of both civil and criminal decisions is weak. Additional measures to improve enforcement are required.  
The logistical and administrative capacity of the Montenegrin judiciary is broadly adequate 
for normal administration of justice. Lack of  infrastructure and equipment has hindered the 
judiciary’s efficiency, but effo rts are being made by the author ities to remedy the situation. 
These need to be stepped up. Th e budget allocated to the courts  has risen over the last few 
years, but the overall allocations remain low in comparison with the needs, in particular for investment.  
A Judicial Training Centre pr ovides both initial and con tinuous training for judges and 
prosecutors. However, there are no permanent mandatory courses and no set curricula. In 
addition, the centre is dependent on scarce financing from the central budget and from 
international donors. Training with set curricula for all members of the judiciary needs to be 
established. Enhanced training for prosecutors on  the implementation of the new CPC is also 
indispensable. 
EN 20  EN Overall , Montenegro has pursued reforms in the judiciary since its establishment as a 
sovereign state. It set up new institutions such  as the judicial and pr osecutorial councils and 
adopted other measures aimed at strengthening  the independence and the efficiency of the 
judiciary. However, the country lacks a tradition of judicial independence. Serious concerns 
remain over the role of the parliament in judi cial appointments. The majority of the members 
of the Judicial and the Prosecuto rial Councils are directly or i ndirectly elected by parliament 
with simple majority and by the government, while all state prosecutors are elected by 
parliament. As a result, selection, promotion and dismissal of judges and prosecutors leave 
room for political interference. This raises c oncerns regarding the re spect of separation of 
powers as regards the judiciary. Monitoring corruption and conflict of interest for judges and 
prosecutors needs to be tightened up. 
The capacity of the prosecution needs to be strengt hened, in particular in  view of its leading 
role under the new CPC. Cooperation with judici al and prosecutorial se rvices of neighbouring 
countries should be further developed, includin g on extradition. Systema tic training should be 
put in place, in particular on new legislati on and EU law, for all judges and prosecutors. 
Delivery of results in complex cases will depend on sound implementation of the new legislation. 
Administrative capacity of the judiciary is still weak. There is a positive trend towards 
improving efficiency. Yet many of these reforms are at an early stage. Lack of high-quality  
infrastructure and equipment as well as co urtrooms continue to hinder the judiciary’s 
efficiency. The reorganisation of the court netw ork in the light of the criminal justice and 
misdemeanour reforms requires improved judicial  statistics. The judiciary still has to 
demonstrate its independence, accountability and efficiency, notably by producing convincing 
results, including final decisi ons on corruption and organised crime cases at all levels.  
1.1.5. Anti-corruption policy (See also Chapter  23 – Judiciary and fundamental rights) 
Montenegro has made significant efforts to put in place the legal and institutional framework 
needed for combating corruption. However, corr uption is prevalent in many areas and remains 
a particularly serious problem. 
Important legislation has been adopted, such as the new Criminal Procedure Code (CPC), 
amendments to the Criminal Code, the Law on pr evention of conflicts of interest, the Law on 
the financing of parties and the Law on civil servants and state employees.  
A first strategic framework was provided by the 2006-2009 strategy and action plan on 
combating organised crime and corruption. A m echanism to monitor its implementation was 
put in place in 2007. However, results so far have been uneven. A new improved strategy and 
an action plan for the peri od 2010-2014 have been adopted. They are more detailed and 
explicit in their objectives, ac tions and division of competences  between key institutions with 
a focus on implementation. However, there is no satisfactory risk assessment.  
The current institutional framework for preven ting and repressing corr uption needs to be 
streamlined and properly coordinated. Funding needs to be ensured. There is no single 
authority with clear legal pow ers and the capacity to monitor and enforce commitments and 
obligations of government bodies or to follo w up complaints on corruption from the public. 
There is no clear division of competences between the different agencies. The National 
Commission monitors implementation of the strategy papers. The Directorate for Anti-
Corruption Initiatives (DACI), to which 54 othe r institutions report on corruption, has mainly 
EN 21  EN a consultative role fo cusing on soft prevention measures such as education and awareness-
raising. It is however respons ible for screening new legisl ation from an anti-corruption 
perspective, following fulfilment of anti- corruption commitments, conducting surveys, 
training and awareness-rais ing and centralising compla ints about corruption.  
Integrity plans are envisaged for a number of state institutions. Municipalities and health care 
and educational institutions have been encour aged to develop anti-corruption plans. The 
DACI and the Human Resources Management Au thority have conducted anti-corruption 
training and awareness-raising campaigns. Howeve r, the impact of these activities has been 
limited so far. Amendments made to the Law on civil servants and State employees in 2008 
introduced provisions to protect whistle-blowers, but this has not encouraged reporting of 
corruption in practice. Efforts should be steppe d up to ensure active an d systematic reporting 
of corruption. 
A new Law on prevention of conflic ts of interest in exercising public functions has been in 
force since 2009, but it is not in line with European standard s. In particular, the law remains 
ineffective against Members of Parliament a nd politicians taking up duties as members of 
managing or supervisory bodies. In addition, th e Conflict of Interests Commission performs 
its supervisory role inadequately, as it has no pow ers to verify the declarations of assets by 
public officials and its sanctioning powers remain limited.  
An internal control department  operated within the police for ce until the end of 2009. It dealt 
mainly with the legality of the work and conduc t of police officers and with complaints from 
members of the public, with no focus on dete cting and prosecuting corruption. In 2010, the 
internal control department was moved outside th e police force to the Ministry of Interior and 
Public Administration. Monitoring of conflicts of interest in the judiciary a nd the prosecution 
– which, in the broad sense, is one of the disciplinary tasks of  the Judicial Council and the 
Prosecutorial Council – has been of limited e ffect. Furthermore, the potential for direct 
political interference in  the appointment of prosecutors an d indirectly, of judges limits the 
capacity for objective in vestigations into high-level corruption. 
A Law on financing of political parties and a Law on financing the campaign for election of 
the President of Montenegro, mayors and the pr esidents of municipalities set the framework 
for transparent state budget funding; these cap electoral campaign expenditure and ban 
anonymous donations. However, the supervisory capacity for both laws is inadequate. The 
Ministry of Finance collects financial report forms from the parties but no verifications or 
follow-up measures are carried out. Financing of  electoral campaigns is to be supervised by 
the State Electoral Commission w hose related powers ha ve yet to be established. As a result 
of deficient controls, pot entially illicit financing can remain undetected. 
Parliament needs to significantly strengthen its role in fighting corruption by further 
improving the scope and quality  of the legal framework (f or example, the Law on the 
prevention of conflicts of interest exempt s members of parliament) and by stepping up 
supervision of the executive. Civil societ y and non-governmental organisations are very 
active in awareness-raising, research a nd watchdog activities. Cooperation between the 
government and civil society in this area has im proved, including particip ation of civil society 
in formulation of policies and legislation. Ho wever, this cooperation needs to be further 
strengthened. 
In Montenegro, construction, inspection, supervision and urban and spatial planning, 
including the land register, are high risk areas for corruption. The risk for corruption is also 
EN 22  EN high in the tax administration and customs, with in the judicial system, the police and local 
self-government, while public procurement, hea lth, education and privatisation are further 
areas of concern.  
The track record of investigations, prosecutions and final convictions in corruption cases at all 
levels remains low. Although, operational and inve stigative capacities of the law enforcement 
authorities have been strengthened, it remains weak..  
Montenegro has strengthened mechanisms to fight corruption by allocating human resources, 
funds and equipment to the relevant bodies. Th e Police Directorate, the Public Prosecution 
Office and the Administration for prevention of  money laundering and terrorism financing 
(the FIU) have sufficient operational skil ls to investigate and prevent corruption.  However, 
their capacity must be strengthene d. The lack of expertise in m odern financial investigations 
is still a serious impediment to tackling corru ption. There are serious gaps in coordination 
between law enforcement agencies, including in th e initial phases of investigations, collection 
of evidence and, beyond that, in the prosecution and trial phases . The capacity to investigate 
corruption remains very limite d and the link between corrup tion, money laundering, tax 
evasion and organised crime is rarely made. Thr eat assessment and risk analysis are not used 
to guide investigations. 
Overall , Montenegro has advanced in its efforts to establish the strategic, legislative and 
institutional framework for figh ting corruption. However, the strategic framework is not yet 
based on risk analysis and this  has a negative impact on its e ffectiveness. Key legislation 
needs to be amended to improve its scope and implementation. The institutional framework 
for fighting corruption needs to be streamlined and strengthened  in order to scrutinise and 
rigorously enforce commitments and obligations of government bodies. 
The independence and capacity of supervisory aut horities need to be e nhanced in order to 
ensure compliance with legislati on on conflicts of interest and financing of political parties 
and campaigns and to monitor that rule of law,  transparency and accountability are applied in 
areas such as public procuremen t, privatisation, spatial pl anning, construction permits and 
local self-government. Administrative capacity  for both prevention and repression of 
corruption needs to be strength ened. Law enforcement statistics need to be substantially 
improved. Track record of inve stigations, prosecutions and fi nal convictions in corruption 
cases at all levels need to be improved. Po liticised appointments of prosecutors and judges 
and limited investigation capacities notably in the area of financial crime undermine law enforcement effectiveness. Strong political  will is needed to significantly improve 
performance in combating corruption.  
1.1.6. Civilian oversight of security forces 
Civilian control over the armed and security forc es and intelligence services is regulated by a 
comprehensive legal and policy framework
7 guaranteeing development of the security sector.  
                                                 
7 This consists of the relevant parts of the Constitution (2007), the Law on the police (2005), the Law on 
the National Security Agency (2005), the Law on the armed forces (2007), the Criminal Procedure 
Code (2009), the draft strategy and vision for the police (2005), the strategy and action plan for the fight against corruption and organised crime for 2005-200 8 (which was extended until the end of 2009), the 
national security strategy, the defence strategy (2008 ) and the strategy for reform of the judiciary for 
2007-2012. A counter-terrorism strategy is currently being developed. 
EN 23  EN Security forces in Montenegro include the polic e, the armed forces and the national security 
agency. The police service  (5,566 staff) is in charge of internal security, with the tasks of 
preventing and suppressing all forms of crime. It also assists civil author ities during natural or 
man-made disasters. Within the police serv ice at national level, the Criminal Police 
Department (the special section for the fight against organised crime and corruption and the 
section for the fight against economic crime) and the Border Police Department play a key 
role in combating serious crime. Apart from the police service at national level, there are eight 
regional units, eleven local units and a special anti-terrorist unit. While the capacity of the 
police force has been strengthened, a further review of its structur e and capacity is needed, in 
particular to deal with the threats posed by organised crime and corru ption. A review of the 
overall numbers of the police serv ice, which are among the highest per capita  in the region, is 
necessary to ensure efficiency in the medium  term. Further development of cooperation with 
the prosecution and other law enforcement agencies is important. In this context, further development of the strategic framework for po lice reform could be needed in the medium 
term. The armed forces (2,090 staff), under the command of the Minister of Defence, are 
responsible for defence and cooperate with civ ilian authorities during natural or man-made 
disasters. They can also provi de support to the police in the fight against terrorism.  
The National Security Agency (NSA – 391 staff), which was previously pa rt of the Ministry 
of the Interior, has become a separate state au thority pursuant to the Law on national security 
of May 2005. It is in charge of collecting and analysing data of interest to national security 
and conducting national security operations. It is accountable to the government and subject 
to parliamentary control. The government appoi nts the NSA director and exercises regular 
internal control over its operations through an inspector general. Th e parliament receives 
annual reports from the NSA and can conduct inspections. 
In addition to these services, internal security  issues are also dealt with by the Defence and 
Security Council which is consists of the Presid ent of Montenegro, as ch air, the speaker of the 
parliament and the Prime Minister. The Defen ce and Security Council analyses and assesses 
the security situation in Montenegro and d ecides on measures implying deployment of the 
armed forces.  
Parliament oversees defence and security bodies. It directly appoints th e chief of the police. 
The Committee for Security and Defence organised hearings of the directors of the police and 
the security services. Enquiries and heari ngs held on specific cases demonstrated the 
commitment of the committee members across th e political spectrum to exercise their duties 
in an independent and professional manner. Am endments made to the Law on confidentiality 
of data to give parliament wider access to rele vant data improved the conditions for oversight.  
Overall , the existing framework guarantees the basi c principles for ensuring the civilian 
control of security forces. The ro le of the parliament has been strengthened. Yet there is room 
for further strengthening oversight of security  and defence structures , notably by adopting a 
dedicated law on parliamentary oversight over th e defence sector and the security forces and 
by strengthening the capacity of the committee.  
1.2. Human rights and the pr otection of minorities (See also Chapter 23- Judiciary 
and fundamendal rights) 
Observance of international human rights law 
EN 24  EN Montenegro’s constitutional and legal framew ork on human rights is well developed and 
generally in line with EU standards. Montenegro has rati fied the European Convention on 
Human Rights (ECHR) together with its main  additional protocols and other important 
international  human rights instruments . However, application of the ECHR to the period 
before independence has not yet been fully clarified. The Constitution (Article 20) needs to be aligned with Article 13 of the ECHR to safe guard the right to an effective remedy before 
national authorities for violations of rights under the c onvention. Direct implementation of 
international human rights standards still remains re stricted to cases of conflicts with domestic 
legislation.  
Individuals may bring cases before the European Court of Human Rights  (ECtHR). As of 
mid-September 2010, 622 cases against Montenegro  are pending before the ECtHR, mostly 
related to non-implementation of court decisi ons, non-alignment of domestic jurisprudence 
with the case law of the court, freedom of  information, access to justice and length of 
procedures. Three decisions ha ve been given against the c ountry, based on violation of 
Protocol 1 to the Conven tion relating to the protec tion of property rights. 
As regards promotion and enforcement of human rights , the Ombudsman  is the main 
institution. It is responsible for monitoring pr otection of human rights and freedoms. The anti-
discrimination law establishes the Ombudsman as  the national protectio n mechanism against 
discrimination. This is expected to be confirmed in a forthcoming new Law on the 
Ombudsman, which will also define the Ombud sman as the national protection mechanism 
against torture. The recommendations made by the Ombudsman are almost always followed 
up by the relevant institutions, although with some delay. Howeve r, the current financial and 
human resources are not sufficient to carry ou t the tasks of the Ombudsman efficiently. There 
is no other independent body deal ing with fundamental rights . The Ombudsman is currently 
competent only for discrimination occurring in cases involving the public sector. The 
independence of the Ombudsman could raise concer ns, as he is elected by a simple majority 
of parliament. The Ombudsman’s ac tivities are currently  mainly related to the functioning of 
the judiciary. The number of measures taken on  his own initiative is lo w (below 2.3%) and he 
is not sufficiently involved in improving th e legal framework regulating human rights. 
Despite recent improvements, awareness of the Ombudsman’s role needs to be further strengthened, in particular at local level.  Cooperation of the Ombudsman with NGOs on 
monitoring respect of fundamental rights and freedoms and improving the legal framework is 
still weak. 
A Committee for Human Rights a nd Freedoms has been set up wi thin parliament but its 
activities need to be further strengthene d. The Ministry for Hu man and Minority Rights 
focuses predominantly on promotion of rights of ethnic minorities and gender equality, but 
lacks sensitivity to other areas of human right s, notably regarding th e rights of lesbian, gay, 
bisexual and transgendered (LGBT) persons. Judg es are not yet fully aware of human rights 
standards and do not refer to  the case law of the ECtH R in national proceedings. 
Civil and political rights 
The Constitution guarantees access to justice . However, the long duration of court 
proceedings and the backlog of court cases, even though it has been reduced, remain causes for concern. The Law on the right to trial within  a reasonable time is not being implemented 
effectively, as almost all comp laints are rejected on procedur al grounds. A law on free legal 
aid is still pending. Long delays in court pr oceedings, combined with difficulties faced by 
detainees in meeting bail conditions, freque ntly lead to length y pre-trial detention. 
EN 25  EN The Constitution prohibits the death penalty . Montenegro has ratified  Protocol No 13 to the 
Convention for the Protection of Human Right s and Fundamental Free doms, concerning the 
abolition of the death penalty in all circum stances, which entered into force in 2006.  
Conditions in the  prison system  are being improved. Video survei llance has been installed to 
prevent ill-treatment and efforts are currently underway to improve internal rules. However, 
while, a Deputy Minister post exists in the Mi nistry of Justice, it remains vacant. This 
potentially weakens political accountability for th e supervision of sentenced detainees and the 
implementation of alternative sanctions and th e operation of the probation system. The Law 
on execution of criminal sanctions, along with internal rules governi ng the penitentiary 
system, need to be aligned with European standards, including on access to education, 
adequate healthcare and the length of isolati on measures. Prisons and,  specifically, pre-trial 
facilities are still overcrowded. Living conditions in  older parts of the detention facilities are 
inadequate. To overcome the problem of poor prison conditions, alternative sanctions and 
rehabilitation activities need to be developed. Th e length and frequency of  visits to prisoners 
need to be aligned with European standards.  
The Constitution prohibits  torture and ill-treatment. Montenegro has ratified European and 
UN conventions for the prevention of torture an d inhuman or degrading treatment as well as 
the optional protocol to the UN convention. It ha s adopted an action plan for the prevention of 
torture. The Criminal Procedur e Code provides for prohibition and punishment of any use of 
violence against detainees and prisoners. The police are more actively involved in preventing 
torture and ill-treatment. The number of incident s in prisons has started to decrease. However, 
the establishment of the National mechanism for the prevention of torture and ill treatment is 
still pending. Cases of ill-treatment in the penitentiary system and more particularly cases of excessive use of force by the police continue to be reported. Penal sanctions and disciplinary 
procedures for abuse of office and exceeding o fficial powers are inadequately deterrent and 
rarely applied. There is a lack  of consistent training of pr ison officers on human rights. The 
procedure for recording injuries is still not sa tisfactory. Proper implementation of the right to 
compensation is necessary.  
Montenegro remains a transit country for trafficking in human beings . However, to address 
this issue, a national strategy against human trafficking and a corresponding action plan have 
been defined. Montenegro has ratified the Co uncil of Europe Convention on action against 
trafficking in human beings. An anti- trafficking working group, which includes 
representatives of several ministries, the O ffice of the State Prosecutor, two NGOs, the 
International Organisation for Migration (I OM) and the OSCE, coordinates government 
efforts to combat trafficking. The appointment of a new national anti-trafficking coordinator 
led to more energetic efforts to deter, identif y and prosecute trafficker s. The coordinator is 
also focusing more on trafficking of child ren, particularly Roma children and orphans. 
Montenegrin authorities are actively involved in regional cooperation in this field. The 
government is continuing its po licy of making temporary visa s and shelter available for 
victims of trafficking who agr ee to testify against trafficker s. The government has funded one 
shelter in Podgorica, which is operated by a lo cal NGO. The Police Dire ctorate and judiciary 
are actively prosecuting traffickers. 
The protection of personal data  is enshrined in the Constitution, the Criminal Procedure 
Code and the Law on protection of  personal data. Legal remedies grant individuals the right to 
damages for violations of privacy. The Agency for the protection of personal data is still 
being established. However, the legislation in this  field has yet to be fully aligned with the EU 
EN 26  EN acquis  and the independence of the Agency for the protection of personal data needs to be 
fully ensured. There are cases of  disrespect of children's ri ght to privacy in the media. 
Freedom of expression (including the media) is guaranteed by the Constitution and broadly 
applied in practice.  The media  landscape  is diverse and  pluralistic, although the financial 
sustainability of media outlets is  often weak. The new Law on elec tronic media, together with 
the amendments to the Law on electronic communications lays a good legal basis for 
developing and regulating the public broadcaster and, more  broadly, for independent and 
professional media. The independence of the a udiovisual regulator and proper implementation 
of the above-mentioned laws need, however, to  be confirmed. The capacity and independence 
of the public broadcaster need to be further st rengthened. A better balan ce needs to be struck 
between the Information Secrecy Act, the Law on protection of personal data and the Law on 
free access to information, in order to preven t undue restriction of access to information 
which needs to be made public and to consolid ate the monitoring role of civil society.  
In the past there have been in cidents of severe violence agai nst journalists in Montenegro, 
which have not always been satisfactorily investigated and follo wed up. Investigative 
journalists still face intimidation.  
Prison sentences for libel cases have been abo lished and courts may now decide not to impose 
criminal sanctions in cases where they find that the journalist acted in line with professional 
standards and ethics. Neverthe less, law suits for defamation and hefty fines, although less 
frequent, are still used to exert pressure on me dia. Montenegro does not consistently comply 
with ECtHR case law8.  
Compliance of journalists with  professional ethics and st andards still needs to be 
strengthened. The media se lf-regulatory body is  currently divided and does  not play its role of 
promoting high professional standards properly, as  the main media outlets are not part of it. 
The code of ethics for journa lists needs to be strengthened.  
The Constitution guarantees the  right to vote to all Montenegrin citiz ens over 18 years of 
age, but on condition of at least two years’ permanent residence in Montenegro prior to 
polling day.  
Freedom of assembly and association  is guaranteed by the Constitution and generally 
respected. The Constitution prohibits political activity in state bodies and political activity by foreigners and political organisations with their headquarters abroad. This is not in line with 
the Venice Commission’s re commendations. As regards civil society organisations,  NGOs 
can be established freely in  line with the particularly  liberal Law on NGOs. NGOs in 
Montenegro are very diversifie d and several of them play a significant public and political 
role. The government provides financial supp ort to NGOs from the state budget and funds 
from the national lottery. NGOs’ activities and pr emises are exempted from tax up to a certain 
threshold. The government decided in June 2010 to establish the Council for Cooperation with NGOs. However, it is not yet functioning. In some cases the most critical NGOs have been exposed to political and administrative pressure. The procedure for selection of NGO 
representatives on the National C ouncil for European Integration needs to be improved, as do 
the transparency and monitoring of state financ ing and tax relief for NGOs. State financial 
                                                
 
8 ECtHR case law rules out greater protection for public figures, establishes that the amount of financial 
compensation must not endanger the viability of the defendant media and emphasises that statements or 
allegations made in the public interest should not be punishable. 
EN 27  EN support to NGOs dealing with socially vulnerabl e groups is often insufficient compared to the 
social importance of their action. There is a need  for regular updating of the register of NGOs. 
The cooperation of the government with NGOs, in pa rticular in the course  of the legislative 
process and on definition of major public policie s and projects, remains insufficient. The Law 
on volunteer work sets very restrict ive conditions on vol unteer activities  in NGOs.  
Freedom of religion  is guaranteed by the Constitution and is respected. Restrictions are 
allowed only in the cases provided for by the Constitution. Respect of religious rights is 
regulated by the Law on the le gal status of religious commun ities and the Law on celebrating 
religious communities. There is no state religio n in Montenegro. The state financially assists 
some activities of the main religious communitie s. Inter-faith relations are overall smooth, but 
there are tensions between the Serbian (S OC) and Montenegrin (MOC) Orthodox Churches 
over canonical recognition and prop erty issues. Tensions also st em from the historical and 
cultural background of the Orthodox Church in Montenegro. Despite the constitutional division of state and church, there have been cases  of involvement of authorities in the dispute 
between the Serbian and the Montenegrin Orthod ox churches, in particul ar on property issues. 
No progress was reported on restitution of property  taken from religious communities after 
1945. Claims have been submitted by the two Or thodox Churches, the Catholic Church and 
the Islamic and Jewish communities.  
Montenegro has improved its le gislation regulating access to citizenship  in the framework of 
state succession by amending th e Law on citizenship and ratifying the European Convention 
on nationality and the Convention on the avoidan ce of statelessness in relation to state 
succession. However, the legal framework (the Law on citizenship and the Law on foreigners) 
needs to be fully aligned with the European standards. Around 1500 of domiciled Roma, Ashkali and Egyptian persons, in par ticular children, are at risk of statelessness due to the lack 
of personal documents. The electronic central popul ation register, the electronic database of 
all the population, citizens and foreigners, is not yet fully operational. Procedures for 
checking data during civil registration need to be improved. Judges’ awareness of the 
European conventions regulati ng citizenship is insufficient.  The new Law on citizenship 
contains strict naturalisation criteria, which restricts the opportunities for displaced persons 
from Bosnia and Herzegovina and Croatia to obtain citizenship. Displaced persons
9 from 
Kosovo10 are not eligible for naturalisation under th is law. Negotiations on dual citizenship 
with neighbouring countries, in particular Se rbia, need to continue. The Law on citizenship 
provides that a person can acqui re Montenegrin citizenship through admission because of a 
special contribution to the economic and cultur al development of Montenegro. A government 
decision adopted in May 2010, which establishes criteria for the impl ementation of this 
provision of the Law on citizenship, raises co ncerns about possible misuse as regards the 
acquisition of citizenship through admission due  to special contribution to the economic 
interest of Montenegro. The implementation of this provision ha s been put on hold.  
Economic and social rights 
As regards anti-discrimination policies , the Constitution prohibits direct or indirect 
discrimination on any ground. This prohibition is specified by seve ral pieces of legislation, 
including the July 2010 gene ral Law on prohibi tion of discrimination, which bans 
discrimination on any grounds, in cluding sexual orientation and gender identity. This law 
constitutes an important step forward; however it is not fully  in line yet with the EU 
                                                 
9 In Montenegro the displaced persons from Kosovo are referred to as "internally displaced persons". 
10 Under UNSCR 1244/1999. 
EN 28  EN standards, notably as it permits justificatio ns of direct discrimination in some cases. 
Discrimination is defined as a criminal offence in the Penal Code. However, the 
implementation of mechanisms for preventi ng, monitoring, sanctioning and prosecuting 
discrimination cases still needs to be strengt hened, including through the adoption of the law 
on the Ombudsman and the provision of suffic ient means to the Ombudsman’s Office. Roma, 
Ashkali and Egyptians, persons w ith disabilities as well as  lesbian, gay, bisexual and 
transgendered (LGBT) persons are still subject in practice to discrimination, including on the 
part of state authorities. Seve ral cases of violence against LGBT persons have been reported, 
but no complaints have been presen ted to the police; a r eason for this is fear on the part of the 
victims to have their sexual orientation revealed. Awarene ss-raising campaigns against 
discrimination are insufficient. 
As regards  women’s rights, gender equality is guaranteed by th e Constitution. It is regulated 
by the Law on gender equality (2007) and promoted by the relevant action plan (2008). Implementation is monitored by parliame nt, the government and the Ombudsman. 
Montenegro has ratified the C onvention on the elim ination of all forms of discrimination 
against women. Awareness-rais ing campaigns are regularly conducted within  the public 
administration. Six municipalities have adopt ed local action plans on gender equality. 
However, further efforts to raise awareness of gender equality are nece ssary, particularly in 
rural areas. The Law on gender equality pr ovides for only limited sanctions and does not 
clearly address the principle of equal pay. Th e action plan on gender e quality has not been 
properly implemented. Women are severely unde r-represented in parliament, top government 
posts and in decision-making positions in th e local administration and public undertakings . 
The protection of women against all forms of violence remains insufficient. Sexual 
harassment at work and rape cases are not adequately prosecuted. In rural areas women cannot always exercise their ri ght to control property and husba nds occasionally direct their 
wives’ voting.  
Domestic violence against women (who are the most  affected), children and elderly is a cause 
for concern, despite improvement of the legal fr amework and some efforts to raise awareness 
and improve attitudes amongst the police. Considerably greater e fforts are needed in order to 
protect women and other victims against all fo rms of violence. The Law on protection from 
violence in the family was adopted in July  2010. The strategy and the action plan for its 
implementation are pending. There are no comprehe nsive statistics on domestic violence. The 
monitoring mechanism of this phenomenon needs to be improved. Only three police stations 
have an officer in charge of domestic violen ce and only one municipa lity has a specialised 
social service to protect children and women who are victims of such violence. Judges remain 
lenient towards perpetrators of domestic vi olence. Coordination between the Ministry of 
Justice and the Ministry of Labour and Social Welfare is poor. Support provided to victims by 
the authorities and social care centres is very limited, as are awareness-raising efforts. There 
is no regular budgeting for shelters for victims of  domestic violence. Pr otection and shelter of 
victims, including children, are ensured by NGOs, which lack financial support from the state. 
As regards children’s rights , Montenegro ratified the UN and European conventions on the 
rights of the child and adopted a national action plan for chil dren for 2004-2010. Efforts have 
been made to harmonise the national legal framew ork with international law, in particular as 
regards juvenile justice. However, the definition of ‘child’ is not enshrined in the 
Constitution, nor is there a definition of child  in the implementing legislation. The Law on 
child and social protection has still to be ali gned with the UN Convention on the rights of the 
child. Implementation of the national plan for ch ildren has been inadequate. There is a need 
for higher level of political support and inter- ministerial coordination  in this area. The 
EN 29  EN Council for Children’s Rights, the main body for coordinating implementation of the national 
plan, is not operational. Its capacity remains w eak and its mandate is not clearly defined. The 
mandate of the deputy Ombudsman for children's ri ghts, appointed in 2 009, is not explicitly 
and legally defined. Resour ces assigned specifically to childr en’s issues within the Office are 
insufficient . Despite some recent improvements, childr en with disabilities face considerable 
discrimination, in particular t hose in the Komanski Most institution for persons with mental 
disabilities. Alternatives to institutionalisation need to be developed, including for preventing 
segregation of children with speci al educational needs. An overall  multi-sectoral reform of the 
child and social protection system, in lin e with UNICEF standards, is needed.  
The right to  education  under equal conditions is guaranteed by the Constitution. Primary 
education is compulsory and free. The Bologna reform process is underway. However, the quality of education needs to be improved in order to meet the requirements of the labour 
market better. Roma, Ashkali and Egyptian child ren’s right to educa tion is not properly 
safeguarded. Structural reforms limiting corruption risks  and strengthening the monitoring 
and evaluation system are needed in order to enhance the efficiency and quality of education. Montenegro has to improve access to primary education. The right to education for children with disabilities needs to be respected, incl uding by means of proper implementation of the 
strategy for inclusive education. 
The rights of persons with disabilities are protected by the Constitution. Montenegro ratified 
the UN Convention on the rights of persons with  disabilities and its Optional Protocol. The 
government adopted the strategy for integration of persons with disabilities for 2008-2016 and 
several laws addressing their specific needs. However, the level of implementation of this legislation remains low. Author ities do not actively prosecute in fringements against the rights 
of persons with disabilities and court decisions are not ad equately implemented by public 
administration. Unemployment remains a serious  problem for persons with disabilities, 
notably due to the lack of in stitutional network for rehabilit ation. Very few buildings and 
premises, even new, or courts and public facili ties, have access for pers ons with disabilities.  
Social inclusion of persons with  disabilities (access to social  services, employment, aid to 
dependent persons and proper health care) remain s unsatisfactory and they continue to face 
discrimination in society. Persons with mental disabilities, including children, are the most 
vulnerable and discriminated group,  including when it comes to access to appropriate health 
care. Efforts have been made to improve living  conditions and treatment of adult patients in 
the Komanski Most facility for persons with me ntal disabilities. However conditions of their 
institutionalisation remain a matter of serious concern, in particular regarding the lack of 
adequately trained staff and sub-standards facilities. 
As regards  labour and trade unions rights , freedom to join trade un ions is guaranteed by the 
Constitution and further regulated by the Labour Law. Only persons serving in the armed forces are not allowed to join trade unions. The newl y adopted Law on trade union 
representativeness op ens up the possibility  of pluralistic representation of trade unions at 
national level. Montenegro has ratified th e 8 core labour rights conventions of the 
International Labour Organisation (ILO), as well as the revi sed European Social Charter . 
Labour inspection launched recently a free pho ne line for complaints  on illegal labour and 
other irregularities in labour relations. Ho wever, social dialogue has been limited. 
Transparency and effectiveness of the Social Co uncil needs to be impr oved. There is only one 
employers' organisation with social  partner status. Representatives of the social partners need 
to be involved in the process of  integrating the count ry into the EU. Labour  rights of disabled 
persons are not fully respected. (See also Chapter 19 — Social policy and employment)  
EN 30  EN Property  rights are guaranteed by the Constitution. A Law on private property relations 
provides for equal treatment of foreign ci tizens and Montenegrin citizens. A Law on 
expropriation stipulates that ownership may be restricted wh en it is required in the public 
interest, in return for fair compensation. A La w on state property clear ly defines the property 
belonging to the state and muni cipalities. However, there ar e no precise statistics on 
nationalisation of prope rty by the Communist regime. The government established special 
committees to deal with denationalisation in 2004, but the process has been slow. Out of 
10,738 demands for restitution, only 2,791 (i.e. 26%) have been examined. 1,205 applications 
were found eligible for restitution, but property has been re turned in only 142 cases so far 
(i.e. 5% of all cases eligible).  There are cases where property s ubject to restitution was in the 
meantime privatised. Particular efforts are needed to solve such cases. A law regulating property confiscated from religious communities has not yet been adopted. The land register 
system needs strengthening, in pa rticular at municipal level. 
Respect for and protection of minorities, cultural rights 
Respect for and protection of  minorities  is enshrined in the Constitution. It is regulated by a 
broad legal framework, including a strategy,  guaranteeing protection of minorities, in 
particular in the fields of education, cultu re, access to information and use of minority 
languages. Montenegro has ratif ied the Framework Convention fo r the protection of national 
minorities and the European Charter on regiona l and minority languages. The Ministry for 
Protection of Human and Minor ity Rights and the Ombudsman, with a deputy for minority 
rights, form the core of the institutional framework. The c ountry enjoys good inter-ethnic 
relations. Minority Councils (Albanian, Bosnian, Croat, Muslim, Roma and Serbian) are the official channel for communication between  minorities and the government. The state 
provides financial support to th e Minority Councils from the state budget for administrative 
functioning and the Minority Fund for minority-rel ated projects, in proportion to the size of 
the minority .  
However, the Law on minority rights and freedom s defines minorities on a citizenship basis. 
This is not in line with the ge neral principle of the Convention  for the protection of national 
minorities, according to which no distinctio n should be made between citizens and non-
citizens as regards the rights of persons bel onging to minorities. The Law on Election of 
Parliament and Committee Members remains to be aligned with the Constitution to ensure 
authentic representation of minorities in parl iament and local assemblies. The Constitutional 
provision on ‘proportionate repr esentation’ of national minorit ies in public services, state 
authorities and local se lf-government bodies needs to be clarified and implemented. Minority 
representatives, supported by some NGOs, clai m under-representation in the administration, 
judiciary and police. Cooperation between the go vernment and the Minority Councils needs to 
be improved, in terms of the legal framework a nd definition of projects related to minorities. 
The Minority fund still does not function prop erly. Amendments to the Law on minority 
rights and freedoms, which should clarify th e functioning of the F und, are pending. Minority 
Councils’ elected representative s need to be more closely involved in the procedure for 
allocation of funds from the Minority Fund. M onitoring of the use of allocated financial 
means by the Minority Fund remains insufficient.  As regards cultural rights, while the 
constitution guarantees to minorities the right to education in their own language and the right 
to have included in the curricula their history an d culture, concerns have been expressed as to 
the quality of existing textbooks - in particular  in the Albanian language. Recently, the issue 
of amendments to the Law on general e ducation, according to which the Montenegrin 
language will be used in the education process in Monten egro, is being politicised. 
EN 31  EN The Roma, Ashkali and Egyptian communities remain the most vulnerable and 
discriminated group. They face very difficult li ving conditions and frequent discrimination, 
particularly regarding access to economic an d social rights. The government adopted a 
strategy for 2008-2012 to improve the stat us of Roma, Ashkali and Egyptian  and is financing 
its implementation. However, this strategy does not  take into account in a satisfactory way the 
gender dimension of the inclusion of these persons. Results of integration of these 
communities remain insufficient. Efforts have been  made to ensure civ il registration of Roma, 
Ashkali and Egyptian, in particular regarding birth registration. However around one third of 
persons belonging to these communities, domicile d and displaced, mainly children, have no 
personal documents and are thus impeded from  exercise their fundamental rights. The 
majority of the funds for the Roma, Ashkali and Egyptian strategy are allocated to housing, 
but in segregated areas. Despite efforts by the state authorities and so me progress achieved, 
access for persons belonging to these communiti es to education and vocational training 
remains unsatisfactory and they also face majo r discrimination as regards access to work, 
including in public administration. There is no elected Roma, Ashkali and Egyptian 
representative in parlia ment and only one at municipal council level.  
There are around 17,000 displaced persons from Bosnia and Her zegovina, Croatia and 
Kosovo in Montenegro. Montenegrin authorities adopted in 2009 the action plan for resolution of their status. In July 2010 it reduced  all relevant administrative fees to €10 and 
adopted a Decree which gives displaced pers ons access to social and economic rights until 
January 2012. However, the implementation of th e Law on foreigners and of the action plan 
on displaced persons remains insufficient. The Law on social and child welfare, Law on work 
and employment of foreigners a nd its by-law, Law on health ca re, and other relevant laws 
have not yet been harmonised with the amended Law on foreigners. The access of displaced persons to legal status is also hampered by necessary provision of birth and citizenship 
certificates. Montenegro's cooperation with Koso vo on facilitation of the access for displaced 
persons to personal documents remains at an initial stage. Around 2 200 of these persons, vast 
majority Roma, Ashkali and Egyptian, do not curre ntly have any personal document. Living 
conditions in the Konik camp, which accommodate s the majority of displaced Roma, Ashkali 
and Egyptian from Kosovo, are very alarming. The case of segregation of children from 
Konik camp in primary school is a cause for concern. The cooperation of the Coordination 
Committee with the UNHCR remains limited. Th e principles of the Sarajevo Declaration 
process on refugee return need to be properly implemented.  
Overall , while the legal framework regulating human rights and respect for and protection of 
minorities is largely in place and broadly corresp onds to European standards, implementation 
is lagging behind, mainly due to insufficient awareness on the part of the authorities 
(administration, judiciary and municipalities).  The main causes for concern are the use of 
defamation cases to restrict the freedom of me dia, pressure on journalists and NGOs as well 
as discriminatory practices against Roma, Ashkali and Egyptian (whether domiciled or 
displaced), persons with disabi lities (including children) a nd lesbian, gay, bisexual and 
transgendered persons. Not sufficient respect for gender equality, domestic violence, ill-
treatment of detainees by poli ce and sub-standard prison cond itions are further problems. 
1.3. Regional issues and international obligations 
Cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY)  
is good. Since 2005, Montenegro has received 21 requests for assistan ce and has complied 
with them. The ICTY started proceedings agai nst two Montenegrins (both also hold Serbian 
nationality). No cases were referred from the ICTY back to national authorities for possible 
EN 32  EN further investigation. There are only a small number of local war crimes cases in Montenegro. 
Currently two are in the trial phase and two in the pre-trial phase. These cases are being dealt 
with without any unjustified delays and ther e is sufficient capacity to deal with them. 
Concerning international judi cial cooperation in civil and criminal matters, Montenegro 
concluded (or succeeded into) bilateral agreements with Croatia, Bosnia and Herzegovina, the former Yugoslav Republic of  Macedonia and Serbia. Monten egro also concluded (or 
succeeded into) agreements on mutual enforcement of court decisions in criminal matters with 
Bosnia and Herzegovina, Serbia and Croatia. An agreement was initialled with Bosnia and 
Herzegovina on legal assistance in  civil and criminal matters. The Supreme State Prosecutors 
signed a memorandum of understanding between Montenegro and Kosovo on jointly fighting 
terrorism, smuggling and other forms of cross- border crime. Cooperation agreements in the 
fight against organized crime, trafficking of  human beings, trafficking of narcotics and 
terrorism were signed with Bosnia and Herze govina, Croatia, the former Yugoslav Republic 
of Macedonia, Albania, Serbia and Italy. Howeve r, implementation of agreements on judicial 
cooperation needs to be strength ened in order to produce better tangible results. Montenegro 
is also participating in  regional polic e cooperation. 
An extradition agreement was signed with Serbia in May 20 09. The European Convention on 
extradition provides the legal basis for extradition procedures with Slovenia, Croatia, the former Yugoslav Republic of Macedonia and Bosnia  and Herzegovina. In  the absence of an 
international agreement, international legal ai d and extradition with Kosovo are regulated by 
the Law on international legal assistance in criminal matters. However, Montenegro’s Constitution stipulates that a Montenegrin national may not be deported or extradited except under an international obligati on. Croatia is the only country with which an extradition 
agreement for own nationals accused of or ganised crime and corruption, was signed. A 
similar agreement is under negotiation with Se rbia. Extradition in war crime cases is not 
foreseen by these agreements. 
The Sarajevo Process was initially launched th rough the Sarajevo Declaration of January 31, 
2005. Bosnia and Herzegovina, Croatia, Montenegro and Serbia cooperate within this process 
to find solutions for refugees and other persons which were displaced as a result of the armed 
conflicts in ex-Yugoslavia 1991 - 1995. Fresh impetus was given to the Sarajevo 
Declaration process  on refugees following the minister ial meeting in Belgrade in March 
2010. This brought together Bosnia and Herzegov ina, Croatia, Montenegro and Serbia, which 
agreed to work together to clarify refugee st atistics. The countries also committed themselves 
to work towards solutions to a number of outstanding issues by the end of the year. 
Montenegro still maintains the 2007 bilatera l immunity agreement with the United States, 
granting exemptions from the jurisdiction of the International Criminal Court . This does 
not comply with the EU common positions on the integrity of the Rome Statute or the related 
EU guiding principles on bilateral immunity agr eements. Montenegro needs to align with the 
EU position. 
Regional cooperation  and good neighbourly relations  form an essential part of 
Montenegro's process of moving towards the Eu ropean Union. Monteneg ro is a constructive 
regional partner, which plays a stabilising role in  the Western Balkans. It  is an active member 
of most regional and sub-regional initiatives . By acceding to the South-East European 
Defence Ministerial (SEDM), Montenegro has al so become a member of all regional defence 
initiatives and cooperation processes. In 2009- 2010, Montenegro held the Presidency of the 
Central European Free Trade Agreement (CEFTA ), the Central European Initiative (CEI) and 
EN 33  EN the Adriatic-Ionian Initiative (AII). It holds th e chairmanship of the South-East European 
Cooperation Process (SEECP) for 2010-2011. The s eat of the Regional School of Public 
Administration (ReSPA) is in Danilovgr ad, near Podgorica. President Vujanovi ć, together 
with the Chair of the Presidency  of Bosnia and Herzegovina and the Presidents of Croatia and 
Serbia, attended the May 2010 summit of the Igma n initiative in Sarajevo, marking the 10th 
anniversary of the initiative,  involving more than 140 NGOs from the region and aimed at 
promoting and facilitatin g local and regional cooperation. Mont enegro participated in the EU-
Western Balkans High-Level Meeting in Sarajevo on 2 June 2010. 
Montenegro has good bilateral relations with other enlargement countries and EU 
neighbouring state Italy. Cooperation is particularly we ll-developed with the Western 
Balkan countries as regards economic excha nges, tourism, defence, border management, 
transport and energy. A joint border crossing,  the first in the region, was recently opened 
between Montenegro and Albania. Montenegro al so signed a comprehens ive border crossing 
agreement with Bosnia and Herzegovina. Howe ver, delimitation of bor ders with Croatia, 
Serbia, Bosnia and Herzegovina and Kosovo is  still pending. The former Yugoslav Republic 
of Macedonia is the only country  in the region with which an  agreement on dual citizenship 
has been concluded.  
A political agreement with Croatia on joint submission of the Prevlaka border delimitation 
issue to the International Court of Justice has not yet been followed up by a formal agreement 
on the terms of the submission. Nevertheless, the temporary border arrangement, settled by the 2002 Protocol, is functioning smoothly. 
There is occasionally friction in Montenegro's relations with  Serbia , partly due to 
Montenegro’s recognition of Kosovo. The disso lution of the State Union went smoothly. 
However, some issues remain to be solved, such  as finalisation of the distribution of assets 
(both movable and immovable) a nd liabilities and citizenship ri ghts (in particular, concerning 
dual citizenship).  
As regards relations with Kosovo , they are broadly smooth. Yet, further to the pending issue 
of border delimitation, Montenegro has raised the issue of the explicit recognition of the 
Montenegrin minority in Kosovo. It also expect s Kosovo to further improve the conditions for 
the return of displaced persons from Monten egro. The Kosovo response to the above open 
issues is to a large extent positive. 
Overall,  Montenegro largely satisfies the Stabilisation and Association Process (SAP) 
conditionality on co-operation with the ICTY  and regional cooperation. Montenegro is 
encouraged to continue its constructive engage ment in regional cooperation and to strengthen 
bilateral relations with neighbouring countries. Outstanding bilate ral issues need to be solved. 
1.4. General Evaluation 
The present assessment is made on the basis of th e Copenhagen criteria related to the stability 
of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities and of th e conditionality of the Stabilis ation and Association Process. 
Montenegro is a parliamentary democracy  based on a constitutional and legislative 
framework, which is largely in line with European principles and sta ndards. Montenegro 
managed smoothly the referendum on its independence in 2006, in line with EU 
recommendations, on the basis of rules which we re adopted by political consensus. Consensus 
among political parties on state-building is becoming stronger. There is also political 
EN 34  EN consensus with regard to memb ership to the European Union. However, while the country's 
legal and institutional basis is broadly in place, there are deficiencies in the functioning of democratic institutions and s hortcomings in implementation of the legislation persist. The 
parliament's overall capacity to ensure appr opriate oversight of the government remains 
limited. The separation of powers is not fully resp ected in the case of the judiciary. The public 
administration remains weak and highly politicised. 
Elections in Montenegro have generally been  conducted in accordance with international 
standards for democratic elections. The last pa rliamentary elections held in March 2009 were 
assessed by OSCE-ODIHR as having met almost all international standards, but remaining 
shortcomings need to be addressed. In part icular, the election la w has not been fully 
harmonised with the constitution. 
Montenegro has in recent years strengthened the legal and institutional framework of rule of 
law. However, implementation is deficient. The ma in concerns are related to the politicisation 
of the judiciary and shortcomings in the f unctioning of law enforcement institutions, in 
particular in fighting orga nised crime and corruption.  
Reforms in the judiciary are being pursued. Achi eved results include the setting up of new 
institutions such as the judici al and prosecutorial councils a nd measures adopted to improve 
independence and efficiency. However, seriou s concerns remain over the role of the 
parliament in appointing the judicial and pros ecutorial councils and state prosecutors. There 
are also concerns over the efficiency and accountability of the judiciary.  
Montenegro has largely put in place the lega l and institutional framework needed for 
combating corruption. However, corruption remain s prevalent in many areas and constitutes a 
particularly serious problem. An ti-corruption legislation is not  consistently implemented. 
Furthermore, the legal frameworks on prevention of conflict of interest and on financing of 
political parties and electoral campaigns have important deficiencies. Supervisory authorities 
lack the full legal powers and the capacity to  ensure enforcement of the legislation on 
prevention of conflict of interest  and on the control over the fina ncing of political parties and 
election campaigns. There are also concerns rega rding the supervision of public procurement, 
privatisation, spatial planning a nd construction permits. There is no consistent internal control 
to monitor corruption and ensure  accountability and respect of rule of law within the state 
bodies. This applies in particular  in areas such as tax admini stration and customs, the police 
and judiciary and local admini stration. Investigation capacities and law-enforcement co-
ordination remain weak. Strong po litical will is needed to si gnificantly improve performance 
in combating corruption. The track record of investigations, prosecutions and final 
convictions in corruption cases at all levels remains low.  
In the area of the fight against organise d crime, the legal framework developed by 
Montenegro is generally ade quate and capacities have improved. However, organised crime 
remains a serious problem. Money laundering a nd drug-smuggling are key areas of concern. 
Law enforcement capacities and coordination are weak and implementation track records 
remain limited. Proactive investigative capacities remain inadequate. Threat assessment and the collection and processing of criminal intelligence are unsatisfactory. The prosecution's capacity to fully implement the new Criminal Procedure Code needs to be ensured. Further strengthening of cooperation at the intern ational level is necessary, including with 
neighbouring countries. 
EN 35  EN Montenegro's legal and policy framework regulating human rights  and the respect for and 
protection of minorities  is largely in place and broa dly corresponds to European and 
international standards. The institutional fram ework is largely adequate. However, there are 
gaps in implementation of the legislation and existing strategies and action plans. Increased 
awareness and sensitivity of the administration, police and the judiciary to standards in this 
field are needed. 
Human rights are broadly respected in Montenegr o. However there are concerns related to the 
effectiveness of anti-discrimination policies, freedom of expression an d relations with the 
civil society. The anti-discrimination legal framework has been substantially improved. 
However, in practice, Roma, Ashkali and Egyptia n, persons with disabilities and lesbian, gay, 
bisexual and transgendered (LGB T) persons are still subject to discrimination, including on 
the part of state authorities . The implementation mechanisms for preventing, monitoring, 
sanctioning and prosecuting disc rimination cases need to be strengthened. The July 2010 
Anti-discrimination law needs to be fully impl emented. Gender equality is not fully ensured 
in practice. As regards freedom  of media, intimidation of j ournalists and disproportionate 
fines for defamation are a matter of concern. Le gislation and practice on defamation needs to 
be fully aligned with the jurisprudence of  the European Court of Human Rights. The 
independence of media regulator needs to be preserved. As regards relations with civil 
society, the existing dialogue is not fully satisf actory. In some cases, the most critical NGOs 
have been exposed to political and administrativ e pressures. Domestic violence, ill-treatment 
and sub-standard prison conditions are also issues of concern. 
The respect for and protection of minorities ar e broadly guaranteed. However, cooperation 
between the government and minority councils as well as the repr esentation of persons 
belonging to minorities in public services, state authorities and local self-government bodies 
needs to be improved. The access of Roma, As hkali and Egyptians to economic and social 
rights, in particular educatio n and employment, is unsatisf actory. As regards displaced 
persons from Croatia, Bosnia and Herzegovi na and Kosovo, estimated at around 17,000, the 
Law on foreigners of 2009 allows for their access to the status of resident. The reduction of 
administrative taxes in July 2010 has created be tter conditions for their access to this status. 
Montenegrin authorities have also adopted in  July 2010 transitional measures allowing access 
of displaced persons to social and economic rights  in the period prior to acquiring the status of 
a resident. However the action plan on disp laced persons is poorly  implemented on the 
ground. The number of persons who have been gr anted resident status remains low, notably 
due to the difficulties they face in providing all documents required. The laws guaranteeing access to economic and social rights need to be harmonised with the Law on foreigners. Living conditions in the Konik camp shelte ring mainly displaced Roma, Ashkali and 
Egyptians from Kosovo are a matter of serious concern.  
Montenegro broadly satisfies the Stabilisation and Association Process conditions. 
Cooperation with the International Criminal  Tribunal for the former Yugoslavia is 
satisfactory. The country is strongly committed to regional cooperation and plays a constructive regional role. It participates actively in regional initiatives. Bilateral relations with all neighbours are ge nerally good and developing further. Relations with Serbia, after the 
dissolution of the State Uni on, are generally good, however some pending issues remain. 
Delimitation of borders with neighbouring coun tries has not been finalised. Building on the 
political agreement achieved so far, Montenegro needs to finalise together with Croatia the 
joint submission to the International Court of Justice (ICJ) of the Prevlaka peninsula case. 
Montenegro is a party to the Rome Statute. Ho wever, the country ratified a bilateral immunity 
agreement with the United States regarding the International Criminal Court which is not in 
EN 36  EN line with the EU common positions  and guiding principles. The country needs to align with 
the EU position. 
2. ECONOMIC CRITERIA  
In 1993, the European Council in Copenhagen defined the following economic criteria for 
accession to the EU: 
- the existence of a functioning market economy; - the capacity to cope with competitive pre ssure and market forces within the Union; 
These criteria are linked. A functioning market  economy will better c ope with competitive 
pressure and, in the context of membership of  the Union, the market of reference is the 
internal market. 
Following a brief overview of economic developments  and policies in a historical perspective, 
the report goes on to consider  the extent to which Monten egro fulfils the two economic 
criteria established by the Copenhagen European Council. 
2.1. Economic Developments 
Montenegro is a very small economy, with a population of approximately 630,000 distributed 
over a mountainous territory of 13,812 square ki lometres. The country has natural resources, 
mainly bauxite, coal and wood, but also signifi cant hydrological poten tial, and a favourable 
climate for agriculture and tourism. The count ry has witnessed a profound transformation of 
its economic structure in the last decades, from a socialist republic of the former Yugoslavia, 
dependent on a few heavy industries to an open service based ec onomy. Gross domestic 
product reached €3 billion in 2009, or 0.02% of EU-27's GDP. In purchasing power parity 
terms (PPP), GDP per capita amounted to €10,200 in 2009, or 43% of EU-27 average, up from 29% in 2000. Income disparities are signif icant between the more populated and richer 
south and the less developed north of the country.  
Macroeconomic background 
Montenegro, with a GDP per cap ita of roughly 75% of the nati onal average, was one of the 
poorest republics of the former Socialist Fe deral Republic of Yugoslavia, and highly 
dependent on the traditional guaranteed Yugoslav market. In the 1990s, the country was hit by 
the loss of the internal Yugoslav market, and by  several years of inte rnational embargo, which 
severely depressed the industria l sector. This resulted in a dr amatic contraction of economic 
activity, hyperinflation and a banking system unab le to perform its intermediation functions. 
The Deutsche-Mark became a de facto  parallel currency. Illegal practices such as cigarettes 
and petrol smuggling, bypassing offi cial channels for financial transaction, under-invoicing of 
exports, informal employment and the grey  economy were tolerated and flourished. 
In the Federal Republic of Y ugoslavia (FRY), established t ogether with Serbia in 1992, 
Montenegro acquired responsibilit y for its own monetary policy a nd customs, but shared with 
Serbia the federal budget and the currency. The recovery of the economy began only after 
2000, when Montenegro started decoupling from Serbia politically and economically, notably 
in terms of public finan ce and currency. In 2000 the fiscal defi cit was stabilised at over 8% of 
GDP and fully financed by an emergency post-co nflict assistance from the IMF and the EU. It 
was further reduced in subsequent years, and turned into a significant surplus in 2006 and 
EN 37  EN 2007. Prospects for external sustainability were also enhanced by the Paris Club decision in 
2001 to redeem 66% of the FRY's debt. Until 2000, public sector accounts lacked transparency, with a prolifera tion of extra budgetary accounts with earmarked revenue, and 
accounting practices at odds  with international st andards. To remedy this, a set of tax laws 
was adopted to modernise the administration a nd the introduction of th e VAT shifted the tax 
burden towards indirect taxation. Social contributions and the personal income tax rates were 
reduced. All fiscal revenues from customs and i ndirect taxes, as well as from privatisation 
were channelled to the state treasury, ther efore improving tax collection management and 
enhancing fiscal transparency.  
Since its establishment in 2000 the Central Ba nk of Montenegro (CBCG) engaged in the 
reform of the banking sector to reinforce the soundness of th e banking system and adopted 
prudential regulations and supervision in lin e with international standards. In 2001 the 
Deutsche-Mark became the only legal tender in Montenegro, unilaterally replaced one year 
later by the euro (see Chapter 17, Economic and monetary policy) . The constitution 
establishing the State Union of Serbia and Montenegro in February 2003 confirmed the 
existence of different monetary, exchange, customs and tax regimes for both republics. 
Severe unemployment was a key problem during the conflict years in the 1990s when wages 
fell drastically and social programmes colla psed. Over time, labour market indicators 
improved, benefitting from both labour market  reforms and stronger economic growth. The 
recorded unemployment rate which stood at  32.7% in 2000 decreased to 10.7% in 2008 
before reaching 11.9% in mid-2010, as a result of the crisis. However, the activity rate has 
remained close to 50% over time.  
After it had contracted in the 1990s, the econom y gradually recovered after 2000, to peak in 
the period 2006-2008 when it grew on average 8.7% annually. The regained confidence in the 
banking system, high foreign dire ct investment inflows, increasing tourism and some key 
privatisations boosted this growth. However, the rapid expansion of the financial sector 
rendered Montenegro very vulnera ble to the global financial cris is which started in October 
2008. The most affected sector s were the metal industry, construction and financial 
intermediation. As a result, in 2009 GDP dec lined by 5.7%. The economy showed some signs 
of recovery in mid 2010, as the banking sector  gradually stabilised, and the tourism industry 
remained resilient during the crisis. 
Structural change 
Montenegro underwent rapid i ndustrialisation in the 1970s, establishing an aluminium 
complex and the accompanying large infrastructure (railways, port and electric power plants). In the 1980s, the aluminium industry and rela ted activities accounted for 50% of GDP and 
exports. After the 1990s, in parallel with th e country’s transition to a market economy, 
Montenegro underwent a significan t reorientation towards a more  service based economy. In 
the period 2000-2009, the share of industry in gross value adde d (GVA) declined by 29%, and 
currently represents some 13.6%  of GVA, while constructi on, services and agriculture 
accounts for 6.5%, 70% and 10% of GVA respectively. 
Price liberalisation, which started in the late 1980s, was largely achieved by 2001. The 
privatisation of socially-owned assets, launc hed in 1989, resumed 12 years later, when the 
government engaged in privatisation thr ough a dual approach: on the one hand, a mass 
privatisation accomplished via vouchers distribu tion to citizens; on the other hand, the sale 
through international tenders of majority shares in 15 large co mpanies. By 2006 some 86% of 
EN 38  EN total state capital had been priv atised. Since then, the government  has been slowly selling off 
the remaining state ownership. 
A series of reforms were introduced to strengthen confidence and turn financial 
intermediation into an important  contributor to econom ic growth. Driven by the completion of 
the privatisation process, the banking sector  expanded very rapidl y, and it is currently 
dominated by foreign capital (81%). Although it remains the most developed component of 
the financial sector, its structure is highly concentrated and cap italisation is low.  
The contribution of domestic capital to gr owth has always been limited. Following the 
improvements of the business environment and liberalisation FDI became a major source of 
investment, averaging very strong levels of over 20% of GDP since 2005. Both road and rail 
transport infrastructure as well as electric tran smission grid have been historically inadequate. 
Montenegro has started building power stations but the installed capacity is insufficient at present. In the past few years several educ ational and vocational training reforms were 
introduced with a view to  align the supply side with market  requirements. However the skills 
mismatch remains significant and in a number of low qualified labour intensive sectors the 
country continues to resort  to foreign workers.  
2.2. Assessment in terms of the Copenhagen Criteria 
2.2.1. The existence of a functioning market economy The existence of a functioning market economy requires that prices, as well as trade, are 
liberalised and that an enforceable legal sy stem, including property rights, is in place. 
Macroeconomic stability and consensus about economic policy enhance the performance of a market economy. A well-developed financial sector and the absence of any significant 
barriers to market entry and exit im prove the efficiency of the economy. 
Economic policy essentials 
Montenegro has achieved a broad domestic cons ensus in the country on  the fundamentals of 
economic policy required by EU membership as well as a track record in the implementation 
of economic reforms. Since the early 2000s, the coalition government has remained cohesive 
and strongly focused on economic reforms and EU accession. The country has implemented substantial reforms which continued over time with no policy reversal. Montenegro takes an 
active part in the Commission fiscal surveilla nce and reporting arrangements applying to 
potential candidate countries since 2006. Overall , the authorities mainta in reform momentum 
by efforts to establish a business friendly envi ronment, in particular for attracting foreign 
investment.  
Macroeconomic stability 
Since independence, the economy has experi enced very strong growth, averaging 8.7% 
between 2006 and 2008, boosted by st rong inflows of FDI and very  high credit growth which 
financed a robust increase in domestic de mand. Services, notably tourism, financial 
intermediation and real estate, remained the main drivers of  growth. Moreover, the annual 
share of investments (GFCF) remained high at 30.8% of GDP on average during these three 
years. On the demand side, the strong performa nce of private consump tion, with retail sales 
expanding by 35% in real terms from 2006 to 2008, was supported by increasing household 
incomes due to rising real wages and bank cr edit, expanding annually on average by 21% and 
105% respectively. However, in 2009 the globa l crisis affected severely the economy, 
EN 39  EN revealing vulnerabilities in the growth patte rn. GDP declined by 5.7% driven by a sharp 
contraction in manufacturing and mining but also  in investment and private consumption. 
Only net-exports and public consumption contri buted positively to real GDP growth. In the 
first quarter of 2010, the economy continued to c ontract in real term s by an estimated 1.5%. 
After 18 consecutive months of decline, indus trial production indices turned positive (8.7% 
year-on-year) in April 2010, mainly due to positive growth in the metal industry, which benefitted from the rise of commodity prices and the implementation of the restructuring programmes. The recovery of the industrial sect or remains nevertheless  fragile while demand 
is constrained by tight credit conditions. Overall , until 2008 the economy has witnessed 
several years of strong growth driven by dome stic demand and foreign investment. However, 
the financial crisis had a signi ficant impact on economic growth.   
On the external side, the current account defici t raised mainly due to the merchandise trade 
gap. Exports have been highly conc entrated on a few sectors, in pa rticular metals and tourism. 
The level of merchandise exports has historically been very low, with a peak of some 30% of 
GDP in 2006, which decreased progressively to wards 10% of GDP in 2009. In general, the 
level of value added and diversification of exports is low,  with aluminium accounting for 50% 
of total exports of goods and st eel for an additional 15%. Ho wever, the volume of service 
exports, in particular tourism, has been grow ing continuously, reaching some 23% of GDP in 
2009 . Unlike exports, imports surged (40% annual gr owth) since independence, as a result of 
the very strong increase in dom estic demand. Subsequently the trade and the current account 
balances deteriorated strongly. The latter rose sharply, from a deficit of 8.5% of GDP in 2005 
to a record high of 51% in 2008,  to decline to 30% by the end of 2009 due to the adjustment 
brought by the crisis. In 2010, exports' growth improved while imports' contraction continued 
until June, resulting in a further improvement of  the trade balance. The current account deficit 
reached 29% of GDP at the end of June 2010. The drop follows a reduction of 5% year-on-
year of the trade deficit for goods which, however , still remains very high (45% of GDP). The 
balances of services and current transfers impr oved in the first half of 2010 by 8% and 40% 
year-on-year, while the income balance remained marginally positive. In the first six months 
of 2010 the current account deficit was practica lly financed by net FDI while Central Bank 
reserves increased by EUR 35 million. Overall, external imbalances and the dependence on 
external financing ar e still very high.  
Net FDI inflows remained buoyant (22% of GD P annually on average) from 2006 until mid-
2010. While they significantly contri buted to the financing of the current account deficit, their 
concentration on the non-tradable sector, in part icular real estate, th e financial sector and 
tourism, also contributed to increase volatility in  real estate prices. The crisis has led to a 
more sustainable allocation pa ttern in 2009, less dependent on i nvestment into real estate, 
which accounted for 47% of total inflows in  the period 2006-2008 and dropped to 16% in 
2009. Meanwhile investments in domestic compan ies, notably for capitalisation of banks, 
privatisation of the electricity compan y, and for additional investments in 
telecommunications, increased from 36% in  2008 to 69% of 2009 total investments. Overall, 
while in recent years large FDI inflows and pr ivate lending financed the large external 
imbalances; the sustainability of  these inflows is not ensured. 
Like the overall economy, the labour market regist ered accelerated structur al change in recent 
years. Employment in mining and heavy indus try has been declining, reaching 14% in 2009, 
while employment in tourism and construction increased to 15% in 2009. Employment in the 
public sector represents some 25% of total em ployment, while employment in agriculture is 
rather low (6,5% of the labour force in 2009). Currently some 60% of the working age population actively participates in the labour ma rket. Data on unemployment varies strongly, 
EN 40  EN with registered unemployment ra tes between 10-15% of the labour  force, while Labour Force 
Survey (LFS) data points to unemployment ra tes close to 20%. In th e pre-crisis period 
employment increased benefiting from strong economic growth and the positive effects of 
labour market reforms. Employment expanded by 4.8% annually, with a gradual shift from 
industry to services. The regi stered unemployment rate d ecreased from 14.7% in 2006 to 
10.7% in 2008 but rose again to 11.4% end- 2009. During the first three months of 2010 
unemployment continued to rise to 12.4%, mainly due to the re structuring of the metal and 
mining sector. The employment rate of wome n increased from 27.6% in 2005 to 34.4% in 
2009. However, according to the labour force survey s, their participation remained stable over 
time at some 40% of total la bour force. In the same period, the unemployment rate of young 
people (15 to 24 years old) has drop ped, from 58% in 2005 to 35.6% in 2009. 
Informal employment, which according to  estimates by the Employment Agency of 
Montenegro (EAM) had been around one third of total employment in 2003, declined during 
the years of strong growth, but appears to have increased again due to th e crisis, to some 25% 
of the labour force in 2009. Th e persistence of this high level of informal employment 
suggests some structural rigidities. Furthermor e, the reliance on temporary migrant workers 
for seasonal jobs in agriculture, construction and tourism and high vacancy rates for highly 
skilled jobs point to a significant mismat ch between required and supplied skills. Overall, the 
labour market situation improved in recent years. However, the persistent structural unemployment and the high share of informal employment point  to the existence of some 
structural rigidities. 
Since 2002, Montenegro uses the euro  as legal tender. This has contributed to anchor inflation 
expectations, but it prevents  the use of a monetary and exchange rate policy as a 
macroeconomic policy tool to support the econom y, especially in the context of an economic 
crisis. The use of euro led to low inflation ra tes (averaging 3.6% up to 2007). However, due to 
the size of the economy and its dependence on imports, inflation depends largely on 
international prices, particularly for energy and food. Therefore consum er prices increased 
sharply following the global surge in food and energy prices in 2008, reaching a peak of 
11.4% in June. The economic crisis has had a pronounced disinflationary impact and the 
consumer price index dropped to  1.5% by the end of 2009, and recorded a modest cumulative 
increase of 0.5% in the first seven months of 2010. 
Very  rapid credit growth fuelled by low intere st rates and strong competition for market 
shares in the banking s ector led to a very rapid expansi on of the money supply from 74% of 
GDP in 2006 to 112% in 2007. After increasing signs of overheating, the Central bank 
introduced restrictive measures in 2008 based on increased mandatory reserve requirements as 
well as the introduction of credit ceilings. These administrative limits to credit were removed 
by year end as the global financial crisis hit.  Later in 2009, as the crisis unfold the central 
bank was able to smoothen its impact by relaxing reserve requirements on banks Overall, 
while risks to price stability a ppear to be low, there are constraints on the monetary policy due 
to the country's unilateral adoption of the Euro. 
Since autumn 2008 the central bank has been very active trying to preserve  the stability of the 
country's financial system. The government and th e central bank adopted a set of measures to 
preserve the stability of the banking system, consisting in a full guara ntee for bank deposits 
and the possibility of government  credit support for eventual li quidity shortfal ls of troubled 
banks. The relatively young banking sector whic h had undergone a very fast process of 
financial deepening has been a main channel of transmission of the global crisis. In October 
2008, the significant fall of the H ungarian OTP Bank shares led to a bank run on its domestic 
EN 41  EN subsidiary CKB, the largest bank with a depos its market share of 41%. Meanwhile, the second 
largest bank, Prva Banka CG, delayed payments to its depositors due to liquidity problems 
resulting from very poor asset quality and large e xposure to the falling re al estate market. By 
December 2009, bank deposits contracted furthe r by 8.3% year-on-year and credits by 14.3%, 
while non-performing loans (NPL) surged from  4.6% end of 2008 to 10.3%. Banks reduced 
their exposure to credit risk to improve thei r balance sheets. After 16 months of continuous 
contraction, deposits growth turned positive in  March 2010. However, banks credit activity 
took some additional time to recover, register ing negative growth until July (-11.4% year-on-
year). Overall, while banks are progressively re-estab lishing their deposits base, credit 
activity remains highly constrained. 
Public sector revenues and expenditures accoun ted for some 45% of GDP on average during 
the last five years. During the economic boom  and following reforms to broaden the fiscal 
base revenues had been increa sing. However, public expenditu res were also increased, in 
particular current ones on public administratio n wages and pensions which increased by 40% 
during 2006-2008, weakening the long-term sustaina bility of public finances. As a result, 
public spending jumped from 42.7% of GDP in 2006 to 50% of GDP in 2008. In 2009, the 
authorities tried to adjust to the sharp dec line of revenues by conso lidating spending: net 
wages of state administration were reduced by 7%, maintenance expenditures by two thirds, 
and expenditures of goods and se rvices by almost 10%. Capital spending was also used as a 
buffer, through the reduction of planned works by mo re than half. These efforts resulted in a 
consolidated budget deficit of 3.5% of GDP in 2009, financed by foreign borrowing as well as 
receipts from privatisation. In the first ha lf of 2010, the general government budget execution 
posted a deficit of 0.4% of GDP as a result of the restrictiv e fiscal policy that reduced 
expenditures by 6.3% year on year. Overall , fiscal policy has been pro-cyclical in recent 
years, exacerbating the overheating of the economy in the boom period and the economic 
downturn when the crisis hit the economy. 
In the pre-crisis period public debt declin ed from 38.6% of GDP in 2005 down to 27.5% of 
GDP in 2007, notwithstanding previous debt rede mption in 2001. The share of external debt 
remained stable at 70 % of the total public de bt. As from 2008 the publi c debt has been rising 
again, and reached almost 37% of GDP by the end of 2009. Domestic public debt increased 
faster than foreign public debt as the state assumed liabilities from restitution, pension arrears 
and restructured public companies. Simulta neously, foreign debt, mostly financed by 
international financial institutions, has been growing too, to cover infrastructure needs, the restructuring of troubled industries and the fina ncing of the budget. The share of foreign debt 
represents currently ar ound 60% of total public debt. Public  debt fell slight ly to 35.8% of 
GDP during the first half of 2010, rising to  close to 40% in early September as 
the government 
placed successfully a €200 million Eurobond issue. Part  of these funds will be used for the repayment 
of existing obligations as well as for increasing reserves . Overall, while still at a relatively 
moderate level, the public debt  remains exposed to potential contingent liabilities including 
those deriving from state guaranteed loans. 
The global financial crisis ha s challenged the foundations and sustainability of the recent 
years' growth model based on only a few cyclical sectors, rapid credit growth and high capital 
inflows to finance growth. The macroeconomic policy mix strongly relies  on fiscal policy. It 
was used with some success until 2006 as a si zeable fiscal consolidation took place. However, 
public expenditures considerably incr eased in 2007-2008, exacerbating the economic 
overheating. As a result, when the crisis hit Montenegro in  late 2008, margins of manoeuvre 
had been exhausted and the country had to en gage in pro-cyclical budget cuts throughout 
2009 and state guaranteed loans. Central bank interven tions –even though limited to reserve 
EN 42  EN requirements- contributed to curb down credit growth in the boom period and to dampen the 
effects of the crisis. The importance of structural reforms has increased with the crisis, leading to the reinforcement of the central bank's su pervisory role and industry restructuring to 
increase competitiveness. Overall, given severe limitations on the monetary policy side and 
the limited fiscal space, the onus of economic adjustment lies to a large extent on structural 
reforms. 
Interplay of market forces  
Most price categories had been liberali zed by the early 2000s. Since 2005, the Energy 
Regulatory Agency (ERA) sets el ectricity prices in relation to  production cost thresholds. 
Only a small number of products are currently  subject to administrative price control, 
including medicines and postal services, while local authorities may control the prices of certain utility services. The consumption of these regulated products (electricity, 
pharmaceutical products, water supply, sewerage a nd refuse collection) currently represents 
about 9% of total spendi ng for an average household. Overall, the state influence on price 
dynamics is limited to some utility services. 
By 2006, around 86% of originally state ow ned property had been privatised. The 
privatisation process is currently  in its final stage. Key sector s like banking, insurance, and 
telecommunications have been fully privatis ed. A large majority (73%) of joint-stock 
companies are completely private. An additional 17% have more than half of private capital, and the remaining 10% have state ownership ab ove 50%. Further progress has been recorded 
with the partial priva tisation (44%) of the electricity company EPCG in 2009. The state still 
has majority shareholding notably in large ne tworking industries: the local electric power 
company, the railways, ports, the shipyard, Montenegro Airlines, and the airports. Overall, the 
privatisation process is fairly advanced and st ate ownership has been re duced to some 14% of 
total assets. 
Market entry and exit 
Since 2006, the process of business registratio n has been improved, reducing the number of 
procedures from 15 on average in 2006 to 12 in 2009, while the duratio n declined from 24 to 
currently 13 days. This might have facilitated the increase in new business registrations, 
which rose by 26% between 2006 and 2009. However,  the time and cost to obtain a license 
for business operation remains the major constraint . Furthermore, differences in requirements 
and costs across municipalities create additio nal distortions. In 2008, the Council for the 
elimination of business barriers was establishe d, becoming one year later the Council for 
regulatory reform and improvement of the busin ess environment. One of the major outcomes 
was the adoption by the parliament in July 2010 of the Law on Improvement of the Business 
Environment, removing the requirement of a nnual renewal of compan ies in the business 
register, as well as cutting deadlines and fees for several admi nistrative procedures. Overall, 
despite recent progress, business licensing pr ocedures are still lengthy, delaying market entry 
of new companies. 
The weak quality of domestic banks credit portfolio and, lately, the scarcity of foreign 
financing, have a significant im pact on the risk premium and he nceforth on persistently high 
interest rates close to two digi ts. The high cost of finance remains a major obstacle for setting 
up and developing companies. Overall, businesses are confronted with scarce and expensive 
financing. 
EN 43  EN At the time of the adoption of the Bankruptcy  Law in 2002, bankruptcy procedures lasted 
more than one year. To improve the situation, a new law facilitating implementation and amending the Law on Company Insolvency was adopted in 2007. The new legislation helped 
to reduce the backlog of lawsuit and execution cases. Procedures have been reduced to six months on average, although for the most complex cases it may take up to one year. A total of 
2,314 companies were liquidate d in 2008 and 2,259 in 2009. Overall , market exit procedures 
have been streamlined and accelerated. 
Legal system 
The lack of reliable land prope rty ownership was a significant problem for inve stors in the 
past. Since 2007, new regulations have been introduced and im plemented resulting in the 
average time required to register a property dimi nished to 21 days. Additional reforms in 2009 
re-defined and clarified con cession rights on public propert ies and resources. The Property 
Relations Law, and more recently, the entry into  force of the Stabilisation and Association 
Agreement, provides the same treatment to EU citizens as to nationals for acquiring real estate. Overall, the registration of prope rty is well advanced. 
The two Commercial Courts are the main instituti ons for contract enforcement. The situation 
has gradually improved in recent years. In 2008 and 2009, the courts registered some 1000 
new cases annually, with a backl og of some 800 cases from prev ious years. In the meantime 
the backlog is slowly being reduced. The averag e length of procedures has declined from 6 
months in 2008 to 5 months in 2009. At present, 90% of cases are being resolved within three 
months. The regulatory framework also improve d with the establishment of a mediation 
centre to facilitate simple resolution of co mmercial disputes. The Agency for Amicable 
Labour Dispute Resolution, established in 20 10, should enable workers to solve their 
collective or individual disputes without litigation. Efforts to fi ght corruption are dispersed as 
several institutions are engaged in this task at different levels. Furthermore, capacity for 
financial investigation is still insufficient; especially for using it as a means to fight corruption 
and organised crime (see Chapter 23: Judiciary and fundamental rights).  Persisting 
weaknesses in law enforcement fuel the informal sector. Overall, recourse to the judicial 
system has increased progressively in recent years, as administrative capacity gradually 
improved. Weaknesses in the rule  of law and prevalent corrupt ion continue to negatively 
affect the business environment.  
Financial sector development 
The small size of the market has not been an obstacle for the rapid de velopment of a banking 
industry that became one of the main contributo rs to growth. Asset expansion has been very 
rapid. The ratio of banking sector assets to GDP rose from 56% in 2005 to 131% of GDP in 
2007. Though the global financial cris is led to a significant decr ease, they still represented 
95.7% of GDP at the end of June 2010. The struct ure of assets is dominated by loans (78%), 
of which the corporate sector subscribed 55% , households 38%, the public sector 2.4%, and 
financial institutions the rest. Following the re form of the banking sector in 2005, credit 
soared by 105% on average from 2006 until 2008, but contracted by 14 % in 2009 due to the 
impact of the global crisis. However, lending average real effective interest rates have 
remained steady at around 9.5% in the whole period (2006-June 2009). Operations with 
derivatives were introduced in 2009, although they  remain marginal (€1.2 million in 2009).  
The banking sector in Montenegro is dominated  by foreign capital (81.3%), while domestic 
private capital accounts for 16% and state ownership 2.6%. The sector remains highly 
EN 44  EN concentrated with four banks accounting for so me 75% of assets, of loans and of total 
deposits. Montenegrin banks have historically been amongst the less capitalised ones in the 
region. Since 2003, when banks' capital amounted on av erage to 25% of tota l assets, the ratio 
deteriorated along with the surge of credit, reaching 8% in 2007, to slowly recover to 10.4% 
in mid-2010. Overall, the banking system has recorded a very rapid expansion driven by a 
low initial base and the entry of several major regional players. The sector remains highly concentrated. 
The global crisis led to a shar p deterioration in the banking sector starting with a massive 
deposit withdrawal in late 2008. The authorities reacted quickly through measures aimed at 
bolstering confidence which, togeth er with the liquidity provided  by foreign parent banks, led 
to stabilisation during 2009. The government provided liquidity through a loan to the 
domestic ailing bank Prva Banka CG, while nine other banks did recourse to foreign parent 
banks support. Four banks out of eleven r ecorded a combined loss of €33.7 million by end 
2009. Prudential indicators furthe r deteriorated throughout the crisis. During the fast 
expansion of loans in the period 2006-2008, th e loan portfolio of banks had already 
deteriorated rapidly and the sh are of non-performing loans (NPL ) remained at 6.7% of total 
loans on average. By June 2009 the level of NPLs doubled, reaching 14.8%. Following, the 
deterioration of assets quality due to the hi gh level of NPLs and consequent provisioning, 
banks return on assets (ROA) dropped from a le vel of 1% in 2006 down to negative values up 
to mid-2010 (-3.5%), and return on equity (R OE) dropped more dramatically from levels 
above 6% in 2006 and 2007 to strong negative va lues until June 2010 (-34%). The results of 
the quarterly stress tests of the banking sy stem performed by the CBCG during 2009 and 2010 
confirmed the importance of credit and liquidity risks, especially for one large bank, and the 
need for capital injections. Overall, the economic downturn has revealed vulnerabilities and 
the need for adequate recapitalisation. Moreover , the full magnitude of the impact of the 
global crisis on the financial sector remains uncertain. 
The parliament adopted in July 2010  a legislative package with a view to reinforce the 
stability of the financial sect or and the intervention capacitie s of the central bank. Several 
laws were amended: the Central Bank Law;  the Law on Banks, now introducing conditions 
for acquiring qualified participation and fo r corporate management, and including the 
possibility for interim admini stration of a troubled bank; the Law on Bank Bankruptcy and 
Liquidation, defining the role of interim administration, the protection of the bankruptcy 
administrators, and including the possibility for th e Central Bank to decide to sell the assets of 
a troubled bank. The new Deposit protection law establishes (p rogressively) banks deposit 
guarantees at €50,000 per depositor. Overall, the authorities have strengthened the legislative 
framework to address deficiencies in the fina ncial sector, improving s upervision and stability. 
Stock exchange market capitalisation r eached 272% of GDP in 2007, followed by a 
significant deterioration in 2008 to  110% of GDP. The stock exchanges showed some signs of 
improvement in the course of 2009, with mark et capitalisation rising to 162% of GDP to 
decrease again in 2010 to 142% of GDP at the end of July. 
The merger of the two stock exchange 
companies was approved in August 2010 with the consent of  the securities commission. Despite 
its dynamic development, the ro le of the cap ital markets to finance domestic companies 
remains limited. 
The insurance market has gradually expande d, though from a low base, accounting for only 
3% of GDP by end-2008. Though there are 11 co mpanies active in the sector in 2010, 
concentration is very high, with one company holding a 60% market share. The sector is 
dominated by car insurance, while the life segm ent, though developing fa st from a very low 
EN 45  EN base, accounts for some 12% of total prem iums. The insurance law adopted in 2006 has 
established a supervisory agency indepe ndent from the Central Bank. The Law on 
Receivership and Liquidation of Insurance Companies in 2007 completed the legal framework, defining the terms and procedure of receivership, voluntary and judicial 
liquidation of insurance companies and th e rights and liabiliti es of parties.  
The adoption of the Law on Financial Leasing in  2005 enabled the fast development of this 
sector. However, in 2009 the market was severely  hit by the crisis, and contracted strongly to 
1.1% of GDP compared with  5.5% a year earlier. Overall, non-banking financial institutions 
play a limited role as a sour ce of private sector financing. 
2.2.2. The capacity to cope with competitive pr essure and market forces within the Union 
The ability to fulfil this criterion depends on the existence of a market economy and a stable 
macroeconomic framework, allowing economic ag ents to take decisions in a climate of 
predictability. It also require s a sufficient amount of human and physical assets. Enterprises 
need to invest to improve their efficiency a nd innovate to adjust to a globalised and highly 
competitive external environment. Overall, the mo re an economy is integrated with the Union 
before accession, the better will it be able to take on the obligations of membership. 
Existence of a functioning market economy 
Montenegro is a small and very open economy with a private sector which currently accounts 
for some 84% of total shareholding. Prices , foreign exchange and trade regimes are 
liberalised. Given severe limitations on the mone tary policy, the policy mix strongly relies on 
fiscal policy. However, due to an expansionary  stance in the two previous years, margins for 
manoeuvre were severely constrained when th e crisis hit Montenegro in October 2008. 
Furthermore, large external imbalances bui lt up without being vigorously addressed, and 
combined with the credit and real estate boom  exposed the country as the crisis unfold. A 
number of important challenges still lie ahead, such as safeguarding fina ncial sector stability 
and improving administrative capacities, crow ding-in new private s ector activities and 
increasing productivity, in order to improve  the sustainability of economic growth, 
competitiveness and public finances. Overall, Montenegro has achieved a degree of macroeconomic stability allowing economic opera tors to make decisions in a climate of 
predictability. However, macroeconomic imbala nces have exacerbated the country's exposure 
to the global economic and financial cris is. To become a functioning market economy 
Montenegro needs to address these imbalances, as well as existing weaknesses, notably in the financial sector and the f unctioning of labour markets. 
Human and physical capital 
As regards  human capital , enrolment in education in both primary and secondary schools is 
relatively high, reaching 89% of the 5-14 year s old group and 69% of the 15-19 years old 
respectively. It has increased over time. The number of univers ity students has been rising 
even faster, reaching 3.6% of the total populatio n. Overall, public spending on education has 
remained rather stable at  4.5% of GDP on average sinc e 2006. Yet, improving quality 
assurance mechanisms and overall strategic appro ach to education that is connected to labour 
market needs remain the main challenges (see Chapter 26: Education and Culture) . 
Regarding the development of a knowledge based economy, the latest available data indicates 
that gross domestic expenditures on R&D in Montenegro represented 0.1% of GDP in 2008.  
EN 46  EN Structural unemployment requires further reform  of the education system notably vocational 
education (VET), and further training of the workfo rce in line with labour market needs. The 
proportion of published job vacancies unfilled is ra ther high (63% in 2009), which points to 
skill mismatches, but also a persistent lack of mo bility, as most of the offers concern works in 
the coast and central areas. Current unemploym ent data point to weaknesses in vocational 
education. A 66% share of those registered as unemployed at the Employment Agency had 
vocational education, while their share repres ents only 20% in tota l employment. Several 
educational reforms are trying to align labour supply with market demand. A Law on National 
Vocational Qualifications with a new and wide r system of qualifications was approved in 
2008. Yet, the VET system continues to face serious problems in delivering high-quality education. The employment agency aims at smoo thing the transition from education to work 
through cooperation with academic institutions , professional guidance, and programmes such 
as those for young managers having already gr aduated. Together with the Directorate for 
Small and Medium-sized Enterprises (SMEDA), it promotes self-employment and vocational training along with a strategy for life-long entrep reneurial learning. It is estimated, that these 
measures resulted in some 4,000 new employ ments since September 2009 until June 2010. 
Overall , qualifications and skills mism atch remain important issues . 
With reference to physical capital , in view of the large savings and investments gap as 
measured by the current account deficit, the co ntribution of domestic capital accumulation to 
growth has been limited. Efforts have thus  been focused on improving the investment 
environment so as to attract FDI which so far remained the major source of investment. The 
sectors benefiting the most from  FDI have been telecommunicati ons, real estate and tourism, 
followed by financial intermediation, and more recently energy. Gross fixed capital formation (GFCF) has been increasing steadily, reachi ng 38% of GDP in 2008 but decreased to 26.7% 
of GDP in 2009. During this period constr uction accounted for some 24% of capital 
formation. Hotels, retail trade, transport and communications were resp onsible for some 20% 
each of GFCF while manufacturing accounte d for around 8%. Public capital spending 
declined to 3.4% of GDP in 2009 from 8.1% in 2008. Overall , while the level of investment 
has remained high, its contribution to the expa nsion of the production capacity has remained 
limited, as a significant share of foreign and do mestic investment was directed to the non-
tradable sector.  
The electricity production and tr ansmission system is underdeveloped and results in power 
cuts notably during the winter season. The average pr ice of electricity, th ough 60% lower than 
in the EU, remains higher than in most  neighbouring countries . To address these 
shortcomings, but also with a view to becomi ng in the medium-term a net exporter of energy, 
several projects have been launched recently to  build new diversified capacities (hydropower, 
thermal, windmills) although they will take a few years before completion. Meanwhile the 
electric company is engaged in a series of activities to reduce transmission losses and to improve distribution efficiency. Overall, physical infrastructure rema ins insufficient to cover 
domestic energy needs and the country relies on energy imports to satisfy domestic needs.  
Transport infrastructure has been  historically inadequate and hi nders the efficient transport of 
goods and passengers. The railway company is i nvesting to upgrade the infrastructure after 
several years of neglect. Overall, the transport infrastructure suffers from years of insufficient 
investment and a difficult topography. 
All fixed telephone lines are digitalised. There we re three mobile phone operators with a total 
market penetration just above 200% in 2009 and a f ourth mobile operato r license has been 
attributed in early 2010. However, the country only has 25,800 broadband internet subscribers 
EN 47  EN (or 4% of total population) and internet use by companies is not yet widespread. Overall, 
telecommunications are already fairly developed,  but some segments of the market such as 
broadband are at an early stage of development. 
Sector and enterprise structure 
The contribution of the different sectors to  output has evolved over the last decade. 
Agriculture represented 12.5% of  total gross value added (GVA) in 2000, and despite a sharp 
reduction of employment over time, still reta ined 10% in 2009 which points to increased 
productivity of this sector. Ma jor declines during this period were recorded in activities 
closely related with metallurgy: mi ning (from 2.9% down to 0.8% of GVA) and 
manufacturing (from 10.2% down to 5.9% of GVA). Construction, by contrast, increased its 
share in GVA from 4.3% in 2000 up to 6.5% in 2009. The share of wholes ale and retail has 
remained stable, but it is st ill the highest in the economy (14.7% of GVA on average during 
2000-2009). Transport accounted for 11.5% of GVA in 2009; financial intermediation for 
4.2% on average between 2000 and 2009 and hotels and restaurants increased their share in 
GVA from 2.8% in 2000 up to 6.2% by 2009. The in formal sector, fuelled by weaknesses in 
tax and expenditure policies, as well as in law enforcement, including the fight against 
corruption and organised crime, remains large. It  reduces the tax base and the efficiency of 
economic policies. Overall , the economic structure shifted markedly towards services over the 
last decade. The informal sector is an important challenge. 
The industrial sector has been historically dom inated by the metal industry, with aluminium 
and steel production together with  their associated industries a nd services (mining, railways, 
harbour, and energy) accounting for 48.6% of GDP in 2002. Eight ye ars later, the contribution 
of metals to the nati onal economy has decreased significan tly. Before the crisis, aluminium 
gross output represented less th an 15% of GDP and steel 2.7%  though their shares in total 
exports remain significant (39% and 11%). The drop in international metal prices has further 
endangered the viability of the aluminium and steel industrie s. The Niksic steelworks (ZNK) 
managed a reconversion with state support, mos tly in form of bank guarantees and energy 
subsidies. However, the more distressed alum inium smelter (KAP) went  through a partial re-
nationalisation, with the state ta king back 30% of the company' s shares in exchange of a 
rescue package, including loan guarantees an d an ambitious restructuring plan to halve 
production costs. Other economic sectors, nota bly tourism have deve loped more dynamically, 
contributing from less than 10% of GDP in 2000 to 16% of GDP in 2009. Overall , the 
relevance of Montenegro's heavy metal industr y for the economy is d eclining as it suffers 
from deterioration in competitiveness,  requiring large scal e restructuring.  
In the energy sector the restructuring of the power company (EPCG) was launched in 2008. 
After the separation of the transmission unit from EPCG in 2009, tariffs for the use of the 
network were established and secondary legislat ion adopted in the context of the SEE Energy 
Treaty, formally meeting all necessary preconditions for the development of a competitive electricity market.  
In the transport sector, while restructuring is quite advanced, privatisation results are mixed. 
The railway transportation company separate d its passenger unit from the freight unit 
Montecargo and offered for sale th e latter in 2010 to an  international railwa ys cargo operator. 
The tender for the sale of the port of Bar contai ner and general cargo ope rator failed. In both 
cases, the railways and the port, the government keeps the ownershi p of the infrastructure. So 
far, the national air carrier, Montenegro Air lines, has implemented the first stage of its 
EN 48  EN foreseen restructuring by  being transformed into  a shareholder company. Overall , a large 
restructuring of strategic ente rprises and sectors is underway. 
The share of small and medium-sized enterpri ses (SMEs) in the economy has constantly 
increased over the recent years. However, SMEs remain largely focused on the domestic 
market and only around 15% of them export out side the former Yugos lav territory. Having 
benefited from the buoyant credit activity of banks until 2008, they are now faced with 
diminishing demand, increasing payment arrears, and stricter bank loans conditions due to the 
crisis. In 2009, the SME sector represented so me 60% of GDP and employed 67% of the total 
workforce. SMEs face a number of persistent obstacles, such as delays and costs for obtaining municipal permits or the absence of spatial planning documents in some municipalities. 
Overall , SMEs have increased their weight in th e economy but there is still ample scope for 
development. 
State influence on competitiveness 
The weight of subsidies in the consolidated budget has been historically low, accounting for 
less than 1% of GDP on average since 2003, very often re lated to privatisati on clauses in view 
of restructuring the metal industries. During th e crisis in 2009 and 2010, support to distressed 
companies mostly took the form of state gua rantees (4.7% of GDP on foreign sources of 
financing and additional 1.8% of GDP to domes tic ones), raising subsequent contingent 
liabilities for the public finances that may materialise later on. Electricity price cross-
subsidisation amongst different cl ass of users is being reduced and replaced with direct budget 
subsidies with the intention to avoid ma rket distortions amo ngst consumers. An 
Administration for Protection of Competition an d a State Aid Commission were established in 
2008 (see Chapter 8: Competition) . Overall , direct state aid has been limited but large state 
support interventions recently took place in the form of state guarantees for bank loans to 
distressed companies. 
Economic integration and c onvergence with the EU  
Montenegro remains a very open economy, with to tal trade (defined as  the sum of imports 
and exports of commodities) close to 100%  of GDP until 2008. However, 2009 witnessed a 
significant decline of trade, reducing the ratio of openness to 64% of GDP, as the most 
important trading partners (the EU and CEFTA), were also aff ected by the financial crisis. 
Exports to the EU contracted from 65% of total exports in 2008 to 48% in 2009, while exports to CEFTA increased from 33% in 2008 to 46% in 2009. However, the share of imports from the EU (40% of total imports in 2009) re mained unchanged compared with 2008, while 
imports from CEFTA countries declined to 45 % in 2009 from 50% a year earlier. During the 
first six months of 2010, exports to neighbou ring markets witnessed a noticeable recovery, 
while exports to the EU as well as imports from CEFTA and EU markets still remained 
negative. However, the level of EU investme nt has remained high, reaching in 2009 almost 
80% of total FDI. Relatively high inflation and wage growth after 2007 led to an appreciation 
of the real effective exchange  rate (by 1.5% in 2008 and 5% in 2009), which, together with 
lack of adequate infrastructures, hampers Montenegro's international competiveness. Overall , 
in recent years Montenegro suffered from deteri oration in international competitiveness. Yet, 
the level of investment integr ation with the EU remains high. 
EN 49  EN 2.3. Genaral evaluation 
The present assessment is made on the basis of the Copenhagen criteria related to the 
existence of a functioning market economy , as well as the capacity to cope with  
competitive pressure and market forces within the Union. 
Montenegro achieved a broad domestic consensu s on the fundamentals of economic policy as 
well as a track record in the implementation of  economic reforms. Economic stability reached 
a degree considered sufficient to allow economic operators to make deci sions in a climate of 
predictability. This has resulted  in high growth rates which were on average above 5% in the 
years preceding the economic cris is. Budget deficit and public debt have been kept at 
moderate levels. Unemployment has been reduced to below 12% in 2009 and labour 
legislation modernised. The free interplay of mark et forces has been developing in the last 
decade through privatisations and the abolition of controls on prices, foreign exchange and 
trade regimes. Foreign investments were attr acted by the improved business environment. The 
restructuring process of strategic enterprise s and sectors is underway . State aid has been 
historically low, often related to privatisati on clauses or supporting distressed companies. The 
Montenegrin economy remains very open and the level of trade and i nvestment integration 
with the EU and the Wester n Balkan region is high. 
However, after years of strong capital inflow s supporting rapid economic growth, the global 
crisis unveiled significant internal and ex ternal imbalances e xposing the country and 
threatening macroeconomic stability. The crisis al so revealed vulnerabilities in the regulation 
and supervision of the banking sector, calling for critical recapitalisation of banks. In absence 
of fiscal space, the government could mainly  react by providing guarantees to firms in 
difficulties, which threaten to materialise in the growing public debt. Persisting unemployment, and informal employment, poi nt to weaknesses in the education and 
vocational training systems as well as to some la bour market rigidities. The country has a still 
insufficient energy and transport infrastructure. Small businesses in part icular are confronted 
with scarce and expensive financing. Persisti ng weaknesses in the rule of law negatively 
affect the business environment. The informal sector remains an important challenge.  
3. A
BILITY TO ASSUME THE OBLIGATIONS OF MEMBERSHIP  
The European Council in Copenhagen in June 1993 included among the criteria for accession 
“the ability to take on the obligations of me mbership, including adherence to the aims of 
political, economic and monetary union”.  
In applying for membership on the basis of the Treaty, Montenegro  has accepted without 
reserve the basic aims of the Union, in cluding its policies and instruments.  
This part of the analytical report analyses  Montenegro's ability to assume the detailed 
obligations of membership — that is, the acquis , as expressed in the Treaties, the secondary 
legislation and the policies of the Union. Th is section follows the structure of the 33 
negotiating chapters into which the acquis  has been divided for the purpose of conducting 
accession negotiations. Each chapter examines the current situation and prospects in Montenegro.  
As the Union has developed, the acquis  has become progressively more onerous and presents 
a greater challenge for future accessions than  was the case in the past. The ability of 
EN 50  EN Montenegro to implement the acquis  will be central to its capacity to function successfully 
within the Union. 
In this respect, alignment with the acquis  is a necessary but not su fficient condition to meet 
the obligations of EU membership. Montenegro must also take all necessary measures to 
create the necessary implementing structures, to bring its administrative capacities to the 
required level and to ensure effective enforc ement. An analysis and assessment of the 
country’s administrative capacities is therefore included in each of the chapters below.  
For the purpose of this analyti cal report, and without prejudgi ng any future date of accession, 
the medium-term perspective in the assessments ha s been defined as a period of five years.  
3.1. Chapter 1: Free movement of goods 
The principle of free movement of goods means that products must be traded freely from one 
part of the Union to another. In  a number of sectors this gene ral principle is supplemented by 
a harmonised regulatory framework, following either the ‘Old Approach’ (laying down 
precise product specifications) or the ‘New Approach’ (settin g general product requirements). 
Transposition of harmonised European pr oduct legislation accounts for the bulk of the 
obligations under this chapte r. Smooth implementation a nd proper enforcement of the acquis  
requires sufficient administrative capacity to  notify restrictions on trade and to apply 
horizontal and procedural measures in areas su ch as standardisation, conformity assessment, 
accreditation, metrology and market surveillance.  
The Stabilisation and Association Agreement  creates a number of oblig ations in the field of 
free movement of goods, such as establishment of a free trade area. It also provides for 
gradual alignment to EU technical regula tions and standards as  well as metrology, 
accreditation and conformity assessment procedures.  
Regarding general principles , Montenegro needs to ensure that its legislation, including 
distinctly as well as indistinctly applicable m easures, is compatible with Articles 34–36 of the 
Treaty on the Functioning of the European Unio n and related case law of  the European Court 
of Justice (with special emphasis on th e principle of mutual recognition).  
In the area of horizontal measures , Montenegro adopted new le gislation on standardisation, 
accreditation and metrology in 2008 and 2009. Gradua l harmonisation with the principles of 
the New and Global Approach  has also been sought by adopting a new Law on technical 
requirements for products and conformity assessment in 2008. This law will need further revision to fully comply with the general pr inciples of the New A pproach and with the 
horizontal acquis  of 2008.  
In the area of standardisation , the Institute for Standardisation of Montenegro (ISME) was 
established in April 2007 and the present fram ework law has been in force since 2008. ISME 
is currently an affiliate member of the Eu ropean Committee for Standardization (CEN) and 
the European Committee for Electrotechnical St andardization (CENELEC) , and it is planning 
to become a member of the European Teleco mmunications Standards Institute (ETSI) during 
2010. ISME is also active in international sta ndardisation organisations. However, it is 
estimated that full membership of the thr ee European Standards Organisations (ESOs), 
representing a precondition for EU accession, will take approximately five years. ISME’s 
current staffing level is 18 out of the 32 planne d employees, mainly due to lack of qualified 
applicants and inadequate office space. There are only limited financial resources for ISME's 
further development and the transposition of Eur opean standards into national ones. There are 
EN 51  EN currently 4,150 Montenegrin st andards transposing European  (EN) and international 
standards. Regulations have been introduced that  provide for the withdr awal of old, and often 
compulsory, Yugoslav standards. Furthermore, ISME has recently established its first own 
database for newly adopted Montenegrin stan dards and related documents. However, some 
old laws still make normative re ference to the old standards. 
As regards conformity assessment, the Montenegrin framework law on technical requirements 
for products and conformity assessment and some implementing legislation has been established but it will need to be revi sed to take on board the latest horizontal acquis . So far 
ten conformity assessment bodies have been  accredited. In line with Regulation (EC) 
765/2008, accreditation remains voluntary in princi ple. There still ex ists a network of 
laboratories, certifica tion and inspection bodies which we re authorised to carry out 
conformity assessment activities in accordance with the old legal framework that prevailed 
before Montenegro’s independence. In future these will be designated and accredited in accordance with the new Montenegrin horizontal le gislation and the relevant international and 
European standards.  
The present law setting the requirements for accreditation  was adopted in 2009. The 
Accreditation Body of Monteneg ro (ATCG) which was set up in 2007 is a public, non-profit 
accreditation body with a full-time staff of 6. Th e Montenegrin accreditation policy principles 
are broadly in line with those of the EU, notably the public not-f or-profit basis of 
accreditation and its professional and financia l independence from possible clients. The 
ATCG signed a contract for co-operation with  the European co-operation for Accreditation 
(EA) in 2008. 
Pursuant to the Law on metrology of 2008, the Bu reau of Metrology (BoM) is in charge of 
legal and scientific metrology . Since its establishment in  2006 under the Ministry for 
Economic Development, the BoM has been f aced with a lack of  adequate space and 
equipment for the metrology laboratories. The broken traceability chain has now been re-
established for mass standards. The Bureau will  seek at first to be  accredited by a foreign 
accreditation body and, when possible, by the Montenegrin accreditation body. 
As regards market surveillance , the Montenegrin system is based on a set of laws and 
secondary legislation, includi ng the Law on inspection control of 2003, the Law on general 
product safety of 2008, the Law on technical requirements for products and conformity 
assessment of 2008 as well as product-specific laws and technical regulations. However, the 
system lacks coordination and additional measures  are needed for further alignment with the 
acquis . The comprehensive market surveillance st ructure required by Regulation (EC) No 
765/2008 still needs further development a nd existing inconsistencies with the acquis  need to 
be repealed.  
Montenegro has not yet aligned its legislation with  the vast majority of the sector-specific EU 
legislation. In areas covered by the Old Approach product legislation , major discrepancies 
with the acquis  remain to be addressed. Legislation regarding motor vehicles, emissions of 
pollutants from non-road mobile engines, chem icals, including REAC H, medicinal products 
for human use, medicinal products for veterinary  use, cosmetics, pre- packaging, textiles, 
footwear, aerosol dispensers and crystal glass will need to be aligned with the acquis . 
As regards New and Global Approach product legislation , Montenegro has not yet aligned 
its legislation with the vast majority of directives. At this stage it has adopted legislation 
aimed at alignment only in the field of recrea tional craft, non-automa tic weighing instruments 
EN 52  EN and eco-design requirements for energy-relate d products. Legislation has not been aligned 
with the acquis  on low-voltage equipment, electromagnetic compatibility, toys, machinery, 
noise emissions from outdoor equipment, lifts , personal protective equipment, equipment and 
protective systems intended for use in potentially  explosive atmospheres, medical devices, gas 
appliances, pressure equipment, simple pressu re vessels, cableway installations, construction 
products, radio and telecommunications termin al equipment and measuring instruments. 
Regarding procedural measures , Montenegro has not yet aligned its legislation with 
Directive 98/34, as amended by Di rective 98/48, on prov ision of information in the field of 
technical standards and regulations. As regards external border checks , the Montenegrin 
legislation does not yet incorporat e all the requirements of the EU acquis  on control of 
products coming from third countries. The Law on weapons adopted in January 2004 and 
amended in 2008 aims to harmonise national legislation with the acquis on civil firearms . The 
Montenegrin Law on foreign trade in arms, military equipment and dual use goods of 2008 is 
a sound basis for implementing the relevant direc tive on intra-EU transfer  of defence-related 
products. As regards the return of  cultural objects  unlawfully removed from the territory of 
EU Member States, Montenegro has not al igned its legislation with the relevant acquis . 
Conclusion 
Although Montenegro has taken init ial steps to bring its national legislation into  line with the 
principle of free movement of goods, most elements of the EU acquis  are not yet in place.  
In particular horizontal and procedural measures and Old and New Approach product 
legislation still need to be harmonised with EU legislation.  The framework legislation on 
technical regulations for products and confor mity assessment procedures needs alignment 
with the acquis . The basic separation of standard isation, accreditation and metrology 
functions has been established, but furt her implementing measures are necessary. 
Administrative capacities must be reinfor ced in relevant mini stries and technical 
organisations, and proper coordination of measur es relating to free movement of goods is 
needed at governmental level. Major efforts towards alignment with the acquis  will be 
necessary. 
Overall , in the field of free movement of goods, Montenegro will need to enhance 
preparations and to make considerable and sustained efforts to align with the acquis  and to 
implement it effectively in the medium term. Chapter 2: Freedom of movement for workers 
3.2. Chapter 2: Freedom of movement for workers 
The acquis  under this chapter provides that EU citizens of one Memb er State have the right to 
work in another EU Member State, to reside th ere for that purpose with their family and to be 
treated in the same way as nati onal workers in terms of worki ng conditions and social and tax 
advantages. Furthermore, the acquis  includes the EU instruments on coordination of different 
national social security systems. 
The Stabilisation and Association Agreement  provides that subject to  specific conditions and 
modalities applicable, Montenegro and EU Member  States ensure that their nationals who are 
legally employed on the territory of a partner co untry are free from a ny discrimination based 
on nationality as regards working conditions,  remuneration or dismissal. Montenegrin 
legislation prohibits discrimination of employe d persons and persons seeking employment on 
grounds of, inter alia, nationality. 
EN 53  EN As regards access to the labour market , Montenegrin legislation requires EU citizens to 
obtain a work permit. The Law on employment a nd work of foreigners  does not distinguish 
between EU nationals and nationals of third countr ies in this respect. In addition to the work 
permit, a permanent or temporary residence pe rmit and a valid labour contract are required 
before a foreigner can access the Montenegrin labour market. The government of Montenegro 
establishes annual work permit quotas for fore ign citizens, based on a proposal from the 
Ministry of Labour and Social Welfare, following consultation of  other ministries concerned 
and the Social Council. 
By the time of Montenegro’s accession to the EU, national law will have to ensure that EU 
citizens will be able to look for and take up wo rk in Montenegro without any restriction and 
without being subject to a work permit scheme. The law will also have to ensure that EU 
nationals who have made use of their right to take up employment  have the right to reside in 
the country. In addition, Montenegrin law will have  to secure the right of family members to 
reside in the countr y, and to take up employment and se lf-employment. Children of EU 
workers will also have to be admitted to education institutions under the same conditions as Montenegrin nationals. 
As regards employment in the public sector, Montenegrin legislation will have to take into 
account the acquis  (in particular, the case law) in this field, according to which EU Member 
States may only restrict public se rvice posts to their ow n nationals if they are directly related 
to the specific activities of the public service,  i.e. involve exercising public authority and 
responsibility for safeguarding the general interest of the State (i ncluding of local authorities). 
As regards Montenegro’s future participa tion in the European Employment Services 
(EURES ) network, attention needs to be paid to respective preparations. Besides making sure 
that the vacancy database is available in Eng lish and checking the language skills of potential 
EURES advisors, attention needs to be paid to  ensuring that local and regional offices have 
the possibility to share vacancies data not only with the central employment agency but also 
with each other. 
Concerning coordination of social security systems , the Montenegrin social security system 
includes all traditional branches of social se curity which come within the scope of EU 
coordination rules. The system is based on th e principle of compulsory insurance in the 
country of work. Non-Montenegrin nationals are not discriminated in the compulsory 
insurance scheme. Montenegro has also a num ber of special benefits for war victims. 
Following its independence in June 2006, Mont enegro has signed a limited number of 
bilateral social secur ity agreements with ot her countries, including f our EU Member States 
(Austria, Belgium, Hungary and Luxembourg). On  the basis of state succession, Montenegro 
applies various bilateral social security agre ements concluded with the SFR Yugoslavia, SR 
Yugoslavia and State Union of Serbia and Mo ntenegro. The strengthening of administrative 
capacity in order to fully apply Regulation 883/2004 on the coordination of social security 
systems as from accession will be the main cha llenge for the country in this context. The 
Montenegrin fund for pensions and disability insurance, the health insurance fund and the 
employment office would be the principal admini strative structures re sponsible for applying 
the EU provisions in this field. 
The main challenge for Montenegro will be bui lding up the administrative capacity necessary 
to fully apply Regulations 883/ 2004 and 987/2009, which coordina te Member States' social 
security systems, upon accession. In addition, prep arations for participat ion in the Electronic 
EN 54  EN Exchange of Social Security Information (EESSI) will be needed, which will require 
investment in IT infrastructure.  
Additionally, Montenegro will also have to introduce the European Health Insurance Card  
upon accession. 
Impact 
The estimated impact of Montenegro's possible accession upon the EU labour market has to 
be related to a number of factors, such as the size of Montenegro's working population, age 
structure, and migration movements. 
Montenegro's total population is estimated to  be around 630,000 persons and not expected to 
increase significantly over the next ten years (with an annual expected growth of 0.1%11 until 
2020). As regards the age structure, the share of  the youngest (15 and less)  is only slightly 
higher (19.7%) than in the EU (15.4%).  
Montenegro's working age population (aged 15-64) in 2009 was estimated at 434,300, among 
which 262,100 were economically active. Th is represents around 0.1% of the EU 
economically active population. The employment  rate for 2009 was estimated to be 48.7% 
(compared to 65.9% in the EU). Data on unem ployment varies strongly depending on the 
method of calculation, with re gistered unemployment rates be tween 10-15% and labour force 
survey's data pointing to unemployment rates close to 20%. This rate has substantially decreased compared to the high level of 2005 (around 30%). Furthermore, an important 
number of persons work in the informal economy. 
Despite a strong annual growth of GDP in the la st decade (the GDP per capita in Montenegro 
has more then doubled since 2000),  there remain significant di fferences between Montenegro 
and the EU. Montenegrin GDP per capita in purch asing power parity represents 43% of the 
EU 27 average. 
Historically, there have been migration moveme nts from Montenegro within the territory of 
the former Yugoslavia and, more limited, towa rds third countries, including EU member 
states. While precise figures of Montenegro's diaspora are not available, existing indications 
point to a very low migra tion rate in recent years. 
Notwithstanding limits due to the lack of reliabi lity and comparability of Montenegro's labour 
market statistics with that of the EU, overa ll, the above preliminar y assessment tends to 
indicate that Montenegro's membership in th e EU would have a minor impact on the EU 
labour market. However, this situation will  have to be monitored taking into account 
developments in Montenegro and the EU. 
Conclusion  
Overall , Montenegro will have to undertake additional efforts to align with the acquis  and to 
implement it effectively in the medium term in the field of free movement of workers. On the 
basis of existing bilateral agreements, Monteneg ro has gained some experience in applying 
the social security coordination principle. However further efforts will be needed to 
strengthen administrative capacity to implement these tasks.  
                                                
 
11 United Nations Population projections. See: http://esa.un.org/unpp/index.asp?panel=2  
EN 55  EN 3.3. Chapter 3: Right of establishment and freedom to provide services 
Member States must ensure that the right of establishment of EU nationals and legal persons 
in any Member State and the freedom to provi de cross-border servi ces, as laid down in 
Articles 49 and 56 of th e Treaty on the Functioning of th e European Union (TFEU), are not 
hampered by national legislation, subject to the excep tions set out in the Treaty. The core 
piece of acquis  in this area is the Services Directive. The acquis  also harmonises the rules 
concerning regulated professions to ensure mutu al recognition of qualific ations and diplomas 
between Member States. For certain regulat ed professions a comm on minimum training 
curriculum must be followed in order to have th e qualification automatically recognised in an 
EU Member State. The EU postal reform aims  to ensure provision of a universal postal 
service, the establishment of an internal mark et for postal services and a high-quality postal 
service for end users. 
The Stabilisation and Association Agreement  provides for gradual liberalisation of the right of 
establishment and the freedom to provide se rvices between the EU and Montenegro. It 
includes a standstill clause as regards rest rictions to supply of services by providers 
established in a country other th an that of the person for whom  the services are intended.  
In the field of the right of establishment , the Montenegrin  legislation does not discriminate 
against foreign operators or thei r subsidiaries or branches. The procedures for registration in 
the commercial registry are non-discriminatory.   
As regards freedom to provide cross-border services,  Montenegrin legislation is not in line 
with the acquis , particularly the Services Directive. Its current legislation regulates provision 
of services with an establishment in Monteneg ro, but not provision of cross-border services. 
Full alignment with, and implem entation, of the Services Dir ective will require building up 
and strengthening administrative capacity. Fu rthermore, effective compliance with the acquis  
will entail adequate coordination at national level between all relevant administrative bodies 
and, eventually, upon accession, with EU Member States.  
In the area of postal services , Montenegrin primary legislation follows the principles and 
objectives laid down in the acquis . The postal affairs development strategy takes into account 
the latest developments of the acquis , as introduced by the Third Postal Directive, and 
provides for full liberalisation of  the postal sector by the begi nning of 2013. In this regard, 
particular attention will need to be paid to a number of specific issues regarding the universal 
service obligation (USO), such as VAT exem ption, procedure for a llowing exceptions to 
USO, transparent criteria for period of designa tion of universal servi ce provider(s) and their 
supervision. Further efforts have  to be made with regard to the reserved area, authorisation 
system, tariff regulation and complaints procedure. As regards administrative capacity, the government adopts postal policy decisions and develops the strategy. The Ministry of 
Transport, Maritime Affairs and Telecommunicat ions sets the tariffs for universal postal 
services and deals with appeals against decisions of the Agency for Electronic Communications and Postal Services, the nati onal regulatory authority (NRA). While the 
financial independence of the NRA is mainly en sured through proceeds of authorisations and 
licences, there is a need to ensure separation of  regulatory functions cu rrently exercised by the 
responsible Ministry. An incr ease in the number of dedicated  staff dealing with postal 
services will be needed as well as a clear se paration of regulatory and management tasks.  
In the field of mutual recognition of pr ofessional qualifications , the scope of the regulated 
professions in the country co incides with the main Directive on the recognition of 
EN 56  EN professional qualifications. The exceptions are ve terinary surgeons and midwives, for which 
no training is offered. However, further adjust ments of the legal framework are needed to 
achieve compliance with the acquis . This would include the e limination of all nationality, 
residence and inappropriate lingui stic requirements as well as  reciprocity clauses and the 
introduction of a legal distinction between profe ssions of doctors, dentists and pharmacists, as 
regards both training for and access to the exercise of these professions. Montenegrin 
legislation provides for mutual recognition of fo reign higher education qualifications, but not 
of foreign professional qualific ations. Recognition is granted by the Ministry of Education 
and Science, but it remains unclear to what ex tent such recognition actually gives access to 
regulated professions. Administrativ e structures and procedures wi ll need to be established to 
allow the mutual recognition of all ki nds of professional qualifications. 
Conclusion   
There are no discriminatory legal barriers to th e right of establishmen t for EU operators in 
Montenegro. However, significant efforts need  to be made regarding the alignment of 
legislation on the freedom to provide services with the acquis  as well as for administrative 
capacity and inter-institutional c ooperation. Montenegro  should be able to  align its national 
postal legislation with the acquis  in the medium term, but fu ll independence of the NRA and 
integrity of its regulatory functions will need to  be ensured. Professional training curricula 
need to be aligned with the acquis  and relevant administrative structures and procedures 
established to ensure recogniti on of professiona l qualifications. 
Overall , Montenegro will need to undertake additional efforts to align with the acquis  and to 
implement it effectively in the medium term. Earl y preparations and particular sustained effort 
will be needed in the area of freedom to provide services. 
3.4. Chapter 4: Free movement of capital 
Member States are expected to  remove all restrictions on capital movements and payments 
both within the EU and between Memb er States and third countries. The acquis  also includes 
rules on cross-border payments and execution of transfer orde rs concerning securities. The 
Directive on the fight against money laundering  and terrorist financing requires banks and 
other economic operators to identify customers and report certain transactions, particularly 
when dealing with high-value item s and large cash transactions. A key requirement in order to 
combat financial crime is creation of effective administrative and enforcement capacity, including cooperation between supervisory, la w enforcement and prosecution authorities.  
The Stabilisation and Association Agreement  sets out a timetable for capital liberalisation. It 
also provides for freedom and convertibility of current account payments and transfers. 
With regard to capital movements , Montenegro became an IMF member and assumed the 
obligations of Article VIII of the IMF Articles of Association, and hence full current account 
convertibility, in January 2007. Foreign direct i nvestment has been the main factor in the 
development of Montenegro in recent year s. Over the period January 2002-December 2009 
the total inflow of foreign direct investment amounted to over 4 billion euro. Of this, 51% was 
invested in companies and banks , 34.5% in real estate, while 14.1% related to inter-company 
debt and 0.4% to other investments. In 2009 FDI as a percentage of GDP stood at 30.6% 
compared with 5.6% in 2002. Most of these infl ows (about 64%) originated  in the EU. During 
the reference period, significant direct inve stment occurred in privatised enterprises 
(telecoms, banks and financial services and metal industry) as well as in the tourism sector. 
EN 57  EN The Law on foreign current and capital transacti ons, adopted in July 2005 (last amended in 
2008), is mostly aligned with the acquis  and fully liberalises current and capital transactions, 
with a few exceptions justified by the public interest, defence and international agreements. No restrictions apply to long-term lease, concession or buy-own-tr ansfer arrangements on 
immovable property, although inward investment in real estate by non-reside nts is still subject 
to some restrictions on ownership of property by foreign natural person s and legal entities. 
However, these restrictions do not concern EU nationals, subsid iaries and branches, as with 
the entry into force of the SAA in May 2010, they are subject to national treatment in 
acquiring real estate. In the ev ent of a serious threat to m onetary policy or the financial 
situation, safeguard measures can apply to capit al movements for a period not exceeding six 
months. Montenegro has not retained special rights in privatised companies. However, 
investment rules for institutional investors, such  as pension funds, are no t yet in line with the 
acquis .  
As regards payment systems , Montenegro will need to align with Directives 2007/64/EC and 
2009/110/EC. The existing legislation does not re gulate payment institutions and does not 
apply to cross-border payments. The necessary ad ministrative structure is in place to ensure 
implementation of the payment acquis . Nonetheless, given the increase in workload, 
supervisory and enforcement duties and given th e new responsibilities once the EU payment 
systems legislation is adopted, additional staff may be needed. 
With reference to anti-money laundering (AML) , Montenegrin legislati on is partially in line 
with the EU acquis, however additional efforts are needed to eliminate existing shortcomings 
(See also Chapter 24 - Justice, freedom and secu rity). These include th e current definition of 
beneficial owner, shell bank, financial institu tion, customer due diligence (CDD) measures, 
and politically exposed persons. The Montenegri n legislation does not e xplicitly prohibit the 
opening or keeping of anonymous accounts and does not provide for verification of the 
customer’s identity. The national legislatio n is neither complete ly in line with the acquis  with 
reference to full exemption from CDD measures  in certain instances,  provisions requiring 
obliged persons to pay special attention to any ac tivity which is considered particularly likely 
to be associated with money laundering or te rrorist financing and to complex or unusually 
large transactions, and to repor t suspicions of money launderi ng or terrorist financing. No 
provisions for terminating business relations and f iling a suspicious transaction report apply in 
case the obligors are unable to comply with CDD requirements. Finally, no explicit legal 
requirements oblige supervisors to inform th e Financial Intelligence Unit (FIU) about 
suspicious transactions, persons, and facts disc overed during their supervision activities.  
Designated supervisors are th e Central Bank of Monteneg ro (CBM), the Insurance 
Supervision Agency (ISA), the Securities and Exchange Commission (SEC) and the 
Administration for the Prevention of Money La undering and Terrorist Financing (the FIU) 
12 
The supervision regime in the area of AML an d combating the financing of terrorism (CFT) 
encompasses inter alia  banks, life insurance companies and agents, investment funds, 
stockbrokers, pension funds, leasing companies a nd currency exchange offices. However, the 
FIU, which plays a central role in the system, does not have sufficient staff to deal with all 
tasks assigned to it and suffers significant constr aints in terms of high staff turnover as well as 
working space and IT equipment. The CBM has established a dedicated AML/CFT unit for the supervision of the banking sector, with a curre nt staff of 3 out of 5 officials envisaged. 
                                                
 
12 There are also other supervisors for supervis ing compliance in the area of AML and combating 
financial terrorism (CFT): the Agency for Telecomm unication and Postal Services for the post offices, 
the administration body for games of chance for lotteries, and the tax authority for pawnshops. 
EN 58  EN The Agency for insurance supervision, responsible for the insurance sector, became 
operational in 2008 but has not yet developed any activities with regard to AML/CFT. There 
are no supervisory authorities for lawyers and not aries, while the FIU supervises real estate 
agents. Having identified this sect or as an area of pa rticular risk for money laundering the FIU 
took supplementary measures, including the collec tion on a daily basis of all real estate 
contracts from courts. Cooperation between the CBM, the SEC, the ISA and, to some extent, 
the FIU needs to be enhanced.  
Conclusion  
Capital movements in Montenegro are essentially  liberalised, but furthe r efforts are necessary 
to fully align legislation with the acquis . As regards payment systems, legislation is not yet 
aligned with the relevant acquis . Nonetheless, Montenegro should be able to align, as well as 
effectively implement and enforce the acquis  in the medium term if sufficient human 
resources are assigned to these tasks. Concerning anti-money laundering and counter-
financing of terrorism good progress has been made, with the adoption of a basic legal 
framework which needs to be further fine-t uned. However implementation and enforcement 
mechanisms still need to be put in place or fu rther enhanced. In partic ular, Montenegro needs 
to strengthen the capacity of th e financial supervisory authorities and enforcement agencies. 
Factors such as the high level of cash usage in the economy and corruption may influence the 
effectiveness of the fight against money launderi ng and financing of terrorism. Measures need 
to be taken to limit these risks. Also, closer cooperation and coordination is needed between 
the relevant institutions as we ll as broad involvement of the pr ivate sector, which needs to be 
trained and adequately supervised.  
Overall , Montenegro will have to undertake additional efforts to align with the acquis  and to 
implement it effectively in the medium term in this area. Further efforts are particularly needed as regards the strengthening of th e independence and capacity of supervisory 
authorities and enforcement agencies.  
3.5. Chapter 5: Public procurement 
The acquis  on public procurement includes the genera l principles of transparency, equal 
treatment, and non-discrimination. In addition, sp ecific EU rules apply to coordination of the 
award of public contracts for wo rks, services and s upplies, for the classi cal sector, for the 
utilities and for the fields of defence and se curity. The scope of application is defined 
according to contracting entities, contracts covered and application thresholds and specific exclusions. The acquis  also lays down rules on review pr ocedures and the availability of 
remedies. 
The Stabilisation and Asso ciation Agreement stipulates that EU companies, whether 
established in Montenegro or not, must ha ve access to contract award procedures in 
Montenegro based on treatment no less favour able than that accorded to Montenegrin 
companies.  
Whereas the general principles  applying to public procurement in the internal market have 
been mainly transposed in the Montenegrin le gislation, their implementation and enforcement 
needs to be improved by enhancing understandi ng and administrative capacity at local level 
and keeping up on policies to fight corruption in public contracts. 
EN 59  EN The award of public contracts  is governed by th e reform of public procurement legislation 
of July 2006. The Montenegrin law is modelled on the EU public procurement directives and it reflects the basic requirements of the classical directive (Dir ective 2004/18/EC); however, it 
still presents some procedural weaknesses with reference to restricted tenders, the 
considerable administrative burden imposed on bi dders and too short time limits. In addition, 
an appropriate legal framework for procuring en tities active in the utilities sector is not 
provided. Shortcomings concern the scope and procedures and the fact that public 
procurement legislation does not apply to private companies operating in the utilities sector on 
the basis of special or exclusive rights. A polic y for green and social procurement has not yet 
been put in place. A new Law on concessions wa s adopted in January 2009 however it fails to 
satisfy some fundamental requirements of the procurement acquis , especially in terms of 
definitions and procedures. 
As regards administrative capacity, the Public Procurement Directorate (PPD) was established 
in 2006 and has a vast number of  tasks, including pa rticipation in prep aring and monitoring 
the Montenegrin public procuremen t legislation and its applicati on. Its capacities need to be 
strengthened through additional resources. The Concessions Committee has been set up by the new Law on concessions and it also  needs to be strengthened in  order to prope rly perform the 
tasks attributed to it by the law.  
With reference to the remedies  system, complaints on public contracts are reviewed by the 
State Commission for the control of procurement procedures (PPC), which is an autonomous 
body. Any person harmed by a contracting author ity’s decision may subm it an objection to 
the contracting entity within eight days of  such decision. The objection will have an 
immediate suspending effect on the contracting authority. The contracting authority’s decision 
on the objection may be challenged in the State Commission. This implements the basic 
requirements for an independent review system, including the standstill period, as provided in 
the Remedies Directive, with the exception of  the time limit for submitting objections and 
complaints. Montenegrin legislation still need to be aligned with other provisions of the new 
Remedies Directive providing more clarity and modernising the remedies regime. The 
Commission functions rather efficiently within very tight deadlines. However, with its very limited resources, it may find it difficult to con tinue handling all its ta sks if the number of 
complaints continues to rise. Moreover, the PPC  provides statements on correct application of 
the law. This gives rise to qu estions of conflict of interest when dealing with complaints 
where the same PPC has previously issued a statement. 
Conclusion  
Montenegro has made significant efforts to  comply with the requirements of the acquis  in this 
area and progress towards alignment has been substantial. However, further efforts will be needed for the Montenegrin legislat ion to fully comply with the EU acquis . This applies in 
particular to the Utilities, concessi ons and the new Remedies Directives.  
The requirements of the SAA have been impl emented, although the EU utilities market will 
be open to Montenegrin operators only once the country will have adopted legislation 
introducing EU rules in this area. 
Overall , in the area of public procurement Monten egro will have to undertake additional 
efforts to align with the acquis  and to implement it effectively in the medium term. 
Strengthening of administrative capacity at centr al and local level - for both implementation 
EN 60  EN of the legislation and monitoring - is needed. Furt hermore, it is necessary  to step up efforts to 
fight corruption in public contracts.  
3.6. Chapter 6: Company law 
The company law acquis  includes rules on disclosure re quirements, formation, maintenance 
and alteration of capital, mergers and divisions, takeover bids and shareholders' rights, as well 
as corporate governance principles. In  the area of financial reporting, the acquis  lays down 
rules for the presentation of annual and conso lidated accounts, including simplified rules for 
small and medium-sized enterprises. Partic ular accounting rules ap ply to the banking and 
insurance sectors. Application of International Accounting Standards is mandatory for some 
public interest entities. In addition, the acquis  specifies rules for th e approval, professional 
integrity and independence of statutory auditors. 
Montenegrin company law  is largely consistent with the EU acquis  on the disclosure 
requirements for branches, on single-member private limited companies, on the disclosure requirements for public and private limited companies, on the formation of public limited liability companies and the maintenance and alteration of their capital, on mergers and on 
divisions. However, there are inconsistencies in these areas that relate mainly to the evolution 
of the acquis  since 2003. The inconsistencies concer n more specifically the disclosure 
requirements of companies, the grounds for nulli ty of companies, the electronic operation of 
business registers and capital maintenance a nd alteration. Montenegro  has not yet aligned 
with the Shareholders’ Rights Directive and the Takeover Bids Di rective, although the 
Montenegrin Law on takeover of jo int stock companies contains some elements of the last-
named. A Corporate Governance code was adopted in May 2009 based on the ‘comply or 
explain’  approach, but corporate culture and corpor ate governance is still to be developed in 
the full sense.  
As regards administrative structure, the Mi nistry of Economy, Ministry of Justice and 
Ministry of Finance are competent for polic y proposals in the area covered by the business 
organisation law. The Central Registry of comm ercial entities is an independent state body 
established as part of the Comm ercial Court in Podgorica and is  in charge of implementation 
of the business organisation law and registration  of business organisations in Montenegro. Its 
staff numbers 17 employees and no increase is envisaged. The deadline laid down by law for 
the registration or reject ion of a company is four days from  the application for registration and 
the average period effectively re quired is two days. The Law on electronic signatures has been 
amended, however it will need to be furthe r aligned with releva nt EU legislation. 
Registration with the tax administration, empl oyment agency, health insurance fund and 
pension insurance fund has been  unified at the tax administ ration, in a single form. The 
percentage of limited liability co mpanies that have submitted their financial statement is low 
(68% in 2008 and 62% in 2009). Applicable  sanctions are stipulated by the Law on 
accounting and auditing. The Ministry of Fina nce has the powers to check the annual and 
quarterly financial statements of joint stock companies and other lega l entities that issue 
securities, other financial instru ments traded on the organised ma rket and parent legal entities 
required to prepare financial statements. In addi tion, the Ministry of Finance, in coordination 
with the Council for Misdemeanours, has determ ined the procedure for submitting the request 
for initiating the misdemeanour procedure against legal entities and thei r responsible persons 
for the non-submission of financial statements.  
EN 61  EN The area of corporate accounting  is regulated by the Law on accounting and auditing of 
2008 while by-laws further regula te individual areas of its implementation. Legal entities 
having control (parent legal companies) over one or more legal entities (subsidiaries) are 
required to compile, submit and disclose consolid ated financial statements, in accordance with 
the IFRS. Harmonisation with the EU acquis , which started in 2002, has not yet been 
completed and will most probably not be done before 2012.  
Under the Law on accounting and auditing, Montenegro set up an Accounting and Auditing 
Council. The Council is a cons ultative body whose tasks are to consider and adopt its position 
on matters such as the development and prom otion of accounting and auditing practice in 
Montenegro; to provide advice to policy make rs, regulators and go vernment bodies; to 
provide technical assistance for improving the qu ality of financial reporting and other matters 
important for the development and promoti on of accounting and auditing practice in 
Montenegro, in line with the IFRS.  
As regards statutory audits , the Law on accounting and auditi ng of 2008 transposes partially 
the Statutory Audit Directive (2006/43/EC) a nd takes into account some aspects of the 
Commission recommendations of 2008 on external  quality assurance and limitation of the 
civil liability of statutory audi tors and audit firms. A series  of by-laws further regulates 
particular areas of auditing such as registra tion of audit firms and authorised auditors, 
requirements for authorised auditor licensing, and mandatory liability insurance of audit firms 
and authorised auditors. Howeve r, legislation needs to be de veloped on the establishment and 
approval of audit firms; the specific requirement s for statutory auditors and audit firms which 
carry out audits of public interest entities su ch as banks, insurance companies or listed 
companies; the establishment of an external quality assurance system for statutory auditors 
and audit firms; the independent  public oversight for auditors ; the cooperation and exchange 
of information with other regulatory and supe rvisory authorities; the regulation of third-
country auditors and au dit firms as well as cooperation w ith competent authorities from third 
countries.  
Conclusion  
In most areas under this chapter Monteneg rin company law is aligned with the EU acquis . 
However, particular attention needs to be paid to alignment with the acquis  on grounds for 
nullity of companies, electronic operation of business register, disclosure requirements of 
companies, capital maintenance and alterati on, shareholders' rights, takeover bids and 
corporate accounting. Further alignment is needed  on important aspects of the Statutory Audit 
Directive.  
Beyond alignment, Montenegro faces additio nal challenges relating to effective 
implementation and enforcement in areas such as the electronic operation of business registers. All appropriate measures need to be taken to improve th e corporate culture and 
further develop systems of corporate governance . Besides, an independent public oversight 
body for auditors and a quality contro l system need to be established. 
Overall , Montenegro will have to undertake a dditional efforts to align with the EU acquis  and 
to implement it effectively in the medium term. 
3.7. Chapter 7: Intellectual property law 
The primary objective of the EU acquis  in the area of intellectual property rights is to ensure 
the proper functioning of the internal market while striking the right balance between the 
EN 62  EN rights of right-holders and the interests of users and adapti ng the legal framework to the 
changing technological envi ronment. The copyright acquis  harmonises rules on legal 
protection of copyright and rela ted rights. Specific provisions apply to protect databases, 
computer programs, semiconductor topogra phies, satellite broa dcasting and cable 
transmission. The acquis  on industrial property rights sets  out harmonised rules for legal 
protection of trademarks and designs. Spec ific provisions apply to biotechnological 
inventions, pharmaceuticals and plant protection products. The acquis  also establishes an EU 
trademark and EU design. Finally, the acquis contains harmonised rules for enforcement of 
copyright and related rights and industrial property rights. It re quires Member States to set up 
adequate implementing mechanisms, in par ticular effective enforcement capacity.  
The Stabilisation and Association Agreement states that Montenegro must take the measures 
necessary in order to guarantee, by January 2013, a level of protecti on of intellectual, 
industrial and commercial property rights si milar to that existing in the EU, including 
effective means of enforcing such rights.  
In the area of copyright and neighbouring rights , the current relevant  national legislation, 
which dates from 2005, presents some importa nt gaps and incompatibilities with the acquis . 
These include key provisions on th e resale right, on exercise of the cable retransmission right, 
and on the protection of technol ogical measures. However, some of these divergences are 
expected to be addressed in a revised copyr ight law, to be adopted by the end of 2010. 
Responsibilities in this area have been shifted fr om the Ministry of Culture to the Ministry of 
Economic Affairs to consolidate e fforts and resources. However, this  process is at a very early 
stage.  
Montenegrin legislative framework on industrial property rights  is largely aligned with the 
acquis , but some discrepancies remain. On 1 March 2010 the Cooperation and Extension 
Agreement with the EPO entered into force.  However, a number of amendments to the 
Montenegrin laws on trademarks and designs are necessary in order to bring them into line 
with the EU acquis . In addition, a number of implementing rules are needed in  order to enable 
the IPR law to be implemented effectively with regard to patents. The Montenegrin 
Intellectual Property Office (MIPO), opened in May 2008, currently employs 24 permanent 
staff out of 31 planned. Its I ndustrial Property Department currently employs one trademark 
examiner. MIPO is at present not in a position to  fulfil its legal obligations with regard to 
processing IP rights. Technica l infrastructure, including s ecured premises, a configured 
network, databases and register s, and workflow management tools, is not yet in place. 
Absence of working procedures as well as limited expertise in IP hamper the active 
involvement of MIPO in reforming the sy stem of industrial property rights.  
The provisions relating to enforcement  of intellectual property right s are to be found in legal 
texts regulating the various intellectual prope rty rights. In addition there is a Law on the 
enforcement of legislation regulat ing the protection of intellectua l property rights that covers 
administrative procedures (inspections, destru ction, etc.) and criminal  sanctions. Directive 
2004/48/EC is not completely implemented. Too many provisions are not sufficiently aligned 
with the Directive’s standard s (rules about evidence and meas ures to preserve evidence, 
provisional measures, right of information, corrective measures) an d several tools are 
completely missing (e.g. recurring penalties, m easures in case of alleged commercial-scale 
infringements). Considerable efforts remain to  completely align the legislation with the 
acquis .  
EN 63  EN The main enforcement agencies are the Intellectual Property Office, the Customs 
Administration, the National Police, the Market  Inspection Service, the Commercial Court 
and the basic courts. Also the inspectorates  for medicines and for medical devices, the 
building inspectorate, the touris t inspectorate and the authorised  official of the independent 
regulatory authority in charge of broadcasti ng are listed in the Law on the enforcement of 
legislation regulating the protec tion of intellectual property rights. All main enforcement 
agencies suffer from both inadequacies of premis es and staff and/or from lack of specialised 
expertise in the intellectual property field. Coordination among the IPR enforcement bodies is 
non-systematic and limited to specific cases. In formation exchange and provision is episodic 
and not based on modern IT platforms that wo uld ensure quality and update information. The 
level of activities is fairly low except fo r the Market Inspection Service, which in 2009 
reported a number of activities considerably higher than for other enforcement agencies. 
Participation of economic operators and consum ers in preventing counter feiting and piracy is 
sporadic. The process of building a sound IPR protection system in Montenegro needs to 
continue beyond the first step by securing the necessary resources and expertise for bodies 
involved in fighting counterfeiti ng and piracy. Effective coordination mechanisms need to be 
established and awarene ss-raising activity intensified. So fa r, Montenegro cannot effectively 
and efficiently fight counterfei ting and piracy, which leads to considerable economic, social 
and development losses.  
Conclusion  
Montenegrin legislative framework on intellectu al property is partially aligned with the acquis  
but remaining discrepancies need to be timely addressed, with particular attention to civil 
judicial remedies. Significant strengthening of administrative cap acity, not least through 
vocational training and development of necessary competences, especially  for judges, is vital 
for further progress in this area. Effective en forcement of intellectual property rights will 
require substantial further e fforts based on political determ ination and the allocation of 
adequate human, financial and technical resources to the re levant agencies and to the 
judiciary. Strengthening and rati onalisation of resources and cap abilities of the authorities 
responsible need to be accompanied by an  efficient mechanism for coordination.  
Overall , Montenegro will have to enhance its preparations and to make considerable and 
sustained efforts to align with the EU acquis  in this area, and to implement it effectively in the 
medium term. This is even more urgent taking  into consideration Montenegro's obligations 
under the SAA.  
3.8. Chapter 8: Competition policy 
The competition acquis  covers antitrust, merger and state ai d control policies. It includes rules 
and procedures to fight antic ompetitive behaviour by compan ies (restrictive agreements 
between undertakings and abuse of a dominant pos ition), to scrutinise mergers and to prevent 
governments from granting state aid that dist orts competition on the internal market. 
Competition rules are directly applicable th roughout the Union and Member States must 
cooperate fully with the Co mmission on enforcing them.  
The Stabilisation and Association Agreement  (SAA) includes provisions  closely aligned with 
a large part of the competition acquis.  These cover anti-competitive agreements between 
undertakings, abuse of dominant positions a nd State aid distorting competition. The SAA 
includes rules applying to public undertakings and to undertaki ngs which have been granted 
special and exclusive rights and prohibits quantita tive restrictions on imports from the EU into 
EN 64  EN Montenegro. The SAA provides fo r operationally independent public  authorities to supervise 
application of the competition rules. It also in cludes a protocol laying down rules on State aid 
in steel industry. 
As regards antitrust including mergers , the necessary legal and in stitutional framework has 
been put into place satisfactoril y, but certain legal provisions n eed to be improved to better 
align with the EU acquis.  Rules applicable to anticompetitive agreements, abuses of dominant 
positions and merger control are based on Articles 101 and 102 TFEU and on Council 
Regulation (EC) No 139/2004. Competition law app lies to all sectors of the economy, to 
goods and services and to public as well as  private enterprises. Moreover, the law 
incorporates the principles of Article 106(2) TFEU regarding services of general economic 
interest. Block exemptions harmonised with EU Regulations are regulated separately in a by-
law. Merger rules stipulate that proposed merges must be notified to the competition authority on the basis of ‘threshold valu es’ that appear appropriate  to the country’s economic 
conditions. However, the assessment of merg ers and acquisitions is still based on the 
‘dominance test’ instead of the ‘SIEC (
significant impediment of effective competition ) test’. 
The definition of a dominant position  is overly simplistic. And, finally, the determination of 
fines as a multiple of the minimum wage -rathe r than a function of the firm’s turnover- has 
regressive implications  penalising SMEs.  
The Competition Protection Administration, es tablished in 2008, has investigatory powers 
and may impose fines on undertakings and pub lic bodies where the competition rules are 
infringed. Decisions by the competition author ity are subject to judicial review by the 
Administrative Court of Montenegro. The co mpetition authority has a staff of 10 civil 
servants, insufficient to carry out all its tasks.  Its administrative capacity needs to be boosted 
and adequate financial resources need to be provided for adequate competition enforcement.  
The necessary legal framework for state aid  control has been put into place in a satisfactory 
manner. Certain legislative provi sions need, however, to be al igned more closely with EU 
rules, e.g. the rights of third pa rties to file complaints. The Montenegrin Law on state aid, as 
revised in 2009, is in line with  the provisions of Ar ticle 107 TFEU and Regulations in force at 
the time of its adoptio n. A State aid inventory was dr awn up in September 2008 and its 
database is updated regularly. 
As regards administrative capacity, the Monten egrin state aid authority is the State Aid 
Commission (SAC), a collegial body that ta kes final decisions based on an assessment 
prepared by the State Aid Monitoring Unit (SAMU) , a separate office with in the Ministry of 
Finance. The SAC consist of a Chairman, appo inted by the Ministry of Finance, and eight 
members nominated by state bodies, associations  of municipalities and employers. The SAC 
authorises notified state aid schemes and i ndividual aid. In addition, the SAC may order 
recovery of unlawful aid. If the aid granting bod y fails to comply with the SAC instructions, 
the SAC informs the government and proposes that measures be taken. The SAC may initiate ex officio  investigations but the Law on State aid does not explici tly allow third parties to 
submit complaints. The SAMU, w ith a staff of 5, performs professional, administrative and 
technical tasks on behalf of the State Aid Co mmission and prepares draft opinions for ex-ante 
and ex-post state aid control. In 2009, 19 cases of proposed state aid were assessed; resulting 
in 15 decisions on compliance and 4 conclusions on non-applicability or lack of competence. 
To date, no ex officio  cases have been opened.  
There are no systemic issues regarding Monteneg ro’s ability to assume the obligations of EU 
membership in the field of state aid. However, efforts will be needed to strengthen the 
EN 65  EN institutional capacity and indepe ndence of the SAC. Its enforcem ent record and the quality of 
its decisions need to be closely monitored in th e future. This will include in particular the 
compatibility of the restructuring aid being granted to the metal industry with the obligations undertaken by Montenegro in the SAA. 
Concerning liberalisation , a number of Montenegrin undertak ings enjoy special or exclusive 
rights, e.g. in the field of electricity, pharmaceu ticals, road and railway infrastructure, postal 
services, radio and television, forestry, utilities , maritime management and the management of 
goods of general interest. Further analysis and monitoring of Montenegro ’s progress in this 
regard will be required, although no systemic i ssue can be identified at this stage with 
reference to undertakings enjoying special or exclusive rights and services of general interest. 
Conclusion 
Montenegro’s legal framework for competition is based on EU rules, but elimination of 
idiosyncrasies which are not entirely in line with the acquis will be needed. The relevant 
administrative structures are in place, however , the de facto independ ence of the state aid 
authority needs to be closely monitored and the quality of the decisions taken by the competition authority and the state aid authority needs to be verified on a regular basis. Further monitoring and analysis of Montenegro 's progress towards market liberalisation in 
reserved sectors in line with the acquis will be required.  
Overall , Montenegro will have to undertake a dditional efforts to align with the EU acquis  in 
the field of competition and to implement it effectively in the medium term, including strengthening administrative capacity and safe guarding the operational independence of the 
state aid and competition authorities.  
3.9. Chapter 9: Financial services 
The main objectives of the acquis  as regards financial servic es are to ensure financial 
stability, the financial soundness of compan ies operating in the financial sector, and 
appropriate protection of consumers, investor s and policyholders. The aim is to build up 
confidence in the financial markets and to provide a level playing field. The acquis  on 
financial services includes rules on author isation, operation and supe rvision of financial 
institutions in the areas of banking, insurance,  supplementary pensions, investment services 
and securities markets as well as on financial ma rket infrastructure. Financial institutions can 
operate across the EU in accordance with the ‘sin gle passport’ and the ‘home country control’ 
principle, either by establishing branch es or by providing cross-border services. 
As regards banks and financial conglomerates , the banking sector is the most developed 
component of the financial sector in Montenegro . There are 11 banks op erating in the country. 
At the end of 2009, their balance sheet total amounted to €3,025.2 million, recording a 
nominal decrease of €284.4 million (8.59%) in co mparison with 2008. The official statistics 
show that the Montenegrin banking system is si gnificantly concentrated. The market share of 
the four largest banks in  terms of total assets amounts to 76.5%; their share of loans is 79.4%, 
and their share of deposits is 80.1%. The nine foreign-owned banks have a market share of 
77% in terms of total assets. 
The Law on banks adopted in February 2008, as amended in July 2010, and several 
implementing decisions adopted by the Cent ral Bank of Montenegro (CBM) together 
constitute the legislation applicable to the sect or. Both are to a great extent in line with the 
Capital Requirements Directive (CRD). However, further progress in the area is needed for 
EN 66  EN full alignment with the CRD and the EU acquis . Improvements are especially needed in 
relation to own funds, introduction of internal models for credit and operational risks, credit 
risk mitigation, large exposures, counterparty credit risk, consolidation rules and home/host 
issues. The internal capital assessment pro cess, the supervisory review process and the 
transparency of the banks’ activities for bui lding and maintaining a sustainable financial 
system are not sufficiently covere d and further intensive work in this area is required. The 
recent amendments to the banking law also intr oduced early intervention and bank resolution 
arrangements, which are under review and development in the EU. The Financial Stability Council Law aims at improving the identificati on and mitigating of systemic risks in the 
financial sector to ensure fi nancial stability. The current le gal framework for the deposit 
guarantee scheme is not compliant with the acquis  either. The amended bank bankruptcy and 
liquidation law is not compliant with the reor ganisation and winding up di rective of the EU.  
The Montenegrin parliament adopts primary financ ial legislation. The Mini stry of Finance is 
responsible for submitting draft new laws to pa rliament and for coordinating the legislative 
drafting process between parliament, the CBM and the Secur ities and Exchange Commission 
(SEC). The cooperation process, however, need to be improved as there have been numerous 
cases in the past where the legislative proposals made by the CBM were subsequently changed before the final vote by parliament wi thout coordinating the changes or consulting 
the other authorities involved. The CBM particip ates actively in the process of technical 
preparation of legislative acts,  and has established appropriate  enforcement mechanisms for 
their implementation. However, the establishmen t of a team dedicated to the process of 
alignment with the EU legislative acts is need ed. Further progress in th e enforcement of some 
areas of legislation needs to be achieved, as re gards for example consolidated supervision and 
financial reporting.  
The supervision of banks is the sole res ponsibility of the CBM. In addition, the CBM 
supervises five micro-credit inst itutions. Under the law it is responsible  for the supervision of 
credit unions, so far non-exist ent in Montenegro. Th e banking supervision department of the 
CBM, consisting of 45 employees, performs speci alised supervision an d supervision of the 
systemic risk. This structure is quite new a nd was introduced two years ago with the aim of 
promoting an effective risk-based supervisi on process in the CBM. The banking supervision 
department has the right to issue instructions an d prescriptive guidelines. In the light of future 
challenges to the regulatory framework there is a need for additional knowledge and professional competence to be built up. 
As regards the deposit guarantee scheme, although the Deposit Protection Fund is aware of 
the EU requirements, the limited resources it possesses jeopardise further alignments, hence capacity improvement is vital. 
In the areas of insurance and occupational pensions , the insurance sector , including private 
pension insurance, remains relatively small.  Gross underwritten premiums for 2009 amounted 
to €64.22 million, out of which 87.42% in non-life insurance. The five biggest insurance 
companies account for 93% of the insurance mark et and only two of them offer life insurance.  
The main legislation in the field of insuran ce is the Law on insurance of 2006 while the Law 
on compulsory transportation insurance regulat es the minimum amounts of coverage for 
compulsory motor vehicle insura nce. Some important principles are missing and amendments 
are needed in order to en sure compliance with the acquis . No cross-border provision of 
services is allowed, nati onal incorporation is requi red, and minimum amounts of 
compensation for personal injuries and materi al damage are far belo w the amounts specified 
EN 67  EN in the motor insurance acquis . There are no financial conglomerates in Montenegro and the 
relevant acquis  has not been transposed. 
The insurance supervisory agency (ISA) is empowered to regulate and supervise the insurance 
market. It is an independent regulatory body, repor ting directly to parliament. It also issues 
recommendations, guidelines and opinions, and prepares annual reports on the insurance 
market . The ISA is reasonably endowed with the re levant authority and responsibility but is 
severely burdened by limited resources, especially  in terms of staff. Additional resources are 
needed to further strengthen its capacity. 
As regards securities markets and investment services , the securities mark et in Montenegro 
is small. The merger of the two domestic stoc k exchanges was approved  in August 2010 with 
the consent of the securities commission, es tablishing a single capital market. On 30 
September 2010, there were 23 authorized particip ants on the securities market, of which 10 
have broker licenses and 13 have broker and deal er licenses; six banks have a license to 
provide custody services. Trade in  securities is perf ormed exclusively on regulated markets 
and legislation does not offer any alternative trading venues, such as multilateral trading facilities (MTFs) or systematic internalisers as  defined in markets in financial instruments 
directive (MiFID).  
The regulatory framework for the securities sector  consists of the Securities Law adopted in 
2000 and amended in 2006, along with implemen ting legislation, covering most of the acquis  
principles. However, no legislation is in place with regard to investor compensation schemes 
and credit rating agencies. The provisions of the undertakings for collective investment in 
transferable securities  Directive (UCITS) have not been  transposed into Montenegrin 
legislation, which regulates onl y closed-ended investment funds. Alignment gaps relate to 
definitions, exemptions, and the requirement for a summary; the possibility of incorporating information by reference or preparing a prospect us consisting of several documents; certain 
requirements for the admission of shares; requi rements for notifying major holdings of voting 
rights; a series of definitions on e.g. system atic internalisers, market makers, market 
operators, MTFs, as well as some principles concerning investment intermediaries; and, 
finally, minor aspects concerning th e market abuse Directive (MAD). 
The Montenegrin Securities Commission is the competent regulatory and supervisory 
authority for the securities sector. It is compos ed of a president, a deputy president and three 
commissioners. It currently employs a staff of 28 out of the 39 employees planned. It is 
entirely self-financed through taxes from businesses. The Commission has signed the IOSCO 
Multilateral Memorandum of Unde rstanding on the exchange of information and cooperation, 
becoming part of the international network of  regulators. This improved its capacity to 
undertake cross-border actions, and the possibility of excha nging information with all 
important jurisdictions in the world. The Commission manages li censing of participants in the 
market and the registration of issuers. It has sufficient investigative powers and may withdraw 
or suspend licences or trading in securities,  but it cannot impose pecuniary fines or other 
administrative penalties. It has to rely on ad ministrative or criminal courts for imposing 
sanctions on both regulated and non-regulated entities. All decision s of the Securities 
Commission may be challenged before the Administrative Court of Montenegro. 
Conclusion 
Although the legislation on financial services covers  to a considerable extent the requirements 
of the EU acquis , numerous provisions need to be amended.  Particular attention will need to 
EN 68  EN be paid to staff competence of the banking supe rvision department, especially with reference 
to Basel II requirements. Banking supervision need s to be effective. Capacities of the Deposit 
Protection Fund also need to be reinforced. As regards insurance both the legislation and the 
corresponding supervisory framework, includi ng enforcement, need to be enhanced.  
Overall , Montenegro will have to undertake a dditional efforts to align with the EU acquis  and 
to effectively implement it in the medium term. 
3.10. Chapter 10: Information society and media 
The acquis  on information society and media aims to  eliminate obstacles to the effective 
operation of the internal market  in electronic communication se rvices and networks, promote 
competition and safeguard consumer interests in the sector, including the universal availability of basic modern services. It also  includes rules on information society services 
and a transparent, predictable and effectiv e regulatory framework for audiovisual media 
services in line with European standards. 
As regards electronic communications a nd information technologies , the Stabilisation and 
Accession Agreement  specifies the ultimate objective of Montenegro adopting the EU acquis  
in the sector of electronic communications netw orks and services thr ee years after the entry 
into force of the SAA, therefore by May 2013. This means that a substantial number of 
directives, which form the relevant EU acquis , such as the Access Directive, the 
Authorisation Directive, the Framework Directive, the Universal Service Directive and the Data Retention Directive, have to be tran sposed into Montenegrin legislation and the 
necessary administrative structures for implem entation have to be in place by that date. 
The electronic communications sector was formally liberalised on 31 December 2003, and 
competition has emerged since then mainly in  the mobile telephony market. Competition in 
the other market segments (fixed telephony, intern et, fixed wireless acce ss, etc.) is limited, 
mainly due to the very small market share that  the existing new entrant operators have in 
these markets. There is no state shareholding in any of the operators currently active in the 
market. Very few competitive safeguards have been introduced in the market, and there is 
neither full tariff rebalancing, nor has a cos ting methodology been developed and applied. In 
combination, these conditions make it difficult for new operators to enter the Montenegrin 
market. 
Montenegro’s policy in the field of electroni c communications is set out in the five-year 
strategy for the electronic communications se ctor, adopted by the government in June 2006. 
Based on this strategy, the Law on electronic communications (LEC) was adopted in July 
2008, replacing the Telecommuni cations Law of 2000, and esta blishing a new legislative 
framework aiming for alignment with the EU  regulatory framework. Amendments to the 
LEC, and the Law on audiovisual media were a dopted in July 2010, which are aligned with 
each other and together clarify the funding of the future agency for electronic media and its 
role in the procedure for granting broadcasting licences. However, as the amendments entered 
into force only in August 2010, their actual impl ementation cannot be assessed at this stage 
and will need to be seen in the coming months . Implementation of the LEC so far, through the 
adoption of secondary legislation and through the enforcement of re gulatory decisions, is still 
at an early stage. Several decrees on unive rsal services were adopted in September 2010. 
Despite the alignment of the LEC with the La w on electronic media there are still concerns 
about several provisions of the LEC, not le ast those regarding th e regulatory oversight 
function of the ministry over the regulatory authority and the latter’s independence. 
EN 69  EN The LEC established the Agency for Electronic Communications and Post al Services (EKIP), 
which became operational at the end of 2008. Th e five members of the agency’s board are 
appointed directly by the government, which carri es the potential risk of political influence. 
This appointment procedure is not in line with  the EU regulatory fram ework, which aims to 
ensure that national regulatory authorities are protected against any external intervention jeopardising their independent assessment.  The LEC further grants comprehensive 
supervisory powers over EKIP to the Mini stry of Transport, Maritime Affairs and 
Telecommunications, which also endangers the agency’s independence. The administrative 
capacity of EKIP to adopt and implement re gulatory decisions/secondary legislation as 
required by the LEC is limited; the administra tive capacity of the Ministry is even more 
limited. 
In the field of information society services , Montenegro adopted a strategy on the 
information society 2009-2013 in early 2009; ho wever, broadband policy is not addressed. 
The Ministry for the Information Society, establ ished at the beginning of 2009, is in charge of 
its implementation and coordination with ot her government bodies and institutions. A 
dedicated budget is available, but  the administrative capacity of the ministry is fairly limited. 
The legislation on conditional access will need to  be improved and brought into line with the 
acquis . The Law on electronic signatures and the Law on electronic trade were amended in 
July 2010. While the Law on electronic trad e is now well approximated with the acquis , the 
Law on electronic signatures will need to be fu rther aligned with rele vant EU legislation. 
As regards audiovisual policies , Montenegro adopted in July 2010 the Law on electronic 
media, which aims to align Montenegrin le gislation with European standards on media 
regulation and the Audio Visual Media Services Directive (AVMSD). The law establishes the 
Agency for Electronic Media, previously th e Broadcasting Agency, as an independent 
regulatory body in this field and defines its co mpetences. It clarifies, together with the 
amendments to the Law on electronic communica tions that the Agency for Electronic Media 
will be in charge of the allocation of broadcasting frequencies. The new law also redefines the 
sources of funding of the regulatory authority and provides that the revenues from frequency 
allocation tenders will be allocated to the activities of the Agency, thereby contributing to its financial independence. Overa ll, the Law on electronic media is largely aligned with the 
AVMSD.  
As regards film heritage, the actions undertak en in this area are satisfactory. Concerning 
protection of minors, increased e fforts will be necessary. Monten egro is party to the Council 
of Europe Convention on tran sfrontier television and to the UNESCO Convention on the 
promotion of diversity of  cultural expressions. 
Conclusion 
As regards electronic communicat ions and information technologi es, Montenegro has partly 
aligned its legislation with the acquis . However, the country is at an early stage of 
implementation of the legisla tion. Market liberalisation ha s progressed slowly. Moreover, 
there is a lack of administrative capacity and a potential risk of political influence through the 
appointment of the board of the Agency for Electronic Communications and Postal Services. 
In the area of information society, there has be en progress in terms of  legislative alignment 
and the focus now needs to turn to implem entation, which is at an early stage. The 
administrative capacity of the new established Ministry for Information Society is fairly 
EN 70  EN limited. Concerning audiovisual media, Monteneg rin legislation is largely aligned with the 
Audiovisual Media Services Directive and European standards on media regulation. 
Montenegro will need to step up effo rts as regards protection of minors. 
Overall , Montenegro will have to undertake additiona l efforts to align with the acquis in the 
area of information society and media and to implement it effectively in the medium term .  
3.11. Chapter 11: Agriculture and rural development 
The acquis  on agriculture and rural development covers a large number of binding rules, 
many of which are directly applicable. The proper application of these rules and their 
effective enforcement and control by an effici ent public administration are essential for the 
functioning of the common agricu ltural policy (CAP). Running the CAP requires the setting-
up of a paying agency and management and control systems such as an integrated 
administration and control system (IACS), and the capacity to implement rural development 
measures. Member States must be able to appl y the EU legislation on direct support schemes 
and to implement the common market orga nisation for various agricultural products. 
Pending the entry into force of the Stabilisation and Association Agreement  between the EU 
and Montenegro on 1 May 2010 an Interim Agreem ent on trade and trade-related matters had 
been in force since 1 January 2008 and alrea dy provided for the gradual liberalisation of 
agricultural trade. 
Montenegro has a surface area of about 13,812 square kilometers with agricultural land 
accounting for 38% (516,067 hectares) of the total territory. The greatest share of agricultural 
land resources consists of pasture and gras sland (88%; 454,138 hectares ), which is used 
extensively. Covering a relative ly small area and benefiting from a Mediterranean climate, 
Montenegro’s agriculture is quite diversified — from growing olives and citrus fruits in the 
costal region, through early season vegetables a nd tobacco in the central parts to extensive 
livestock breeding in the north. Agriculture is by far the largest activity of the rural population 
— more than 60,000 households obtain their income partly or entirely from agriculture. Food 
production and agriculture play an  important role in Montenegro ’s economy, with the primary 
sector alone providing more than 10% of tota l Gross domestic product (GDP). Agricultural 
employment stood at 8.3% in 2007 . 
Montenegro is a net importer of food products, with a negative trade balance (approximately 
€350 million in 2009). Agricultural trade follo ws an upward trend, reaching €440 million in 
2009, a 16% increase on 2007. Neighbouring Cent ral European Free Trade Agreement 
(CEFTA) countries are the main  exporting/importing destinations , accounting for 80% of the 
trade. Serbia is the main partner, accounting for over 55% of total agricultural imports and 40% of total exports. The EU share in total ag ricultural trade has been growing in recent 
years, representing around 28%  of all Montenegrin imports  and 18% of exports in 2009. 
Montenegro’s tariffs will have to be aligned with EU levels upon accession. 
The current administrative capacity of the Mi nistry of Agriculture, Forestry and Water 
Management is limited, with 72 staff covering policy formulation and undertaking the necessary measures for its implementation. Curren tly available agricultura l statistics are rather 
limited and unreliable. However, an agricultur al census took place in mid-June 2010. The 
results of the census are currently being analysed  and are expected to provide a more reliable 
basis for designing agriculture and rural development policy. (See Chapter 18 — Statistics)   
EN 71  EN Montenegro’s agricultu ral policy is based on the 2009  Law on agricultu re and rural 
development. This law sets the objectives of agriculture policy and provides the general 
framework for the development of and support to agriculture and ru ral areas, grouped under 
four main strands: market pri ce, rural development policy, activities of public interest and 
social transfers to the rural popul ation. Montenegro’s ag riculture is still ch aracterised by small 
subsistence farming and traditional production, wh ich results in a less favourable structure 
and low productivity. There are many challenges for Montenegrin agricu lture, with emphasis 
on increasing competitiveness and stronger integration w ithin the food chain. Total 
agricultural support by the Minist ry of Agriculture, Forestry and Water Management in 2010 
amounts to €26.75 million. 
Concerning horizontal issues , the main form of support to production is direct headage 
payments for livestock and payment per hectare of area in plant production. Since the acquis  
on the paying agency and IACS — central elem ents for the management and control of CAP 
funds — is very demanding, planning and preparat ion will require extensive investment and 
institution building well in advance of accession. Montenegro will also need a farm accountancy data network (FADN) in line with the acquis . 
Direct payments  in Montenegro are not in line with the EU rules. There are substantial 
differences in the way direct support to farmers is delivered. Contrary to the reformed CAP, 
which provides for 85% decoupling (93% in 2013) , direct aid payments are coupled, and will 
need to be brought into  line with the EU acquis . Direct aid payments are currently granted for 
Montenegro’s key production sectors: milk, t obacco, headage payments for cows, bulls, sheep 
and goat production. In all cases, a yearly b udgetary ceiling is fixed which limits the 
individual payments. Therefore,  the aid rate can change annu ally. The national programme for 
food production and rural development 2009-2013 provides for the introduction of the 
principle of mandatory compliance, but its precise scope and extent remains unclear. 
Furthermore, Montenegro will have to put in pl ace an information system for beneficiaries of 
CAP payments under shared management and ensure yearly publication of names of 
beneficiaries. 
With regard to state aid,  other than market-related subsidie s and rural development measures, 
Montenegro applies a number of additional measures for granting aid to farmers. Montenegro will need to bring all its state aid measures  into line with EU rules and guidelines. 
Due to its specific natural conditions, Montenegro has small areas of  arable land that are 
under-utilised, so that arable crop  production is limited. Cereals are grown on an area of 
5,000 hectares, with subsidies granted for the production of wheat, maize, barley, rye, oats, buckwheat and fodder  crops (lucerne, clove r-grass mixtures). Potato  production at around 
10,000 hectares is a very important sector, wh ich has been growing in recent years. 
Production of other products of the arable sector has little  significance in Montenegro. 
Cattle breeding is the largest sub-sector in overall animal production , with dual-purpose 
production prevailing. The total population stands at 106,000 h eads while cows and heifers 
constitute 73%. Annual production of milk is around 160,000 tonnes and meat approximately 
7,500 tonnes. Only 15-20 % of total milk production is  delivered to dairies,  with the rest used 
in households. Average yield per cow is very low, less than 2,500 kg, and the breed structure 
is not favourable, as around 50% of the Mont enegrin cow herd are of the lower productive 
crosses. The sheep  breeding sector is characterised by semi-intensive production and is 
focused on most rural areas. It is based on rearin g of local breeds used for milk and meat, with 
EN 72  EN an annual output of 7,000 t onnes and 3,500 tonnes respectively. Goat  production is also 
important. Pig meat  production is weak.  
Regarding specialised crops , in the area of fruit and vegetables the surface under fruit has 
been increased by some 20% in the peri od 2001-2008. Total annual production of fresh fruit 
reaches 30,000 tonnes (mainly oranges, tangerines,  plums and apples). Montenegro applies a 
per hectare subsidy for planti ng new orchards. This measure is not in line with the acquis . 
While there are associations of  producers in Montenegro wh ich undertake certain functions, 
these are not producer organisa tions as defined by the EU acquis. There is a need to develop 
administrative capacity to operate this scheme in  the future. Particular attention needs to be 
paid to aligning existing marketing standards with EU standards and building up a quality 
inspection body. Montenegro already operates a system of price reporting for domestic and 
imported fruit and vegetables. In the wine  sector, grape production and vineyards cover an 
area of 4,300 hectares, with an upward trend in r ecent years. Montenegro grants a per hectare 
subsidy for the planting of new vineyards. Subsidies for olive oil  are in place for the setting-
up and reconstruction of existing olive groves.  These measures are not in line with the acquis.  
As a member of the International Olive Oil C ouncil, Montenegro appl ies marketing standards 
on olive oil that are ha rmonised with the EU. 
Montenegro’s policy displays a commitment to rural development  with a comparable 
approach to that of the EU and the existe nce of a strategy and a national programme. 
However, certain measures or parts th ereof are not compatible with the EU acquis.  Selection 
criteria and targeting of measur es must be established and m onitoring and evaluation further 
enforced. The agri-environmental orientation of Montenegro’s rura l development policy 
remains weak. In addition, limited a ttention is paid to extension and advisory  services or to 
the upgrading of human cap ital. The overall approach to rural development policy will need to 
be further strengthened and consolidated in line with EU requirements. The Ministry of 
Agriculture, Forestry and Water Management ha s overall responsibility for rural development 
policy and implementation, albeit with lim ited capacity. Thorough preparations will be 
required to adopt EU-compatible delivery mechan isms. The first important step is the timely 
establishment of complete IPARD (Instrume nt for Pre-accession Assistance for Rural 
Development) structures for implementing pre- accession assistance. Cooperation between all 
concerned departments of the Ministry and rela ted IPA structures shou ld be strengthened. 
As regards quality policy , Montenegro applies a quality ma nagement scheme similar to the 
EU scheme of geographical indica tions and traditional names. The organic farming  sector in 
Montenegro is relativ ely small but expected to grow  due to domestic support, ongoing 
international projects and tr ends. There are 88 producers invo lved in organic production but 
no precise data are available on the area planted.  Montenegro’s legislation on organic farming 
needs to be aligned with the acquis and supervisory activi ties strengthened.  
Impact 
The estimated impact of EU accession of Montenegro on the EU’s common agricultural 
policy is linked to the structur e and size of Montenegro’s agricultural sector. The agricultural 
sector in Montenegro account s for 9.3% of GDP (2008). Monten egro, if it joined the EU, 
would add 516,067 hectares of agricultural land to  the EU agricultural sector (equal to 0.3% 
of utilised arable area in the EU-27). The production of milk, be ef and sheep would constitute 
a small percentage of total EU-27 production. Crop production is negligible when compared 
to EU production. Overall, a prel iminary assessment indicates th at Montenegro’s membership 
of the EU would have a limited impact on the CAP. 
EN 73  EN Conclusion 
Overall , in the field of agriculture and rural development, Montenegro will have to undertake 
considerable and sustained efforts to align with the acquis  and to implement it effectively in 
the medium term. Agricultural policy will requir e adjustments, moving towards decoupled 
support measures. Montenegro will have to st rengthen its administrativ e capacity and focus 
preparations on setting up basic instrument s and institutions for managing the CAP in 
particular with regard to the paying agency  and the integrated administration and control 
system. An important action is the timely establishment of all operational structures for implementing pre-accession assistance to rural de velopment. Montenegro needs to establish a 
solid basis of precise agricultural statistics. Particular attention must be paid to strengthening administrative capacity to manage common market organisation and rural development 
activities.  
3.12. Chapter 12: Food safety, veterinary and phytosanitary policy 
The EU has an integrated approach aimed at ensuring a high level of public health, animal 
health, animal welfare and plant health by m eans of coherent farm-to-table measures and 
adequate monitoring, while ensuring effectiv e functioning of the internal market. The acquis  
lays down hygiene rules for food production and veterinary rule s, which are essential for 
safeguarding animal health, animal welfare and the safety of food of animal origin in the internal market. EU phytosanitary rules cover issues such as seed quality, plant protection 
products, harmful organisms and animal nutriti on. Member States must have appropriate 
administrative structures for inspection and co ntrol of food products, including appropriate 
laboratory capacity. 
In the area of general food safety , the Ministry of Agricu lture, Forestry and Water 
Management and the Ministry of Health sh are the competence for policy planning, adoption 
of secondary legislation and supervision. The ma in piece of legislation in this area is the 2007 
Law on food safety, which is only  partially aligned with the acquis . The veterinary and 
phytosanitary administrations within the Mini stry of Agriculture, Forestry and Water 
Management and the department for food safety within the Ministry of  Health are the main 
administrative bodies responsible for implementa tion. As regards risk assessment, a National 
Council for Food Safety Assessment was esta blished in September 2009, which provides 
scientific advice and as sistance towards all risk assessme nt activities con cerning food and 
feed safety. Food safety controls are perf ormed by the veterinary and phytosanitary 
administrations of the Ministry of Agricultur e, the department for health and sanitary 
inspection of the Ministry of Health, and eight municipal units. The capacity of these services 
is very limited and will need to be considerably  strengthened in order to be able to fulfil the 
obligations arising from the acquis . Laboratories carry out the testing in Montenegro, except 
for genetically modified organism (GMO) analys is, which is done in foreign laboratories. The 
laboratories’ equipment is outdated and inadequa te, so that overall f ood testing capacity is 
limited. Several laboratories are undergoing the process of accred itation for various analytical 
methods. There is currently no rapid al ert system in place in Montenegro. 
In the veterinary policy sector, the legislative framework and basis for secondary legislation 
is formed by the Veterinary Law, the Law on animal welfare, and the Law on animal identification and registration. Montenegro has commenced the process of harmonisation with 
the relevant acquis , but this will require further efforts, with special reference to the animal 
by-product sector. The veterinary administration within the Minist ry of Agriculture, Forestry 
EN 74  EN and Water Management is the competent authority for the identification of animals , for 
animal health and animal welfare  issues and for the safety of products of animal origin. 
Montenegro is a member of the World Organisa tion for Animal Health (OIE) and joined on a 
voluntary basis the EU Animal Diseases Notif ication System (ADNS). The Ministry of 
Agriculture, Forestry and Water Management adopts annually programmes concerning animal 
health protection measures. However, certain animal disease  contingency plans are not in 
place yet and a comprehensive programme for control and monitoring of transmissible 
spongiform encephalopathy (TSE) will be necessary in order to comply with acquis  
requirements. Basic elements of the control system  required in the internal  market are in place 
but need to be strengthened. Le gislation creating a system for th e identification of animals and 
registration of their movements has been adopte d. However, some secondary legislation (for 
sheep and goats, porcine and equine animals) is still required and the syst em needs to be made 
fully operational. 
The introduction of animals and animal products into Montenegro is possible at nine border 
crossing posts. Equipment and procedures would need to be upgraded and modified in order 
to meet the requirements applicable to an EU border inspection post. 
Concerning the placing on the market of food, feed and animal by-products, Montenegrin 
legislation in place will need to  be further harmonised with the acquis , in particular through 
amendments to the Law on food safety and th e adoption of a law on animal by-products. 
Hygiene rules  have already been partially aligned w ith EU requirements, with the exception 
of certain microbiological criteria for foods tuffs. The new hygiene requirements are being 
progressively implemented, starting with new establishments. Legal provisions for hazard 
analysis and critical control point (HACCP) ba sed controls have been adopted and financial 
support for their introduction is provided to food business operators  from the state budget. 
The current system for controls of animal products  and animal by-products is not harmonised 
with EU requirements; in partic ular there are no provisions for the control of specified risk 
material (SRM). Harmonisation will also be  necessary in the ar ea of feed hygiene. 
In Montenegro, 76 meat, 22 milk and 9 fish esta blishments are currently operating. It is likely 
that a large number of these establishments will  need to substantially upgrade their facilities 
in order to meet EU requirements. 
As regards food safety rules , national legislation addresses some of the EU requirements 
concerning labelling, additives , food enzymes, flavourings, contact materials, supplements  
and contaminates, but further harmonisation with the relevant acquis  will be necessary. The 
Montenegrin legislation on specific rules for feed  comprises some elements required by the 
acquis . However, legislation on feeding stuffs intended for pa rticular nutritional purposes  and 
on certain products used in animal nutrition  is missing. There are two bilateral agreements in 
place in this area, concluded with Bosnia and He rzegovina and Croatia. It will have to be 
ensured that all relevant international agreem ents are in compliance with EU requirements 
upon accession. 
In the phytosanitary sector , the Law on plant health protection forms the main legal basis. 
Montenegro has started the proc ess of transposition of the acquis  in this sector by adopting or 
aligning framework legislation. However, there is  currently no specific legislation with regard 
to protected zones, registration of operators , passports, notificatio n of interception and 
expenditure. The main competent authority is  the phytosanitary administration within the 
Ministry of Agriculture, Forestry and Water Ma nagement. It is in charge of implementation 
EN 75  EN and, in cooperation with the Ministry of Health, sets and monitors maximum residue limits for 
pesticides. For the placing on the market of plant protection products , the Agriculture 
Ministry, the Health Ministry and the Ministry of Physical  Planning and Environmental 
Protection cooperate. Montenegro  has been a member of the International Union for the 
Protection of New Varieties of Plants (UPOV)  since 2007. Tests for distinctness, uniformity 
and stability (DUS) are not performed in M ontenegro, but tests performed abroad are 
recognised. Laboratory capacity for control of seed and seed material and fo r pesticide residue 
analysis is limited and will need to be strengthened considerably to meet EU requirements. 
Conclusion  
Montenegro has started the pr ocess of aligning its legislat ion with EU requirements. Overall , 
however, it will have to make considerable a nd sustained efforts to fully align with the acquis  
and in particular to implement it effectively in the medium term. The administrative capacity 
of all authorities active in the sector but mainly of the veterinary and the phytosanitary administration within the Ministry of Agricultu re, Forestry and Water Management will need 
to be strengthened to be able to cope with EU requirements. This is in particular valid for all 
activities related to inspection and control measures. 
3.13. Chapter 13: Fisheries 
The acquis  on fisheries consists of directly applicable Regulat ions, which do not require 
transposition into national legi slation. However, it does require  the introduction of measures 
to prepare the administration and operators fo r participation in the common fisheries policy 
(CFP), which covers resource and fleet mana gement, inspection and control, structural 
actions, market policy and state aid control. In some cases, existing fisheries agreements and 
conventions with third countries or intern ational organisations need to be adapted. 
The Stabilisation and Association Agreement regulat es preferential trade in fish and fishery 
products and encourages cooperatio n in the field of fisheries. 
Montenegro has a very small fishery sector, which accounts for only 0.5% of its GDP. There 
are currently around 160 persons em ployed in marine fisheries (ful l- and part-time) and 36 in 
aquaculture. The official annual catches am ount to around 700 tonnes, mainly pelagic, 
demersal and molluscs. 
The Montenegrin fisheries administration is likewise small. The fisheries unit within the 
Ministry of Agriculture, Forestry and Water Management consists of one senior advisor 
(working half-time on fisheries) and two junior officers. The Institute of Marine Biology in 
Kotor plays an important role, not only as a scientific advisory body but also by providing 
support regarding fleet management and data colle ction. Overall, the cap acity of the current 
fisheries administration is very limited and will need to be significantly  strengthened to take 
on the tasks imposed by the CFP. 
The Law on marine fisheries and aquaculture of 2009 and the Law on freshwater fishery of 
2007 form the main legal foundation. A national st rategic plan for the fisheries sector 2009–
2013 sets objectives for the development of aqu aculture and marine fisheries, including the 
scientific assessment of fish stocks. 
Regarding Montenegro’s resource and fleet management , no fish species exploited by 
Montenegrin fishermen are subject to catch lim itations. Montenegro is not a member of the 
International Commission for th e Conservation of Atlantic Tunas (ICCAT) and has no quota 
EN 76  EN for blue-fin tuna. The Montenegrin fleet co mprises around 200 small vessels, including 21 
commercial vessels larger than 12 metres. Vessels are registered manually by the local harbourmaster’s office. A fleet re gister as part of a fisheries information system (including 
data collection and a sampling programme for the small-scale fishing fleet) has been designed 
in the context of an EU-funded pr oject, but is not yet fully opera tional. It will need to be 
further developed and implemented to become co mpatible with the EU fishing fleet register. 
The Ministry of Agriculture, Forestry and Wa ter Management establishes the number of 
fishing permits annually on a proposal from th e Institute of Maritime Biology, based on catch 
data. However, there is a need for more reliab le, systematic and improved collection of data 
as regards the fishing fleet, catches, landings a nd the biological state of the fish stocks in 
Montenegrin waters in order to allow a co mprehensive resource assessment programme and 
to prepare for the EU CFP. 
Montenegro will need to align its legislation with several acquis  provisions, in particular 
Regulation 1967/2006 concerning management measur es for the sustainable exploitation of 
fishery resources in the Me diterranean Sea, and Regula tion 2371/2002 on the conservation 
and sustainable exploitation of fi sheries resources under the CFP. 
As regards inspection and control , the Montenegrin Marine Fi sheries Law regulates logbook 
requirements for vessels larger than 10 metres, but its application in practice is problematic. 
There is no systematic processing of logbook s, catches and landings are not adequately 
registered, and there are no sales notes. Hence,  systematic cross-checking between the catch 
composition and logbook records can not take place. Montenegro will have to ensure proper registration and cross-checking of  catches, landings and sales not es as a matter of priority. 
The country will also need to prepare for th e future obligation to record all catches by 
electronic means and to submit this informa tion also electronically to the competent 
authorities (this ‘elect ronic logbook’ requirement will be applicable for EU Member State 
vessels with a length of over 12 metres as of 1 January 2012). Montenegro will further need to 
clarify how it will tackle the acquis  requirements for a vessel monitoring system (VMS). 
Although only few Montenegrin vessels will be concerned, Montenegro needs to establish a 
fisheries monitoring centre or agree with a ne ighbouring country to share its facilities. 
Concerning the human resources involved, ther e are currently three inspectors monitoring 
marine fisheries in Montenegro. There is some cooperation with the border maritime police, but their involvement in fisheries control is limited due to their own priorities. 
As regards structural actions and state aid , Montenegro provides only limited financial 
support to the fishery sector. Apart from some  aid to freshwater restocking of endemic 
species, the support measures are similar to t hose provided by the European Fisheries Fund 
(EFF). Upon accession, all state aid measures, in cluding direct and indirect support to the 
fisheries sector, will have to be brought into line with the acquis . 
In order to benefit from EU assistance following accession, Montenegro will have to comply 
with the programming mechanisms of the EFF. Montenegro will also have to set up a proper 
management and control system to ensure th e sound and efficient management of EFF funds 
in the framework of shared management. This will require strengthening human resources and 
in particular training. 
EN 77  EN Concerning market policy , Montenegro’s market measures ar e at a very embryonic stage, in 
particular with regard to establishing produ cer organisations and collecting market data. 
Alignment with the acquis  would be required. 
Regarding international agreements , Montenegro is a member of the General Fisheries 
Commission for the Mediterranean (GFCM) and participates in the FAO AdriaMed project 
‘Scientific cooperation to support responsible fi sheries in the Adriatic  Sea’, which is co-
funded by the EU. The 2002 protocol on the Prev laka peninsula, at the border between 
Montenegro and Croatia, comprises a provision on fishing activities. No difficulties regards 
its implementation are reported. 
Conclusion 
The Montenegrin fishery sector is very sma ll and the current capacity of the fisheries 
administration for dealing with management  and inspection is particularly limited. Overall , 
Montenegro will have to make considerable and sustained efforts to align with the acquis  and 
to implement it effectively in the medium term. In particular, there is a need to strengthen 
administrative capacity and to improve the collection of data as regards the fishing fleet, catches, landings and the biologi cal state of the fish stocks. 
3.14. Chapter 14: Transport policy 
EU transport legislation aims at improving the functioning of the internal market by 
promoting efficient, environment- and user -friendly transport se rvices. The transport acquis  
covers road transport, railways, aviation, mar itime transport and inland waterways. It governs 
technical and safety standards, social standards,  and market liberalisati on in the context of the 
single European transport market. 
The Stabilisation and Association Agreement  (SAA) places an obligation on Montenegro to 
grant unrestricted access to EU transit traffic to cross its territory a nd provides for applying 
non discriminatory road charges as well as for a timetable for harmonisation of the road safety 
legislation with the EU. 
In the field of  road transport , Montenegro needs to step up its efforts in both aligning and 
implementing the acquis . Access to the market  for goods and passenger transport for both 
national and international operations is regu lated, but the four criteria for access to the 
occupation (professional competence, fi nancial standing, good repute and effective 
establishment) are not fully met. As regards the road charging acquis , Montenegro applies 
discriminatory charges towards EU road vehicles  in addition to the so-called eco-tax that has 
not been made proportionate for road vehicles of EU origin other than heavy goods vehicles. 
If the legislation and organisational arrangement s for roadworthiness testing are in place, the 
technical acquis on vehicles' wei ghts and dimensions is not ye t implemented. In the area of 
the social acquis, the legal framework regulating driving ti mes and introducing tachographs 
was adopted in mid-2010. Compliance with mandat ory driving times and rest periods and the 
use of tachographs are still to be verified. En hanced administrative ca pacity is needed to 
overcome the delay in the implementation of digi tal tachographs. As rega rds the transport of 
dangerous goods, the Law on transp ort of dangerous substances is  in force and the country is 
a party to the European Agreem ent concerning the internationa l carriage of dangerous goods 
by road (ADR). However,  Montenegro must strengthen its mechanisms for monitoring the 
implementation of relevant international ru les and EU legislation, including that on 
transportable pressurised equipment, roadsi de checks on vehicles and safety advisors. 
EN 78  EN On rail transport , Montenegro achieved some progress in implementing the railway reform. 
It has unbundled infrastructure and operations of its state-owned railway companies, thus 
meeting a major requirement of EU railway le gislation. Montenegro  has signed a border 
crossing agreement with Serbia (based on the Bulgarian – Serbian agreement) which, however, is not in full compliance with EU legi slation. The internationa l rail freight traffic 
with Serbia and Albania reports strong grow th after the 2009 crisis. The cooperation with 
Serbia on this route increases the strategic and commercial value of Montenegro’s rail sector. 
Montenegro aims to develop passenger transport by rail. However, the legal framework in this 
area does not meet the requirements of EU law. The third railway package and the most recent 
EU legislation have not yet been transposed. Implementa tion of the EU Regulation on 
passenger rights and obligations  is not satisfactory. The acquis  in the area of rail transport 
safety must be transposed and implemented, in particular the Directives on the train driver 
license and interoperability. The separation of  accounting between activities of the operator 
receiving state compensation and other activities, such as frei ght transport, is still pending. 
The absence of infrastructure charges for passe nger trains does not comply with EU law and 
risks damaging the competitive position of rail freight. The Railway Authority, in charge of 
safety and regulation, was established in 2009. Ho wever, due to a lack of staff and resources, 
it is not fully operational. The remit of the Railway Authority needs to be e nhanced through 
granting it the right to impose penalties and to request information as well as through 
mechanisms to enforce its decisions. An independent accident investigation body and a relevant appeal mechanism  need to be set up. 
There is no inland waterway transport in Montenegro.  
As regards  combined transport, Montenegro is in the initia l phase of its development. 
Concerning air transport , according to the last European Common Aviation Area (ECAA) 
experts' assessment (September 2010), Monteneg ro has made considerable progress with 
regard to the implementation of the first tr ansitional phase of the ECAA Agreement and 
further requirements relating to the second ph ase. The state of compliance of Montenegro 
airlines is satisfactory. The c ountry is on track to fulfil the conditions for phase one during 
2011. However the issues of independence of the accidents' investigation body and the 
implementation the Safety Management System at  the airport, as required by the Montreal 
Convention, still need to be addressed. A numbe r of changes to the dom estic air transport law 
are also necessary in the field of economic re gulation, including regard ing the implementation 
of the working time directive. The authorit y responsible for the National Civil Aviation 
Security Plan and the responsible for the Qual ity Control Programme need to be designated. 
Particular efforts need to be made to implement the safety acquis  and the Single European 
Sky acquis  through the ISIS Programme. Some progress has already been made in this respect 
with draft legislation prepared for implem entation of the Single European Sky acquis. 
Montenegro needs to ensure that this legislation is adopted at the earliest opport unity to help 
ensure regulatory convergence in the air traffic management field.  
Montenegro has only a limited maritime transport 
sector. However, c onsiderable progress 
needs to be made in improving both flag state co ntrol and port state control. Montenegro is a 
member of the International Maritime Orga nisation (IMO) and the International Labour 
Organisation (ILO). Even though full st atistics under the Paris Memorandum of 
Understanding on port state contro l are not available, the dete ntion rate for Montenegro-
flagged vessels was 23% in 2009, to be compared  with an average for EU-flagged vessels of 
2.2% the same year. 
EN 79  EN As regards satellite navigation , Montenegro is committed to participate in the Galileo 
satellite navigation programme once it is operational. 
Conclusion 
Overall , the country will have to undertake additional efforts to  align with the transport acquis  
and to implement it effectively in the medium term. Further adjustments of the legal and institutional framework and in particular strengthening of ad ministrative and implementation 
capacities are needed. Particular a ttention needs to be paid to fu rther alignment of the eco-tax 
and road charges legislation as well as to transposition of the third railway package. Montenegro need also to ensu re sound implementation of social  and technical rules in road 
transport, safety and security requirements in the maritime sector as well as the standards for 
transport of dangerous goods by road. 
3.15. Chapter 15: Energy  
The EU’s energy policy objectives are to improve competitiveness, ensure security of supply 
and protect the environment. The energy acquis  consists of rules and policies covering 
competition and state aid, the internal energy ma rket (opening up electricity and gas markets 
in particular), promoting renewable energy sour ces, energy efficiency, crisis management and 
oil stock security obligations, nuclear energy and nuclear safety and radiation protection. 
Montenegro’s overall energy ba lance comprises hydropower, petr oleum products, coal, wood 
and wood waste, as well as imported electr icity. In 2008, the thr ee largest major energy 
groups in the overall energy balance were pe troleum products (37%), coal (34%), and 
hydropower (12%). Domestic production is roughly  half of total primary energy consumption, 
with lignite being the most important source (some 69% of total domestic production). All oil 
and petroleum products are imported. Monteneg ro currently has no gas infrastructure; 
however it intends to bring gas to the country.  
As a member of the Energy Community, M ontenegro is legally  bound to implement 
substantial parts of the energy acquis . A new Energy Law, adopted in April 2010, is the basic 
document governing the main principles fo r implementing energy policy and strategy, 
competencies of the government in the ener gy sector, and the establishment, role and 
responsibility of the regulatory body. This la w is generally in line with the energy acquis but 
substantial implementing legislation is still required. 
With respect to security of supply , the new Energy Law sets the legal framework for 
maintaining 90 days of petroleum products stoc ks in accordance with the previous Directive 
on oil stocks. However the law does not set tim eframe and conditions. It will be accompanied 
by a Decree on mandatory strategic stocks of oil and petroleum products in accordance with 
the new Directive on oil stocks. Some provisions of the Directives on security of electricity 
and gas supply have been transposed by the new energy law, but further efforts are required, 
also in view of Montenegro's participation in regional gas infrastructure projects ("Gas 
Ring"). 
In the area of competitiveness and the internal energy market , the new Energy Law (and 
associated implementing legislation) aims to achieve a greater degree of  harmonisation with 
EU directives on electricity and natural gas markets, and will better address overall 
competences in the energy sector, the rights an d obligations of ener gy entities and of the 
regulator. The electricity market has been de jure  open for all non-household consumers since 
1 January 2009 (some 40% of the market). R eal market opening s till lags behind. In 
EN 80  EN December 2009, the regulator issued the first licence for trading and supply to a company 
other than EPCG.  
The distribution system operation function remains with the verti cally integrated utility. There 
is no timeline foreseen for the legal unbundling of the distribution system operator. The 
transmission company (Prenos) was legally unbundl ed in 2009. Its operat ing transparency is 
improving, but it still does not fully meet the requirements of the acquis  (such as publishing 
network charges and investment forecasts). Th e energy regulatory agency, Regagen, develops 
licensing rules and procedures, tariff meth odology and dispute settlement rules. Its 
independence needs further strengthening. 
In line with its oblig ations under the Energy Community, M ontenegro needs to establish a 
legal framework for its future gas market. 
Further efforts need to be made to align the national energy laws with  the new provisions of 
the Third internal energy market package. 
Hard coal is not exploited in Montenegro, which produces around 1.5 million tonnes of lignite 
per year. There is no state aid scheme s upporting coal production, although government aid 
exists in the form of deferred payment of the liabilities of the Pljevlja  mine towards the 
government (concessions, VAT, contributions). 
The Law on the exploration and production of hydrocarbons, adopted in July 2010, provides a 
partial alignment with the Hydrocarbons Directive.  
As for  renewable energy , Montenegro has very significan t hydropower potential. Tenders are 
well advanced to build both larg e-scale and small-scale hydropow er plants.. The country also 
has potential for solar, wind and biomass. Th e new Energy Law aims to comply with the 
Renewable Energy Directive, which sets Memb er States targets for minimum shares of 
renewable energy by 2020. Through the Energy Co mmunity, each contacti ng party will have 
to establish a national target according to  the same methodology as  for Member States. 
Montenegro’s target has not yet been established, and a key challenge will be to establish a 
reliable value for Montenegro’s share of rene wable energy in 2005 (the base year for the 
calculation). Montenegro’s current renewable en ergy plans are not sufficient to comply fully 
with the 2020 target. Current efforts to increa se renewables are focused on the electricity 
sector, but not on transport or heating. There is no timeframe fo r adopting national legislation 
related to the requirements of the Renewable Energy Directive. Montenegro commits to meet 
this future target, but without giving an outline or a timeframe for its adoption.  
Montenegro adopted an energy efficiency  strategy in 2005. It is supplemented by an action 
plan for the period 2008-2012, which sets out the measures, responsibilities and timing. 
However, it does not fully meet the requirements of the acquis . In particular, it lacks national 
indicative targets for improving energy efficiency. This plan is currently being revised. A Law 
on energy efficiency was adopted  in May. It contains provisi ons relating to energy end-use 
efficiency, energy performance of buildings, ec o-design of products, la belling of household 
appliances, as well as obligati ons of suppliers and distributo rs of energy-using appliances. 
However this Law does not foresee a specialis ed implementing body or an Energy Efficiency 
fund. The promotion of high-efficiency cogene ration is regulated by the April 2010 Energy 
Law. Montenegro is preparing a new national energy efficiency action plan, which should set 
out a strategy for achieving a 9% energy sa ving by 2018, in compliance with the Energy 
EN 81  EN Community commitments. Montenegro has no pl ans to implement the new EU Regulation on 
the labelling of tyres. 
As regards  nuclear energy, nuclear safe ty and radiation protection , Montenegro has 
ratified all the international conventions and treaties relevant for EU membership apart from the Convention on Nuclear Safety. The 2009 Ra diation Protection Ac t provides the legal 
framework for the nuclear sector in accordan ce with international standards. However, 
Montenegro needs to develop implementing regul ations and working procedures in line with 
the EU acquis . The regulatory body has been integrated into the Environmental Protection 
Agency, but there is no specific department within the EPA that  has been assigned to nuclear 
issues. Neither has the EPA su fficient manpower to fulfil the tasks assigned in the nuclear 
field. There is no separate/dedicated budget for regulation in this area.  The EPA’s capability 
for review and assessment needs to be enhanc ed. There is no programme of environmental 
monitoring of radioactivity that is in full co mpliance with Articles 35 and 36 of the Euratom 
Treaty. There is no national emergency plan fo r radiation/nuclear accid ents. The licensing of 
the storage facility for radioactive waste ne eds to be licensed following international 
standards and EU Directives, with special reference to environmental impact assessment.  
In the area of nuclear safeguards, Monten egro has signed a Comprehensive Safeguards 
Agreement and an Additional Protocol thereto and has also signed the amended Small Quantities Protocol. However, none of these instruments is in force yet. 
Montenegro is a party to the Convention on the Physical Prot ection of Nuclear Material, but 
not to the amended Convention. 
Conclusion 
Overall , despite recent legislative developments , Montenegro will have to undertake 
additional efforts to al ign with the energy acquis  and to implement it effectively in the 
medium term, with special reference to genuine opening of the electricity  market, security of 
oil stocks, meeting targets for improving energy efficiency and use of renewables. A great 
deal of progress remains to be achieved in the field of nuclear safety and radiation protection. 
Further adjustments of the legal and institutional framework and in particular strengthening of administrative and implementati on capacities are also needed. 
3.16. Chapter 16: Taxation  
The acquis  on taxation covers the area of indirect taxation as re gards value added tax (VAT) 
and excise duties and lays down definitions a nd principles of VAT. Excise duties on energy, 
tobacco products and alcoholic beverages are subj ect to EU Directives covering the structures 
of the duties, the levels of minimum rates and the holding and moveme nt of excisable goods. 
Regarding direct taxation, the acquis  covers some aspects of corporate taxes and aims mainly 
at removing obstacles to cross-bo rder activities between enterprise s. EU legislation in the area 
of administrative cooperation and mutual assist ance provides tools to prevent intra-EU tax 
evasion and tax avoidance.  
As regards indirect taxation  and value added tax , the legislation is broadly in line with the 
Directive; however, Montenegro  should pursue its legi slative alignment for the concept of the 
zero rate; the investment gold sche me (which is not applied); and the reduced rates applicable 
to e.g. computer equipment.  
EN 82  EN Related to excise duties , the energy taxation  provisions of the Excise Duties Law are only 
partially aligned, since the law es sentially only covers mineral o ils. In order to further align 
national legislation with the EU acquis  in the field of energy ta xation, natural gas (used as 
motor fuel or for heating, industrial and commerc ial purposes), coke and coal (heating) and 
electricity need to be made subject to excise duties.  
The fiscal marking of mineral oi ls is not in line with the Un ion marking level laid down in 
Article 1 of Commissi on Decision 2006/428/EC.  
The Law on excise duties for tobacco products pr ovides for a comparable tax structure to that 
applicable in the EU. However, following the entry into force of the new Tobacco Directive 
2010/12 on 1 January 2011, Montenegrin tobacco le gislation will diverge more significantly 
from EU legislation. The excise duties on ciga rettes are still below the European minimum 
level. 
Currently, for travellers , the exemptions for alcoholic products  differ from those applicable in 
the EU, as well as the monetary thresholds.  
The categories of alcoholic  products (beer, wine, other fermen ted beverages, intermediate 
alcoholic beverages and ethyl alcohol) and the product definitions are similar to those laid 
down by EU law. Wine, other fermented bevera ges and intermediate products are taxed per 
hectolitre, whereas beer and et hyl alcohol are taxed on the content of al cohol by volume per 
hectolitre, which is similar to EU law. The ra tes of duty which are applied either meet or 
exceed the minimum rates specified in Dir ective 92/84EEC. The provisions in Article 45 
concerning the personal use of alcohol by sm all commercial producers are not provided (yet) 
for in Community law. 
Concerning the taxation of passenger cars, the maximum depreciation level of 70% is not 
sufficient to allow reasonable approximati on of the value of a specific used car. 
As regards direct taxation , Montenegro needs to implement all pieces of EU legislation 
enacted in the direct tax area, which are curren tly only partially reflected in its direct tax 
system. The provisions concerni ng direct taxation of the lim ited commercial activities of non-
governmental organisations are not compatible with EU legislation. 
As regards harmful tax competition (Code of Conduct on business taxation) , the following 
measures need to be formally assessed agai nst the criteria of the Code of Conduct by the 
European Council: tax relief for activities in eco nomically underdeveloped municipalities; tax 
relief for hiring new employees ; tax relief for NGOs; tax relief for investments in specific 
fixed assets; tax exemption for dividends; ta x exemptions from corporate income tax under 
Article 25 or 34 of the Law on free zones. 
Regarding administrative cooperation or mutual assistance  in the field of recovery, the 
country does not have any agreement for the moment. Montenegro has concluded several 
bilateral agreements for mutual assistance and avoida nce of double taxation. Measures 
implementing the EU legislation applicable in the field of mutual assistance for assessment in 
direct tax matters should  be put into effect.  
By the time of accession, the tax administration w ill be required to perform additional tasks in 
terms of administrative coopera tion (in both the di rect and indirect area) and under the 
Savings Directive. Therefore further efforts ar e needed to upgrade human resources capacity.  
EN 83  EN Concerning operational capacity and computerisation , as a general rule, the administration 
appears to employ competent, well-educated and committed staff at all levels of its 
organisation. The administration is encouraged to  further increase training activities and make 
them extensively accessible to all members of staff. The tax administration has made 
significant efforts to enhance voluntary complia nce by taxpayers, by means of transparency, 
including a website, a call centre, training activ ities, information campaigns and a high level 
of service to taxpayers. As a result, the admini stration manages to effectively collect the bulk 
of tax debts. However, the administration is en couraged to strengthen its risk analysis and 
inspection tools to iden tify unregistered taxpayers. In additi on, further efforts are needed to 
regulate the legal effects for the tax administration of the written answers provided to 
taxpayers. Internal and external inspection aud its are carried out on the basis of flexible 
planning and the results are co mmunicated throughout the organi sation. However, the internal 
control mechanism for detecting misconduct or co rruption is not yielding results; Montenegro 
is therefore encouraged to invest igate the efficiency of its tax administration’s internal control 
system.  
The tax administration has developed a national taxation IT system which allows registration 
of taxpayers, receipt and processing of tax returns for different types of taxes, collection 
enforcement, inspection audit, accounting and bookkeeping of public revenues, undertaking, 
verification and archiving data, internal cont rol and safety, preparation of reports and 
verification and archivin g of data. All units of the Montenegrin tax administration have access 
to the network of the taxation IT system. 
Although the central IT syst em functions well, the automated a pplication of risk  parameters is 
lacking, as well as the possibility of filing auto mated tax returns. In order to further increase 
the efficiency of the data systems, the intern al checks on information fed into them by tax 
officers should be extended. 
In the area of administrative assistance Monteneg ro will only start preparing the relevant 
legislation and setting up the necessary infr astructure (CLO, ELO, FN, EMCS, VIES, etc.) 
shortly before accession. All na tional parts of the trans-Eur opean taxation and excise IT 
systems should be developed and fully  operational by the time of accession. 
The tax administration has the legal and administ rative structures and adequate resources to 
sufficiently enforce the relevant legislation. As a consequence, this  administration can be 
considered to have reached a sufficient leve l of administrative capacity to assume the 
obligations of the acquis  in the medium term. 
Conclusion In general, the tax legisla tion in Montenegro is part ially aligned with the EU acquis . Some 
discrepancies can be observed in the area of indirect taxation, e.g. VAT, where zero rates, the 
gold scheme and reduced rates are not EU-compatib le. In the excise sector some more energy 
products need to be co vered, although the level of excise  duties on the products that are 
covered meets the EU minima. Apart from ciga rettes, most products are taxed at the EU 
minimum level, although the new Tobacco Directive may cause new gaps between Montenegrin and EU legislation.  The excise rate applicable to wine and other fermented 
beverages needs to be adapted to the EU rate. Finally, the depreciation of the value of cars is 
not in line with the acquis . In direct taxation, Montenegro ha s to implement EU tax directives 
by the date of accession. Some aspects of tax relief  laws need to be further examined in order 
to check whether they can be considered as ha rmful. The IT system is functioning and needs 
to be further modernised. In terms of administ rative capacity the tax administration functions 
EN 84  EN sufficiently, although some organisational issues re main to be solved. Internal control needs 
to be enhanced in order to effectively pr event and detect corruption and misconduct.  
Overall , despite the fact that the Montenegrin tax administration is stil l facing challenges in 
the area of legislative alignment and administ rative capacity, if it continues its efforts, 
Montenegro should, in the medium term, have th e capacity to comply with the requirements 
of the acquis . 
3.17. Chapter 17: Economic and monetary policy 
The acquis  in the area of economic and monetary  policy contains rules requiring the 
independence of central banks in Member States  and prohibiting both dir ect financing of the 
public sector by the central banks and privileg ed access for the public sector to financial 
institutions. Member States are expected to coordinate their economic policies and are subject 
to the rules of the excessive deficit procedure as  well as of the Stabilit y and Growth Pact. The 
national central banks will  be subject to the Stat ute of the European System of Central Banks 
(ESCB) and of the European Central Bank (ECB) . New Member States are also committed to 
complying with the criteria for adopting the eu ro. Until they join the euro area, they will 
participate in economic and monetary union (EMU ) as Member States with a derogation and 
must treat their exchange rate po licy as a matter of common concern.  
In the area of monetary policy , Montenegro currently uses the euro as sole legal tender. 
Unilateral euroisation runs counter to the unde rlying economic logic of EMU in the Treaty, 
which foresees the eventual adoption of the euro  as the endpoint of a structured convergence 
process within a multilateral framework. The in troduction of the euro in  Montenegro is the 
result of history and is not  linked to its EU-membership ambitions. The origin of 
Montenegro's euroisation goes back to Nove mber 1999 when its government unilaterally 
decided to introduce the D-mark, already widely used as a para llel currency, as its official 
tender, replaced by the euro in 2002. A Centra l Bank was established in 2000 with functions 
mostly related to banking supervision and running the payment system, the only effective 
monetary instrument being its  reserve requirement policy. 
The functional independence of the Central Bank of Montenegro is enshrined in the new Law 
on the national bank, adopted on 16  July 2010 and almost compliant with EU legislation. It 
stipulates that the Bank shall neither seek nor take instructions from other authorities. The 
Bank is financially independent and is the onl y institution responsible for monetary and 
foreign exchange policies in Montenegro. The primary objective of the Bank is the 
achievement and maintenance of price stability. However, some legislative provisions need to 
be further aligned with the acquis . In terms of institutiona l independence, the reporting 
obligations on monetary policy should only be ex- post, in order to prev ent any possibility of 
external influence. In the area of personal independence, the provisions concerning grounds 
for dismissal of the Governor do not reflect the Statute of the ESCB and of the ECB. 
Regarding the prohibition of direct financing and privileged access of the public sector, the 
law explicitly prohibits extending credit directly  to the Republic of Montenegro. However, the 
Insurance Act contains floors or thresholds with respect to pub lic Montenegrin securities. This 
is tantamount to creating privileged access for the Republic of Montenegro compared to other 
states and institutions. These provisions will need to be adapted.  
In the area of economic policy, since 2006 Montenegro has been participating in the pre-
accession economic policy surveillance which ai ms at strengthening economic planning 
capacity in the country to prepare it for ev entual participation in the economic policy 
EN 85  EN coordination and budgetary surveillance mechan isms of the European Monetary Union 
(EMU). In this context, Mont enegro submits regular economic  and fiscal programmes (EFP). 
The 2010 EFP covers the period 2010-2012, provides a concise overview of recent 
macroeconomic developments and present different scenarios about future macroeconomic developments and structural reform framework. However, data coverage remains weak; some 
discrepancies persist as well as the need for streamlining. 
Conclusion   
Overall , Montenegro will have to undertake additional efforts to align with the acquis  and 
implement it effectively in the medium term in  the field of economic and monetary policy. 
Some aspects of legislation on central bank in dependence, monetary financing, privileged 
access of the public sector to fina ncial institutions and protection of  the euro need to be paid 
particular attention.  
Montenegro’s present use of the euro is distinct from euro area membership, which is the 
endpoint of a structured convergence process wi thin a multilateral framework. This may take 
considerable time to achieve for Montenegro  after EU accession. The implications of the 
Treaty framework for Montenegro’s monetary regi me will be further detailed in the future 
accession negotiations. 
3.18. Chapter 18: Statistics 
The acquis  on statistics consists almost  exclusively of legislation wh ich is directly applicable 
in the Member States, such as European Par liament and Council regulations and Commission 
decisions or regulations. It also includes a range of methodological handbooks and manuals. 
International agreements provide a furthe r basis for production of statistics.  
In the area of statistical infrastructure , further efforts are need ed. Monstat, the national 
statistical institute, is the main producer of o fficial statistics and re sponsible for coordination 
of the Montenegrin statistical system. W ith the independence of Montenegro in 2006, 
Monstat's functions and responsibilities incr eased significantly. However, the corresponding 
increase in resources has not been sufficien t and the lack of human resources remains a 
critical issue. Monstat curren tly has 127 staff, 34 of which wo rk in the regional offices. 
Additional office space is a necessity as Monstat’ s current offices are al ready stretched to the 
limit. The management capacity of Monstat need s to be strengthened ur gently and adequate 
resources made available so Monteneg ro can fulfil all obl igations under the acquis . 
The Law on statistics was adopted in 2005 and is broadly aligned with in ternational standards. 
It guarantees the professional independence of  producers of official statistics and the 
confidentiality of data. However, there are weak nesses in the law which need to be addressed 
to strengthen the position of M onstat in the national statistical system and clarify ambiguities 
with regard to the role of  the Statistical Council.  
The national statistical system consists of seve ral producers of official statistics, including the 
Central Bank, the Ministry of Finance, the Securities Commission and others. The 
coordination of the national statistical system has improved, but Monstat does not yet fulfil its 
role as the main coordinator. The progra mme of statistical surveys 2009-2013 is very 
ambitious, but it can only be achieved if the a ppropriate human and financial resources are 
made available. Therefore planning needs to be better linked to the resources available. 
EN 86  EN In the area of classifications and registers  substantial efforts are needed to become compliant 
with the acquis . The preparation of the Law on the na tional statistical classification of 
economic activities according to the European  classification NACE Rev. 2 is seriously 
delayed. The revision of the national classifica tion of products by activities according to CPA 
2008 needs to start as soon as possible. The sta tistical business register is operational, but 
significant shortcomings remain. A survey to imp rove the quality of the statistical business 
register is ongoing. Monstat plans to establish a statistical farm register based on the results of 
the agricultural census carried out in June  2010. A regional statisti cal classification in 
accordance with the EU NUTS Regulation has been  agreed with the European Commission. 
According to the classification Montenegro co nstitutes one statistical region equivalent to 
NUTS level 1, 2 and 3, so national statistics w ill serve as input for regional statistics on all 
three NUTS levels.  
In the area of sector statistics  significant challenges remain before Montenegro is compliant 
with the acquis . Overall, progress has been achieved in  many areas over the last two years. 
Several new statistical products  are in the development pha se and should produce visible 
results in the next years. Tec hnical assistance is provided in  a range of areas to achieve 
harmonisation with the acquis . However, administrative capacity remains limited and several 
projects have suffered from delays due to lack of staff.  
The agricultural census was conducted in June 2010. Monstat is preparing the introduction of 
agro-monetary statistics (2012). Fi shery statistics are produced by the Ministry of Agriculture, 
Forestry and Water Management. Monstat is  preparing the population and housing census, 
which is planned for April 2011. The population census law has been adopted by parliament. 
A new population register has be en developed by the Ministry of the Interior and Public 
Administration that will be an important source for population st atistics in th e future. Vital 
statistics and migration statistics are mainly based on registers, but a new migration survey 
was introduced in 2009. Concerning  labour market statistics, M onstat has been conducting the 
labour force survey quarterly since 2008. The methodology is harmonised with EU standards. 
The labour cost survey was carried out for th e first time in 2009 for reference year 2008. Job 
vacancy statistics are produced by the Employ ment Office. With regard to other social 
statistics, Montenegro has carried out th e household budget surv ey annually since 2005. 
Monstat collects data on education statistics.  
Progress has been made in the area of annua l and quarterly nationa l accounts, but much 
remains to be done to fully comply with the European System of Accounts (ESA 95). The timeliness of annual national accounts has impr oved significantly. Financial accounts are not 
yet produced. Government finan ce statistics are produced by th e Ministry of Finance and 
largely follow the manual of the Internat ional Monetary Fund on Government Finance 
Statistics. The balance of payments, foreign di rect investment and mo netary and financial 
statistics are compiled by the Central Bank. Fore ign affiliates statistics  (inward and outward 
FATS) are not yet collected. With regard to pric e statistics, the consumer  price index (CPI) is 
the official inflation index in Montenegro. Improvements in quali ty are still needed. The price 
collection survey has been improved in 2010 to include all products required for the 
harmonised index of consumer prices (HICP) . The purchasing power parities are partially 
compliant and a project for further improvement s is ongoing. The production of statistics on 
own resources is at an early stage. The analys is of available data sources for the compilation 
of gross national income has star ted. In the area of external tr ade statistics, Montenegro is 
partially compliant and data are delivered to Eurostat. The quality of data must be further improved; in particular, exports  are believed to be underrepor ted. The customs authorities 
have implemented the single administrative docu ment and apply the latest EU classification, 
EN 87  EN CN2010. For short-term statistics several improvements have b een made to the existing 
questionnaires and a new quarterly  survey established in early 2010. In the area of tourism, 
transport, energy and environmental statisti cs Montenegro is not  compliant with the acquis . 
Conclusion  
Overall , the statistical production of M ontenegro is not yet at a sa tisfactory level of alignment 
with the acquis . Progress is being made in several areas and the range of statistics is 
increasing, but significant challenge s remain. Montenegro will have to make considerable and 
sustained efforts to align with the acquis  and to implement it effect ively in the medium term. 
This requires in particular that the necessary human and financial resources are made 
available and that progress is closely monitored. In the area of sector statistics, shortcomings 
need to be addressed inter alia  in the fields of  agriculture, business and macroeconomic 
statistics. The implementation of  the agricultura l census in June 2010 an d the adoption of the 
Law on the population census show that things  are moving in the right direction. The 
necessary resources for the population and housi ng census planned for 2011 need to be made 
available in due time. Given Monstat's weak instit utional status, the statistical law needs to be 
revised to strengthen its posit ion in the national statistical system. The coordination of the 
statistical system needs to be further improved.  
3.19. Chapter 19: Social policy and employment 
The acquis  on social policy and employment includes minimum standards in areas of labour 
law, equal opportunities, health and safety at work and anti- discrimination. Member States 
participate in EU policy processes in the areas  of employment policy, social inclusion and 
social protection. The social pa rtners of Member States participate in social dialogue at 
European level. The European Social Fund (ESF ) is the main financial tool through which the 
EU supports the implementation of its employ ment strategy and contributes to social 
inclusion efforts. 
As regards labour law , Montenegrin legislation, in partic ular the Labour Law of 2008, covers 
several of the basic principles  laid down by the EU labour la w directives. However, a number 
of adjustments to the national legislation in this  area will still be necessary in order to fully 
transpose the acquis . In addition, Montenegro will have to put in place legislation transposing 
the Directives on information and consultation at transnational level, i. e. regarding European 
Works Councils, the European Company and th e European Cooperative Society, and the 
Directive on posting of workers.  
The central piece of legisl ation in the area of health and safety at work  is the Safety at Work 
Law, which covers both public and private sectors.  It aims to transpose the main provisions of 
the Framework Directive 89/391/EEC on the introduction of measures to encourage 
improvements in the safety and health of worker s at work and also incorporates provisions 
relevant to certain specific areas and subj ects (such as the constr uction sector, personal 
protective equipment, health and sa fety signs, and chemical hazards).  There are also other 
related legislative acts in force which were adopt ed still in the Socialist Federal Republic of 
Yugoslavia, regulating both specific subject areas and sectors. In certain areas International 
Labour Organisation (ILO) instru ments are applied (e.g. safety  in the use of asbestos).  There 
is no national legislation corresponding to EU  Directives concerning display screen 
equipment, fishing vessels and artificial optical radiation. Ne ither are there indicative limit 
values set for chemical agents at work as required by the acquis.  
EN 88  EN The safety at work inspectorate of the Minist ry of Labour and Social Welfare supervises the 
implementation of the Safety at Work Law and related by-laws. Currently, there are 12 safety 
at work inspectors active for around 212,000 employed persons, which constitutes an 
approximate ratio of 1 inspector per 17,600 wo rkers (ILO recommendations are 1 inspector 
per 10,000 workers). The inspection capacities need therefore to be significantly strengthened 
in order to allow effective enforcement.  
Social dialogue  takes place mainly at tripartite level in the framework of the Social Council 
(SC). The SC was established in June 2008 as a consultative body with the task of monitoring, 
encouraging and analysing social and economi c activities in Montenegro. It comprises 
representatives of the government and worker s and employers associations and works with 
seven commissions covering differe nt socio-economic areas. Transparency and effectiveness 
of its work needs to be improved. The plan of the governme nt to develop the technical and 
administrative capacities of the SC secretar iat was suspended due to current budgetary 
restrictions.  
The General Collective Agreement dates from  2004 and was amended in 2006; negotiations 
for further amendments took place in 2010. 
Bipartite social dialogue is lit tle developed and the numbers of agreements concluded in the 
past years indicate a declining trend in the development of autonomous social dialogue. 
Efforts towards the promotion of bipartite social dialogue, especially at th e branch level, need 
to be stepped up. 
The most prominent trade union organisations are the Confederation of Trade Unions of 
Montenegro (CTUM) and the Union of Free Tr ade Unions of Montenegro (UFTUM), which 
split from CTUM in 2008. CTUM is a memb er of the International Trade Union 
Confederation (ITUC) and in the process of becoming affiliated with the European Trade 
Union Confederation (ETUC) as  an observer. A new Law on tr ade union representativeness 
was adopted in May 2010 establishing new repres entativeness criteria and thereby opening 
the way to trade union pluralism. 
Employers in Montenegro are represented by th e Montenegrin Employers Federation (MEF), 
a voluntary organisation established in 2002. The MEF is a member of the International 
Organisation of Employers (IOE) and has observer status within BusinessEurope.  
An agency for peaceful resolution of labour di sputes was established in April 2010, with a 
tripartite steering committee as governing body. It is the first body of this kind in Montenegro 
and it is in the process of being established; the selection and training of staff is ongoing and 
additional efforts are needed before it will be fully operational. 
As regards employment policy , the unemployment rate was recorded at over 11% by 
administrative data at the end of 2009 and at a much higher level by the labour force survey 
(LFS), with an upward tendency due  to the impact of the economi c and financial crisis, and a 
large share of long-term unempl oyed. The relatively low activity  rate (around 60%  in 2009) is 
a matter of concern for Montenegro’s future development as are development and employment gaps between the no rth and other parts of  the country. Other ar eas of concern are 
the substantial level of informal employment, the increasing segmentation of the labour market, with increased usage of fixed-term contracts and the persisting skills mismatch. 
Developing reliable data and statistics remains an outstandi ng issue in several areas, in 
particular for labour market analysis. 
EN 89  EN Montenegro has a national stra tegy for employment and huma n resources development in 
place for the period 2007-2011, which is suppl emented by a national action plan for 
employment (NAPE), currently covering 2010 -2011. However, implementation of the NAPE 
has until now fallen short on its ma in objective of increasing empl oyment rates, partly due to 
the impact of the economic and financial cris is. Employment policy consists mainly of a 
number of active labour market measures (e.g. co -financing of apprentices, training, retraining 
and credits for self-employment), which up to  2009 took more than 50% of the total budget 
for labour market measures. The labour market  mismatch is being addressed through a new 
vocational training strategy and efforts made by the employment office to develop vocational 
counselling. However, training programmes seem under-utilised and cooperation between the 
employment offices and the training institutions should be strengthened. 
In terms of preparation for the European Social Fund  (ESF), a large number of elements 
required by the acquis  in the area of cohesion policy are not  yet in place. Montenegro will 
have to adapt its legislation and structures in order to be able to successfully manage, 
implement, monitor, audit and control Soci al Fund-type measures. The administrative 
capacity of all authorities involved, mainly gove rnment bodies, but also  municipalities and 
education institutes, will need  to be strengthened. Good progr ess in the preparation and 
implementation of IPA component IV on human resources development, including the finalisation of the draft Strategic Cohere nce Framework (SCF) and the Operational 
Programme (OP), will be an indicator of cap acity to manage ESF funds efficiently upon 
accession. (See also Chapter 22 — Regional policy and coordination of structural 
instruments)  
Additional efforts are necessary to ensure the social inclusion  of socially and economically 
disadvantageous and vulnerable groups, such as Roma, Ashkali and Egyptians, disabled 
persons, youth and elderly people. Related statistics will need to be improved and in particular 
a data base and indicators used in the EU to m onitor social inclusion a nd social protection will 
need to be developed. 
As regards persons with disabilities, Monten egro has ratified the UN Convention on the rights 
of people with disabilities an d national legislation is in li ne with the UN Convention. A 
strategy for integration of pe ople with disabilities 2008-2016, w ith a respective action plan, 
was adopted in 2008. A quota system for the em ployment of people with disabilities was 
introduced in May 2009. However, most co mpanies concerned prefer to pay a non-
compliance fee. There is a need to move to  a more comprehensive approach to promote 
access of people with disabilities to open employment and to establish reliable data. 
Montenegro has implemented a number of reforms in the field of social protection , notably 
of pensions, e.g. increasing the retirement age. In order to face the demographic challenge of 
an ageing population, efforts to promote employ ment of women and older workers need to 
follow. Further progress is need ed in the introduction of internationally co mparable indicators 
of adequacy of pensions. In the health care sector , equal access to health care services need to 
be ensured, also for representatives of social ly disadvantaged groups, e.g. Roma, Ashkali and 
Egyptians and internal ly displaced persons. 
As regards anti-discrimination , the Constitution of Montenegro  prohibits discrimination ‘on 
any ground’ and a comprehensive Anti-discrimi nation Law was adopted in July 2010. The  
adopted law is broadly in  line with the relevant acquis , but some aspects, such as the 
definition of direct discrimination, will need  to be further aligned. The law includes 
provisions on the "Protector of human rights and freedoms"  (Ombudsman) designating this 
EN 90  EN institution as an equality body with competences  corresponding to those set out in related EU 
directives. This will need to be complemented with further guarantees for effective and independent functioning of the Ombudsman in  the Law on the Ombudsman. Several other 
laws, including the Labour La w, also contain provisions prohibiting discrimination on a 
number of specific grounds covered by EU legislation.  
In the area of equal opportunities , Montenegro is a party to  a number of relevant 
international conventions, including the UN Conve ntion on the elimination of all forms of 
discrimination against women (CEDAW). Disc rimination on grounds of sex in relation to 
employment is prohibited by Montenegrin le gislation, e.g. the Labour Law and the Gender 
Equality Act, to mention the principal instruments. Montenegro has the necessary basic legislation in this area in place, comprising equal pay, access to employment and maternity 
protection, including maternity leave. The adop tion of the Anti-discrimination Law in July 
2010 should further improve the legal framewor k. Further legal adjustments are, however, 
necessary, e.g. concerning the removal of ove r-protection of women, introducing parental 
leave in accordance with EU le gislation or improving the equal pay legislation. Generally, as 
regards both anti-discrimination and gender equa lity, effective implementation of existing 
legislation and strengthening of related ad ministrative capacity is the main challenge. 
A Law on the prevention of domestic violence was adopted in July 2010. The law aims to 
prevent and reduce all forms of domestic viol ence by providing various protection measures, 
outlining the rights of the victims, and relate d procedures. The preparation of a connected 
strategy and action plan is also envisaged by the law. 
Conclusion 
Montenegro has started alignment with the acquis in the areas of labour la w, health and safety 
at work, equal treatment for women and men, and anti-discrimination. However, progress is 
uneven across the areas and substantial gaps remain to fully transpose and effectively 
implement the acquis  related to health and safety at wo rk. Social dialogue remains weak. In 
general, strengthening capacity for policy development, implementation and monitoring 
constitute the key challenges fo r Montenegro, also with a view to the country’s preparation 
for the European Social Fund. Establishing reliab le labour market and social data and related 
statistics remains an outstanding issue. 
Overall , Montenegro will have to make considerable  and sustained efforts to align with the 
acquis  in the area of social policy and employment and to implement it effectively in the 
medium term. The country also needs to prepar e itself for participati on in the cooperation 
processes developed at European  level in the fields of empl oyment, social inclusion and 
pensions. 
3.20. Chapter 20: Enterprise and industrial policy 
The acquis under the enterprise and industrial polic y chapter consists largely of policy 
principles and policy recommendations, which are reflected in communications, 
recommendations and Council conclusions. The EU’s enterprise and industrial policy, 
including its small and medium-sized ente rprises (SME) policy, seeks to promote the 
competitiveness of the economy. It is strong ly driven by the Europe 2020 strategy, the 
successor of the Lisbon strategy for growth and jobs, and by the 2008 Small Business Act for 
Europe. Enterprise and industrial policy compri ses policy instruments, including financial 
EN 91  EN support and regulatory measures. It also includes  sectoral policies, such as recommendations 
for more targeted policy analysis and for new initi atives and consultations at sectoral level.  
The most highly developed component of Montenegrin enterprise and industrial policy is 
currently  SME policy.  
Montenegro has developed an SME policy which has a positive impact on the business 
environment as the weight of SMEs in terms of employment, GDP and exports has increased 
in recent years. In 2008, SMEs accounted for a pproximately 62% of employment, and their 
contribution to gross value added amounted to approximately 60%. The contribution of SMEs 
to Montenegro’s tota l exports is 31%.  
The Montenegrin SME policy complies with the principles of the European Charter for Small 
Enterprises and is moving towards alignment with  the Small Business Act. An SME strategy 
is in place for 2007-2010 and a new one for 2011-2015 is being prepar ed. The main body in 
charge of the SME policy, the Directorate fo r development of SMEs (SMEDA) within the 
Ministry of Economic Affairs, has 11 regiona l and local centres and runs the European 
Information and Innovation Centre (EIIC). The centres provide information to local 
businesses, advise on the prep aration of business plans and implement SMEDA’s projects. 
Business representatives are c onsulted on legislation in the framework of the Council for 
Regulatory Reform and Enhancement of the Business Environment.  
However, the definition of SMEs is not fully aligned with the EU de finition, and different 
providers of statistics on SMEs  (the Central Register of the Commercial Court, the statistics 
agency — Monstat, and the tax administration) us e different criteria in  monitoring registered 
companies. 
Montenegro’s  industrial policy  is relatively weak as regard s overall policy design, even 
though the development of specific policy component s, such as enterprise policy, is fairly 
satisfactory. Montenegro has faced a strong de cline in the relative size of industry to GDP 
(from 20.7% to GDP in 2001 to 13.5% in 2009), with the manufacturi ng sector going down 
from 12.8% to 5.9% for the same period. Indust rial production has ke pt on increasing in 
absolute terms, but not in relative terms. So far, the government has not indicated whether the 
issue of declining industry will be addressed in an industrial strategy. Such a strategy should 
also address the high concentration of the manufacturing industry in the metal and agri-
processing sectors. 
The country has few elements of  an innovation policy. There is no  overall strategy for 
effective innovation support, only a number of sectoral innovation programmes and 
innovation support for SMEs. Innovation policy focu ses still very much on R&D as a major 
source of innovation. The involvement of the business community in innovation policy is 
limited.  
As regards enterprise and industrial policy instruments , Montenegro joined the 
Entrepreneurship and Innovation Programme of the EU Competitiveness and Innovation 
Framework Programme in 2008 and participates  in the Enterprise Europe Network. The 
government launched a series of programmes in order to promote and improve access to 
finance for SMEs, newly-established enterpri ses and unemployed people establishing their 
own business. However, there is no indicati on whether the programmes concerning access to 
finance have yielded the expected results. In order to improve access to finance, the 
Montenegrin government has established the Investment and Deve lopment Fund (with a 
EN 92  EN capital of €80 million, of which 20% will be liquid assets), which should operate in the 
following fields: supporting the implementation of  infrastructure and ecological projects, 
reducing regional discrepancies, supporting the sector of micro, small and medium-sized 
enterprises, and privatis ing the remaining capital in the Fund’s portfolio.  
Regarding alignment with Directive 2000/35/EC on combating late payments in commercial 
transactions, Montenegro has made progress in  aligning its national legislation with the 
obligations of the Directive. 
As regards sector policies , the main component of Monten egrin industry is manufacturing. 
Approximately 80% of gross value added in  manufacturing in 2009 came from two sectors 
with similar contributions: produ ction of foodstuffs, beverages and tobacco and production of 
basic metals and standard metal products. At th is stage, no sectoral policies have been drawn 
up, with the exception of tourism.  
Tourism is an important sector of the Mont enegrin economy. For 2009 the travel and tourism 
industry indicators show that tourism has 16 % of total GDP and 10.8 % when related to 
employment. The Ministry of Tourism suppor ts the tourism sector through promotion 
programmes aimed at creating a more favourable  overall environment for enhancing tourism 
development, as well as improving the quality of services offered. The tourism strategy as developed and put in place so far shows that Montenegro is taking account of the 
sustainability aspect as followed by the EU and its Member States. Montenegro is a member 
of the United Nations World Tourism Organi sation and works with other international 
organisations in developing its strategic framework.  
The production of basic metals and standard me tal products is the largest sector of the 
manufacturing industry. The capaci ty of the iron and steel indus try in Montenegro is about 
160,000 tonnes, corresponding to slightly more than 0.1% of the EU-27 capacity. Production 
capacity for the manufacture of non-ferrous metals is about 145,560 tonnes, mainly 
aluminium oxide (alumina) and aluminium ingots. The biggest plant, the Podgorica 
aluminium plant (1 300 employees), was priv atised in 2005, being acquired by the Central 
European Aluminium Company. The plant is th e biggest single contributor to Montenegrin 
GDP and exports (until recently 51% of the coun try’s exports). The restructuring programme 
started in 2005 and is on-going in 2010.  
The production of food products, beverages and tobacco products is the second largest 
manufacturing sector (38% of total manuf acturing in 2008). Othe r industrial sectors 
(chemicals and rubber, defence industry, wood production, and maritime industry) make only 
a marginal contribution to the country ’s manufacturing sector and economy.  
Conclusion  
Montenegro has developed an ente rprise policy in line with EU pr inciples, particularly in the 
area of support for SMEs. Overall , therefore, if it continues its efforts it should have the 
capacity to comply with the requirement of th e acquis in the medium-term. However, further 
efforts are needed with regard to industrial policy and strategically important manufacturing 
sectors. 
3.21. Chapter 21: Trans-European networks  
This chapter covers trans-European netw orks policy in the areas of transport, 
telecommunications and energy infrastructu res, including the EU guidelines on the 
EN 93  EN development of trans-European networks and the support measures for developing projects of 
common interest. The aim of establishing an d developing trans-European networks and 
promoting proper interconnection and interoperabili ty of national networks  is to take full 
advantage of the internal market and contri bute to economic growth  and the creation of 
employment in the European Union. 
As regards  trans-European  transport networks  (TEN-T), Montenegro participates actively in 
the implementation of the memorandum of unde rstanding on development of the South East 
European Core Network and Observatory and ha s been playing a constructive role in the 
negotiations on a Transport Community Treaty  for South-East Europe. However, more 
concrete steps are needed to develop jointly projects of regional in terest with neighbouring 
countries. Regarding the current state of the Co re Network in Montenegro, both road and rail 
links need to be upgraded. Bar-Boljare motorway project was developed to  address this issue. 
However Montenegro's efforts are challenged due to mountainous landscape and limited financial means and rather low-density traffic. Maintenance of the transport infrastructure is not fully ensured, mainly due to a lack of financ ial resources. This affects in particular the 
secondary network, hampering connection to the Co re Network of the remote rural areas. The 
port of Bar, which is among the deepest wate r ports in the region and Montenegro’s only 
commercial port, also needs to be upgraded. Improving the two main airports (Podgorica and 
Tivat) should also be considered.  
Trans-European  energy networks  (TEN-E) play a pivotal role in Montenegro’s electricity 
supply. Montenegro’s electricit y networks are well connected with the power systems of 
Serbia, Bosnia and Herzegovina and Albania, but the electricity  networks are outdated, which 
causes supply instability. The insufficient capac ity of the high voltage networks affects its 
reliability, which may cause system collapse.  Montenegro’s transmission network has a 
mostly radial structure and its 110 kV network is  not interconnected over the entire territory 
of Montenegro. In order to ensure more reli able supply, the transmi ssion system operator is 
expanding several transformer stations and building new national transmission lines. The 
priority project to upgrade the interconnecti on with Albania to 400 kV is well advanced. 
Montenegro signed an agreement with Italy to  build an underwater interconnection between 
the two countries by the end of 2013. All infr astructure will be public (owned by the 
transmission system operator), and the rules of the national regulators will apply to this infrastructure. Construction of at least one 400 kV line towards Serbia or Bosnia and 
Herzegovina is envisaged. Montenegro has no national gas network at this stage; however 
there are plans to develop domestic off- shore production and to join regional gas 
infrastructure projects. A participation in th e development of the regional gas pipeline, the 
Ionian Adriatic Pipeline was envisaged, but not  delivered. In particular, Montenegro needs 
concrete steps, in coordination with other Ener gy Community countries in the region, towards 
the construction of gas transmi ssion lines and interconnectors unde r the concept of the Energy 
Community Gas Ring.  
Regarding telecommunication networks , activities for the accession  of Montenegro to the 
ICT Policy Support Programme, component of the Competitiveness and Innovation 
Framework Programme, are at an early stage.  
Conclusion 
Overall , Montenegro will have to un dertake additional efforts in the field of trans-European 
transport and energy networ ks to align with the acquis  and to implement it effectively in the 
medium term. Regarding TEN-T in frastructure, Montenegro needs to develop in particular the 
EN 94  EN road Core Network in line with the expected vo lume of traffic. Rail needs specific attention, 
in particular the rail link from the port of Bar,  which plays an essentia l role in the country’s 
development. Balance needs to be found betw een the necessary improvement of the Core 
Network and its connections on the one hand and, on the other hand, the profitability of some 
projects, which must be better taken into acco unt. Some projects, in particular motorway 
links, might need to be delayed. Regarding the TEN-E network, given the dependence on 
electricity imports and the pr oblems caused by the outdated tran smission system, Montenegro 
has to develop its policy conc erning electricity as well as  gas interconnections with 
neighbouring countries (within the concept of Energy Commun ity Gas Ring) and has to 
update the national transmission system. 
3.22. Chapter 22: Regional policy and coordi nation of structural instruments 
The acquis  on regional policy and coordi nation of structural instru ments consists mostly of 
framework and implementing regulations, which do not require transposition into national legislation. They lay down the rules for drawing up, approving and implementing 
programmes financed by the Structural Funds (the European Regional Development Fund and 
the European Social Fund) and — for some Member States — Cohesion Fund programmes 
reflecting each country’s territorial organisa tion. These programmes are negotiated and agreed 
with the Commission. Implementation is a shared responsibility of the Member States and the Commission. Member States must co mply with the provisions of the acquis , for example in 
the areas of public procurement, competition and the environment, equality between men and 
women and non-discrimination, as well as sust ainable development, when selecting and 
implementing projects. 
As regards the legislative framework , regional development in Mo ntenegro is not regulated 
in an integrated manner. There is no Law on regional development but preparatory work for 
such legislation is under way, although such a la w is not mandatory. Policy measures with a 
regional or local focus are currently based on se veral pieces of legisl ation, e.g. the spatial 
plan, the Law on territorial organisation, and the Law on local self-government.  
Montenegro has two levels of governance : national/central and local authorities 
(municipalities), which are self-government units. Montenegro’s territory is organised into 19 
municipalities, the capital Podgorica and the hist oric royal capital Cetinje. There are neither 
regions, as an administrative form of territo rial organisation, nor  bodies competent for 
decision making at regional level. The competen ces of the municipalities are determined by 
the Law on local self-government. Their financ ing is ensured by own revenues (local taxes) 
and by budgetary transfers fr om the central government. 
The Budget Law does not explicitly prov ide for multi-annual budget programming, but 
allocations for implementing multi-annual polic ies and programmes are presented in the 
annual budget bill as previews. Amendments to  the Budget Law will be needed to allow the 
transfer of national co-financing budgets be tween EU programmes, funds and years.  
Montenegro is considered in statistical terms as one region corresponding to levels 1, 2 and 3 
of the NUTS classification.  
With regard to the institutional framework  for the implementation of regional development 
policy, the Ministry of Economic Affairs pl ays a coordinating role among the multiple 
stakeholders. A department for regional development has been established in the ministry, 
EN 95  EN which is, among other things, responsible for co ordinating and monitoring the implementation 
of Montenegro’s regional developmen t strategy and related legislation.  
Montenegro is currently preparing for compone nts III (regional development) and IV (human 
resources development) of the IPA programme, which will become available once Montenegro is granted candidate country stat us. IPA components III and IV mainly aim to 
prepare candidate countries for the management of financial instruments under the Structural 
and Cohesion Funds following EU  accession. A number of decisions and actions have been 
taken in this context. A strategic coordinator ha s been appointed and the Operating Structures 
(OS) for IPA components III and IV, as well as their heads, were designated. Yet, the 
operation and function of the OS will need to be  specified in more detail and to be put in 
place. Other structures established for IPA co mponent I will remain in effect, namely the 
national IPA coordinator, nati onal authorising officer (NAO), the National Fund and the 
Audit Authority. Capacity developed in the Ce ntral Finance and Contracts Unit (CFCU) will 
serve as a basis for implementing future programmes under IPA components III and IV. 
Nevertheless, a lot remains to be done to prep are the institutional framework and structures 
for managing IPA components III and IV and subsequently Structural Funds. Related 
preparatory activities need to be further accelerated. 
Upon accession, Montenegro will need to have a sufficiently strong administrative capacity  
in place to deal with the requirements of the EU  structural policy. Competent staff with solid 
managerial capacities needs to be  deployed at various levels of the administration dealing 
with Structural Funds, and effective fina ncial management, control and monitoring 
mechanisms will need to be in place. Thorough and sound project preparation and implementation by the final beneficiaries is one of the keys to success, and trained and skilled staffing is essential in this re spect. IPA assistance and in part icular the preparations for IPA 
components III and IV are expected to contribute to the administrative strengthening process. 
With regard to programming , the government of Montenegro  has adopted a number of 
strategic documents to implement and promot e sectoral policies for regional development 
purposes. A Regional Developmen t Strategy was adopted in Ju ly 2010, which sets policy 
objectives and strategic directio ns to create the conditions fo r balanced development of the 
country. The national programme for Montenegro’s  integration into the EU for the period 
2008-2012, the energy development strategy to 2 025, the transport development strategy and 
the strategic master plans for waste manageme nt are some further strategic documents. In 
addition, Montenegro aims, with IPA project as sistance, to draw up a national development 
plan. In the framework of preparing for IPA co mponents III and IV, drafts of the Strategic 
Coherence Framework (SCF) and of the opera tional programmes have been elaborated; 
however, they need further improvement before adoption. 
Progress is needed on the availabili ty of reliable statistics. In particular, Montenegro needs to 
strengthen its capacity to gather a nd prepare adequate statistical data. 
The implementation of actions under IPA compone nt I (transition and institution building) 
and II (cross-border cooperation) has allowed th e Montenegrin authorit ies to familiarise 
themselves with the requirements for monitoring and evaluating  EU (co-)funded 
programmes and projects. But adequate nationa l systems and mechanisms do not exist yet; 
they need to be designed and put in place in  order to evaluate and monitor the quality and 
impact of development programmes. 
EN 96  EN With regard to financial management and control , the Ministry of Finance is the main body 
responsible. Within the context of IPA comp onents III and IV, the national authorising 
officer, as the head of the national fund, will be responsible for the sound financial management of EU funds once the country ha s been accredited to manage IPA funds in a 
decentralised manner. This responsibility is assumed by the Deputy Minister of Finance for 
the Treasury Department. A central finance and contracting unit (CFCU) within the Ministry 
of Finance has been established that will be in charge of tendering and contracting once IPA management powers are conferred on Monten egro. Currently, experience in project 
implementation entailing financial transactions is  rather limited and confined to projects under 
IPA components I and II. Financial management, control systems and procedures will need to 
be designed and put in place in order to fully align with IPA requirements. 
An audit authority for IPA funds has been appoi nted within the State Audit Institute. Its full 
independence will need to be en sured before the management of  IPA funds can be transferred 
to Montenegrin authorities. ( See also Chapter 32 Financial Control ) 
Impact 
Montenegro had a nominal GDP of €3 billion in 2008. This equals about 0.02% of EU-27 
GDP for about 0.13% of the EU-27 population. Considering the size of its economy and 
population, Montenegro’s accessi on would only marginally redu ce the EU’s average GDP per 
capita (PPS) compared to today’s data and hen ce would slightly influe nce the eligibility of 
regions. 
Given that GDP per capita is considerably be low the EU average, Montenegro would be 
entitled to receive EU cohesion policy cont ributions under the c onvergence objective. 
Following a preliminary assessment of Monteneg ro’s, economic situatio n and considering the 
current capping rules of the structural funds, the estimated impact of Montenegro’s possible 
accession on EU cohesion policy is considered manageable. 
Conclusion 
Overall , Montenegro’s preparatio ns for regional policy instruments, structures and 
mechanisms are at an early stage. A positiv e start was made with preparation for IPA 
components III and IV and with the definiti on of some strategic directions; however, 
considerable and sustained efforts to set up sound procedures and competent administrative 
structures will be necessary to allow Monteneg ro, in the medium term, to apply EU rules and 
channel the funds from the EU  structural instruments. 
3.23. Chapter 23: Judiciary a nd fundamental rights 
EU policies in the area of the judiciary and f undamental rights aim to maintain and further 
develop the Union as an area of  freedom, security and justice. The establishment of an 
independent and efficient judici ary is of paramount importance . Impartiality, integrity and 
high standards of adjudication by the courts are essential for safeguarding the rule of law. 
This requires a firm commitment to eliminating external influences over the judiciary and to 
devoting adequate financial reso urces and training. Legal guarant ees for fair trial procedures 
must be in place. Likewise, Member States must fight corruption effectively as it represents a 
threat to the stability of democratic institutions  and the rule of law. A solid legal framework 
and reliable institutions ar e required to underpin a coherent policy of prevention and 
deterrence of corruption. Member States must ensure respect for funda mental rights and EU 
citizens’ rights as guaranteed by the acquis and by the Charter of Fundamental Rights.  
EN 97  EN The principle of independence  of the judiciary  is set out in the Constitution and further 
specified in the country's legislation13. The permanent status of judges is guaranteed by the 
Constitution. However, serious concerns exist over the independence of the judiciary, as the legal framework leaves room for disproportio nate political influe nce. Although judges are 
appointed by the Judicial Council, the majority  of its members are appointed by parliament 
and the government.  
Except for the President of the Supreme Cour t who is appointed by the Parliament, the 
selection, promotion, disciplinary proceedings and dismissal of judges are carried out by the 
Judicial Council. Yet, selection criteria are not followed consistently while written entry tests are not mandatory or anonymously checked. A fully-fledged merit-base d career system needs 
to be established to strengthen independence,  professionalism and transparency in the 
judiciary. 
Accountability in the judiciary is ensured by m eans of the monitoring role of the Judicial 
Council and its role in disciplinary proceedings. A Code of Ethics has been established in 
2008 but no proceedings have been initiated for its  breach. There is a need to strengthen the 
overall system to increase transparency and ensure proper implementation of the Code of 
Ethics.. A track record on fighti ng corruption in the judiciary ha s started to be established. 
However, corruption and conf lict of interest rules are not sufficiently monitored. 
Accountability in the judiciary needs to be improved.  
Prosecutors  are appointed and dismisse d by parliament. Deputy pros ecutors are appointed by 
the Prosecutorial Council, the members of wh ich are appointed by parliament. Deputy public 
prosecutors enjoy permanent tenure after a 3-year probationary period. Disciplinary 
proceedings against prosecutors are carried out  by parliament and for deputy prosecutors by 
the Prosecutorial Council. The criteria for dismissal and disciplinary proceedings are not transparent and the risk of disc retionary implementation is high.  
Impartiality  of judges is ensured by random allocati on and by conflict of interest rules and 
disqualification provisions esta blished by law. However, the rules for random allocation are 
not sufficiently sound and do not guarantee th e genuinely random allocation of cases, 
especially in small courts. The recent introduct ion of a computerised court case management 
system and random allocation is expected to change this. Disqualifi cation rules apply to 
prosecutors as for judges. The financial positio n of judges and prosecuto rs has considerably 
improved. Both judges and pr osecutors enjoy functional immunity. The lifting of immunity 
for judges and deputy prosecutors is within the competence of th e Judicial Council and of the 
Prosecutorial Council respec tively while Parliament can lift the immunity of public 
prosecutors. The President of the Supreme Court has full immunity which can be lifted only by the parliament.  
A Judicial Training Ce ntre functions under the Supreme Court and is financed from its 
budget. The Centre provides both initial and continuous training to judges and prosecutors. 
However, there is no sy stematic approach to training. Planne d training with set curricula for 
all members of the judiciary needs to be establ ished. This should include systematic training 
on new legislation and EU law.  
                                                
 
13 the Law on Courts, Law on Public Prosecutors and La w on the Judicial Council, as well as in the Rules 
of Procedure of the Judicial and Prosecutorial Councils. 
EN 98  EN Montenegro has made efforts to improve the e fficiency of the judiciary. Implementation of 
the new Criminal Procedure Code (CPC) and of the amendments to the Criminal Code will 
contribute to a more effective ad ministration of justice. Monten egro has suffered from a large 
backlog of unresolved court cases but the authorities introdu ced measures since 2008 to 
address this problem. Data presented by the aut horities suggest a reduction of over 75% on an 
annual basis in the beginning of 2010. Yet, th ere are concerns as to the soundness of the 
approach and the transparency of the me thodology used. Enforcement of both civil and 
criminal decisions is weak. Additional meas ures to improve enforcement are required.  
The administrative capacity of the Montenegrin judiciary is generally adequate for normal 
administration of justice. Lack of  infrastructure and equipment has hindered the judiciary’s 
efficiency, but efforts are being made by the authorities to remedy the situation. A 
reorganisation of the court system is envisage d in the government stra tegy on the reform of 
the judiciary but it has not yet been implemented. Such a reorga nisation should be carried out 
following an objective analysis on th e basis of reliable court statis tics and a precise account of 
the current workload of the courts. Budget allocations  for the courts have risen in the last few 
years, but the overall allocations remain low in comparison to the needs in particular for 
investment.  
Access to justice is guaranteed by the Constitution to different categories of both national and 
foreign persons. The right to a fair and publ ic trial within a reasonable time and the 
presumption of innocence are also guaranteed . The Law on the right to trial within a 
reasonable time is not being implemented effectiv ely, as almost all complaints are rejected on 
procedural grounds . Long duration of court proceedings remains a cause for concern. Legal 
aid is provided by the Bar Association a nd other services, incl uding non-governmental 
organisations. Free legal aid is regulated by the provisions of the Criminal and Civil 
Procedure Codes. Local Self-Government is in ch arge of organising the provision of legal aid 
to citizens. However, the law is not implemen ted effectively yet. The constitutional provision 
on the right to legal remedy does not fully comply  with Article 13 of the ECHR. Enforcement 
of both civil and criminal decisions is weak. Additional measures to improve enforcement are required.  
(See also Political criteria — Democracy and the rule of law ) 
Concerning anti-corruption policy and measures,  Montenegro has undertaken coordinated 
efforts to fight corruption, by putting in place the legal, policy and institutional framework. 
Montenegro has ratified the ke y anti-corruption conventions, in cluding the Council of Europe 
Criminal and Civil Law Conventions on corrupti on, the Additional Protocol to the Criminal 
Law Convention and the Council of Europe Conve ntions on laundering, search, seizure and 
confiscation of the proceeds from crime and on th e financing of terrorism. Montenegro also 
acceded to the United Nations Convention agai nst corruption. However, the alignment of 
national law with provisions of internationa l conventions has not yet been completed. 
Montenegro is a member of GR ECO, the Group of States against corruption. An evaluation of 
December 2008 found that eight out of the twenty  four recommendations made in 2006 by the 
group have not yet been implemented.  
Important legislation has been adopted, such as the new Criminal Procedure Code (CPC), 
amendments to the Criminal Code, the Law on pr evention of conflicts of interest, the Law on 
the financing of parties and the Law on civil servants and state employees. A Strategy for 
fighting corruption and organise d crime was adopted in 2005 followed by two Action Plans. 
EN 99  EN A mechanism to monitor implementation was put  in place in 2007. However results so far 
remain uneven. A new improved Strategy and Action Plan for the period 2010-2014 have been adopted. Montenegro needs to vigorously  implement the new anti-corruption strategy 
and action plan. 
A number of key institutions and agencies have been established for the fight against 
corruption. However, the in stitutional set up needs to be streamlined and properly 
coordinated. The National Commission monitors  implementation of the strategy papers. The 
Directorate for Anti-Corruption Initiatives (DAC I), to which 54 other institutions report on 
corruption, has mainly a consultative role fo cusing on soft prevention measures such as 
education and awareness-raising. There is no single authority w ith clear legal powers and the 
capacity to monitor and enforce commitments and obligations of government bodies and no clear division of competences. 
The Parliament's role in supervision of the anti-corruption efforts remains limited. 
Supervisory institutions in areas and bodies where large expenditure of public money or 
disposal of public assets takes place need to be further strengthened to efficiently control 
corruption risks.  
Montenegro has strengthened mechanisms to fight corruption by allocating human resources, 
funds and equipment, in particular in the Poli ce Directorate, the Publ ic Prosecutor's Office 
and the Administration for Prevention of Money Laundering and Terrorism Financing (the FIU). Efforts have been made to strengthen c ooperation between various law enforcement and 
other bodies on the national and international le vel. Cooperation agreements have been signed 
between the main law enforcement bodies. A Joint Investigative Team, dealing amongst 
others with corruption cases, consisting of representatives of law enforcement bodies and 
headed by the Special Prosecutor was established in early 2010 .  
An internal control de partment operated within  the police service unt il the end of 2009. In 
2010 it was moved to the Ministry of Interior an d Public Administration. However its work so 
far has been limited to cases of petty corruptio n. Anti-corruption monitoring in the judiciary 
has had limited effectiveness so far.  
The law enforcement authorities possess the ba sic skills for prosecu ting corruption, however 
the track record of investigati ons, prosecutions and final convicti ons in corruption cases at all 
levels remains low. There is a need for a proa ctive approach in inve stigating and prosecuting 
corruption. 
The track record of investigations, prosecutions and final convictions in corruption cases at all 
levels remains low. Although, operational and inve stigative capacity of the law enforcement 
authorities have been strengthened, it remain s weak.. The recent criminal law reform can 
improve the capacity of the criminal justice system to investigate and prosecute corruption. The new CPC enhances investigation capacity by  allowing use of special investigative means 
in corruption cases. Efficient implementation of the CPC will be essential in order to achieve tangible results. The prosecution service needs to  develop pro-active approaches and take the 
lead in performing its investigation duties under the new CPC. Continuous training must be 
provided for all prosecutors. The quality of st atistics has not significantly improved, despite 
the establishment of a tripartite commi ssion to unify data collection methods. 
Despite an improved legal and institutional fr amework, corruption remains a widespread and 
prevalent problem in Montenegro. The per ception of corruption ac ross many sectors and 
EN 100  EN institutions remains very high with certain se ctors and areas particul arly concerned, i.e. 
construction and inspection supervision as we ll as urban and spat ial planning, including 
cadastre. Other risk areas are public admi nistration, the judicial system, the police, 
privatisation, public procurement, health, education and local-gove rnment. Furthermore, 
capacity for financial investigations is still insu fficient. The use of fina ncial investigation and 
confiscation as a means of targeting corrupt ion (and organised crime) based on unexplained 
wealth needs to be used as a basis of inve stigations. Lack of proactive approach in 
investigations (which are trig gered mainly by complaints) including the collection of evidence 
from various sources affects efficiency in this field.  
Politicised appointments of prosecutors a nd judges and limited investigation capacities 
notably in the area of financial crime undermine law enforcement effectiveness. Statistics on 
corruption cases need to be substantially improved. Strong po litical will is needed to 
significantly improve performance in combating corruption and establishi ng a track record of 
final convictions at all levels.  
(See also Political criteria — Democracy and the rule of law ) 
Montenegro is well a dvanced in setting up the  legal and institutional framework necessary for 
the protection of fundamental rights  and is constantly improving it. However, further efforts 
are needed to ensure genuine implementa tion of the legal and policy framework. The 
capacities and efficiency of institutions devoted to human rights, in particular the Ombudsman, needs to be enhanced. Increased awar eness and sensitivity of the administration, 
police and the judiciary to European and inte rnational fundamental rights standards are 
needed.
 
As regards the prison system , further upgrading of facilities is needed as well as the alignment 
of detention conditions w ith European standards. 
Montenegro has made some progress as regards the fight against torture and ill-treatment  
including impunity but serious efforts ar e still needed, including through improved 
administrative and judiciary proceeding of cases.  
Despite satisfactory constitutional and largely improved legal framework, freedom of 
expression (including the media)  remains hampered by the hi gh-level fines applied in 
defamation cases. Investigative j ournalists still face intimidation. Past cases of violence have 
not always been satisfactorily investigated and followed up. Compliance of journalists with 
professional ethics and standards still needs to be  strengthened. 
Freedom of assembly  and association  is guaranteed and generall y respected in Montenegro, 
as shows the State's financia l support to NGOs and the J une 2010 decision to set-up the 
Council for cooperation with NGOs. However, cooperation with civil society organisations , 
in particular in the framework of the legislative process and de finition of major public policies 
and projects needs to be improved. 
Freedom of religion  is guaranteed by the Constitution and is widely respected, ensuring 
broadly smooth inter-faith relations. However,  the adoption of the legal framework for the 
restitution of property confiscated from religious communities is still pending.  
Montenegro has improved provisions regulating access to citizenship . However, registration 
and checking of data need to be improved. De facto statelessness of around 1 500 Roma, 
Ashkali and Egyptian persons, due to the lack of  personal documents, is a matter of concern. 
EN 101  EN As regards anti-discrimination policies , direct or indirect di scrimination on any ground is 
forbidden by the Constitution a nd addressed through several pieces  of legislation, including 
the recently amended general law on prohibition of discrimination. However, implementation 
of mechanisms for preventing, monitoring, sa nctioning and prosecuting discrimination cases 
need to be strengthened. Discriminations ag ainst Roma, Ashkali and Egyptian, persons with 
disabilities (including children) and lesbian, ga y, bisexual and transgender (LGBT) persons, 
including on the part of state aut horities, are a matter of concern.  
Further efforts are also needed to ensure women's rights  and gender equality, in particular 
regarding the access to decision-making positions in  politics and work as well as to equal pay. 
Despite some efforts at awareness-raising and improved attitude of the police, domestic violence remains an issue of concern as the legal framework is not properly implemented and 
support to victims is unsatisfactory. 
Concerning the children's rights , despite efforts of harmoni sation of the national legal 
framework with intern ational standards, more needs to be done to improve the legal 
framework and to ensure its proper implemen tation, including as regards the situation of 
children with disabilities and the developmen t of alternatives to  institutionalisation. 
The labour rights and  freedom to join  trade unions  is guaranteed by the Constitution and the 
issue of trade union repr esentativeness was proper ly addressed with th e newly adopted law. 
However social dialogue remains unsatisfactory,  as shown by the limited role of the Social 
Council. 
The property rights  are guaranteed by the Constitution and addressed through the Law on 
Private Property Relations. However, the process of property restitution is slow. 
Montenegro has a broad legal and inst itutional framework for protection of minorities.  
However, cooperation of the government with  Minority Councils is still insufficiently 
developed. Persons belonging to minorities cl aim under-representation in the administration, 
judiciary and police. Roma, Ashkali and Egyptia n persons remain the most vulnerable group 
as regards access to political, economic and social rights.  
(see also political criteria - Human Ri ghts and the protection of minorities) 
To ensure EU citizens' rights  to vote  and stand as a candidate in municipal and European 
Parliament elections , Montenegro will need to harmonise the provisions of the Constitution, 
laws and other regulations, which regulate the exercise of right to vote, with the acquis 
communautaire and especially  with the Council Directives  94/80/EC and 93/109/EC.  
Regarding residence rights , the current Montenegrin legal fr amework is not in line with EU 
acquis in the area of free move ment of EU citizens and majo r amendments are necessary. 
However, this will only be a requirement in the later stages of the EU accession process. 
Administrative structures are in place to deal with migration issues and these structures are 
likely to be involved in implemen tation of EU law. Montenegro is  on the right tr ack and it is 
expected that by the time of accession it will be able to adopt the necessary legislative 
changes and to prepare for full implementation of the EU legislation.  
In order to comply with the acquis , Montenegro will have to implement in particular the 
Decision regarding protection for ci tizens of the European Union by diplomatic and consular  
representations and the Decisi on on the establishment of an emergency travel document. 
EN 102  EN Conclusion 
Overall, Montenegro will have to make considerable  and sustained efforts to align with the 
acquis  in this chapter and in particular to eff ectively implement and enforce it in the medium 
term. Considerable strengthening of administrati ve and implementation cap acities will also be 
needed. 
(See also the conclusion of Part 1 – Political criteria ) 
3.24. Chapter 24: Justice, freedom and security 
EU policies aim to maintain and further develop the Union as an area of freedom, security and 
justice. On issues such as external migrat ion, asylum, border control, visas, judicial 
cooperation in criminal and civi l matters, police coope ration, the fight against organised crime 
and terrorism, cooperation in the field of drugs and customs coope ration, Member States need 
to be properly equipped to adequately implem ent the growing framew ork of common rules. 
Above all, this requires str ong and well-integrated capacity within the law enforcement 
agencies and other relevant bodies to attain th e necessary standards. A professional, reliable 
and efficient police organisation is of paramount importance. 
The most detailed part of the EU’s policies on justice, freedom and security is the Schengen 
acquis, which entails the lifting of internal border controls in the EU. For a new Member 
State, substantial parts of the Schengen acquis  are implemented following a separate Council 
decision to be taken after accession. 
Visa-free travel to the Sche ngen area entered into force in December 2009 for Montenegrin 
citizens holding biometric passports, after Montenegro had fulfilled the requirements of the visa liberalisation roadmap. Benchmarks were set on areas such as vi sa policy, migration, 
border management, asylum, judicial co-operation in civil and criminal matters and organised 
crime including money laundering, drug-trafficking. Progress attained in these fields, through 
the visa liberalisation dialogue, constitutes a good basis on which Montenegro can build 
further in order to meet challenges in th e area of justice, freedom and security.  
Currently, the migration  flow to Montenegro is limited a nd migrants come primarily from 
neighbouring countries. The appro ach, structure and concepts in troduced in the migration 
legislation are generally in line with the EU acquis . However, in order to achieve full 
harmonisation, further efforts are necessary, with special referen ce to legislation on family 
reunification, foreign workers, foreign student s and researchers. Legislation on irregular 
migration is broadly in line with the EU acquis . A significant divergence concerns the 
definition of smuggling of persons and the rule s concerning residence permits for victims of 
trafficking. 
Montenegro implements the readmission agreemen t with the EU efficiently. During the return 
procedure, the special needs of vulnerable persons such as unaccompanied minors and disabled persons are taken into account. In th e case of voluntary compliance with a return 
decision, the necessary safeguards must be provided as well. The main challenge for 
Montenegro in this area relates to the im plementation of the new legislative framework, 
which requires adequate resources and administ rative capacities, as well as efficient inter-
agency coordination and cooperation. 
Montenegro has established its asylum  system. The legislation largely transposes the essential 
elements of EU Directives on eligibility, pr ocedures and reception conditions for asylum 
EN 103  EN seekers. The essential institutions have been  set up, staffed and are operating. The completion 
of the asylum centre has delayed. It is pla nned to become operational by mid-2011. Although 
Montenegro faces a low number of asylum s eekers, there are challenges related to their 
reception, including access to health care, empl oyment, identity documents and integration. 
Relevant pieces of primary and secondary legisl ation in this area need to be adjusted and 
practices must be improved. With a view to pr eparing for possible futu re participation in 
Eurodac, the country needs to develop a na tional database for checking asylum-seekers’ 
personal data, including fingerprints.  
Montenegro has adopted several laws aimed at modernising the visa regime, following 
international and EU standards. However, visa policy  is not yet fully in line with the EU 
acquis . Montenegro has limited capacities for the i ssuing of visas by the Ministry of Foreign 
Affairs and by its diplomatic and consular mi ssions. There is no electronic database linking 
consular offices issuing visas with the Foreig n Ministry. Furthermore,  the high number of 
visas issued at the border remains a concern, taki ng into account the fact that applications are 
processed on paper, which und ermines the effectiveness of checks. Upgrading of 
administrative capacity, includi ng enhancing of expertise and human resources is required. 
Regarding external borders and Schengen , the necessary conditions and arrangements for 
implementing efficient border management are broadly in place. The new legal framework on 
border control has been harmonised with the Schengen Border Code. Legislation and agreements provide for inter-agency and in ternational cooperation. An integrated border 
management (IBM) strategy is in place, but m onitoring of its implementation remains weak.  
The Border Police Department is organised with in the Police Directorat e. Its organisation is 
generally in line with EU standards. Human re sources allocated are sufficient but training 
needs to be further improved, as a means to ensure consistency in implementing policies and rules. Frequent staff rotation within border po lice needs to be avoided. Modernisation and 
upgrading of equipment and infrastructure is required both at border crossing points and for 
surveillance purposes, including access to relevant Interpol databases. Border with Kosovo is 
not demarcated and poses a challenge in terms of  crime activities. Security of the sea border 
also needs to be strengthene d. Cross-border cooperation needs to be further strengthened. 
Montenegro and Frontex signed a working a rrangement on 18 June 2009, establishing the 
basis of their operational cooperation.  
Regarding judicial cooperation in civil matters , the relevant legislative framework is mostly 
in place and the general system for civil and co mmercial matters is broadly in line with the 
EU acquis. However, further efforts are nece ssary to ensure its efficient enforcement. 
Furthermore, Montenegro has not ratified all relevant international instruments in this area 
area, in particular those related to the framew ork of the Hague Confer ence on Private Internal 
Law. Practical enforcement of both national and international legal frameworks needs to be 
improved. 
Montenegro has adopted legislation, ratified re levant international instruments and concluded 
bilateral agreements to ensure judicial cooperation in criminal matters . However, the legal 
framework is not complete and needs to be brought fully into line with the acquis . Further 
efforts are necessary to meet requirements in cluding on applying legislation on the European 
evidence warrant and the principle of mutu al recognition to judgments and probation 
decisions. The main challenge concerns impl ementation. The capacity of the Ministry of 
Justice for judicial cooperati on needs to be strengthened a nd effective implementation of 
legislation must be ensured. It s internal organisation and pro cedures, administrative capacity 
EN 104  EN and IT systems need to be further improved. Mont enegro also needs to take steps to ensure 
cooperation with Eurojust. 
In the area of  police cooperation and the fight against organised crime , Montenegro has 
achieved progress in recent years. Nevertheless, it continues to face major challenges in this 
area. Montenegro is a country both of origin and of transit for orga nised crime activities.  
Money laundering and drug smuggling are key ar eas of concern. The le gislative and policy 
framework are broadly in place. Montenegro has acceded to relevant international legal 
instruments 14. However, the implementation of adopted legislation and policy documents as 
well as the application of ra tified international conventions , which have not been fully 
transposed in the national legislation, are st ill poor and have a ra ther limited impact.  
The new Criminal Procedure Code (CPC) en tered into force in August 2010, as regards 
organised crime and corruption as well as war crimes. Its general use has been postponed by 
one year. It introduces a number of new tool s and concepts, including the use of special 
investigative means and the reverse burden of pr oof for property of susp icious legal origins 
and extended confiscation of criminal assets. The capacity of public prosecutors to implement 
the new legislation and to ensure guidance and coordina tion of police and other law 
enforcement agencies will be critical to improve effectiveness in the fight against organised crime and corruption in the medium term. M ontenegro needs to fu lly engage in sound 
implementation of the CPC and to provide the necessary means to ensure it. 
The level of inter-agency cooperation, inform ation flow and exchange among the different 
law enforcement agencies (police, customs, tax authorities, anti-money laundering administration) and with the prosecutor’s office is not satisfactory. The framework also needs 
to be streamlined and duplications avoided. Mont enegro also lacks proper risk assessment, 
crime mapping and a forward-looking approach  to organised crime risks and threats. 
Intelligence-led policing needs to be enha nced and implemented across the country. 
Considerable improvements are needed with regard to crime statistics produced by law 
enforcement and judicial authorities.  
Montenegro cooperates with In terpol (ICPO) and the SECI Centre/Selec. Montenegro needs 
to enhance usage of the available Interpol tools leading to operati onal results. Regional 
cooperation in law enforcement matters needs to be further improved. 
In October 2010, an 
agreement establishing a regional office in Belgra de for improving cooperation in the fight 
against organised crime was signed with Albania, Bosnia and Herzegovina, Croatia, Montenegro and 
the former Yugoslav Republic of Macedonia. Cooperation with Europol is based on a strategic 
cooperation agreement which has been in force since July 2009. Prior to conclusion of an operational agreement with Europol, Montenegro  will have to comply with the relevant 
requirements, data prot ection in particular.  
Activities in the  fight against terrorism  are broadly aligned with the existing international 
regulatory framework. The national legal framew ork includes provisions relating to counter-
terrorism. However, they need to be  brought fully into line with the EU acquis . Capacities to 
detect and address activities possibly linke d to terrorism need to be enhanced. 
                                                
 
14 UN Convention on transnational organised crime and its additional protocols, Council of Europe (CoE) 
Convention on laundering, search, seizure and confiscation of the proceeds from crime and on the 
financing of terrorism, CoE Convention on action against trafficking in human beings, EU Convention 
on mutual legal assistance in criminal matters, CoE Convention on corruption 
EN 105  EN Montenegro remains on one of the main Balkan trafficking routes for drugs. The strategic, 
legislative and institutional framework for the fight against  drugs  is satisfactory. However, 
the administrative and operational capacities fo r its implementation are weak and need to be 
further strengthened. Particular attention need s to be paid to reinforcing law enforcement 
cooperation and coordination, especi ally at the borders. In particular drug trafficking via the 
blue border has increased. Investigative and pr osecution capacities need  to be continuously 
developed and improved. Policies and activitie s in this area need to be underpinned by 
adequate human and financial resources. With re gard to drug reduction, more information and 
precise data are needed. The creation of the Nati onal Office for Drugs is only the first step as 
far as the preparation for future participati on in the EMCDDA is concerned. There has been 
limited institutional progress in this area; more concrete results are expected from the EMCDDA technical assistance for 2010-2011. So far, Montenegro is not yet ready for 
establishing a national focal point.  
Regarding trafficking in human beings , Montenegro has put in place a legislative 
framework which is largely in line with the EU acquis . Montenegro has ratified relevant 
international instruments with the exception of the Council of Europe Convention on the 
protection of children against sexual exploitation a nd sexual abuse. Following the regional 
trend, a low number of cases ha ve been registered. The number  of staff and other resources 
are adequate.  However, investigative techniques and vict ims' identification need to be further 
enhanced. Substantial work was accomplished in the field of prevention and public awareness-raising. The government authoriti es maintain good cooperation with the non-
governmental sector in this area. 
Additional efforts are needed to  fully align legislation on money laundering  with the EU 
acquis  and international standards. (See also Chapter 4 — Free movement of capital)  
Advanced legislation on matters such as cr iminal liability of legal persons, extended 
confiscation of assets, and money laundering as a stand-alone crime has been adopted. 
However, its implementation is weak, as sh own by the fact that convictions for money 
laundering and confiscations are rare. The capacity of the law enforcement bodies for financial investigation and investigation of money laundering is limite d, including capacities 
of the Financial Intelligence Unit (FIU).  
The overall level of reporting of suspicious transactions by financial institutions and other 
relevant agencies remains insufficient. Police and prosecutors have a limited track record in following up cases reported by the FIU. In this context, the potential impact of citizenship 
granted to persons based on their investment to Montenegro is an issue of concern. At 
international level, the FIU main tains active contacts, in partic ular with the Egmont Group. In 
March 2010, MONEYVAL has identified several w eaknesses, which need to be addressed. 
The legislative framework on seizure and confisca tion of criminal assets has been improved. 
Effective implementation and management of the assets needs to be ensured. There have been 
no convictions on confiscation and only  one conviction on money-laundering  
Montenegro has put in place a range of bilateral agreements on customs cooperation . It 
needs to start preparing for ratification and implementation of the Convention on mutual 
assistance and cooperation between the Member States (Naples II) and the Convention on the 
use of information technology for customs purposes  (CIS). The technical and administrative 
capacity of customs services needs to be further enhanced so that they can carry out effective 
operations to counter organised crime.  
For the protection of the euro against counterfeiting , see Chapter 32. 
EN 106  EN Conclusion 
Montenegro has put in place the basic elements of  the legal framework in the area of justice, 
freedom and security. Overall , however, the country will ha ve to make considerable and 
sustained efforts to align its legislation with the acquis  and in particular to implement it 
effectively in the medium term. All relevant in ternational instruments also need to be signed, 
ratified and implemented in the medium term. Considerable strengthen ing of administrative 
and implementation capacities are needed, in part icular in the fight against organised crime 
where track records of convictions remain  limited. Money laundering and drug-smuggling are 
key areas of concern. Overall , considerable and sustained efforts are needed to address weak 
law enforcement capacities and coordination between law enforcement agencies. Administrative capacity including infrastructure, equipment and adequate training must be 
significantly strengthened. Consistency of im plementation across th e country must be 
ensured.  
3.25. Chapter 25: Science and research 
The acquis in the field of science and research does not in principle require transposition of 
EU rules into the national legal order. Successful implementation of the acquis  in this domain 
therefore involves mainly fulfilling the necessary  conditions for participating effectively in 
the EU’s Research Framework Programmes and c ontributing to the crea tion of the European 
Research Area. This requires good administra tive capacity (adequate staffing and knowledge 
of research cooperation) and scientific excelle nce in order to be su ccessful in carrying out 
research and innovation projects to gether with scientific partners  from EU Member States and 
in creating growth and jobs in an economically sustainable way. 
Montenegro, as a pote ntial candidate country, has been associated to the Seventh EU 
Research Framework Programme (FP7) since January 2008. 
Science and research policy  is under the authority of the Mi nistry of Education and Science. 
A special department for science, research and technological develo pment was established 
within the ministry at the end of 2008. A Council for Scientific Research Activities, 
established in 2006, acts as an independent advisory body. It cons ists of nine members, three 
from the government and six from the resear ch community. The Agency for International 
Scientific, Educational, Cultura l and Technological Cooperation plays an important role in 
research cooperation with third countries. The Montenegrin Academy of Sciences and Arts is 
the most significant scientific institution in the country, covering natural sciences, humanities 
and arts. The State University of Monteneg ro, founded in 1974, comprises 19 faculties and 3 
research institutes. The privately-owned Univer sity Mediterranean also engages in research 
through its independent facultie s for scientific research. 
In July 2008, the governm ent adopted a strategy for scien tific research activities 2008-2016 
(including an action plan) in which increased res earch cooperation with the EU and reform of 
the national scientific community were identified  as key priorities in order to facilitate 
integration into the European Research Area. The strategy’s action plan includes a roadmap 
for increasing investment in science and rese arch, both by the public and private sector, 
aiming at investing 1.4% of Montenegro’s GDP  in research by 2013. The current level of 
investment is very low (estimated at 0.13% of GDP in 2007). Due to the lack of statistics and 
means of collecting data on investment by the pr ivate sector, there are no reliable figures on 
investment in research by the private sector ava ilable. The lack of reliable statistics makes the 
EN 107  EN monitoring of identified targets very difficult. Montenegro is, however, working on the reform 
of statistics in science and rese arch to bring its statistics into line with EU criteria. 
Human research capacity is very limited: in  2008 Montenegro counted 766 full-time research 
equivalents (researchers, who together with part-time colleagues and external research 
associates work in the country’s 2 universi ties, 9 private higher education institutions, 
government and the private sector ). This corresponds to about 0.3% of the total workforce in 
Montenegro. Montenegro still suffers from br ain drain following the wars in the 1990s. The 
government has launched some measures to at tract young researchers, in particular PhD 
students, to the University of M ontenegro. A database on scientific diaspora  is also being 
established. Montenegro suffers fr om a lack of modern research  infrastructure and state-of-
the-art equipment which hampers its engageme nt in research activities and research 
cooperation with the EU.  
Since its association to the 7th Framework Programme  in January 2008, Montenegro has 
progressively increased its participation, w ith a focus on information and communication 
technologies, environment and food safety project s. Montenegro is actively participating in 
several FP7 regional projects which allows for the exchange of researchers and programmes 
with the countries in the regi on. Montenegro organises at regul ar intervals information and 
promotion events on research and innovation, some  of them together with the chamber of 
commerce, to encourage the private sector to become more involved.  
Montenegro is not engaged in nuclear research  and has not requested to become associated 
with the Euratom Framework Programme  for nuclear research. 
Montenegro has started to integrate into the European Research Area  (ERA). It has 
nominated delegate observers in most ERA governance bodies including in the European 
Research Area Committee (ERAC, ex CREST). Mont enegro participates as an observer in the 
Standing Committee on Agricult ural Research (SCAR). 
Montenegro has concluded science and tec hnology agreements with several neighbouring 
countries. 
Conclusion 
Montenegro has started to be involved in EU research policy, mainly through its association 
to the 7th Research Framework Programme. Monten egro’s strategy for research activities is 
largely in line with the EU research policy and c ontributes to the targets set at EU level in the 
context of the ERA. However, close monito ring of these targets and implementation of 
planned actions will be of key importance. Overall , if it continues its efforts, Montenegro 
should, in the medium term, have the capacity to  comply with the requi rements of the acquis. 
However, it will have to undertake additiona l efforts in strengthening human capital and 
infrastructure capacities for its effective partic ipation in research fr amework programmes and 
integration into the European Research Area. 
3.26. Chapter 26: Education and culture 
The acquis on education and culture consists mainly  of a cooperation framework made up of 
programmes and the open method of coordinati on (OMC), which aims at convergence of 
national policies and attainment of shared obj ectives. In the field of education and youth, 
Member States need to ensure sound manage ment of decentralised EU programmes. The 
acquis  also requires Member States to facilitate the education of children of EU migrant 
EN 108  EN workers and to prevent discrimination against EU  nationals. In the fiel d of culture, the 2005 
UNESCO Convention on the protection and pr omotion of the dive rsity of cultural 
expressions, ratified by the EU, is a major component of the acquis . The EU also contributes 
to promoting European sporting issues. 
As regards the field of  education and training , Montenegro has initiated reforms with 
extensive legislative changes in the past few years. Laws on general,  preschool, primary, 
secondary, vocational, higher and adult edu cation were adopted or amended. A very 
ambitious roadmap has been esta blished, which aims to bring M ontenegro’s education system 
into line with European principles and de velopments by 2014. The main objective of the 
reforms is the modernisation of the educa tion system, with the focus on the design and 
structure of various education subsystems. Howe ver, the human and financial resources of the 
Ministry of Education and Science for the implementation of the reforms are limited and the target dates are highly unrealistic. The impact of the reforms and revised legislation cannot be 
evaluated as the timeframe is too short. 
A high enrolment level is reported in prim ary and secondary education. Montenegro 
participated in the 2006 PISA test assessing skills  of 15 year-old pupils and ranked 48th out of 
57 participating OECD countries . In order to converge with EU best practices, teaching 
methods will need to be further modernised. Legislation on ensuring inclusive education of 
vulnerable groups and children with special need s remain to be enforced more vigorously. 
The Montenegrin vocational education and tr aining (VET) system also needs to be 
modernised as it continues to face serious problems in delivering high-quality education and in responding to labour market  needs. Rather than ente ring the labour market, a high 
percentage of graduates from VET schools enrol in university. 
As a member of the Bologna process, Monten egro has already started reforms in higher 
education since 2003. However, improving quali ty assurance mechanisms and designing a 
national qualification framework re main the main challenges. Th e country has benefited from 
the Tempus programme supporting university reform.  
In the field of youth  policy, a national youth action plan was adopted by Montenegro in 2006. 
The strategy identifies nine pr iority areas (e ducation, employment, heal th, social inclusion, 
human rights, culture, leisure time, access to information and mobility, family) and is implemented via annual action plans. In Fe bruary 2010 the responsibility for youth policy 
implementation was assigned to a directorate fo r youth and sports, linked to the Ministry of 
Education and Science. However, it is too earl y to assess the impact of this measure and 
implementation capacity so far is limited. 
As regards the Directive on education of ch ildren of migrant workers, Montenegro’s 
legislation already covers most of its requirem ents. Montenegro will need to slightly amend 
its laws to ensure that EU citizens have access to the Montenegrin higher education system and are granted the same rights and conditions as Montenegrin nationals. 
In order to fulfil the preconditions for partic ipation in the decentralised EU programmes  in the 
fields of education and training and youth, the re levant authorities will need to develop its 
capacities for sound financial management and financial control. 
As regards culture , Montenegro ratified the 2005 UNE SCO Convention on the protection and 
promotion of the diversity of cultural expressions in  2008 and subscribes to  the objectives of 
the European Agenda for Culture. The 2008 Law on culture provides the general framework 
EN 109  EN for cultural policy, incorporating goals a nd principles promoted by the 2005 UNESCO 
Convention. Montenegro has a well developed st ate support system in the field of cultural 
activities and joined the EU’s Culture Programme (2007-2013) on 1 January 2010. It 
cooperates actively in cultural regional initiatives (e.g. Lj ubljana process, Council of 
Ministers of Culture of Southeast Europe). 
Conclusion 
Montenegro has started its preparati ons towards the alignment with the acquis  in the area of 
education, youth and culture. However, the coun try now needs to shif t its attention from 
policy design to implementation. Close monitoring of the implementation of reforms and ambitious targets set is necessary. Montenegro will need to significantly strengthen its administrative capacity in order to ensure sound financial management of the decentralised education programmes. Non-di scrimination of EU nationals within the Montenegrin 
education system will need to be ensured. Inclusive education of vulnerable groups and 
children with special needs de serves continued attention. Overall , if it continues its efforts 
Montenegro should, in the medium term, have th e capacity to comply with the requirements 
of the acquis in this area. 
3.27. Chapter 27: Environment  
EU environment policy aims to promote sustai nable development and protect the environment 
for present and future generations. It is based on the integration of environmental protection 
into other EU policies, preventive action, the polluter pays principle, fighting environmental 
damage at source and shared responsibility. The acquis  comprises over 200 major legal acts 
covering horizontal matters, water and air quality, waste management, nature protection, 
industrial pollution and risk management, chemi cals and noise. Ensuring compliance with the 
acquis  requires significant investment, but also brings significant benefits. A strong and well-
equipped administration at nati onal and local level is imperative for the application and 
enforcement of the acquis . 
The Constitution defines Montenegro as an ecologi cal state. It enshrines the key principles of 
sustainable development and environmental pr otection, provides for a universal right to a 
sound environment and makes it mandatory for ever yone, in particular the state, to preserve 
and improve the environment. The national en vironment programme (NEP) determines the 
key actions and priorities for environmental protection and for strengthening Montenegro’s 
legal and institutional framework.  
The basic legal framework for environmental protection is provided by the Law on the 
environment. However, the law is not fully impl emented as a series of  by-laws have not yet 
been adopted. Given the size of the environmental acquis  further efforts need to be made for 
timely approximation of legislation.  
Regarding the  institutional  and administrative framework  the newly established Ministry 
for Spatial Planning and the Environment has been responsible for environmental policy since 2009. The administrative capacities and staffing levels dealing with the environment are low. 
The Environmental Protection Ag ency (EPA), with a wide range of responsibilities in 
implementing and enforcing legislation, began operation in 2009. Water issues fall under the 
responsibility of the Ministry of Agriculture. Further efforts are needed in consolidating 
currently fragmented responsibilities for envi ronmental protection. A precise division of 
responsibilities between the minist ry, the EPA, other relevant mi nistries and local authorities 
EN 110  EN needs to be defined. Heavy reliance on temporar y staff and trainees and a high turnover of 
staff, as well as limited resour ces in both the ministry  and the EPA, raise concerns as to the 
overall capacity of these institutions to gua rantee continuity, sustainability and due 
accountability.  
A legal and institutional framework for inspections is in place. The EPA has an annual 
inspection and monitoring programme implem ented by inspection bodies at national and 
municipal level. However, the number of insp ections carried out remains limited. The number 
of prosecutions for breaches of environmental law is extremely low and no prosecution for 
major breaches has been complete d. A more effective system is  required. Overall enforcement 
levels are low, due to the lack of huma n and financial resources, low awareness of 
environmental compliance requirements, scatte red responsibilities an d poor coordination 
between relevant authorities, as well as weaknesses in prosecution and the judiciary. 
There is no overall environmental investment  plan. Priority needs to be given to 
environmental spending by national means,  to supplement inte rnational funding. A 
comprehensive national environmental investment  strategy needs to be prepared urgently.  
Public awareness  of environmental issues is starting to grow but public participation in 
environmental decision making and public acc ess to environmental information remains 
weak. Further efforts are needed to build a so lid partnership between government and civil 
society. There are some mechanisms for integr ating the environment into other policies, 
mainly at strategic document level, but their application in practice is limited.  
Regarding horizontal legislation , Montenegro has achieved a high level of alignment. 
Further efforts are needed to more closely a lign legislation relating to transboundary aspects 
of the environmental impact assessment and provisions relating to access to environmental information and access to justice. It is also essential to make environmental administrative 
and judicial procedures more e ffective in relation to  access to justice and public participation. 
Particular attention needs to be given to issues related to the Environmental Liability 
Directive, especially regarding prevention and remediation of environmental damage.  
Implementation and enforcement of legisla tion in this field require considerable 
strengthening. In particular, environmental imp act assessments, including due consideration 
of viable alternatives, need to be properly carried out wherever le gally required and proper 
coordination among different authorities as well as  with all stakeholders needs to be ensured.  
Montenegro is progressing in its alignment with air quality legislation. The Air Quality Law 
has been adopted, but implementing measures a nd air quality standards have not been drawn 
up yet. Montenegro needs to identify conurba tions and zones, establish an air quality 
monitoring programme, plans and a database and make relevant data available to the public. 
The EPA’s capacity in the area of  air pollution, monitoring, inve ntories, etc. needs to be 
strengthened.   
Waste management is one of Montenegro’s biggest problems. Despite some progress, 
alignment with the European standards is at a very early stage and needs speeding up 
considerably. The waste management law and the waste management master plan were 
adopted in 2008, but the law only entered into force in January 2010. Implementing 
legislation has been adopted and the future inte grated waste management system is being set 
up, including the preparatory wo rk on developing six regional landfills. Currently there is 
only one modern sanitary landfill, while most waste is disposed of in open landfills or multiple unauthorised sites. There are no incineration or composting plants and few recycling 
EN 111  EN facilities. The lack of suitable infrastructure  hampers adequate waste disposal, including of 
hazardous waste. The establishment of an effici ent system for data collection, analysis and 
reporting is essential for sound  policy making. Particular atte ntion needs to be given to 
implementation of the waste management st rategy at local level. Administrative and 
enforcement capacity needs to be considerably st rengthened and investment s need to increase.  
The existing water quality  legislation provides a good basis for alignment with the acquis , 
although by-laws and implementing measures  are often missing. M ontenegro is quite 
advanced in alignment with the Water Fram ework Directive and its daughter directives. 
Further efforts are needed, however, as regards alignment with the Drinking Water Directive, 
the Urban Waste Water Treatment Directive a nd the Marine Strategy Framework Directive. 
Furthermore, implementation and enforcement of the water legislation needs to substantially 
improve: Montenegro will have to make signifi cant investments in the area of waste water 
collection and treatment as well as drinking wate r supply. It also needs to ensure a clear 
division of responsibilities and coherence between the action of all authorities involved in 
water management issues.  
Montenegro is well on track as regards alignment with the nature protection  policy and its 
initial preparations for estab lishment of the Natura 2000 netw ork. An increased effort is 
needed, however, to develop scientific inform ation and data required for the designation of 
sites. A biodiversity strategy with an action plan have been  adopted. Currently 20.75% of the 
territory is reported as protec ted either through national legi slation or in compliance with 
international obligations. However, illegal huntin g and logging in the pr otected areas as well 
as widely spread unauthorised construction, partic ularly in the coastal area, remain significant 
concerns. Implementation measures, and particular ly management of the protected areas, need 
to be significantly strengthened, as does capacity  building at all levels and ensuring proper 
coordination among public authori ties. Inspection measures and sanctions have not yet been 
adopted. Further awareness-ra ising efforts are needed. 
The Law on chemicals regulates the procedure for reporting and placing on the market new 
and existing chemicals , the procedure for assessing and evaluating the hazard arising from 
chemicals, the classification, packaging and labe lling of chemicals, imports, exports and other 
issues important for the protection of human health and the environment. It does not, 
however, cover exports and imports of danger ous chemicals. The Rotterdam Convention has 
not been ratified and alignment with the Biocid es Directive has not yet started. In order to 
achieve Montenegro’s plans to comply with  the REACH Regulation by 2011, work needs to 
be accelerated considerably. Furthermore, implementation is slow due to unclear and overlapping competences. Although competent author ities have now been designated for most 
of the chemicals directives, the introduction of implementation meas ures is at an early stage.  
As regards industrial pollution and risk management , -Montenegro has the necessary 
national legislation regarding Integrated Pollu tion Prevention and Cont rol (IPPC) installations 
and a clear plan for BAT (best available technique)-based permitting within a reasonable timeframe (existing installations to be perm itted until the end of 2015). Capacities of 
inspectorates should be strengt hened. Alignment with the Di rectives on industrial risks 
(Seveso II) and large co mbustion plants has not been achie ved and competent authorities for 
implementation have not been designated. Further progress is needed also in aligning with the 
Waste Incineration and Solven ts Emissions Directives.  
EN 112  EN The Law on the environment provides a basis for the application of environmental audit 
schemes  (EMAS) and eco-labelling . However, further alignment of legislation with the 
acquis  is needed and structures have to be  put in place for proper implementation.  
As regards climate change , Montenegro has ratified the K yoto Protocol. Montenegro is a 
non-Annex I Party to the United Nations Framework Convention on climate change 
(UNFCCC) and has no greenhouse gas (GHG) emission limitation/ reduction target. At this 
point Montenegro is not ready to take on a legally binding GHG emission limitation or 
reduction commitment under the post-2012 climat e regime. It has not submitted a national 
communication (NC) under the UNFCCC, but development of the first NC is under way.  
Montenegro is striving for gradual harmonisation and implementation of the climate change 
acquis  and will have to put a great deal of effo rt into implementing the climate and energy 
package setting a GHG emission reduction target for the EU.  
Currently, Montenegro is not able to meet  the GHG reporting oblig ations under Decision 
280/2004/EC on the monitoring mechanism. It prepared an inventory of greenhouse gas 
emissions for the years 1990 and 2003 and an es timation of GHG emissions in 2006 with 
external help, but a national sy stem for the development of a GHG inventory or projections is 
still missing. Montenegro has not  taken any steps so far to prepare the inclusion of its 
installations in the EU Emissions Trading Syst em (EU ETS). Montenegro will have to make a 
considerable effort in order to align with the acquis  for sectors outside the EU ETS. 
Montenegro is a party to the Montreal Protocol  on substances that deplete the ozone layer and 
has ratified all amendments to it. Montenegro  has to comply with less demanding phase-out 
schedules for the different groups of substances than the EU and its Member States and has a 
satisfactory level of complia nce with the Protocol.  
Administrative capacity as well as technical and financial res ources need to be strengthened 
considerably for Montenegro to be able to al ign with and implement all the requirements of 
the climate change legislation.  
As regards noise,  transposition has started, while implem entation is at an early stage.  
Civil protection , which falls under the responsibility of  the Ministry of the Interior, is 
regulated by the Law on protecti on and rescue. A national strategy for emergency situations is 
in place. Civil protection units have been establ ished in all municipalities but only 20% of the 
planned staff of 2,000 have been recruited an d equipped. The Law and the strategy provide 
for measures to be taken in the event of an environmental emergency. The aim is the identification of risk and vul nerability reducti on through sustained development and the 
creation of conditions for rapid reaction and rescue of persons and property. Montenegro 
introduced the European emergency number 112 and established in 2009  a national team for 
action in case of chemical, biological or nu clear accidents. It ha s signed international 
agreements on cooperation and exchange of information and is very active in the framework of the disaster preparedness and prevention ini tiative (DPPI) in South-Ea st Europe. It faces a 
particular threat of forest fires during summer and has developed some operational capacity in 
this field, establishing observation services covering all fore st regions. While some basic legal 
and administrative infrastructure is being put in place, the overall administrative and operational capacities remain particularly limited and will have to be further developed. 
Conclusion 
EN 113  EN While the basic elements of a legislative framew ork are in place, considerable efforts will be 
needed to fully align with the environmental acquis . Montenegro needs to speed up its 
strategic planning in all sectors and identi fy sustainable funding for implementation. The 
environment has to be integrat ed into other sectors more sy stematically, including at the 
policy implementation level. There are se rious weaknesses in implementation and 
enforcement that need to be addressed for the acquis  to be effectively implemented, in 
particular regarding EIAs. While projects and actions with an environmental dimension are 
being publicly consulted, a more genuine consul tation process which suffi ciently incorporates 
comments and suggestions received needs to be envisaged. Implementati on of legislation and 
particularly management of protected areas, ne ed to be significantly strengthened. Among 
others, a more careful development planning of  the coast that takes into account the unique 
natural values must be envisaged. Development of the comprehensive environmental monitoring and information system needs to be sped up. 
The environmental administration will need to be significantly strengthened to implement the 
EU environmental acquis.  Streamlining management of res ponsibilities currently fragmented 
between different ministries and bodies and ensuring proper horizo ntal and vertical 
coordination is needed. Particular efforts are need ed to ensure that local self-government units 
have the necessary resources to implement thei r responsibilities effec tively. Inspectorates and 
enforcement capacities need to be strengthened while cooperation with the judicial system 
needs to be reinforced.  
Overall , Montenegro will have to ma ke considerable and sustained efforts to align with and 
especially to implement and enforce the environmental acquis . It will be particularly 
important to create conditions for building th e necessary technical and human capacities and 
resources in this area within the next few y ears. Effective complian ce with EU legislation 
requiring a sustained high level of investment and considerable administrative efforts can only 
be achieved in the long term. Howe ver, given the challenge ahead efforts to align in this area 
need to be considerably speeded up. 
3.28. Chapter 28: Consumer and health protection 
The acquis on consumer protection covers the safe ty of consumer goods  as well as the 
protection of the economic intere sts of consumers in a number of specific sectors. Member 
States need to transpose the acquis into national law and to put in place independent 
administrative structures and enforcement powers that allow effective ma rket surveillance and 
enforcement. Appropriate judici al and out-of-court dispute resolution mechanisms, consumer 
information and education, and a role for consum er organisations should be ensured as well. 
This chapter also covers rules in the area of public health.  
The Stabilisation and Asso ciation Agreement  provides for enhanced cooperation in the area of 
consumer protection aimed at aligning the stan dards of consumer protection in Montenegro 
with those of the European Union, including through active consumer protection and efficient 
law enforcement.  
The overall responsibility for consumer protection  policy lies with the Ministry of Economic 
Affairs. Inspections to monitor compliance wi th the Law on consumer protection are carried 
out by the Ministry through its ma rket inspectors, other minist ries and administration bodies. 
Consumer policy is spelled out in the national consumer protection programme. A 
Commission consisting of representatives of various administrative bodies, consumer 
organisations and industries to monitor its im plementation has been established. There has 
EN 114  EN also been an arbitration board responsible fo r out-of-court settlement of consumer disputes 
since late 2008.  
Product safety -related issues  are regulated by the Law on general product safety. 
Montenegro’s legislation has b een broadly aligned with the Ge neral Product Safety Directive 
(GPSD) and the Food Imitating Products Directiv e. However, provisions included in acts 
adopted by the European Commission to implemen t the GPSD are not aligned. Inspection for 
product safety is shared between the Health In spectorate, the Ecological Inspectorate and the 
Market Inspectorate.  
Concerning non-safety related issues , the 2007 Law on consumer  protection is broadly 
aligned with the EU acquis  on unfair terms in consumer c ontracts, distance contracts, 
contracts negotiated away from business prem ises, misleading and comparative advertising, 
and the indication of product prices. Unfair co mmercial practices are only partially covered. 
Sectoral laws cover issues regulated by the Directives on sale of consumer goods and 
guarantees, on package travel and on timeshare s (the old Directiv e 94/47/EC). The new 
Timeshares Directive has not yet been addr essed by Montenegro. Distance marketing of 
consumer financial services is covered by the regulations on the securities market.  
Montenegro’s legislation has no t been aligned with the Consumer Credit Directive and the 
Directive on injunctions.  
While Montenegro has a basic institutional in frastructure for market surveillance regarding 
product safety, with competences shared between market, health and ecological inspectorates, 
there are serious problems of coordination am ong these bodies. There is no systematic 
approach to re-active and pro-active surveill ance. Although an interdepartmental working 
group on coordination was set up recently, ther e is no authority coordinating consumer 
product safety policy and no uniform approach to risk assessment in the area of product 
safety. Neither is there any testing for essent ial safety requirements (only administrative 
checks based on documents), while traceability of goods is not ensured as no mapping of the 
retail outlets has been established so far. 
National enforcement competences for consumer  rights are not fully defined. Enforcement 
and investigative tools are no t effective enough in preventi ng infringements of consumer 
laws. Inspection authorities do not have adequa te powers to take measures when consumer 
rights are breached, such as imposing sanctions. 
There are two consumer NGOs, which are cooper ating with the government but have limited 
impact on the substance. Information and awar eness activities are planned in the national 
consumer protection programme but activities so  far have been limited. Montenegrin society 
remains broadly unaware of consumers’ rights. 
Concerning public health , the overall aim of the EU’s policy is to improve health and prevent 
human illness and diseases. The EU acquis  in this area consists of a limited number of legally 
binding instruments and a larger body of non-binding measures and policy documents, as well as two international commitments on health.  
In this area, the overall responsibility in Mont enegro lies with the Mi nistry of Health, the 
authority in charge of health  policy, and the Public Health Institute, whose activities are 
aimed at preserving and improving the health of all citizens . The government strategy ‘Health 
Policies in Montenegro up to 2020’ aims to extend life expectancy, improve the quality of 
life, reduce health inequities a nd integrate Montenegro’s health system with the European and 
EN 115  EN global health development process. The developm ent of the health sector in Montenegro is 
guided by a Master plan for 2010 – 2013, which is br oadly in line with th e EU health strategy.  
E-health is used as a policy tool and is on its way to full integration within health policy. Full-
scale implementation remains outstanding as does active involvement of patients’ and health 
professionals’ associations. 
The legislation on tobacco  is partially aligned with the acquis . There is a national strategy for 
tobacco control and a law on limiting the us e of tobacco products was adopted in 2004. 
However, missing elements concern the sponsors hip of sports and similar events and the 
maximum levels of tar, nicotine and carbon m onoxide for export products. Generally, there is 
a need to closely monitor implementation of tobacco legislation. Sm oking is a persistent 
problem in Montenegro and implementation of the provisions regard ing limiting the use of 
tobacco in public spaces needs to be strengthened. 
The basic act regulating communicable diseases  in Montenegro is the Law on the protection 
of the population against communicable diseases and the Rulebook on reporting 
communicable diseases and hospita l infections. However, some case definitions for reporting 
communicable diseases, including clinical, la boratory and epidemiol ogical criteria, are 
missing. Legislation provides for reporting mechanisms which go beyond the existing 
epidemiological surveillance system in Mont enegro. Overall, the legal basis, national 
structures and resources are generally in pl ace and are being strengthened. However, the 
surveillance and response capacity is still limited, in particular regarding human and material resources.  
Concerning blood , tissues  and cells, legislation on blood is overall  aligned while legislation 
on tissues and cells is still at an early stage of development. Implementing measures in the 
field of blood transfusio n are still to be adopted, while admi nistrative and technical capacities 
need to be strengthened.  
Regarding mental health , Montenegro’s national strategy iden tifies a series of efforts needed, 
but the administrative capacity is in adequate to ensure its implementation. 
On cancer  prevention and control, Mont enegro is still at an early  stage of de velopment. A 
national programme on early detection of br east cancer was adopted  in June 2010. The 
Council recommendation on cancer screening is  still to be implemented. Reducing the 
harmful effects of alcohol, drugs and smoking ar e included among the specific goals of health 
policy up to 2020. There is a National Strategic Response to Drugs addressing the prevention 
of drug use, treatment and rehabilitation, as well as harm reduction. There is no dedicated 
policy document for the prevention of alcohol -related harm, but alcohol  is addressed in a 
range of broader health policie s and child/youth policies. Alc ohol is also addressed in the 
mental health strategy and as pa rt of the secondary prevention of  TB and diabetes. In the field 
of HIV/AIDS, Montenegro broadly has the nece ssary legal basis for pr evention and control. 
Montenegro’s efforts in the field correspond to  the broad lines of th e EU Communication on 
combating HIV/AIDS.  
Conclusion 
Montenegro has aligned its legisla tion with a signifi cant part of the acquis in the area of 
consumer protection. Overall , however, the country will have  to undertake additional efforts 
to achieve full alignment and to deliver on commitments already undertaken, substantial 
further efforts will have to be made, in partic ular in the field of unfair commercial practices 
EN 116  EN and by amending and fully implementing the La w on general product safety. Although some 
basic infrastructure for market surveillance is in place, the market surveillance system needs 
to be substantially improved in order to meet EU requirements. Further enhancements to the 
enforcement system for consumer rights are necessary. Support for consumer NGOs as well as awareness raising within the ge neral public need to be promoted. 
On health protection, while the country has made  many steps forward in the recent past and 
the basic administrative and legal infrastructure is in place, additional efforts are needed for it to be able to align with the acquis  and to implement it effect ively in the medium term. 
3.29. Chapter 29: Customs Union 
The acquis  in this sector consists of the EU Cu stoms Code and its implementing provisions; 
the Combined Nomenclature; the Common Customs Tariff, including trad e preferences, tariff 
quotas and tariff suspensions; and other customs-related legisla tion outside the scope of the 
Customs Code. Member States must ensure th at the necessary implementing and enforcement 
capacities, including links to the relevant co mputerised EU customs systems (e.g. tariff-
related systems, NCTS, ECS, ICS and EOS) are in place. Th e customs administration must 
also ensure adequate capacity to implement and enforce special rules laid down in related 
areas of the acquis  such as the provisions on extern al trade, health and security.  
The Stabilisation and Asso ciation Agreement (SAA) provides for establishment of a free trade 
area with the EU and the immediate or progressi ve removal of customs duties on a wide range 
of products. It places an obligation on Montenegro to adopt the Combined Nomenclature. It also provides for administrative cooperation on customs matters, and ru les of origin which 
have to be observed in order to benefit from the trade preferences. 
Concerning Customs legislation ,upon accession, Montenegro will need to ensure full 
implementation of all the EU customs-related legislation. The Combined Nomenclature (CN) 
is applied and the cla ssification rules are largely in line with the acquis  although classification 
practice is not always consistent.  
Montenegro applies a system of binding tariff in formation, which is similar to the EU system, 
but the service is not provided for free.  
Tariff quotas are currently manage d via the TARICG system, not daily, but on a first-come 
first-served basis at the moment  of acceptance of every single declaration for release for free 
circulation.  
Montenegrin legislation contai ns provisions similar to those in the EU Regulation on duty 
relief (EC 1186/2009) but on accession they will ha ve to be replaced in full by the EU 
provisions. Montenegro applies several administrative fees th at are not in line with the 
Stabilisation and Association Agreement and the EU acquis .  
The country implements preferential rules of origin and methods of administrative 
cooperation that largely reflect those used by the EU in its free trade agreements. Montenegro 
applies diagonal cumulation with the EU and other countries pa rticipating in the European 
Union’s Stabilisation and Association Process. 
The legislation in the field of intellectual prope rty rights is not fully in conformity with the 
EU customs enforcement legislation since, for ex ample, plant variety rights are not covered. 
EN 117  EN The customs procedures are aligned with the rule s of the Trade-related aspects of intellectual 
property rights (TRIPS) Agreement a nd are largely in line with the EU acquis . 
As regards cash controls, Montenegro’s legislation is not fully in line with the EU acquis . In 
particular, it does not lay down the necessary deta ils and procedures for taking cash in or out 
of the country, and penalties for failure to d eclare such movements, and lacks provisions on 
exchange of information with third countries.  
Concerning administrative and operational capacity , the Customs Administration of 
Montenegro has the legal and administrative st ructures in place and adequate resources to 
implement and enforce the customs legislati on. A high degree of autonomy is conferred on 
the regional and local departments, and the Internal Audit Unit helps ensuring uniform 
application of rules and procedures. However, in ternal control needs to be enhanced in order 
to effectively prevent and de tect corruption and misconduct. 
Post-clearance controls and risk analysis are widely used, but th e actual effectiveness of these 
procedures is unclear. The department in ch arge of post-clearance c ontrols needs to be 
strengthened in order to be able to systematically plan and operate a posteriori  controls 
compensating for reduced physical and documen tary checks. The Customs Administration 
needs to further encourage the use of simplifie d procedures in the framework of specific 
authorisations allowing customs clearance at the premises of operators so as to eliminate the 
current lack of a legal basis for such procedures. Montenegro needs to align its transit 
procedures in preparation for accession to the Common Transit Convention. 
The Customs Administration currently uses a Cu stoms Information System (CIS). The CIS is 
able to process customs declarations electronica lly, with the exception of  transit declarations. 
Yet there is no obligation on economic operators to use electronic data processing techniques. 
Data transmitted are not synchronised. The CIS checks the authenticity of declarations and 
data accuracy, while automated risk analysis is performed for import and release for free 
circulation. Regarding statistics, electroni c tariff and accounting systems, the Customs 
Administration collects statisti cal information on trade. Th e country has implemented its 
national TARIC system, used al so for the control of quotas. 
The Administration has adopted a business strategy for customs, a three-year action plan and 
an IT strategic plan. However, further action is  still needed in the preparation of technical 
specifications and software for customs IT systems.  
The department for IT and statistics of th e Customs Administrati on is responsible for 
developing the systems’ administ rative and operational capacity.  
Overall, Montenegro has progressed in custom s computerisation and is planning for future 
interconnectivity with trans-European customs IT systems. However, the country has limited 
resources for implementation. 
Conclusion The Customs legislation is partially aligned with the EU acquis . Further efforts are needed in 
a number of areas, such as management of quotas , intellectual property ri ghts, cash controls, 
security-related provisions  and the EU Customs Code. 
The administrative and operational capacity of Montenegro’s customs administration is 
adequate, thus ensuring that procedures and working methods are effectively implemented. 
However, to be able to address the future challe nges, it will need to be reinforced. Particular 
EN 118  EN attention needs to be given to interconnectivity and interoperability with the EU IT systems. 
Internal control needs al so to be enhanced in order to effectively prev ent and detect corruption 
and misconduct. 
Overall , Montenegro needs to address some challe nges in the area of legislative alignment 
and administrative capacity, but, if it continues its  efforts, it should, in the medium term, have 
the capacity to comply with the requirements of the acquis .  
3.30. Chapter 30: External relations 
The acquis in the field of external relations consists  mainly of directly binding EU legislation 
that does not require transposit ion into national law. In the area of humanitarian aid and 
development policy, an applicant country need s to comply with EU legislation and its 
international commitments and to ensure that it  has the capacity to participate in the EU’s 
policies. 
The Stabilisation and Association Agreemen t includes a core trade part establish ing a free 
trade area between Montenegro and the EU . It includes provisions requi ring the parties to act 
in accordance with the rules of the WTO or re levant international obl igations. Montenegro 
shall also enhance trade libera lisation within the We stern Balkans and w ith other countries 
involved in the enla rgement process. 
Upon accession, Montenegro will be bound by the common commercial policy . Montenegro 
will have to apply all the autonomous trade re gimes that the EU grants to certain third 
countries, including the Generalised System of Pr eferences (GSP). Montenegro will also have 
to terminate all its current preferential trade agreements with third countries and bring all 
other agreements, including non-preferential trad e agreements, into line with the obligations 
of EU membership. Moreover, Montenegro will become part y to the European Economic 
Area (EEA) and it will have to apply all EU international trade agreements.  
Montenegro is not yet a member of the World Trade Organisation  (WTO). However, it has 
concluded all except one bilate ral negotiation and has finalised the multilateral negotiations. 
In its WTO’s accession process Montenegro submitted its last schedule of commitments 
under the General Agreement on Trade in Se rvices (GATS) in December 2008, and both 
horizontal limitations and sector-specific commitm ents are generally in accordance with those 
undertaken by the EU. However, the final commitme nts will have to be verified when the last 
outstanding bilateral negotiation is concluded. Whether Montenegro will have to consider 
modifying or  withdrawing its WTO commitments upon accession to the EU depends on the 
final terms of accession to the WTO. 
The average Montenegrin mo st favoured nation (MFN) ad valorem tariff rate for agricultural 
products is 13.16%, for fish and fishery products 8.6%, and for i ndustrial goods 3.9 %, with an 
overall average of 5.9%. The EU average MFN ad valorem tariff rate for ag ricultural products 
is 9.74%, for fish and fishery products 10.02 %, and for industrial goods 3.75%, with an 
overall average of 4.83%. Upon accession to the EU , Montenegro will have to apply the EU 
Common Customs Tariff. 
Montenegro foreign trade Law and implemen ting bylaw include provisions on anti-dumping 
and countervailing measures. Upon accession, Montenegro will have to repeal national 
legislation related to its trade defence instrume nts and measures based on this legislation and 
apply the EU rules and measures. 
EN 119  EN Montenegro does not apply any GSP scheme. U pon accession Montenegro will need to apply 
the EU GSP scheme. 
Montenegro does not yet operate any formal export credits  scheme. Upon accession 
Montenegro will have to ensure that its short- term export credit insurance system is in line 
with EU competition rules. As far as medium- and long-term export credits are concerned, the 
country will need to align its legislation w ith EU legislation and the EU’s international 
obligations.  
Montenegro has legislation in place concerning dual-use  export controls, which is not yet 
fully in line with the acquis . Some elements of this legislat ion are different from Regulation 
428/2009.  
As regards free trade agreements  with third countries, Monteneg ro is a member of the Central 
European Free Trade Agreement (CEFTA). It has free trade agreements with Turkey and 
Russian Federation.  
Bilateral investment agreements  (BIT) subscribed by the former State Union of Serbia and 
Montenegro have been confirmed by Monteneg ro upon its independence.  Montenegro has 14 
BITs and currently is negotiating agreements of  the same type with several other countries. 
Some of the provisions included in Montenegro ’s BITs will need to be aligned with the acquis 
in conformity with the obligations of the Treaty on the Functioning of the European Union and relevant case-law. Some BITs are not in line with the acquis in so far as they do not 
provide for exemptions to free transfer of funds  relating to investment s between the signatory 
countries and feature pre-establishment nationa l treatment for third-country investors with 
respect to services. Montenegro has also signed three agreements on trade and economic 
cooperation and currently is negotiating agreemen ts of the same type with several other 
countries. These agreements would need  to be brought into line with EU acquis, upon 
Montenegro's accession to the EU 
With regard to administrative capacity, participation in the EU trade decision-making 
mechanisms and implementation and enforcement of the acquis will require strengthening of 
the Department for multilateral trade cooperation  and international economic relations in the 
Ministry of Economic Affairs. The coordination mechanism in place between various ministries needs to be further strengthened.  
As regards development policy and humanitarian aid policies , Montenegro is an aid 
recipient country and has so far not been in volved in any donor activities. There is no 
legislation on development policy and no rele vant administrative structure in place. 
Humanitarian contributions ar e decided on a case-by-case ba sis, without a legislative 
framework.  
Conclusion  
Overall , if it continues its efforts, Montenegro should, in the medium te rm, have the capacity 
to comply with the requirements of the acquis . In preparing for memb ership, Montenegro will 
need to ensure that its actions and commitme nts concerning international organisations are 
aligned and coordinated w ith those of the EU.  
It is important that Montenegro is aware of the obligations in respect of development and 
humanitarian policy, and it needs to work to establish capacity to fulfil the obligations of EU membership in this area. 
EN 120  EN 3.31. Chapter 31: Foreign, security and defence policy 
The common foreign and security policy (CFSP) and the common security and defence policy 
(CSDP) are based on legal acts,  including legally bi nding international agreements, and on 
political documents. The acquis consists of political declar ations, joint actions, common 
positions and agreements. Member States must be able to conduct political dialogue in the 
framework of the CFSP, align with  EU declarations, take part in  EU actions a nd apply agreed 
restrictive measures. Applican t countries are required to pr ogressively align with EU 
declarations, and to apply restrictiv e measures when and where required. 
Montenegro fully supports the efforts of the European Union to strengthen its role as a 
cohesive force in international relations and its ability to promote European interests and 
values on the international scene. Montenegro commits to full and active participation in the CFSP and the CSDP, as defined in the Treat y on European Union, by the date of accession. 
The Ministry of Foreign Affair s coordinates all activities related to foreign policy; its EU 
directorate is responsible for and has a coordinating role re garding the CFSP and CSDP. The 
administrative structures are small, but adequate: Montenegro has 21 embassies, 6 permanent missions and 2 consulates-general. The diplomatic  service consists of 238 civil servants in 
Podgorica (89) and abroad (149). In the EU accessi on process, the Ministry of Foreign Affairs 
aims to further develop its capacities (a one-t hird expansion of its staff is planned by 2012) 
and upgrade the organisation of its EU directorate. 
With regard to political dialogue , Montenegro has established close political consultations 
with EU Member States since it gained indepe ndence in 2006. Following the entry into force 
of the Stabilisation and Association Agreement  on 1 May 2010, a Stabilisation and 
Association Council was set up, providing an in stitutionalised framework for political 
dialogue. Montenegro has in most instances, when invited, aligned itself with Council 
decisions and EU declarations and demarches.  However, in April 2007 it concluded an 
agreement on Article 98 of the Rome Statute with the United States which is not in line with 
the EU position. Montenegro will have to change  legislation in this fi eld before its accession. 
There are no notable problems in Montenegro’s relations with other countries. However, there 
are 66 countries that have not yet recognised Montenegro since it gained independence in 
2006.  
The development of good neighbourly relations and regional cooperation is a very important 
feature of Montenegro’s fore ign policy. Monteneg ro participates actively in regional 
organisations involving the So uth-Eastern region of Europe and is chairing the Central 
European Initiative (C EI), the South-East European C ooperation Process (SEECP) and the 
Adriatic-Ionian Initiative (AII) in 2010.  
With regard to restrictive measures , Montenegro has implemented all United Nations Security 
Council restrictive measures and EU restrictive measures. It pl ans to adopt by the end of 2010 
a law on restrictive measures th at would regulate the application of such measures and the 
competences of specific stat e bodies in this field. 
In relation to non-proliferation  and strategy on weapons of mass destruction/small arms and 
light weapons (WMD/SALW), Montenegro particip ates in some, but not  all, international 
export control regimes and instruments concer ning the non-proliferatio n of weapons of mass 
destruction. It is very active in arms export.  It complies through national laws and control 
systems with international commitments on sma ll arms and light weapons, including the aims 
EN 121  EN of the EU strategy on SALW. Montenegro has al so communicated its intention to join the 
Wassenaar Arrangement on export controls fo r conventional arms and dual use goods and 
technologies. 
Regarding nuclear safeguards, Montenegro  has signed the Comprehensive Safeguards 
Agreement and its Additional Protocol with the IAEA. Montenegro is a member of the main 
non-proliferation treaties.  
With regard to cooperation with international organisations , Montenegro is a member of the 
UN, the Council of Europe, the OSCE and ot her main international organisations and 
agreements. Montenegro was invited to join the NATO Membership Action Plan (MAP) in December 2009.  
Montenegro has introduced the legal basis and practical arrangements necessary to comply 
with the Council decisions on information s ecurity, including on handling of classified 
information. Montenegro has concluded the Agreement on Security Procedures for the 
Exchange and Protection of Classi fied Information with the EU.  
On civil and military crisis management , Montenegro participates in international 
peacekeeping operations such as UNMIL, ISAF and UNFICYP. Since August 2010, 
Montenegro participates with three navy offi cers in the EU NAVFOR Atalanta peace mission 
in Somalia. The Montenegrin army consists of 1996 personnel and will grow by one fifth over 
the next three years. 
Conclusion 
Overall , assessment of Montenegro's foreign and s ecurity policy to date indicates that it 
should be able to fulfil its obligations under the CFSP and CSDP in the medium term, 
provided it takes the necessary legal and administrative measures and makes the necessary 
adjustments. 
3.32. Chapter 32: Financial control 
The acquis on financial control relates to the following policy areas: public internal financial 
control (PIFC) , which covers internationally agr eed standards and EU good practice on 
internal control across the entire public sector, and external audit , which covers the 
operational and financial independence of the ex ternal audit function (national audit office). 
PIFC is made up of three pillars: Financial Management and Control systems, functionally 
independent internal audit systems; and a Central Harmonisation Unit for developing 
methodologies and standards relating to the first two pillars. 
Management and control of EU funds are discu ssed in the other releva nt chapters (e.g. on 
agriculture and rural developmen t, regional policy, coordination of  structural instruments or 
fisheries). This chapter covers the more general aspects of internal cont rol and external audit 
of national funds. It also cove rs protection of the EU’s fi nancial interests, including 
administrative cooperation and criminal law protection (the PI F Convention and its 
protocols). Finally, the section on protection of the euro agains t counterfeiting deals with the 
first-pillar aspects of this issue. 
Montenegro is still at an ear ly stage in implementing its public internal financial control  
(PIFC) system. However it has adopted a strategy for the deve lopment of public internal 
control which maps out the future developm ent actions necessary. The legal framework, 
EN 122  EN including a law on PIFC and specific implementi ng legislation, is broadly in place. The PIFC 
law applies to all users of the national budget.  
Regarding financial management and control  (FMC), a Rulebook on the manner and 
procedure for establishing and implementing FM C in the public sector has been adopted. 
Also, amendments have been introduced to the Treasury Directions on the handling of 
financial transactions, in order to co ordinate them with the PIFC law. 
Considerable training and awareness-raising efforts will be required to explain the new 
control framework and encourage positive acceptance by public sector managers and staff. 
The PIFC Law stipulates that internal audit is to be performed in accordance with national 
regulations and international st andards. Various pieces of sec ondary legislation on internal 
audit are in place. Internal audit units have not yet been established in all budget users where there is a legal obligation to do so. 
While some specialised internal audit training has been delivered, Montenegro still has to 
develop a training and certificat ion programme to allow staff to obtain certification as a public 
internal auditor. Montenegro is encouraged to  recruit an adequate number of persons to 
internal audit posts in order that in ternal audit can be fully operational. 
The existing internal audit units perform complia nce audits and systems audits. Further effort 
will be required in order to enhance cap acity for undertaking performance auditing. 
A central harmonisation unit  (CHU)  has been established in the Ministry of Finance for the 
development and coordination of PIFC throughout the public sector. The principal role of the 
CHU is to draft legislation, manuals, methodologies  and standards; to prepare, organise and 
carry out training; and to monitor and report on PIFC implementation.  
Regarding external audit , the State Audit Institution (SAI) of Montenegro is making progress 
with institutional reform, but does not yet fu lly comply with international standards. 
Montenegro has established an Audit Authority (AA) for the control of EU funds, as a body 
within the SAI. This jeopardises the operational independence of the SAI in exercising its role 
as external auditor of the executive (of which the Audit Authority is a part). Montenegro has 
outlined that this is, however, a temporary situation and it intends to separate the Audit Authority from the State Audit Institution before the end of 2011. In any case, full independence will need to be en sured before the management of  EU funds can be transferred 
to Montenegrin authorities. ( see also chap 22 )  
Article 144 of the Constitution of Montenegro  contains provisions on the State Audit 
Institution and defines it as an  independent body and the suprem e national audit authority. It 
also provides that it is to repor t to parliament. In addition, exte rnal audit is performed on the 
basis of the Law on the State Audit Institution, which established the SAI as an independent 
body for the objective control of the spending of  budget funds and the management of state 
property. 
The SAI Law provides for a wide-ranging audit remit and for regularity, effectiveness and 
efficiency audits. The SAI has unrestricted access to information, it has the right and 
obligation to report on  its work and it is free to publish its repor ts. Its annual report is 
submitted to parliament. The SAI is currently dr awing up a five year development strategy, in 
order to guide further reform. 
EN 123  EN The scope of the PIFC Law encompasses, inter alia , Montenegrin ‘budget users’. The State 
Audit Institution is defined in the Budget Law as being a ‘budget user’ and it therefore falls 
under the scope of the PIFC Law. However, the sc ope of the PIFC Law needs to be limited to 
governmental bodies and not independent organisa tions such as the SAI. These independent 
organisations need to follow the general PIFC principles, but should be  regulated separately. 
The SAI budget is sent to the Mi nistry of Finance for submission to parliament as part of the 
state budget. Should the Ministry of Finance amend the draft budget received, this could 
interfere with the financial independence of the SAI. 
The Lima Declaration on international standards for supreme audit institutions contains a 
provision that the independence of the members of  the institution should be guaranteed in the 
constitution. However, members of the SA I do not have functional immunity from 
prosecution for any act that results from the normal discharge of their duties.  
The overall need for SAI independence, in lin e with the third principle of the Mexico 
Declaration on the independence of supreme audit institutions, represents part of the formal 
benchmarking criteria for this chapter during any future accession negotiations. As such, 
Montenegro does not meet the crit eria regarding external audit. 
Finally, Montenegro needs to ensure, through a strategic external audit plan that all budget 
entities are regularly subject to audit. 
In the fields of protection of the EU’s financ ial interests and protectio n of the euro against 
counterfeiting, Montenegro needs to pass relevant legislation proving that it is able to enforce 
legislation directly applicable after accession.  Moreover, it needs to  show a record of 
administrative cooperation with the Commissi on’s Anti-fraud Office, OLAF. Finally, legal 
and administrative provisions need to be in pl ace to guarantee the eff ective protection of the 
euro against counterfeiting. 
Montenegro indicates that its na tional penal legislation already c ontains many elements of the 
PFI legislation (Convention on the protection of the EU’s financia l interests and its protocols). 
The information provided in the questionnaire  submitted is comprehensive, including 
obligations and procedures with regard to the treatment of cases of suspected fraud and other 
irregularities affecting national or internationa l financial resources, the definitions of active 
and passive bribery, penalties, li ability of legal entities, abuse of  official status , various types 
of fraud, smuggling, money laundering, etc.  
However, in order to properly analyse the cu rrent situation and suggest further steps for 
reinforcing Montenegrin criminal legislation to  protect the EU’s financial interests, the 
Commission needs to be supplied with a reliable transl ation of the criminal  code and of the 
criminal procedure code. Monteneg ro needs to establish continuous  bilateral contacts with the 
Commission in order to provide such in-depth analysis of th e national criminal provisions 
considered to implement the PIF obligations. 
There are several authorities in place relevant to the protection of the EU’s financial 
interests  and the fight against fraud; all have a legal basis describing their scope of 
competencies. Montenegro now needs to set up an  effective and efficient coordination service 
(AFCOS) to guarantee the fulfilment of obligati ons arising from Article  325(3) of the TFEU 
and application of the provisi ons of Regulation (EC) No 2185/96 concerning on-the-spot 
checks and inspections carried out by the Commi ssion, in particular the obligation to provide 
assistance to Commission inspectors from  the day of accession at the latest. 
EN 124  EN Montenegro’s current legislati on covers protection of  the euro against counterfeiting, but only 
to a certain extent. For further alignment of Mo ntenegro’s legislation with Council Regulation 
(EC) No 1338/2001 laying down measures necessary for the protection of the euro against 
counterfeiting, the Commission should be supplied with a reliable translation of the criminal 
code and other laws and re gulations on the subject. 
Further progress also needs to be  made in respect of the roles of national authorities in the 
detection, analysis and proce ssing of counterfeit currency.  
Conclusion 
Montenegro is at an early stage in th e process of aligning itself with the acquis  relating to the 
requirements under this chapter, but in the area of PIFC has developed well. 
Montenegro is now entering th e key phase of implementing th e PIFC legislation. Attention 
needs to focus on developing an understanding of  greater accountability within line ministries 
and other budget beneficiaries. Considerable tr aining and awareness-raising efforts will be 
required in order to embed the new control envi ronment and the new culture in terms of the 
way in which public finance is managed and implemented. 
The establishment of the Audit Authority within  the SAI jeopardises SA I independence and is 
against international standards. The proposed strategic developmen t plan is needed to further 
help the SAI to strengthen its institutional and staff capacities. 
The Commission welcomes Montenegro’s intention to establish an AFCOS system in order to 
allow efficient and effective coordination of  operational cooperation between respective 
national authorities and the Commission as well as between the national authorities themselves.  
Montenegro uses the euro as legal tender.  This makes full compliance with the EU acquis  in 
the area of the protection of the euro ag ainst counterfeiting an  urgent priority. Overall , 
Montenegro will have to make considerable and sustained efforts to align with the acquis  and 
to implement it effectively in the medium term.  
3.33. Chapter 33: Financial and budgetary provisions 
This chapter covers the rules concerning the fi nancial resources necessa ry for funding the EU 
budget (‘own resources’). These own resources ar e made up mainly of contributions from 
Member States based on traditional own res ources deriving mainly from customs duties and 
sugar levies; resources based on VAT; and re sources based on the level of GNI (gross 
national income).  
The acquis  under this chapter co nsists of EU legislation th at is directly binding on the 
Member States and does not require transpositio n into national law. However, all necessary 
steps should be taken to ensure, from accession, full and correct application of the rules on own resources. 
The basic principles and institutions fo r the underlying policy areas shaping the own 
resources  system are in place in Montenegro. A national VAT  system is in operation, 
customs duties are levied on imports, and nati onal accounts and GDP are based on ESA95 
standards. GNI  is not yet compiled by the National Statistical Institute. Further progress is 
EN 125  EN needed for full implementation of the ESA 95 st andards to ensure that the GNI resource is 
measured appropriately. 
As regards operational management of the own resources system, Montenegro will need to 
ensure, in due course, the human and administrative resources  necessary to apply the EU 
rules concerning payments to the EU budget. Member States must have appropriate administrative capacity to coordinate adequately  and ensure correct forecasting, calculation, 
accounting, collection, payment and control of own resources. 
Impact  
Given its GDP level, the impact of Monteneg ro’s accession on the EU budget is expected to 
be limited. This applies both in terms of its lik ely receipts under the va rious EU expenditure 
programmes as well as its expect ed contribution to the EU budget based on application of the 
own resources rules. 
Conclusion  
There are no significant divergences between the systems in Montenegro and the EU in terms 
of the basic principles and institutions in th e policy areas underlying application of the own 
resources rules. Overall , if it continues its efforts, Mont enegro should, in the medium term, 
have the capacity to comply with the requirements of the acquis . 
3.34. General evaluation 
The ability of Montenegro to assume the ob ligations of membership has been evaluated 
according to the following indicators: 
– the obligations set out in the Stab ilisation and Association Agreement; 
– progress with adoption, implementa tion and enforcement of the EU acquis . 
Montenegro has overall smoothly implemented the obligations under the Stabilisation and 
Association Agreement. However, there have b een some gaps in certain areas (state aids, 
transit traffic).  
Montenegro adopted in 2008 a National Programme  for Integration, which is a comprehensive 
and ambitious plan providing for the approxi mation of national legislation to the EU acquis.  
Important progress in adopting le gislation aligned with the EU acquis , particularly in some 
areas of the internal market, trade-related provisions, customs and taxation has been made. 
However the country faces major challenges in implementing and enforcing legislation. 
Administrative and judicial cap acities remain overall limited and the country will need to 
make sustained efforts to strengthen them in orde r to assume the obligations of membership in 
the medium-term. 
If it continues its efforts Monten egro should, in the medium term , have the capacity to comply 
with the requirements of the acquis  in the following fields: 
- Taxation - Enterprise and industrial policy 
EN 126  EN - Science and research  
- Education and culture - Customs union - External relations  - Foreign, security and defence policy - Financial and budgetary provisions Montenegro will have to undertake additional efforts to align with the acquis  and to 
implement it effectively in the medium term in the following fields: 
- Freedom of movement for workers - Right of establishment and freedom to provide services - Free movement of capital - Public procurement - Company law  - Competition policy - Financial services - Information society and media  - Transport policy - Energy  - Economic and monetary policy - Trans-European networks - Consumer and Health Protection Further adjustments of the legal and institutional framework and in particular strengthening of 
administrative and implementation capacitie s are needed in the above areas. 
Montenegro will have to make considerable and sustained efforts to align with the EU acquis  
and to implement it effectively in the medium term in the following fields: 
- Free movement of goods 
- Intellectual property law 
- Agriculture and rural development - Food safety, veterinary and phyto-sanitary policy 
EN 127  EN - Fisheries  
- Statistics - Social policy and employment - Regional Policy and coordinati on of structural instruments 
- Judiciary and fundamental rights  - Justice, freedom and security - Financial control Considerable adjustments of the legal and institutional framework and significant 
strengthening of administrativ e and implementation capacities are needed in these areas. 
Regarding environment, further coordinated and significant efforts will be needed to align 
with the EU acquis  and to implement it effectively.  These should include substantial 
investments and strengthening ad ministrative capacity for the enforcement of legislation in 
order to achieve compliance on the most importa nt issues, including climate change, in the 
medium term. Full compliance with the acquis  could be achieved only  in the long term and 
would necessitate increased levels of investment. 
 
EN 128  EN Statistical Annex  
STATISTICAL DATA (as of 14 October 2010)            
Montenegro  
            
Basic data Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Population (thousand)  612 615 617 619 621 623 624 625 628 630 
Total area of the country (km²)  13 812 13 812 13 812 13 812 13 812 13 812 13 812 13 812 13 812 13 812 
            
National accounts Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross domestic product (GDP) (million national currency)  1 066 1 295 1 360 1 510 1 670 1 815 2 149 2 681 3 086 2 981 
GDP (million euro)  1 066 1 295 1 360 1 510 1 670 1 815 2 149 2 681 3 086 2 981 
GDP (euro per capita) 1) 1 750 2 113 2 208 2 435 2 684 2 912 3 443 4 280 4 908 4 720 
GDP (in Purchasing Power Standards (PPS) per capi ta)  : : : : : 6 900.0 8 500.0 10 000.0 10 700.0 10 200.0 
GDP per capita in PPS (EU-27 = 100)  : : : : : 30.7 35.9 40.2 42.6 43.2 
Real GDP growth rate (growth rate of GDP volume, national curr ency, % change on previous year)  : 1.1 1.9 2.5 4.4 4.2 8.6 10.7 6.9 -5.7 
Employment growth (national accounts, % change on previ ous year)  : : -19.9e -8.9e 2.7e -11.4e -5.0 -11.7 : : 
Labour productivity growth: GDP growth per person employed (% change on previous year)  : : 21.8 11.4 1.7 15.6 13.6 22.4 18.1 :  
Real unit labour cost growth (national accounts,  % change on previous year)  : : : : : : : : : : 
Labour productivity per person employed (GDP in PPS per per son employed, EU-27 = 100)   : : : : : : : : : : 
Gross value added by main sectors (%)                      
Agriculture and fisheries  12.4 11.9 12.2 11.6 10.9 10.4 10.1 9.2 9.3 10.0 
Industry  19.2 20.7 20.0 19.2 18.7 17.1 16.0 13.6 13.4 13.6 
Construction  4.3 3.9 4.0 3.4 3.5 3.6 4.3 7.3 7.7 6.5 
Services  64.1 63.4 63.8 65.8 66.9 68.9 69.5 70.1 69.6 69.9 
Final consumption expenditure, as a share of GDP (%)  91.9 100.2 105.8 101.0 99.4 99.8 104.2 108.5 113.8 106.2 
Gross fixed capital formation, as a share of GD P (%)  16.9 17.5 14.6 13.3 17.0 18.0 21.9 32.3 38.3 26.7 
Changes in inventories, as a share of GDP (%)  5.5 5.9 4.1 2.1 -0.4 -0.3 3.6 1.5 2.3 0.4 
Exports of goods and services, relative to GDP (%)  36.8 38.4 35.4 30.6 42.0 43.6 49.4 44.4 39.6 32.1 
Imports of goods and services, relative to GDP (%)  51.1 62.0 59.9 47.0 58.1 61.1 79.1 86.7 94.0 65.4 
            
Industry Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Industrial production volume index (2000=100)  100.0b 99.0 100.0 102.0 116.0 114.0 115.0 115.0 113.0 77.0 
            
Inflation rate Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Annual average inflation rate (CPI, % change on previous year)  : : : : : : : : 7.4 3.4 
 
EN 129  EN             
Balance of payments Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Balance of payments: current account total (million euro)  : : -175 -102 -120 -154 -531 -1 061 -1 564 -896p 
Balance of payments current account: trade balance (million euro)  : : -433 -359 -416 -514 -849 -1 574 -2 082 -1 371 
Balance of payments current account: net services (million euro)  : : 100 112 148 196 197 439 399 385 
Balance of payments current account: net in come (million euro)  : : 76 88 86 18 31 15 46 5 
Balance of payments current account: net current  transfers (million euro)  : : 83 58 62 147 90 59 73 85 
of which government transfers (million euro)  : : : : : 6 7 2 9 5 
Net foreign direct investment (FDI) (million euro)  : : 76 39 51 381 467 558 552 911 
Foreign direct investment (FDI) abroad (million euro) 2) : : 0 -5 -2 -4 -26 -115 -74 -33 
of which FDI of the reporting economy in EU-27 count ries (million euro)  : : 0 0 -1 -3 -78 -72 -58 -74 
Foreign direct investment (FDI) in the reporting economy (million euro) 2) : : 76 44 53 384 493 673 625 944 
of which FDI of EU-27 countries in the report ing economy (million euro)  : : 73 32 38 319 377 527 430 854 
            
Public finance Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
General government deficit/surplus, relative to GDP (%)  : : : -2.4 -2.0 -2.0 2.9 6.6 -0.4 -3.5 
General government debt relative to GDP (%)  : : : : : : : : : : 
            
Financial indicators Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Gross foreign debt of the whole economy, relative to GDP (%)  : : : : : : : : : : 
Gross foreign debt of the whole economy, relative to total exports (%)  : : : : : : : : : : 
Money supply: M1 (banknotes, coins, overnight dep osits, million euro) 3) : : : 285 291 351 484 592 512 : 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 4) : : : 403 437 615 1 099 1 557 1 209 : 
Money supply: M3 (M2 plus marketable instruments,  million euro) 5) : : : 494 547 867 1 587 2 728 2 339 : 
Total credit by monetary financial institutions to resi dents (consolidated) (million euro)  : : 125 199 279 374 843 2 213 2 754  2 358 
Interest rates: day-to-day money rate, per annum (%)  : : : : : : : : : : 
Lending interest rate (one year), per annum (%)  : : : : : 12.1 10.3 9.3 9.4 9.4 
Deposit interest rate (one year), per annum (%)  : : : : : : : 3.3 4.1 3.9 
euro exchange rates: average of period - 1 euro = … nati onal currency 6) : : : 1.000 1.000 1.000 1.000 1.000 1.000 1.000 
Effective exchange rate index (2000=100)  : : : : : : : : : : 
Value of reserve assets (including gol d) (million euro)  : : 55 50 60 173 329 490 337 397 
            
External trade Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Value of imports: all goods, all partners (million euro)  : : : : : 974.3 1 482.7 2 317.8 2 527.2 1 652.2 
Value of exports: all goods, all partners (million euro)  : : : : : 460.6 627.5 600.8 433.2 287.9 
Trade balance: all goods, all partners (million euro)  : : : : : -513.7 -855.2 -1 717.0 -2 094.0 -1 364.3 
Terms of trade (export price index / impor t price index)  : : : : : : : : : : 
Share of exports to EU-27 countries in value of total exports (%)  : : : : : 53.5 62.2 71.1 61.3 48.3 
Share of imports from EU-27 countries in value of total imports (%)  : : : : : 45.3 45.5 35.7 41.2 37.8 
            
Demography Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Natural growth rate: natural change (births minus deaths) (p er 1000 inhabitants)  6.1 5.5 4.8 4.3 3.4 2.4 2.5 3.0 4.1 : 
Infant mortality rate: deaths of children under one year of age per 1000 live births  11.1 14.6 10.8 11.0 7.8 9.5 11.0 7.4 7.5 5.7 
Life expectancy at birth: male (years)  71.1 71.4 70.9 70.4 71.0 70.4 70.7 71.2 71.2 71.7 
Life expectancy at birth: female (years)  76.3 76.5 75.7 74.9 75.3 74.9 74.8 76.1 76.1 76.6 
 
EN 130  EN             
Labour market Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Population (15-64): total of population aged 15-64 (thousand)  : : : : : 431.2 430.7 428.6 431.6 434.3 
Population in economic activity (1 5-64): total of population aged 15- 64 that is economiclly active 
(thousand)  : : : : : 254.3 251.5 261.5 264.2 262.1 
Total employment (15-64): total of population aged 15-64 t hat is employed (thousand) 7) 181.8 176.6 177.6 168.5 187.3 176.5 176 .7 210.7 219.4 211.7 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 7) 60.4 57.1 59.1 58.9 51.7 59.0  58.4 61.0 61.2 60.3 
Employment rate (15-64): share of population aged 15-64 in empl oyment (%) 7) 38.5 37.1 37.7 36.2 37.4 40.9 41.0 49.2 50.8 48.7 
Employment rate male (15-64) (%) 7) 46.2 45.6 46.6 44.5 46.5 46.2 47.8 56.6 58.3 56.0 
Employment rate female (15-64) (%) 7) 30.6 29.0 29.0 28.1 28.8 35.6 34.8 41.9 43.5 41.6 
Employment rate of older workers (55-64): share of population aged 55-64 in employment (%)  : : : : : : : : : : 
Employment by main sectors (%)                      
Agriculture  3.4 3.1 3.0 1.8 10.9b 8.6 6.8 8.1 7.6 6.5 
Industry  22.4 25.8 26.0 25.7 16.5b 16.3 14.8 13.8 15.3 14.0 
Construction  3.5 2.1 2.1 2.0 3.4b 2.9 4.7 3.8 6.1 6.7 
Services  70.8 69.1 68.8 70.6 69.2b 72.1 73.7 74.3 71.0 72.8 
Unemployment rate: share of labour force that is unemployed (%)  19.3 21.2 20.7 22.7 27.7 30.3 29.6 19.3 16.8 19.1 
Share of male labour force that is unemployed (%)  : : : : : : : 18.1 15.9 18.0 
Share of female labour force that is unemployed (%)  : : : : : : : 20.9 17.9 20.4 
Unemployment rate of persons < 25 years: share of labour force aged <25 that is unemployed (%)  : : : : : : : : : : 
Long-term unemployment rate: share of labour force that is unemployed for 12 months and more (%)  : : : : : : : : : 16.7 
            
Social cohesion Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Average nominal monthly wages and salari es (national currency)  181.0 211.0 149.1 173.9 195.3 213.1 246.0 338.0 416.0 463.0 
Index of real wages and salaries (index of nom inal wages and salaries divided by the CPI) 
(2000=100)  100.0 91.6 109.7 119.3 130.9 139.7 156.4 179.9 195.2 : 
Early school leavers - Share of population aged 18 -24 with at most lower secondary education and 
not in further education or training (%)  : : : : : : : : : : 
            
Standard of living Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Number of passenger cars per 1000 population  185.3 161.0 166.8 171.8 176.1 190.9 244.7 285.6 298.5 284.0 
Number of subscriptions to cellular mobile telephone se rvices per 1000 population  : 639.6 775.5 674.4 778.7 872.0 1 127.5 1 097 .9 1 611.5 : 
            
Infrastructure Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Density of railway network (lines in operation, per 1000 km²)  18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 
Length of motorways (thousand km)  : : : : : : : : : : 
            
Innovation and research Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Spending on human resources (public expenditure on educ ation in % of GDP)  : : : : : : : : : : 
Gross domestic expenditure on R&D in % of GDP  : : : : : : : : : : 
Percentage of households who have Internet access at home (%)  : : : : : : : : : : 
            
Environment Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100)  : : : : : : : : : : 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP)  : : : : : : 493.8 384.4 436.9e : 
Electricity generated from renewable sources in % of gross electricity consumption  : : : : : : : : : : 
Road share of inland freight transport (% of tonne-km)   : : : : : : : : : : 
 
EN 131  EN : = not available 
p = provisional value e = estimated value 
1) The data are without Financial Intermediat ion Services Indirectly M easured (FISIM). FISIM is calculated separately and at th e total level of GVA. Value of FISIM for 2000 is -1622 (in 1000 euro). Value of 
FISIM for 2001 is -1885 (in 1000 euro). Value of FISIM for 2002 is  -2700 (in 1000 euro). Value of FISIM for 2003 is -2119 (in 1 000 euro). Value of FISIM for 2004 is -1353 (in 1000 euro). Value of FISIM for 
2005 is -1842 (in 1000 euro). Value of FISIM for 2006 is -4118 (in 1 000 euro); mid-year estimate of  population used to calculat e per capita values. 
2) The balance of payments sign conventions are used. For FDI abroad a minus sign means  investment abroad by the reporting econ omy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the repo rting economy an entry without sign means that investment into  the reporting economy exceeded di sinvestment, while a minus sign 
indicates that disinvestment exceeded investment. 3) As of 31 December. Instead of standard M1, data  under national definition of M0 are provided. 
4) As of 31 December. Instead of standard M2, data under the nat ional definition of M11 are provided. The monetary aggregate M1 1 comprises M1 increased by the Central Government’s demand deposits 
in EUR and other currencies. The monetary aggregate M2 includes M1 and the non-banking sector’s time deposits with banks, in EU R and other currencies, excluding deposits of the Central Government. 
5) As of 31 December. Instead of standard M3, data under the national definition of M21 are provided. Monetary aggregate M21 co mprises M2 increased by the Central Government’s time deposits in EUR 
and other currencies. 
6) No official national currency exis ts. Euro is the currency in use. 
7) Age group refers to persons aged 15 or more y ears until 2004; from 2005 onwards age group 15-64 is used. 
8) Agricultural area includes: arable l and, area under pastries, fishponds and ponds. 
9) Number of livestock in 1000; includi ng enterprises, cooper atives and households. 
10) Calculated net quantity in 1000 tonnes; in cluding enterprises, c ooperatives, and households. 
11) Including households, ent erprises and cooperative
 
             
Energy Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Primary production of all energy products (thousand TOE)  : : : : : : 982 795 1 136 : 
Primary production of crude oil (thousand TOE)  : : : : : : : : : : 
Primary production of hard coal and lignite (thousand TOE)  : : : : : : 982 795 1 136 : 
Primary production of natural gas (thousand TOE)  : : : : : : : : : : 
Net imports of all energy products (thousand TOE)  : : : : : : -49 9 -25 : 
Gross inland energy consumption (thousand TOE)  : : : : : : 933 804 1 111 : 
Electricity generation (thousand GWh)  2.7 2.5 2.3 2.7 3.3 2.9 3.0 2.1 2.8 2.8 
            
Agriculture Note 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Agricultural production volume index of goods and services (producer  prices, previous year=100)  95.0 107.0 106.0 101.0 104.0 9 9.0 102.0 89.0 : : 
Total utilised agricultural area (thousand hectare) 8) 518e 518e 518e 518e 518e 517e 517 516 516 516 
Livestock: cattle (thousand heads, end of period) 9) 179e 178e 183e 175e 169e 118 115 109 106 101 
Livestock: pigs (thousand heads, end of period) 9) 19e 21e 22e 24e 27e 11 13 10 10 12 
Livestock: sheep and goats (thousand heads, end of period) 9) 293e 244e 241e 252e 254e 255 249 222 209 200 
Production and utilisation of milk on the farm (total  whole milk, thousand tonnes) 10) 197e 194e 198e 203e 209e 186 178 173 160  152 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 11) 3e 4e 5e 4e 3e 3e 3 2 3 3 
Crop production: sugar beet (thousand tonnes, har vested production)  : : : : : : : : : : 
Crop production: vegetables (t housand tonnes, harvested production)  : : : : : : : : : :