COMMISSION STAFF WORKING DOCUMENT Analytical Report     accompanying the  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL  Commission Opinion on Montenegro's application for membership of the European Union   {COM(2010) 670 final}
Date: 2010-11-09
Institutions: European Commission
Subjects: EC opinion, Montenegro, accession criteria, accession to the European Union, impact study

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EUROPEAN COMMISSION 

Brussels, 9.11.2010 
SEC(2010) 1334 final 

COMMISSION STAFF WORKING DOCUMENT 

ANALYTICAL REPORT  

accompanying the 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Commission Opinion on Montenegro's application for membership of the European 
Union 

{COM(2010) 670 final} 

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  EN 

 
 
  
 
 
 
 
 
 
 
TABLE OF CONTENTS 

A. 

a) 

b) 

c) 

B. 

1. 

Introduction .................................................................................................................. 4 

Application for membership ........................................................................................ 4 

Relations between the EU and Montenegro................................................................. 5 

Contents of the Analytical Report................................................................................ 8 

Criteria for membership ............................................................................................... 8 

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. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

Human rights and the protection of minorities .......................................................... 23 

Regional issues and international obligations ............................................................ 31 

General Evaluation..................................................................................................... 33 

Economic Criteria ...................................................................................................... 36 

Economic Developments ........................................................................................... 36 

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 pressure and market forces within the Union... 45 

2.3. 

Genaral evaluation ..................................................................................................... 49 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

3.6. 

Ability to assume the obligations of membership...................................................... 49 

Chapter 1: Free movement of goods .......................................................................... 50 

Chapter 2: Freedom of movement for workers .......................................................... 52 

Chapter 3: Right of establishment and freedom to provide services ......................... 55 

Chapter 4: Free movement of capital ......................................................................... 56 

Chapter 5: Public procurement................................................................................... 58 

Chapter 6: Company law............................................................................................ 60 

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3.7. 

3.8. 

3.9. 

Chapter 7: Intellectual property law........................................................................... 61 

Chapter 8: Competition policy ................................................................................... 63 

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, veterinary 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.................................................................................................. 85 

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 coordination of structural instruments .................. 94 

3.23.  Chapter 23: Judiciary and 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, security and defence policy.................................................... 120 

3.32.  Chapter 32: Financial control................................................................................... 121 

3.33.  Chapter 33: Financial and budgetary provisions...................................................... 124 

3.34.  General evaluation ................................................................................................... 125 

Statistical Annex .................................................................................................................... 128 

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A. 

a) 

INTRODUCTION 

Application for membership 

Montenegro presented its application for membership of the European Union on 15 December 
2008.  Subsequently,  on  23  April  2009,  the  Council  of  the  European  Union  requested  the 
Commission to submit its opinion on this application, 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 Parliament and national Parliaments shall be 
notified of this application. The applicant State shall address its application 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 European 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 acknowledged that Western Balkan countries 
participating  in  the  Stabilisation  and  Association  Process  were  'potential  candidates'  for  EU 
membership.  The  European  perspective  of  these  countries  was  further  confirmed  by  the 
Thessaloniki  European  Council  in  June  2003  which  endorsed  the  "Thessaloniki  Agenda  for 
the  Western  Balkans”.  This  agenda  remains  the  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 individual efforts to comply with the Copenhagen 
criteria  and  the  conditionality  of  the  Stabilisation  and  Association  Process.  A  country's 
satisfactory  track-record  in  implementing  its  obligations  under  a  Stabilisation  and 
Association Agreement (SAA), including trade related 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  reiterated  its  unequivocal  commitment  to  the 
European perspective of the Western Balkans and that the future of these 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  country  is  able  to  assume  the  obligations  of 
membership by satisfying the economic and political conditions required. 

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COM(2010)670 of 09.11.2010. 

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Membership requires: 

that the candidate country has achieved stability of institutions guaranteeing democracy, the 
rule of law, human rights and respect 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  membership  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 integration of [the applicant] countries, particularly 
through  the  development  of  the  market  economy,  the  adjustment  of  their  administrative 
structures and the creation of a stable 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 the International Criminal  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 entered 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 set by the Copenhagen European Council of 1993 and 
the conditionality of the Stabilisation and Association process. Montenegro's track-record in 
implementing  its  obligations  under  the  Stabilisation  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  independence  on  3  June  2006,  following  a  referendum  held  on  21 
May 2006. In June 2006 the EU decided to establish relations with Montenegro as a sovereign 
and independent state. All EU Member States recognised Montenegro's independence. 

In  October  2007  a  Stabilisation  and  Association  Agreement  between  the  European 
Communities and their Member States and Montenegro2 and an Interim Agreement on trade 
and trade-related matters were signed. The Interim Agreement entered into force in January 

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OJ L 108, 29.4.2010, p. 1. 

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2008 and the Stabilisation and Association Agreement in May 2010 after its ratification by the 
parties.  

Political  dialogue  meetings  at  ministerial  level  between  the  EU  and  Montenegro  have  been 
held  since  February  2007.  Policy  dialogue  between  the  European  Commission  and 
Montenegro  has  been  taking  place  since  the  country's  independence.  Annual  inter-
parliamentary  meetings  between  representatives  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 the areas of justice, freedom and security, free 
movement of workers, right of establishment, free movement of capital and services as well 
as  on  transport,  audiovisual  and  telecommunications.  Many  of  these  commitments  have 
already  been  part  of  the  European  Partnership  with  Montenegro.  Furthermore,  the 
Stabilisation and Association Agreement provides for close cooperation between the EU and 
Montenegro  in  a  number  of  EU  policy  areas.  In  most  cooperation  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  implemented  obligations  under  the  Stabilisation  and 
Association  Agreement,  including  its  trade-related  provisions  and  has  contributed  to  the 
sound functioning of the various joint institutions 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 and Association Council 
met  in  June  2010  in  Luxembourg.  The  first  meeting  of  the  Stabilisation  and  Association 
Parliamentary Committee was held in September 2010 in Brussels3.  

Montenegro  participates  in  the  economic  dialogue  between  the  Commission,  EU  Member 
States and potential candidate countries. This dialogue aims at preparing potential candidate 
countries for participation in the multilateral 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 was 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  fulfilment  of  the  specific  conditions  set  out  in  the 
roadmap  for  visa  liberalisation.  An  agreement  on  readmission  between  the  European  Union 
and Montenegro is in force since January 2008. 

Montenegro signed the Energy Community Treaty in October 2005 subsequently becoming a 
full  member  of  the  Energy  Community  of  South  East  Europe.  Montenegro  signed  the 
European Common Aviation Area (ECAA) agreement in June 2006. 

In June 2008 the Government of Montenegro adopted the National Programme for Integration 
of Montenegro in the European Union for the period of 2008-2012. This document represents 

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The rapporteur for Montenegro is Mr. Charles Tannock. 
OJ L 020, 27.1.2007, p. 1. 

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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 partner 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,  petroleum  and  refined  petroleum  products,  electrical 
machinery,  industry  machinery,  textiles,  meat  and  meat  products  and  electricity.  48  %  of 
Montenegrin exports worth €130 million, 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 stood 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 worth  €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  focused  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  criteria  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  with  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  the  trans-national  cooperation 
programmes:  "South–East  Europe"  and  "Mediterranean"  under  the  European  Regional 
Development Fund. 

IPA assistance is currently centrally managed by the EU Delegation. Montenegro is preparing 
for decentralised management of  IPA funds. IPA  assistance builds  on  a  number  of  strategic 
documents,  such  as  the  European  Partnership  and  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  development,  in  the  Entrepreneurship  and 

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Innovation Programme (EIP) and the Culture Programme. 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 European Council conclusions. The report:  

Describes the relations between Montenegro and the Union; 
Analyses  the  situation  in  respect  of  the  political  conditions  established  by  the  European 
Council (democracy, rule of law, human rights, protection of minorities);  
Assesses  the  country’s  situation  and  prospects  in  respect  of  the  economic  conditions 
established  by  the  European  Council  (functioning  market  economy,  capacity  to  cope  with 
competitive pressure); 
Addresses the question of the capacity of the country to adopt the obligations of membership, 
i.e. the total body of EU legislation as expressed 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  Council  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 coordination of structural instruments (chapter 
22),  and  financial  and  budgetary  provisions  (chapter  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 ahead, 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  questionnaire  and  additional  follow-up  questions, 
consultations with the EU Delegation in Montenegro, reports of expert missions, reporting by 
the  Member  States’  Embassies  in  Podgorica,  assessments  by  international  organisations 
(including  the  Council  of  Europe,  OECD,  OSCE,  IMF,  World  Bank),  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 administrative capacities of Montenegrin institutions and of 
the way legislation is implemented. 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 has been defined as a period of five years. 

B. 

CRITERIA 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  ‘stability  of  institutions 

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guaranteeing  democracy,  the  rule  of  law,  human  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 element of EU policy, which will be assessed in 
this  report.  These  include  regional  cooperation,  good  neighbourly  relations  and  compliance 
with international obligations, such as cooperation with the 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  Article  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  the  rights,  freedoms  and 
principles set out in the Charter of Fundamental 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 regard to protection of fundamental rights. It is 
not confined to a formal description but seeks 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  Charter  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  October  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 respect of human and minority rights 
and  prohibits  capital  punishment.  It  provides  means  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  implementation  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 line 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 services needs to be clarified. 

Overall,  establishment  of  the  legal  and  institutional  set-up  required  for  an  independent 
country is almost complete. Ratification in Montenegro of international instruments to which 
the State Union of Serbia and Montenegro acceded has been completed. Political consensus 

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on  state-building  is  becoming  stronger.  The  Constitution  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  (following  the  d’Hondt  method,  with  candidates 
drawn from ranked lists of coalitions). Montenegro is regarded 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 members 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  complaints  is  deficient.  Allegations  of  election-related  criminal 
activity  are  not  properly  followed  up  by  law  enforcement  bodies.  As  a  result  broad  public 
confidence  in  the  election  process  remains  limited.  Electoral  registers  are  overall  accurate. 
However  there  is  a  need  for  their  audit  in  a  transparent  and  consensual  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 Financing of Political Parties. While this brought 
about an improvement over the former law as regards reporting and auditing, issues relating to 
transparency and accountability remain. Amendments and supplements to the law on election 
of municipal councillors and members of parliament have been drafted but they have not been 
adopted yet. These amendments aim to implement 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 four-year mandate during the first session of the 
newly elected parliament. The parliament can dissolve itself by a majority of all its members. 
Members enjoy parliamentary immunity. There are 11 standing parliamentary committees. A 
temporary committee has also been established to monitor the privatisation process. Two of 
the committees are chaired by a Member of Parliament from the opposition, the remainder by 
members from the ruling coalition.  

Each Member of Parliament, like the government, has the right to make legislative proposals. 
Laws  are  normally  adopted  after  three  readings.  The  first  reading  is  in  the  relevant 
committees,  while  the  second  and  third  are  before  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 the total number of MPs must be present.  

Since  independence,  parliament  has  shown  increasingly  intensive  legislative  activity  which 
has allowed Montenegro to put in place a modern legislative and institutional framework in 
line  with  European  standards.  However,  parliament's  capacity  to  ensure  high  quality 
legislation  compatible  with  EU  acquis  has  generally  remained  limited  and  needs  to  be 
enhanced. 

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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  European  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 acceleration 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  National  Council  for  European  Integration  (NCEI)  as  a  strategic 
advisory  body  with  broad  participation  of  civil  society,  government,  the  judiciary  and  the 
opposition.  This  body’s  role  is  to  monitor  the  European  integration  process,  including 
implementation of the Stabilisation and Association 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 compatibility of new legislation with the EU acquis. 
These  checks  fall  under  the  responsibility  of  the  Committee  for  International  Relations  and 
European  Integration,  which  also  has  overall  responsibility  for  relations  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 therefore 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 systematically when passing laws. 

Parliament's role of oversight and control of the government is exercised mainly by means of 
parliamentary  questions  addressed  to  the  government,  to  one  or  more  ministers  and  to  the 
Prime Minister. The Prime Minister appears in the Parliament and replies to oral questions on 
a monthly basis. Regular reporting on progress in the European integration process is ensured 
at both committee and plenary level. Interpellations, votes of confidence and establishment of 
committees  of  inquiry  are  also  allowed.  However,  despite  recent  trends  to  improve  the 
situation, the full array of oversight tools is not used. 

Administrative  capacity  and  other  resources  required  for  professional,  efficient  and 
transparent work by parliament, including expert 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 just one staff member as committee secretary. 
Efforts  have  recently  been  made  to  strengthen  parliament’s  administrative  and  expert 
capacity.  There  is  strong  commitment,  notably  by  the  Speaker  and  parliament’s  Secretary-
General,  to  upgrade  parliament’s  administration.  A  Rulebook  on  Internal  Organisation  and 
Systematisation  of  the  Parliament  Administration  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  started  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  account  adoption  of  the  Constitution.  While  these 

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rules are broadly respected, the possibilities for government oversight they offer are not fully 
used.  

Overall,  electoral  standards  in  Montenegro  are  broadly  satisfactory.  The  last  parliamentary 
elections held in March 2009 met almost all international standards, but some shortcomings 
remained.  Outstanding  OSCE/ODIHR  recommendations  on  how  to  improve  the  electoral 
framework  and  its  implementation  need  to  be  followed  up.  These  include  harmonising  the 
electoral  framework  with  the  Constitution  and  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 with 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  criminal  activity  need  to  be  strengthened.  The 
mechanisms to control the financing of electoral campaigns need to be enhanced. 

Since  the  country's  independence  in  2006  there  have  been  significant  improvements  in  the 
functioning  of  parliament.  The  overall  commitment  of  parliamentary  parties  to  respect 
parliamentary rules and to hold constructive policy dialogue, in particular on EU integration, 
remains a solid basis for further democratic development. However, further efforts are needed 
to  make  parliament  more  effective  as  a  legislative  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  administration.  The  National  Council  for  European 
Integration  has  yet  to  achieve  its  full  potential.  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, universal 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-designate,  the  President 
and  judges  of  the  Constitutional  Court  and  the  Ombudsman,  appoints  and  dismisses 
ambassadors  and  other  diplomatic  representatives  upon  government  proposal  and  grants 
amnesty  and  performs  other  duties  laid  down  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 consists of the President as chair, the Prime Minister 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  Constitutional  Court.  If  the  Constitutional  Court 
establishes a violation, parliament may impeach the President.  

The  current  President  is  Filip  Vujanović,  elected  in  February  2003  (as  President  of  the 
Republic of Montenegro within the State Union of Serbia and Montenegro) and re-elected in 
February 2008 as President of Montenegro. 

The decision on appointment of the Prime Minister is taken by parliament on a proposal by 
the President. Parliament approves the composition of the government and its programme, on 

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a  proposal  by  the  Prime  Minister-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  Prime  Ministers  and  15  ministers,  one  of  whom  is  female. 
They include a new Minister for EU Integration and one Minister without Portfolio.  

The government’s powers, internal organisation and working procedures 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,  like  all  other  state  bodies,  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 country. It is responsible for implementation of 
Montenegro’s  internal  and  foreign  policy  and  implements  legislation.  It  plays  a  key  role  in 
adopting policy guidelines and strategy papers and in steering the country’s reforms. 

The  Ministry  for  European  Integration  (MEI),  which  replaced  the  Secretariat  for  European 
Integration in June 2009, is responsible for coordination on European integration matters. In 
line with the rules of procedure 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  legislation  in  the  proposals  presented  to  parliament.  Overall 
coordination falls under the responsibility of the Minister for European Integration. Individual 
ministries have specifically designated officials responsible for European integration. Overall 
government  policy  and  the  main  strategic  directions  regarding  European  integration  are 
decided by the government collegium for European integration headed by the Prime Minister, 
while  day-to-day  coordination  takes  place  within  the  Commission  for  European  Integration 
headed  by  the  Minister  for  European  Integration.  Seven  inter-disciplinary  groups  are 
responsible  for  coordination  on  SAA-  and  acquis-related  issues.  The  Ministry  of  Foreign 
Affairs  coordinates  the  political  aspects  of  the  European  integration  process,  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  stipulates  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 signed 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 Public Administration, Union of Municipalities 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 

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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  planning  and  monitoring 
purposes. There are also sectoral strategies and work programmes as well as ministries’ work 
programmes.  The  legislative  programme  is  part  of  the  government  work  programme.  When 
preparing  new  legislation,  the  government  generally  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.  

in  weekly  sessions.  Government  sessions  are  prepared  by 

Government  decisions,  including  on  submission  of  legislative  proposals  to  parliament,  are 
two  government 
taken 
commissions,  one  covering  economic  policy,  financial  affairs  and  the  political  system,  the 
other internal and foreign policy. There is also an Executive Council consisting of the Prime 
Minister and the three Deputy Prime 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  priorities  of  the  government  and  arbitrates  in  cases  of  conflicts 
between  ministers.  Central  coordination  of  decision-making  is  becoming  increasingly 
effective. The quality of consultations with stakeholders, including civil society, needs to be 
improved  and  the  cross-sectoral  consistency  of  legislative  proposals  strengthened.  Further 
efforts  will  be  needed  to  improve  the  quality  of  legislation  and  increase  legislative  drafting 
capacity. 

Overall,  Montenegro  has  an  institutional  system  of  government  institutions  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-ministerial 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  legislation.  The  quality  of  consultations  with  all 
stakeholders, including civil society, needs to be improved and the cross-sectoral consistency 
of legislative proposals strengthened. Further efforts will be needed to improve the quality of 
legislation and increase legislative drafting capacity. The government should further develop 
its capacity to ensure consistency and monitor implementation of laws closely.  

With regard to local self-government, adoption of the Law on territorial organisation and of 
the amendments to the Law on local finances and to sectoral laws is still pending. Altogether, 
decentralisation  is  at  an  early  stage.  There  are  serious  concerns  about  the  lack  of 
administrative  capacity,  corruption  and  inefficiency  at  municipal  level.  Establishing 
transparent  and  fully  accountable  administrations  at  local  level,  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 Prime Minister responsible for the political 
system  has  been  charged  with  the  coordination  of  public  administration  reform.  A 
Government Council for Administrative Reform was established in 2010. A strategy aiming 
to introduce European principles and standards is being prepared.  

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The  current  set-up  of  the  public  administration  consists  of  17  ministries,  16  independent 
authorities, 2 secretariats, 10 institutes, 6 directorates and 2 agencies. These 53 bodies have a 
total of 11,625 posts6. While strengthened, the overall capacity of the administration remains 
weak. 

The Law on civil servants and state employees regulates issues related to the status of civil 
servants  and  state  employees  including  recruitment  and  termination  employment,  function, 
rights,  obligations  and  duties,  performance  appraisal,  promotion  and  evaluation  and 
professional training. 

Civil  servants  and  state  employees  are  recruited  following  public  announcements  of 
vacancies.  However,  a  merit  system  for  recruitment  and  promotion  is  neither  clearly 
enshrined  in  the  legislation,  nor  applied  in  practice.  There  are  no  clear,  uniform  criteria  for 
selecting  candidates.  There  is  no  recruitment  panel  involved  in  the  final  stages  of  selection 
and  heads  of  administrative  bodies  empowered  to  take  the  final  selection  decisions  are  not 
required  to  give  reasons  for  their  choice.  The  Appeal  Commission's  control  over  the 
recruitment decisions is very limited. Tests are inadequate and examination requirements are 
waived regularly. This allows for political interference 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 higher administrative bodies such as the Ombudsman 
and  the  Administrative  Court.  Inspections  are  supervised  under  the  responsibility  of  the 
Administrative  Inspectorate  in  the  Ministry  of  the  Interior  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  constitutionality  and  legality  of  administrative 
decisions.  

On  the  basis  of  the  Ombudsman’s  recommendations,  the  government  adopts  binding 
conclusions  which  public  administration  bodies  are 
implement.  The 
recommendations are broadly followed.  

required 

to 

The basic principles of political neutrality and impartiality, a code of ethics for civil servants 
and  the  principle  of  liability  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, disciplinary provisions are inefficiently implemented in 
practice.  

There  is  no  comprehensive,  regulatory  framework  to  monitor  corruption  and  conflict  of 
interest through consistent internal controls. The 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. 

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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 licensing in local administration and customs. 

The  Human  Resources  Management  Authority  (HRMA)  is  responsible  for  monitoring 
implementation  of  public  administration  legislation,  publishing  vacancies  and  administering 
the  human  resources  registry.  However,  its  legally  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  across  the  administration.  Training  programmes 
under  the  responsibility  of  the  HRMA  have  improved.  However,  training  must  intensify  in 
order to strengthen the efficiency and overall capacity of the public administration. 

External auditing has a sound legal basis in Montenegro, where its independence is provided 
for by law. The State Audit Institution (SAI) was established in 2004 and became a member 
of  the  European  Organisation  of  Supreme  Audit  Institutions  (EUROSAI)  in  2008.  It  has 
started  to  contribute  to  sound  public  finance  management  and  to  enhance  the  public 
administration’s accountability. Capacity for auditing budget execution and internal financial 
control must be improved. In the long term, the SAI 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  persons  have  the  right  to  access  to  information 
held  by  state  authorities  and  entities  exercising  public  functions.  This  law  provides  a  good 
basis for transparency, but its implementation 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  needs  to  be  reviewed  and  adapted  to  European 
standards and principles. Administrative procedures are cumbersome and time-consuming and 
must  be  simplified.  Transparency  needs  to  be  improved  by  facilitating  access  to  public 
information including on economic governance and allocation of public assets.  

Significant  efforts  are  still  necessary  by  Montenegro  to  establish  a  sound  and  accountable 
public administration free of politicisation. The quality 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  expertise  of  public  servants,  with  the  aid  of 
merit-based recruitment and promotion and continuous training. Further considerable efforts 
to strengthen administrative capacity to deal with future EU accession obligations are needed.  

1.1.4. Judicial system (See also Chapter 23 – Judiciary and fundamental rights) 

The  judicial  system  is  organised  as  a  three-instance  court  system.  It  consists  of  15  basic 
courts,  two  High  Courts,  an  Appellate  Court  and  a  Supreme  Court.  It  also  includes  two 
Commercial Courts and an Administrative Court. Judicial power 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 second instance on appeals against decisions by 

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the basic courts. The Commercial Courts act as courts of first instance on commercial matters, 
including disputes between Montenegrin and foreign companies. 

The  Appellate  Court  has  jurisdiction  over  the  whole  territory  of  Montenegro  to  decide  on 
appeals  against  first-instance  decisions  by  the  High  Courts  and  the  Commercial  Courts  and 
resolve  conflicts  of  jurisdiction  between  basic  courts,  High  Courts  and  Commercial  Courts. 
The  Administrative  Court  has  jurisdiction  to  decide  on  administrative  disputes  and  on 
extraordinary legal remedies in misdemeanour proceedings.  

The Supreme Court is the highest court in Montenegro. It ensures uniform application of the 
law by the courts. It acts as the third-instance court on appeals against decisions by the High 
Courts,  the  Appellate  Court  and  the  Administrative  Court.  It  decides  on  extraordinary  legal 
remedies against decisions by other courts and on issues of territorial 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 President of the Supreme Court is ex officio the President of the Judicial 
Council. 

The  Constitutional  Court  consists  of  seven  judges  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  judiciary.  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  are  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,  promotion,  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  prosecutor  assisted  by  one  or  more  deputy 
prosecutors. A Special Prosecution Office for fighting organised crime, corruption, financing 
of  terrorism  and  war  crimes  has  been  established  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  Public  Prosecutor,  are  appointed  by  parliament, 
acting on a non-binding recommendation by the Prosecutorial Council. 

The  Prosecutorial  Council  is  appointed  by  parliament  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 prosecutors, one is a  professor  of law,  two  are 
eminent  lawyers  in  Montenegro  and  one  is  a  representative  of  the  Ministry  of  Justice.  The 
Supreme  Public  Prosecutor  is  President  of  the  Prosecutorial  Council.  The  Council  is 
responsible  for  appointment,  promotion,  dismissal  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 

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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  autonomy  of  public  prosecution  and  the  principle  of 
the natural judge are provided for in the Constitution. However, serious concerns exist over 
the  independence  of  the  judiciary,  as  the  legal  framework  leaves  room  for  disproportionate 
political influence. Although judges are appointed by the Judicial Council, the majority of its 
members are appointed by parliament and the government. All Public Prosecutors are elected 
by parliament. Deputy Public Prosecutors are nominated by the Prosecutorial 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  majority  in  parliament.  The  President  of  the 
Supreme  Court  combines  the  presidency  of  the  Judicial  Council  and  of  the  three-member 
Commission on Judicial Appointments with the authority to manage and schedule the work of 
the  Conference  of  Judges.  Appointment  of  the  Supreme  Public  Prosecutor  by  parliament 
raises additional concerns due to the hierarchical structure of the prosecution service. 

The  selection  and  appointment  procedure  for  judges  and  prosecutors  is  under  the 
responsibility of the two corresponding councils. The criteria for selection of new entrants to 
the  judicial  system  leave  room  for  discretion  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  apply  written,  anonymous  tests  and  no  weighting  of 
individual criteria, including of written exams. Both the independence 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  term  of  five  years  with  the  possibility  of  re-
election. They are also dismissed by parliament. The Prosecutorial Council, whose members 
are likewise appointed by parliament, decides on the appointment, promotion and dismissal of 
deputy  public  prosecutors.  The  criteria  for  dismissal  and  disciplinary  proceedings  are  not 
transparent, creating a risk of discretionary implementation.  

The accountability of the judiciary is ensured by means of the monitoring 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  the  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  has been set up  within  the  Judicial Council. A 
track  record  on  fighting  corruption  in  the  judiciary  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  allocation  of  cases  and  by  conflict  of  interest 
rules  and  disqualification  provisions  established  by  law.  However,  the  rules  for  random 
allocation  are  not  sufficiently  sound  and  do  not  guarantee  genuinely  random  allocation  of 
cases, especially in small courts.  

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Both  judges  and  prosecutors  enjoy  functional  immunity.  The  lifting  of  immunity  for  judges 
and  deputy  prosecutors  falls  within  the  competence  of  the  Judicial  Council  and  of  the 
Prosecutorial  Council  respectively,  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 judiciary has improved since 2008. This includes the adoption of major 
amendments to criminal procedures and substantive legislation as well as capacity upgrading 
and reductions in the backlog of unresolved cases.  

Implementation  of  the  new  Criminal  Procedure  Code  (CPC)  and  of  the  amendments  to  the 
Criminal Code will contribute to a more effective administration of justice. The new criminal 
legislation  simplifies  pre-trial  proceedings  and  introduces  plea  bargaining,  summary 
proceedings and instruments such as reverse burden 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  guidance  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-year  reduction  of  over  75%  at  the  beginning  of 
2010. Yet, there are concerns regarding the soundness 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 innocence. 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 effectively, as almost all complaints are rejected on 
procedural  grounds.  Long  duration  of  court  proceedings  remains  a  cause  for  concern.  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.  

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  efforts  are  being  made  by  the  authorities  to  remedy  the  situation. 
These  need  to  be  stepped  up.  The  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  provides  both  initial  and  continuous  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. 

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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 prosecutorial 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 judicial appointments. The majority of the members 
of the Judicial and the Prosecutorial Councils are directly or indirectly 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  concerns  regarding  the  respect  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 strengthened, in particular in view of its leading 
role under the new CPC. Cooperation with judicial and prosecutorial services of neighbouring 
countries should be further developed, including on extradition. Systematic training should be 
put  in  place,  in  particular  on  new  legislation  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  courtrooms  continue  to  hinder  the  judiciary’s 
efficiency.  The  reorganisation  of  the  court  network  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 decisions 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, corruption 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 prevention 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 mechanism 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  period  2010-2014  have  been  adopted.  They  are  more  detailed  and 
explicit in their objectives, actions and division of competences between key institutions with 
a focus on implementation. However, there is no satisfactory risk assessment.  

The  current  institutional  framework  for  preventing  and  repressing  corruption  needs  to  be 
streamlined  and  properly  coordinated.  Funding  needs  to  be  ensured.  There  is  no  single 
authority with clear legal powers and the capacity to monitor and enforce commitments and 
obligations of government bodies or to follow 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 other institutions report on corruption, has mainly 

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a  consultative  role  focusing  on  soft  prevention  measures  such  as  education  and  awareness-
raising.  It  is  however  responsible  for  screening  new  legislation  from  an  anti-corruption 
perspective,  following  fulfilment  of  anti-corruption  commitments,  conducting  surveys, 
training and awareness-raising and centralising complaints about corruption.  

Integrity plans are envisaged for a number of state institutions. Municipalities and health care 
and  educational  institutions  have  been  encouraged  to  develop  anti-corruption  plans.  The 
DACI  and  the  Human  Resources  Management  Authority  have  conducted  anti-corruption 
training  and  awareness-raising  campaigns.  However,  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 stepped up to ensure active and systematic reporting 
of corruption. 

A new Law on prevention of conflicts of interest in exercising public functions has been in 
force since 2009, but it is not in line with European standards. In particular, the law remains 
ineffective  against  Members  of  Parliament  and  politicians  taking  up  duties  as  members  of 
managing or supervisory bodies. In addition, the Conflict of Interests Commission performs 
its supervisory  role  inadequately, as  it  has no powers to verify  the declarations of assets by 
public officials and its sanctioning powers remain limited.  

An internal control department operated within the police force until the end of 2009. It dealt 
mainly with the legality of the work and conduct of police officers and with complaints from 
members of the public, with no focus on detecting and prosecuting corruption. In 2010, the 
internal control department was moved outside the police force to the Ministry of Interior and 
Public Administration. Monitoring of conflicts of interest in the judiciary and 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  effect.  Furthermore,  the  potential  for  direct 
political  interference  in  the  appointment  of  prosecutors  and  indirectly,  of  judges  limits  the 
capacity for objective investigations 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 presidents 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 whose related powers have yet to be established. As a result 
of deficient controls, potentially 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  (for  example,  the  Law  on  the 
prevention  of  conflicts  of  interest  exempts  members  of  parliament)  and  by  stepping  up 
supervision  of  the  executive.  Civil  society  and  non-governmental  organisations  are  very 
active  in  awareness-raising,  research  and  watchdog  activities.  Cooperation  between  the 
government and civil society in this area has improved, including participation of civil society 
in  formulation  of  policies  and  legislation.  However,  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 

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high  in  the  tax  administration  and  customs,  within  the  judicial  system,  the  police  and  local 
self-government,  while  public  procurement,  health,  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 investigative 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.  The  Police  Directorate,  the  Public  Prosecution 
Office  and  the  Administration  for  prevention  of  money  laundering  and  terrorism  financing 
(the  FIU)  have  sufficient  operational  skills  to  investigate  and  prevent  corruption.  However, 
their capacity must be strengthened. The lack of expertise in modern financial investigations 
is  still  a  serious  impediment  to  tackling  corruption.  There  are  serious  gaps  in  coordination 
between law enforcement agencies, including in the initial phases of investigations, collection 
of evidence and, beyond that, in the prosecution and trial phases. The capacity to investigate 
corruption  remains  very  limited  and  the  link  between  corruption,  money  laundering,  tax 
evasion and organised crime is rarely made. Threat 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 fighting corruption. However, the strategic framework is not yet 
based  on  risk  analysis  and  this  has  a  negative  impact  on  its  effectiveness.  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  authorities  need  to  be  enhanced  in  order  to 
ensure  compliance  with  legislation  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  procurement,  privatisation,  spatial  planning,  construction  permits  and 
local  self-government.  Administrative  capacity  for  both  prevention  and  repression  of 
corruption  needs  to  be  strengthened.  Law  enforcement  statistics  need  to  be  substantially 
improved.  Track  record  of  investigations,  prosecutions  and  final  convictions  in  corruption 
cases  at  all  levels  need  to  be  improved.  Politicised  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 forces and intelligence services is regulated by a 
comprehensive legal and policy framework7 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 2005-2008 (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. 

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Security forces in Montenegro include the police, 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 authorities during natural or 
man-made  disasters.  Within  the  police  service  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 structure and capacity is needed, in 
particular to deal with the threats posed by organised crime and corruption. A review of the 
overall numbers of the police service, 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  police  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  civilian  authorities  during  natural  or  man-made 
disasters. They can also provide support to the police in the fight against terrorism.  

The National Security Agency (NSA – 391 staff), which was previously part of the Ministry 
of the Interior, has become a separate state authority 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  appoints  the  NSA  director  and  exercises  regular 
internal  control  over  its  operations  through  an  inspector  general.  The  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 President of Montenegro, as chair, the speaker of the 
parliament and the Prime Minister. The Defence and Security Council analyses and assesses 
the  security  situation  in  Montenegro  and  decides  on  measures  implying  deployment  of  the 
armed forces.  

Parliament oversees defence and security bodies. It directly appoints the chief of the police. 
The Committee for Security and Defence organised hearings of the directors of the police and 
the  security  services.  Enquiries  and  hearings  held  on  specific  cases  demonstrated  the 
commitment of the committee members across the political spectrum to exercise their duties 
in an independent and professional manner. Amendments made to the Law on confidentiality 
of data to give parliament wider access to relevant data improved the conditions for oversight.  

Overall,  the  existing  framework  guarantees  the  basic  principles  for  ensuring  the  civilian 
control of security forces. The role 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 the defence sector and the security forces and 
by strengthening the capacity of the committee.  

1.2. 

Human  rights  and  the  protection  of  minorities  (See  also  Chapter  23-  Judiciary 
and fundamendal rights) 

Observance of international human rights law 

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Montenegro’s  constitutional  and  legal  framework  on  human  rights  is  well  developed  and 
generally  in  line  with  EU  standards.  Montenegro  has  ratified  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  safeguard  the  right  to  an  effective  remedy  before 
national  authorities  for  violations  of  rights  under  the  convention.  Direct  implementation  of 
international human rights standards still remains restricted 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  decisions,  non-alignment  of  domestic  jurisprudence 
with  the  case  law  of  the  court,  freedom  of  information,  access  to  justice  and  length  of 
procedures.  Three  decisions  have  been  given  against  the  country,  based  on  violation  of 
Protocol 1 to the Convention relating to the protection of property rights. 

As  regards  promotion  and  enforcement  of  human  rights,  the  Ombudsman  is  the  main 
institution. It is responsible for monitoring protection of human rights and freedoms. The anti-
discrimination law establishes the Ombudsman as the national protection mechanism against 
discrimination.  This  is  expected  to  be  confirmed  in  a  forthcoming  new  Law  on  the 
Ombudsman,  which  will  also  define  the  Ombudsman  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. However, the current financial and 
human resources are not sufficient to carry out the tasks of the Ombudsman efficiently. There 
is no other independent body dealing 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 concerns, as he is elected by a simple majority 
of parliament. The Ombudsman’s activities are currently mainly related to the functioning of 
the judiciary. The number of measures taken on his own initiative is low (below 2.3%) and he 
is  not  sufficiently  involved  in  improving  the  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  and  Freedoms  has  been  set  up  within  parliament  but  its 
activities  need  to  be  further  strengthened.  The  Ministry  for  Human  and  Minority  Rights 
focuses  predominantly  on  promotion  of  rights  of  ethnic  minorities  and  gender  equality,  but 
lacks sensitivity to other areas of human rights, notably regarding the rights of lesbian, gay, 
bisexual and transgendered (LGBT) persons. Judges are not yet fully aware of human rights 
standards and do not refer to the case law of the ECtHR 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 complaints are rejected on procedural grounds. A law on free legal 
aid  is  still  pending.  Long  delays  in  court  proceedings,  combined  with  difficulties  faced  by 
detainees in meeting bail conditions, frequently lead to lengthy pre-trial detention. 

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The Constitution prohibits the death penalty. Montenegro has ratified Protocol No 13 to the 
Convention for the Protection of Human Rights and Fundamental Freedoms, concerning the 
abolition of the death penalty in all circumstances, which entered into force in 2006.  

Conditions in the prison system are being improved. Video surveillance 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  Ministry  of  Justice,  it  remains  vacant.  This 
potentially weakens political accountability for the supervision of sentenced detainees and the 
implementation of alternative sanctions and the operation of the probation system. The Law 
on  execution  of  criminal  sanctions,  along  with  internal  rules  governing  the  penitentiary 
system,  need  to  be  aligned  with  European  standards,  including  on  access  to  education, 
adequate  healthcare  and  the  length  of  isolation  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. The 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 and inhuman or degrading treatment as well as 
the optional protocol to the UN convention. It has adopted an action plan for the prevention of 
torture. The Criminal Procedure 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 incidents 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 official  powers are inadequately  deterrent and 
rarely applied. There is a lack of consistent training of prison officers on human rights. The 
procedure for recording injuries is still not satisfactory. 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  Council  of  Europe  Convention  on  action  against 
includes 
in  human  beings.  An  anti-trafficking  working  group,  which 
trafficking 
representatives  of  several  ministries,  the  Office  of  the  State  Prosecutor,  two  NGOs,  the 
International  Organisation  for  Migration  (IOM)  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,  identify  and  prosecute  traffickers.  The  coordinator  is 
also  focusing  more  on  trafficking  of  children,  particularly  Roma  children  and  orphans. 
Montenegrin  authorities  are  actively  involved  in  regional  cooperation  in  this  field.  The 
government  is  continuing  its  policy  of  making  temporary  visas  and  shelter  available  for 
victims of trafficking who agree to testify against traffickers. The government has funded one 
shelter in Podgorica, which is operated by a local NGO. The Police Directorate 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 

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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 right 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 electronic 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 audiovisual 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 strengthened. A better balance 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  prevent  undue  restriction  of  access  to  information 
which needs to be made public and to consolidate the monitoring role of civil society.  

In  the  past  there  have  been  incidents  of  severe  violence  against  journalists  in  Montenegro, 
which  have  not  always  been  satisfactorily  investigated  and  followed  up.  Investigative 
journalists still face intimidation.  

Prison sentences for libel cases have been abolished 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.  Nevertheless,  law  suits  for  defamation  and  hefty  fines,  although  less 
frequent, are still used to exert pressure on media. Montenegro does not consistently comply 
with ECtHR case law8.  

Compliance  of  journalists  with  professional  ethics  and  standards  still  needs  to  be 
strengthened. The media self-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 journalists needs to be strengthened.  

The  Constitution  guarantees  the  right  to  vote  to  all  Montenegrin  citizens  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  recommendations.  As  regards  civil  society  organisations,  NGOs 
can  be  established  freely  in  line  with  the  particularly  liberal  Law  on  NGOs.  NGOs  in 
Montenegro  are  very  diversified  and  several  of  them  play  a  significant  public  and  political 
role.  The  government  provides  financial  support  to  NGOs  from  the  state  budget  and  funds 
from the national lottery. NGOs’ activities and premises 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 Council for European Integration needs to be improved, as do 
the  transparency  and  monitoring  of  state  financing  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. 

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support to NGOs dealing with socially vulnerable 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 particular in the course of the legislative 
process and on definition of major public policies and projects, remains insufficient. The Law 
on volunteer work sets very restrictive conditions on volunteer 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 legal status of religious communities and the Law on celebrating 
religious communities. There is no state religion in Montenegro. The state financially assists 
some activities of the main religious communities. Inter-faith relations are overall smooth, but 
there  are  tensions  between  the  Serbian  (SOC)  and  Montenegrin  (MOC)  Orthodox  Churches 
over  canonical  recognition  and  property  issues.  Tensions  also  stem  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 Orthodox churches, in particular on property issues. 
No  progress  was  reported  on  restitution  of  property  taken  from  religious  communities  after 
1945. Claims have been submitted by the two Orthodox Churches, the Catholic Church and 
the Islamic and Jewish communities.  

Montenegro has improved its legislation regulating access to citizenship in the framework of 
state succession by amending the Law on citizenship and ratifying the European Convention 
on  nationality  and  the  Convention  on  the  avoidance  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 particular children, are at risk of statelessness due to the lack 
of personal documents. The electronic central population 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  regulating  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  persons9  from 
Kosovo10  are  not  eligible  for  naturalisation  under  this  law.  Negotiations  on  dual  citizenship 
with  neighbouring  countries,  in  particular  Serbia,  need  to  continue.  The  Law  on  citizenship 
provides  that  a  person  can  acquire  Montenegrin  citizenship  through  admission  because  of  a 
special contribution to the economic and cultural development of Montenegro. A government 
decision  adopted  in  May  2010,  which  establishes  criteria  for  the  implementation  of  this 
provision  of  the  Law  on  citizenship,  raises  concerns  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 has 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  several  pieces  of  legislation, 
including  the  July  2010  general  Law  on  prohibition  of  discrimination,  which  bans 
discrimination  on  any  grounds,  including  sexual  orientation  and  gender  identity.  This  law 
constitutes  an  important  step  forward;  however  it  is  not  fully  in  line  yet  with  the  EU 

9 
10 

In Montenegro the displaced persons from Kosovo are referred to as "internally displaced persons". 
Under UNSCR 1244/1999. 

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standards,  notably  as  it  permits  justifications  of  direct  discrimination  in  some  cases. 
Discrimination  is  defined  as  a  criminal  offence  in  the  Penal  Code.  However,  the 
implementation  of  mechanisms  for  preventing,  monitoring,  sanctioning  and  prosecuting 
discrimination cases still needs to be strengthened, including through the adoption of the law 
on the Ombudsman and the provision of sufficient means to the Ombudsman’s Office. Roma, 
Ashkali  and  Egyptians,  persons  with  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. Several cases of violence against LGBT persons have been reported, 
but no complaints have been presented to the police; a reason for this is fear on the part of the 
victims  to  have  their  sexual  orientation  revealed.  Awareness-raising  campaigns  against 
discrimination are insufficient. 

As regards women’s rights, gender equality is guaranteed by the Constitution. It is regulated 
by  the  Law  on  gender  equality  (2007)  and  promoted  by  the  relevant  action  plan  (2008). 
Implementation  is  monitored  by  parliament,  the  government  and  the  Ombudsman. 
Montenegro  has  ratified  the  Convention  on  the  elimination  of  all  forms  of  discrimination 
against  women.  Awareness-raising  campaigns  are  regularly  conducted  within  the  public 
administration.  Six  municipalities  have  adopted  local  action  plans  on  gender  equality. 
However,  further  efforts  to  raise  awareness  of  gender  equality  are  necessary,  particularly  in 
rural  areas.  The  Law  on  gender  equality  provides  for  only  limited  sanctions  and  does  not 
clearly  address  the  principle  of  equal  pay.  The  action  plan  on  gender  equality  has  not  been 
properly implemented. Women are severely under-represented in parliament, top government 
posts  and  in  decision-making  positions  in  the  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 right to control property and husbands 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 framework and some efforts to raise awareness 
and improve attitudes amongst the police. Considerably greater efforts are needed in order to 
protect women and other victims against all forms 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 comprehensive 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  violence  and  only  one  municipality  has  a  specialised 
social service to protect children and women who are victims of such violence. Judges remain 
lenient  towards  perpetrators  of  domestic  violence.  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. Protection 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 children for 2004-2010. Efforts have 
been made to harmonise the national legal framework 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 aligned with the UN Convention on the rights of the 
child. Implementation of the national plan for children has been inadequate. There is a need 
for  higher  level  of  political  support  and  inter-ministerial  coordination  in  this  area.  The 

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Council for Children’s Rights, the main body for coordinating implementation of the national 
plan, is not operational. Its capacity remains weak and its mandate is not clearly defined. The 
mandate of the deputy Ombudsman for children's rights, appointed in 2009, is not explicitly 
and legally defined. Resources assigned specifically to children’s issues within the Office are 
insufficient.  Despite  some  recent  improvements,  children  with  disabilities  face  considerable 
discrimination, in particular those in the Komanski Most institution for persons with mental 
disabilities. Alternatives to institutionalisation need to be developed, including for preventing 
segregation of children with special educational needs. An overall multi-sectoral reform of the 
child and social protection system, in line 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  children’s  right  to  education  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, including  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. Authorities do not actively prosecute infringements against the rights 
of  persons  with  disabilities  and  court  decisions  are  not  adequately  implemented  by  public 
administration.  Unemployment  remains  a  serious  problem  for  persons  with  disabilities, 
notably  due  to  the  lack  of  institutional  network  for  rehabilitation.  Very  few  buildings  and 
premises, even new, or courts and public facilities, have access for persons with disabilities.  

Social  inclusion  of  persons  with  disabilities  (access  to  social  services,  employment,  aid  to 
dependent  persons  and  proper  health  care)  remains  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 mental 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 unions 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  newly  adopted  Law  on  trade  union 
representativeness  opens  up  the  possibility  of  pluralistic  representation  of  trade  unions  at 
national  level.  Montenegro  has  ratified  the  8  core  labour  rights  conventions  of  the 
International  Labour  Organisation  (ILO),  as  well  as  the  revised  European  Social  Charter. 
Labour  inspection  launched  recently  a  free  phone  line  for  complaints  on  illegal  labour  and 
other  irregularities  in  labour  relations.  However,  social  dialogue  has  been  limited. 
Transparency and effectiveness of the Social Council needs to be improved. 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 country into the EU. Labour rights of disabled 
persons are not fully respected. (See also Chapter 19 — Social policy and employment) 

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Property  rights  are  guaranteed  by  the  Constitution.  A  Law  on  private  property  relations 
provides  for  equal  treatment  of  foreign  citizens  and  Montenegrin  citizens.  A  Law  on 
expropriation  stipulates  that  ownership  may  be  restricted  when  it  is  required  in  the  public 
interest, in return for fair compensation. A Law on state property clearly defines the property 
belonging  to  the  state  and  municipalities.  However,  there  are  no  precise  statistics  on 
nationalisation  of  property  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  returned  in  only  142  cases  so  far 
(i.e. 5% of all cases eligible). There are cases where property subject 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 particular 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,  culture,  access  to  information  and  use  of  minority 
languages. Montenegro has ratified the Framework Convention for the protection of national 
minorities  and  the  European  Charter  on  regional  and  minority  languages.  The  Ministry  for 
Protection  of  Human  and  Minority  Rights  and  the  Ombudsman,  with  a  deputy  for  minority 
rights,  form  the  core  of  the  institutional  framework.  The  country  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 the Minority Councils from the state budget for administrative 
functioning and the Minority Fund for minority-related projects, in proportion to the size of 
the minority.  

However, the Law on minority rights and freedoms defines minorities on a citizenship basis. 
This is not in line with the general principle of the Convention for the protection of national 
minorities,  according  to  which  no  distinction  should  be  made  between  citizens  and  non-
citizens  as  regards  the  rights  of  persons  belonging  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 parliament and local assemblies. The Constitutional 
provision  on  ‘proportionate  representation’  of  national  minorities  in  public  services,  state 
authorities and local self-government bodies needs to be clarified and implemented. Minority 
representatives,  supported  by  some  NGOs,  claim  under-representation  in  the  administration, 
judiciary and police. Cooperation between the government and the Minority Councils needs to 
be improved, in terms of the legal framework and definition of projects related to minorities. 
The  Minority  fund  still  does  not  function  properly.  Amendments  to  the  Law  on  minority 
rights and freedoms, which should clarify the functioning of the Fund, are pending. Minority 
Councils’  elected  representatives  need  to  be  more  closely  involved  in  the  procedure  for 
allocation  of  funds  from  the  Minority  Fund.  Monitoring  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 and 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  education,  according  to  which  the  Montenegrin 
language will be used in the education process in Montenegro, is being politicised. 

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The  Roma,  Ashkali  and  Egyptian  communities  remain  the  most  vulnerable  and 
discriminated  group.  They  face  very  difficult  living  conditions  and  frequent  discrimination, 
particularly  regarding  access  to  economic  and  social  rights.  The  government  adopted  a 
strategy for 2008-2012 to improve the status 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 civil registration of Roma, 
Ashkali and Egyptian, in particular regarding birth registration. However around one third of 
persons belonging to these communities, domiciled 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 some progress achieved, 
access  for  persons  belonging  to  these  communities  to  education  and  vocational  training 
remains  unsatisfactory  and  they  also  face  major  discrimination  as  regards  access  to  work, 
including  in  public  administration.  There  is  no  elected  Roma,  Ashkali  and  Egyptian 
representative in parliament and only one at municipal council level.  

There  are  around  17,000  displaced  persons  from  Bosnia  and  Herzegovina,  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  persons  access  to  social  and  economic  rights  until 
January 2012. However, the implementation of the 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  and  its  by-law,  Law  on  health  care,  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 Kosovo 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 currently have any personal document. Living 
conditions in the Konik camp, which accommodates 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.  The  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 corresponds 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 media, pressure on journalists and NGOs as well 
as  discriminatory  practices  against  Roma,  Ashkali  and  Egyptian  (whether  domiciled  or 
displaced),  persons  with  disabilities  (including  children)  and  lesbian,  gay,  bisexual  and 
transgendered  persons.  Not  sufficient  respect  for  gender  equality,  domestic  violence,  ill-
treatment of detainees by police and sub-standard prison conditions 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  assistance  and  has  complied 
with them. The ICTY started proceedings against two Montenegrins (both also hold Serbian 
nationality). No cases were referred from the ICTY back to national authorities for possible 

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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 there is sufficient capacity to deal with them. 

Concerning  international  judicial  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.  Montenegro  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 Herzegovina, Croatia, the former Yugoslav Republic 
of Macedonia, Albania, Serbia and Italy. However, implementation of agreements on judicial 
cooperation needs to be strengthened in order to produce better tangible results. Montenegro 
is also participating in regional police cooperation. 

An extradition agreement was signed with Serbia in May 2009. 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 aid 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  obligation.  Croatia  is  the  only  country  with  which  an  extradition 
agreement  for  own  nationals  accused  of  organised  crime  and  corruption,  was  signed.  A 
similar  agreement  is  under  negotiation  with  Serbia.  Extradition  in  war  crime  cases  is  not 
foreseen by these agreements. 

The Sarajevo Process was initially launched through 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  ministerial  meeting  in  Belgrade  in  March 
2010. This brought together Bosnia and Herzegovina, Croatia, Montenegro and Serbia, which 
agreed to work together to clarify refugee statistics. 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  bilateral  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 agreements. 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 European Union. Montenegro 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 also 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 

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the  Adriatic-Ionian  Initiative  (AII).  It  holds  the  chairmanship  of  the  South-East  European 
Cooperation  Process  (SEECP)  for  2010-2011.  The  seat  of  the  Regional  School  of  Public 
Administration  (ReSPA)  is  in  Danilovgrad,  near  Podgorica.  President  Vujanović,  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 Igman initiative in Sarajevo, marking the 10th 
anniversary  of  the  initiative,  involving  more  than  140  NGOs  from  the  region  and  aimed  at 
promoting and facilitating local and regional cooperation. Montenegro 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  well-developed  with  the  Western 
Balkan  countries  as  regards  economic  exchanges,  tourism,  defence,  border  management, 
transport  and  energy.  A  joint  border  crossing,  the  first  in  the  region,  was  recently  opened 
between Montenegro and Albania. Montenegro also signed a comprehensive border crossing 
agreement  with  Bosnia  and  Herzegovina.  However,  delimitation  of  borders  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  dissolution  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) and liabilities and citizenship rights (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 expects Kosovo to further improve the conditions for 
the  return  of  displaced  persons  from  Montenegro.  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 engagement in regional cooperation and to strengthen 
bilateral relations with neighbouring countries. Outstanding bilateral issues need to be solved. 

1.4. 

General Evaluation 

The present assessment is made on the basis of the 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 the conditionality of the Stabilisation and Association Process. 

Montenegro  is  a  parliamentary  democracy  based  on  a  constitutional  and  legislative 
framework,  which  is  largely  in  line  with  European  principles  and  standards.  Montenegro 
managed  smoothly  the  referendum  on  its  independence  in  2006,  in  line  with  EU 
recommendations, on the basis of rules which were adopted by political consensus. Consensus 
among  political  parties  on  state-building  is  becoming  stronger.  There  is  also  political 

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consensus with regard to membership 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  shortcomings  in  implementation  of  the  legislation  persist.  The 
parliament's  overall  capacity  to  ensure  appropriate  oversight  of  the  government  remains 
limited. The separation of powers is not fully respected 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 parliamentary 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  particular,  the  election  law  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 main concerns are related to the politicisation 
of  the  judiciary  and  shortcomings  in  the  functioning  of  law  enforcement  institutions,  in 
particular in fighting organised crime and corruption.  

Reforms  in  the  judiciary  are  being  pursued.  Achieved  results  include  the  setting  up  of  new 
institutions such as the judicial and prosecutorial councils and measures adopted to improve 
independence  and  efficiency.  However,  serious  concerns  remain  over  the  role  of  the 
parliament in appointing the judicial and prosecutorial councils and state prosecutors. There 
are also concerns over the efficiency and accountability of the judiciary.  

Montenegro  has  largely  put  in  place  the  legal  and  institutional  framework  needed  for 
combating corruption. However, corruption remains prevalent in many areas and constitutes a 
particularly  serious  problem.  Anti-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 financing of political parties and 
election campaigns. There are also concerns regarding the supervision of public procurement, 
privatisation, spatial planning and 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 administration and customs, the police 
and  judiciary  and  local  administration.  Investigation  capacities  and  law-enforcement  co-
ordination remain weak. Strong political will is needed to significantly 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  organised  crime,  the  legal  framework  developed  by 
Montenegro  is  generally  adequate  and  capacities  have  improved.  However,  organised  crime 
remains a serious problem. Money laundering and 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  international  level  is  necessary,  including  with 
neighbouring countries. 

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Montenegro's legal and policy framework regulating human rights and the respect for and 
protection  of  minorities  is  largely  in  place  and  broadly  corresponds  to  European  and 
international  standards.  The  institutional  framework  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 Montenegro. However there are concerns related to the 
effectiveness  of  anti-discrimination  policies,  freedom  of  expression  and  relations  with  the 
civil  society.  The  anti-discrimination  legal  framework  has  been  substantially  improved. 
However, in practice, Roma, Ashkali and Egyptian, persons with disabilities and lesbian, gay, 
bisexual  and  transgendered  (LGBT)  persons  are  still  subject  to  discrimination,  including  on 
the  part  of  state  authorities.  The  implementation  mechanisms  for  preventing,  monitoring, 
sanctioning  and  prosecuting  discrimination  cases  need  to  be  strengthened.  The  July  2010 
Anti-discrimination law needs to be fully implemented. Gender equality is not fully ensured 
in  practice.  As  regards  freedom  of  media,  intimidation  of  journalists  and  disproportionate 
fines for defamation are a matter of concern. Legislation 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 satisfactory. In some cases, the most critical NGOs 
have been exposed to political and administrative pressures. Domestic violence, ill-treatment 
and sub-standard prison conditions are also issues of concern. 

The  respect  for  and  protection  of  minorities  are  broadly  guaranteed.  However,  cooperation 
between  the  government  and  minority  councils  as  well  as  the  representation  of  persons 
belonging to minorities in public services, state authorities and local self-government bodies 
needs  to  be  improved.  The  access  of  Roma,  Ashkali  and  Egyptians  to  economic  and  social 
rights,  in  particular  education  and  employment,  is  unsatisfactory.  As  regards  displaced 
persons from Croatia, Bosnia and Herzegovina 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 better 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  displaced  persons  is  poorly  implemented  on  the 
ground. The number of persons who have been granted 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  sheltering  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 generally good and developing further. Relations with Serbia, after the 
dissolution  of  the  State  Union,  are  generally  good,  however  some  pending  issues  remain. 
Delimitation of borders with neighbouring countries 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. However, the country ratified a bilateral immunity 
agreement with the United States regarding the International Criminal Court which is not in 

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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 pressure and market forces within the Union; 

These  criteria  are  linked.  A  functioning  market  economy  will  better  cope  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  Montenegro  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 kilometres. The country has natural resources, 
mainly bauxite, coal and wood, but also significant hydrological potential, and a favourable 
climate for agriculture and tourism. The country 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  economy.  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 significant between the more populated and richer 
south and the less developed north of the country.  

Macroeconomic background 

Montenegro, with a GDP per capita of roughly 75% of the national average, was one of the 
poorest  republics  of  the  former  Socialist  Federal  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 international embargo, which 
severely depressed the industrial sector. This resulted in a dramatic contraction of economic 
activity, hyperinflation and a banking system unable to perform its intermediation functions. 
The  Deutsche-Mark  became  a de  facto  parallel  currency.  Illegal  practices  such  as  cigarettes 
and petrol smuggling, bypassing official channels for financial transaction, under-invoicing of 
exports, informal employment and the grey economy were tolerated and flourished. 

In  the  Federal  Republic  of  Yugoslavia  (FRY),  established  together  with  Serbia  in  1992, 
Montenegro acquired responsibility for its own monetary policy and 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 finance and currency. In 2000 the fiscal deficit was stabilised at over 8% of 
GDP and fully financed by an emergency post-conflict assistance from the IMF and the EU. It 
was  further  reduced  in  subsequent  years,  and  turned  into  a  significant  surplus  in  2006  and 

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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  proliferation  of  extra  budgetary  accounts  with  earmarked  revenue,  and 
accounting  practices  at  odds  with  international  standards.  To  remedy  this,  a  set  of  tax  laws 
was adopted to modernise the administration and the introduction of the VAT shifted the tax 
burden towards indirect taxation. Social contributions and the personal income tax rates were 
reduced.  All  fiscal  revenues  from  customs  and  indirect  taxes,  as  well  as  from  privatisation 
were  channelled  to  the  state  treasury,  therefore  improving  tax  collection  management  and 
enhancing fiscal transparency.  

Since  its  establishment  in  2000  the  Central  Bank  of  Montenegro  (CBCG)  engaged  in  the 
reform  of  the  banking  sector  to  reinforce  the  soundness  of  the  banking  system  and  adopted 
prudential  regulations  and  supervision  in  line  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  collapsed.  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 economy 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  direct  investment  inflows,  increasing  tourism  and  some  key 
privatisations  boosted  this  growth.  However,  the  rapid  expansion  of  the  financial  sector 
rendered Montenegro very  vulnerable to the global financial  crisis which started  in  October 
2008.  The  most  affected  sectors  were  the  metal  industry,  construction  and  financial 
intermediation. As a result, in 2009 GDP declined 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  industrialisation  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  related  activities  accounted  for  50%  of  GDP  and 
exports.  After  the  1990s,  in  parallel  with  the  country’s  transition  to  a  market  economy, 
Montenegro underwent a significant reorientation towards a more service based economy. In 
the period 2000-2009, the share of industry in gross value added (GVA) declined by 29%, and 
currently  represents  some  13.6%  of  GVA,  while  construction,  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,  launched  in  1989,  resumed  12  years  later,  when  the 
government  engaged  in  privatisation  through  a  dual  approach:  on  the  one  hand,  a  mass 
privatisation  accomplished  via  vouchers  distribution  to  citizens;  on  the  other  hand,  the  sale 
through international tenders of majority shares in 15 large companies. By 2006 some 86% of 

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total state capital had been privatised. 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 economic growth. Driven by the completion of 
the  privatisation  process,  the  banking  sector  expanded  very  rapidly,  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 capitalisation is low.  

The  contribution  of  domestic  capital  to  growth  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 transmission 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  educational  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  system,  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 improve the efficiency of the economy. 

Economic policy essentials 

Montenegro has achieved a broad domestic consensus 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  surveillance  and  reporting  arrangements  applying  to 
potential candidate countries since 2006. Overall, the authorities maintain reform momentum 
by  efforts  to  establish  a  business  friendly  environment,  in  particular  for  attracting  foreign 
investment.  

Macroeconomic stability 

Since  independence,  the  economy  has  experienced  very  strong  growth,  averaging  8.7% 
between 2006 and 2008, boosted by strong inflows of FDI and very high credit growth which 
financed  a  robust  increase  in  domestic  demand.  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 performance of private consumption, 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 credit, expanding annually on average by 21% and 
105%  respectively.  However,  in  2009  the  global  crisis  affected  severely  the  economy, 

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revealing  vulnerabilities  in  the  growth  pattern.  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  contributed  positively  to  real  GDP  growth.  In  the 
first quarter of 2010, the economy continued to contract in real terms by an estimated 1.5%. 
After  18  consecutive  months  of  decline,  industrial  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 sector 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 domestic demand and foreign investment. However, 
the financial crisis had a significant impact on economic growth.  

On the  external side, the current account deficit raised  mainly due to the  merchandise trade 
gap. Exports have been highly concentrated on a few sectors, in particular 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 towards 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  steel  for  an  additional  15%.  However,  the  volume  of  service 
exports, in particular tourism, has been growing continuously, reaching some 23% of GDP in 
2009. Unlike exports, imports surged (40% annual growth) since independence, as a result of 
the very strong increase in domestic 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 improved 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 practically financed  by net  FDI while Central Bank 
reserves  increased  by  EUR  35  million.  Overall, external imbalances  and  the  dependence on 
external financing are still very high.  

Net FDI inflows remained buoyant (22% of GDP annually on average) from 2006 until mid-
2010. While they significantly contributed to the financing of the current account deficit, their 
concentration  on  the  non-tradable  sector,  in  particular  real  estate,  the  financial  sector  and 
tourism,  also  contributed  to  increase  volatility  in  real  estate  prices.  The  crisis  has  led  to  a 
more  sustainable  allocation  pattern  in  2009,  less  dependent  on  investment  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  companies,  notably  for  capitalisation  of  banks, 
privatisation  of 
in 
telecommunications, increased from 36% in 2008 to 69% of 2009 total investments. Overall, 
while  in  recent  years  large  FDI  inflows  and  private  lending  financed  the  large  external 
imbalances; the sustainability of these inflows is not ensured. 

investments 

additional 

electricity 

company, 

and 

the 

for 

Like the overall economy, the labour market registered accelerated structural change in recent 
years. Employment in mining and heavy industry 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 employment, 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 market. Data on unemployment varies strongly, 

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with registered unemployment rates between 10-15% of the labour force, while Labour Force 
Survey  (LFS)  data  points  to  unemployment  rates  close  to  20%.  In  the  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  registered  unemployment  rate  decreased  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  restructuring  of  the  metal  and 
mining  sector.  The  employment  rate  of  women  increased  from  27.6%  in  2005  to  34.4%  in 
2009. However, according to the labour force surveys, their participation remained stable over 
time at some 40% of total labour force. In the same period, the unemployment rate of young 
people (15 to 24 years old) has dropped, 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 the crisis, to some 25% 
of  the  labour  force  in  2009.  The  persistence  of  this  high  level  of  informal  employment 
suggests  some  structural  rigidities.  Furthermore,  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 mismatch 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 economy, especially in the context of an economic 
crisis. The use of euro led to low inflation rates (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  consumer  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  interest  rates  and  strong  competition  for  market 
shares in the banking sector led to a very rapid expansion 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 appear 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 the central bank adopted a set of measures to 
preserve the stability of the banking system, consisting in a full guarantee for bank deposits 
and  the  possibility  of  government  credit  support  for  eventual  liquidity shortfalls  of  troubled 
banks.  The  relatively  young  banking  sector  which  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 Hungarian OTP Bank shares led to a bank run on its domestic 

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subsidiary CKB, the largest bank with a deposits 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 exposure to the falling real estate market. By 
December 2009, bank deposits contracted further 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 their 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, registering negative growth until July (-11.4% year-on-
year).  Overall,  while  banks  are  progressively  re-establishing  their  deposits  base,  credit 
activity remains highly constrained. 

Public sector revenues and expenditures accounted 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  increasing.  However,  public  expenditures  were  also  increased,  in 
particular current ones on public administration wages and pensions which increased by 40% 
during  2006-2008,  weakening  the  long-term  sustainability  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  decline  of  revenues  by  consolidating  spending:  net 
wages of state administration were reduced by 7%, maintenance expenditures by two thirds, 
and expenditures of goods and services by almost 10%. Capital spending was also used as a 
buffer, through the reduction of planned works by more 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 half of 2010, the general government budget execution 
posted  a  deficit  of  0.4%  of  GDP  as  a  result  of  the  restrictive  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 declined from 38.6% of GDP in 2005 down to 27.5% of 
GDP in 2007, notwithstanding previous debt redemption in 2001. The share of external debt 
remained stable at 70% of the total public debt. As from 2008 the public 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.  Simultaneously,  foreign  debt,  mostly  financed  by 
international  financial  institutions,  has  been  growing  too,  to  cover  infrastructure  needs,  the 
restructuring of troubled industries and the financing of the budget. The share of foreign debt 
represents  currently  around  60%  of  total  public  debt.  Public  debt  fell  slightly  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  has  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 sizeable fiscal consolidation took place. However, 
public  expenditures  considerably  increased  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  engage  in  pro-cyclical  budget  cuts  throughout 
2009 and state guaranteed loans. Central bank interventions –even though limited to reserve 

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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  supervisory  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  liberalized  by  the  early  2000s.  Since  2005,  the  Energy 
Regulatory  Agency  (ERA)  sets  electricity  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  and  refuse  collection)  currently  represents 
about  9%  of  total  spending  for  an  average  household.  Overall,  the  state  influence  on  price 
dynamics is limited to some utility services. 

By  2006,  around  86%  of  originally  state  owned  property  had  been  privatised.  The 
privatisation  process  is  currently  in  its  final  stage.  Key  sectors  like  banking,  insurance,  and 
telecommunications  have  been  fully  privatised.  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 above 50%. Further progress has been recorded 
with the partial privatisation (44%) of the electricity company EPCG in 2009. The state still 
has  majority  shareholding  notably  in  large  networking  industries:  the  local  electric  power 
company, the railways, ports, the shipyard, Montenegro Airlines, and the airports. Overall, the 
privatisation process is fairly advanced and state ownership has been reduced to some 14% of 
total assets. 

Market entry and exit 

Since 2006, the process of business registration has been improved, reducing the number of 
procedures from 15 on average in 2006 to 12 in 2009, while the duration 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  additional  distortions.  In  2008,  the  Council  for  the 
elimination  of  business  barriers  was  established,  becoming  one  year  later  the  Council  for 
regulatory reform and improvement of the business 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  annual  renewal  of  companies  in  the  business 
register, as well as cutting deadlines and fees for several administrative procedures. Overall, 
despite recent progress, business licensing procedures 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 impact on the risk premium and henceforth on persistently high 
interest rates close to two digits. The high cost of finance remains a major obstacle for setting 
up and developing companies. Overall, businesses are confronted with scarce and expensive 
financing. 

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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 liquidated in 2008 and 2,259 in 2009. Overall, market exit procedures 
have been streamlined and accelerated. 

Legal system 

The  lack  of  reliable  land  property  ownership  was  a  significant  problem  for  investors  in  the 
past.  Since  2007,  new  regulations  have  been  introduced  and  implemented  resulting  in  the 
average time required to register a property diminished to 21 days. Additional reforms in 2009 
re-defined  and  clarified  concession  rights  on  public  properties  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 property is well advanced. 

The two Commercial Courts are the main institutions 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 backlog of some 800 cases from previous years. In the meantime 
the backlog is slowly being reduced. The average 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  improved  with  the  establishment  of  a  mediation 
centre  to  facilitate  simple  resolution  of  commercial  disputes.  The  Agency  for  Amicable 
Labour  Dispute  Resolution,  established  in  2010,  should  enable  workers  to  solve  their 
collective or individual disputes without litigation. Efforts to fight 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  corruption  continue  to  negatively 
affect the business environment.  

Financial sector development 

The small size of the market has not been an obstacle for the rapid development of a banking 
industry that became one of the main contributors 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  crisis  led  to  a  significant  decrease,  they  still  represented 
95.7% of GDP at the end of June 2010. The structure 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  reform  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 

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concentrated  with  four  banks  accounting  for  some  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 average to 25% of total 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  sharp  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, together 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  recorded  a  combined  loss  of  €33.7  million  by  end 
2009.  Prudential  indicators  further  deteriorated  throughout  the  crisis.  During  the  fast 
expansion  of  loans  in  the  period  2006-2008,  the  loan  portfolio  of  banks  had  already 
deteriorated rapidly and the share 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  high  level  of  NPLs  and  consequent  provisioning, 
banks return on assets (ROA) dropped from a level of 1% in 2006 down to negative values up 
to  mid-2010  (-3.5%),  and  return  on  equity  (ROE)  dropped  more  dramatically  from  levels 
above 6% in 2006 and 2007 to strong negative values until June 2010 (-34%). The results of 
the quarterly stress tests of the banking system 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  sector  and  the  intervention  capacities  of  the  central  bank.  Several 
laws were amended: the Central Bank Law; the  Law on Banks, now introducing  conditions 
for  acquiring  qualified  participation  and  for  corporate  management,  and  including  the 
possibility  for  interim  administration  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 the Central Bank to decide to sell the assets of 
a  troubled  bank.  The  new  Deposit  protection  law  establishes  (progressively)  banks  deposit 
guarantees at €50,000 per depositor. Overall, the authorities have strengthened the legislative 
framework to address deficiencies in the financial sector, improving supervision and stability. 

Stock  exchange  market  capitalisation  reached  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  market  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  role  of  the  capital  markets  to  finance  domestic  companies 
remains limited. 

The insurance market has gradually expanded, though from a low base, accounting for only 
3%  of  GDP  by  end-2008.  Though  there  are  11  companies  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 segment, though developing fast from a very low 

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base,  accounts  for  some  12%  of  total  premiums.  The  insurance  law  adopted  in  2006  has 
established  a  supervisory  agency  independent  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 the rights and liabilities 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 source of private sector financing. 

2.2.2. The capacity to cope with competitive pressure 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  agents  to  take  decisions  in  a  climate  of 
predictability. It also requires a sufficient amount of human and physical assets. Enterprises 
need  to  invest  to  improve  their  efficiency  and  innovate  to  adjust  to  a  globalised  and  highly 
competitive external environment. Overall, the more 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 monetary 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  the  crisis  hit  Montenegro  in  October  2008. 
Furthermore,  large  external  imbalances  built  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 financial sector stability 
and  improving  administrative  capacities,  crowding-in  new  private  sector  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  operators  to  make  decisions  in  a  climate  of 
predictability. However, macroeconomic imbalances have exacerbated the country's exposure 
to  the  global  economic  and  financial  crisis.  To  become  a  functioning  market  economy 
Montenegro needs to address these imbalances, as well as existing weaknesses, notably in the 
financial sector and the functioning 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  years  old  group  and  69%  of  the  15-19  years  old 
respectively.  It  has  increased  over  time.  The  number  of  university  students  has  been  rising 
even faster, reaching 3.6% of the total population. Overall, public spending on education has 
remained  rather  stable  at  4.5%  of  GDP  on  average  since  2006.  Yet,  improving  quality 
assurance mechanisms and overall strategic approach 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. 

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Structural unemployment requires further reform of the education system notably vocational 
education (VET), and further training of the workforce in line with labour market needs. The 
proportion of published job vacancies unfilled is rather high (63% in 2009), which points to 
skill mismatches, but also a persistent lack of mobility, as most of the offers concern works in 
the  coast  and  central  areas.  Current  unemployment  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  represents  only  20%  in  total  employment.  Several 
educational reforms are trying to align labour supply with market demand. A Law on National 
Vocational  Qualifications  with  a  new  and  wider  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 smoothing the transition from education to work 
through cooperation with academic institutions, professional guidance, and programmes such 
as  those  for  young  managers  having  already  graduated.  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 entrepreneurial learning. It is estimated, that these 
measures  resulted  in  some  4,000  new  employments  since  September  2009  until  June  2010. 
Overall, qualifications and skills mismatch 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 contribution 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 telecommunications, real estate and tourism, 
followed by financial intermediation, and more recently energy. Gross fixed capital formation 
(GFCF) has been increasing steadily, reaching 38% of GDP in 2008 but decreased to 26.7% 
of  GDP  in  2009.  During  this  period  construction  accounted  for  some  24%  of  capital 
formation. Hotels, retail trade, transport and communications were responsible for some 20% 
each  of  GFCF  while  manufacturing  accounted  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 expansion of the production capacity has remained 
limited,  as  a  significant  share  of  foreign  and  domestic  investment  was  directed  to  the  non-
tradable sector.  

The  electricity  production  and  transmission  system  is  underdeveloped  and  results  in  power 
cuts notably during the winter season. The average price of electricity, though 60% lower than 
in  the  EU,  remains  higher  than  in  most  neighbouring  countries.  To  address  these 
shortcomings, but also with a view to becoming 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 remains insufficient to cover 
domestic energy needs and the country relies on energy imports to satisfy domestic needs. 

Transport infrastructure has been historically inadequate and hinders the efficient transport of 
goods  and  passengers.  The  railway  company  is  investing  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 were three mobile phone operators with a total 
market  penetration  just  above  200%  in  2009  and  a  fourth  mobile  operator  license  has  been 
attributed in early 2010. However, the country only has 25,800 broadband internet subscribers 

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(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  retained  10%  in  2009  which  points  to  increased 
productivity  of  this  sector.  Major  declines  during  this  period  were  recorded  in  activities 
closely  related  with  metallurgy:  mining  (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 wholesale and retail has 
remained stable, but it is still 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 informal 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 dominated by the metal industry, with aluminium 
and steel production together with their associated industries and services (mining, railways, 
harbour, and energy) accounting for 48.6% of GDP in 2002. Eight years later, the contribution 
of  metals  to  the  national  economy  has  decreased  significantly.  Before  the  crisis,  aluminium 
gross  output  represented  less  than  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 industries. The Niksic steelworks (ZNK) 
managed  a  reconversion  with  state  support,  mostly  in  form  of  bank  guarantees  and  energy 
subsidies. However, the more distressed aluminium smelter (KAP) went through a partial re-
nationalisation,  with  the  state  taking  back  30%  of  the  company's  shares  in  exchange  of  a 
rescue  package,  including  loan  guarantees  and  an  ambitious  restructuring  plan  to  halve 
production costs. Other economic sectors, notably tourism have developed 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  industry  for  the  economy  is  declining  as  it  suffers 
from deterioration in competitiveness, requiring large scale 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 legislation 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  separated  its  passenger  unit  from  the  freight  unit 
Montecargo and offered for sale the latter in 2010 to an international railways cargo operator. 
The tender for the sale of the port of Bar container and general cargo operator failed. In both 
cases, the railways and the port, the government keeps the ownership of the infrastructure. So 
far,  the  national  air  carrier,  Montenegro  Airlines,  has  implemented  the  first  stage  of  its 

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foreseen  restructuring  by  being  transformed  into  a  shareholder  company.  Overall,  a  large 
restructuring of strategic enterprises and sectors is underway. 

The  share  of  small  and  medium-sized  enterprises  (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  outside  the  former  Yugoslav  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 some 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 the 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 related to privatisation clauses in view 
of restructuring the metal industries. During the crisis in 2009 and 2010, support to distressed 
companies  mostly  took  the  form  of  state  guarantees  (4.7%  of  GDP  on  foreign  sources  of 
financing  and  additional  1.8%  of  GDP  to  domestic  ones),  raising  subsequent  contingent 
liabilities  for  the  public  finances  that  may  materialise  later  on.  Electricity  price  cross-
subsidisation amongst different class of users is being reduced and replaced with direct budget 
to  avoid  market  distortions  amongst  consumers.  An 
subsidies  with 
Administration for Protection of Competition and 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. 

intention 

the 

Economic integration and convergence with the EU  

Montenegro  remains  a  very  open  economy,  with  total  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  affected  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)  remained  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  neighbouring  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 investment  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 deterioration in international competitiveness. Yet, 
the level of investment integration with the EU remains high. 

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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 consensus 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 decisions in a climate of 
predictability. This has resulted in high growth rates which were on average above 5% in the 
years  preceding  the  economic  crisis.  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  market  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 attracted by the improved business environment. The 
restructuring  process  of  strategic  enterprises  and  sectors  is  underway.  State  aid  has  been 
historically low, often related to privatisation clauses or supporting distressed companies. The 
Montenegrin  economy  remains  very  open  and  the  level  of  trade  and  investment  integration 
with the EU and the Western Balkan region is high. 

However, after years of strong capital inflows supporting rapid economic growth, the global 
crisis  unveiled  significant  internal  and  external  imbalances  exposing  the  country  and 
threatening macroeconomic stability. The crisis also 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 
the  growing  public  debt.  Persisting 
unemployment,  and  informal  employment,  point  to  weaknesses  in  the  education  and 
vocational training systems as well as to some labour market rigidities. The country has a still 
insufficient energy and transport infrastructure. Small businesses in particular are confronted 
with  scarce  and  expensive  financing.  Persisting  weaknesses  in  the  rule  of  law  negatively 
affect the business environment. The informal sector remains an important challenge.  

to  materialise 

threaten 

in 

3. 

ABILITY 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  membership,  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, including 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.  This  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 

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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 sufficient 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  enforcement.  An  analysis  and  assessment  of  the 
country’s administrative capacities is therefore included in each of the chapters below.  

For the purpose of this analytical report, and without prejudging any future date of accession, 
the medium-term perspective in the assessments has 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 general principle is supplemented by 
a  harmonised  regulatory  framework,  following  either  the  ‘Old  Approach’  (laying  down 
precise product specifications) or the ‘New Approach’ (setting general product requirements). 
Transposition  of  harmonised  European  product  legislation  accounts  for  the  bulk  of  the 
obligations under this chapter. Smooth implementation and proper enforcement of the acquis 
requires  sufficient  administrative  capacity  to  notify  restrictions  on  trade  and  to  apply 
horizontal and procedural measures in areas such as standardisation, conformity assessment, 
accreditation, metrology and market surveillance.  

The Stabilisation and Association Agreement creates a number of obligations 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  regulations  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 measures, is compatible with Articles 34–36 of the 
Treaty on the Functioning of the European Union and related case law of the European Court 
of Justice (with special emphasis on the principle of mutual recognition).  

In the area of horizontal measures, Montenegro adopted new legislation on standardisation, 
accreditation and metrology in 2008 and 2009. Gradual 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  principles  of  the  New  Approach  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 framework law has been in force since 2008. ISME 
is  currently  an  affiliate  member  of  the  European  Committee  for  Standardization  (CEN)  and 
the European Committee for Electrotechnical Standardization (CENELEC), and it is planning 
to become a member of the European Telecommunications Standards Institute (ETSI) during 
2010.  ISME  is  also  active  in  international  standardisation  organisations.  However,  it  is 
estimated  that  full  membership  of  the  three  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 planned 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 European standards into national ones. There are 

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currently  4,150  Montenegrin  standards  transposing  European  (EN)  and  international 
standards. Regulations have been introduced that provide for the withdrawal of old, and often 
compulsory,  Yugoslav  standards.  Furthermore,  ISME  has  recently  established  its  first  own 
database  for  newly  adopted  Montenegrin  standards  and  related  documents.  However,  some 
old laws still make normative reference 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 revised 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  principle.  There  still  exists  a  network  of 
laboratories,  certification  and  inspection  bodies  which  were  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 legislation and the relevant international and 
European standards.  

The  present  law  setting  the  requirements  for  accreditation  was  adopted  in  2009.  The 
Accreditation Body of Montenegro (ATCG) which was set up in 2007 is a public, non-profit 
accreditation body with a full-time staff of 6. The Montenegrin accreditation policy principles 
are  broadly  in  line  with  those  of  the  EU,  notably  the  public  not-for-profit  basis  of 
accreditation  and  its  professional  and  financial  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 Bureau 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  faced  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,  including  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  structure  required  by  Regulation  (EC)  No 
765/2008 still needs further development and 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,  chemicals,  including  REACH,  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 recreational craft, non-automatic weighing instruments 

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and  eco-design  requirements  for  energy-related  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 pressure vessels, cableway installations, construction 
products, radio and telecommunications terminal equipment and measuring instruments. 

Regarding  procedural  measures,  Montenegro  has  not  yet  aligned  its  legislation  with 
Directive 98/34, as  amended by Directive  98/48, on  provision  of information in  the field of 
technical  standards  and  regulations.  As  regards  external  border  checks,  the  Montenegrin 
legislation  does  not  yet  incorporate  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 directive 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 aligned its legislation with the relevant acquis. 

Conclusion 

Although Montenegro has taken initial 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  conformity  assessment  procedures  needs  alignment 
with  the  acquis.  The  basic  separation  of  standardisation,  accreditation  and  metrology 
implementing  measures  are  necessary. 
functions  has  been  established,  but  further 
Administrative  capacities  must  be  reinforced 
technical 
organisations,  and  proper  coordination  of  measures  relating  to  free  movement  of  goods  is 
needed  at  governmental  level.  Major  efforts  towards  alignment  with  the  acquis  will  be 
necessary. 

in  relevant  ministries  and 

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 Member State have the right to 
work in another EU Member State, to reside there for that purpose with their family and to be 
treated in the same way as national workers in terms of working 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 country are free from any discrimination based 
on  nationality  as  regards  working  conditions,  remuneration  or  dismissal.  Montenegrin 
legislation prohibits discrimination of employed persons and persons seeking employment on 
grounds of, inter alia, nationality. 

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As  regards  access  to  the  labour  market,  Montenegrin  legislation  requires  EU  citizens  to 
obtain a work permit. The Law on employment and work of foreigners does not distinguish 
between EU nationals and nationals of third countries in this respect. In addition to the work 
permit,  a  permanent  or  temporary  residence  permit  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  foreign  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 work 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  country,  and  to  take  up  employment  and  self-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 service posts to their own 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 (including of local authorities). 

As  regards  Montenegro’s  future  participation  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 English 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  security  which  come  within  the  scope  of  EU 
coordination  rules.  The  system  is  based  on  the  principle  of  compulsory  insurance  in  the 
country  of  work.  Non-Montenegrin  nationals  are  not  discriminated  in  the  compulsory 
insurance scheme. Montenegro has also a number of special benefits for war victims. 

Following  its  independence  in  June  2006,  Montenegro  has  signed  a  limited  number  of 
bilateral  social  security  agreements  with  other  countries,  including  four  EU  Member  States 
(Austria, Belgium, Hungary and Luxembourg). On the basis of state succession, Montenegro 
applies various bilateral social security agreements concluded with the SFR Yugoslavia, SR 
Yugoslavia and State Union of Serbia and Montenegro. 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  challenge  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 administrative structures responsible for applying 
the EU provisions in this field. 

The main challenge for Montenegro will be building up the administrative capacity necessary 
to  fully  apply  Regulations  883/2004  and  987/2009,  which  coordinate  Member  States'  social 
security systems, upon accession. In addition, preparations for participation in the Electronic 

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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.  This  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  unemployment  varies  strongly  depending  on  the 
method of calculation, with registered unemployment rates between 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 last decade (the GDP per capita in Montenegro 
has more then doubled since 2000), there remain significant differences between Montenegro 
and the EU. Montenegrin GDP per capita in purchasing power parity represents 43% of the 
EU 27 average. 

Historically, there have been migration movements from Montenegro within the territory of 
the  former  Yugoslavia  and,  more  limited,  towards  third  countries,  including  EU  member 
states. While precise figures of Montenegro's diaspora are not available, existing indications 
point to a very low migration rate in recent years. 

Notwithstanding limits due to the lack of reliability and comparability of Montenegro's labour 
market  statistics  with  that  of  the  EU,  overall,  the  above  preliminary  assessment  tends  to 
indicate  that  Montenegro's  membership  in  the  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,  Montenegro  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 

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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  provide  cross-border  services,  as  laid  down  in 
Articles 49 and 56 of the Treaty on the Functioning of the European Union (TFEU), are not 
hampered  by  national  legislation,  subject  to  the  exceptions  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 mutual recognition of qualifications and diplomas 
between  Member  States.  For  certain  regulated  professions  a  common  minimum  training 
curriculum must be followed in order to have the 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 market 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  services  between  the  EU  and  Montenegro.  It 
includes  a  standstill  clause  as  regards  restrictions  to  supply  of  services  by  providers 
established in a country other than 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 their 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 Montenegro, but not provision of cross-border services. 
Full  alignment  with,  and  implementation,  of  the  Services  Directive  will  require  building  up 
and strengthening administrative capacity. Furthermore, 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  beginning  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  exemption,  procedure  for  allowing  exceptions  to 
USO, transparent criteria for period of designation of universal service 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  Telecommunications  sets  the  tariffs  for  universal  postal 
the  Agency  for  Electronic 
services  and  deals  with  appeals  against  decisions  of 
Communications  and  Postal  Services,  the  national  regulatory  authority  (NRA).  While  the 
financial independence of the NRA is mainly ensured through proceeds of authorisations and 
licences, there is a need to ensure separation of regulatory functions currently exercised by the 
responsible  Ministry.  An  increase  in  the  number  of  dedicated  staff  dealing  with  postal 
services will be needed as well as a clear separation of regulatory and management tasks.  

In the field of mutual recognition of professional qualifications, the scope of the regulated 
professions  in  the  country  coincides  with  the  main  Directive  on  the  recognition  of 

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professional qualifications. The exceptions are veterinary surgeons and midwives, for which 
no  training  is  offered.  However,  further  adjustments  of  the  legal  framework  are  needed  to 
achieve  compliance  with  the  acquis.  This  would  include  the  elimination  of  all  nationality, 
residence  and  inappropriate  linguistic  requirements  as  well  as  reciprocity  clauses  and  the 
introduction of a legal distinction between professions 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 foreign higher education qualifications, but not 
of  foreign  professional  qualifications.  Recognition  is  granted  by  the  Ministry  of  Education 
and Science, but it remains unclear to what extent such recognition actually gives access to 
regulated professions. Administrative structures and procedures will need to be established to 
allow the mutual recognition of all kinds of professional qualifications. 

Conclusion  

There  are  no  discriminatory  legal  barriers  to  the  right  of  establishment  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  cooperation.  Montenegro  should  be  able  to  align  its  national 
postal legislation with the acquis in the medium term, but full 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 recognition of professional qualifications. 

Overall, Montenegro will need to undertake additional efforts to align with the acquis and to 
implement it effectively in the medium term. Early 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 Member States and third countries. The acquis also includes 
rules  on  cross-border  payments  and  execution  of  transfer  orders  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 items 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, law 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  investment  has  been  the  main  factor  in  the 
development  of  Montenegro  in  recent  years.  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 inflows (about 64%) originated in the EU. During 
the  reference  period,  significant  direct  investment  occurred  in  privatised  enterprises 
(telecoms, banks and financial services and metal industry) as well as in the tourism sector. 

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The Law on foreign current and capital transactions,  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-transfer  arrangements  on 
immovable property, although inward investment in real estate by non-residents is still subject 
to  some  restrictions  on  ownership  of  property  by  foreign  natural  persons  and  legal  entities. 
However,  these restrictions do not concern EU nationals, subsidiaries 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  event  of  a  serious  threat  to  monetary  policy  or  the  financial 
situation, safeguard measures can apply to capital 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 not 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  regulate  payment  institutions  and  does  not 
apply to cross-border payments. The necessary administrative structure is in place to ensure 
implementation  of  the  payment  acquis.  Nonetheless,  given  the  increase  in  workload, 
supervisory and enforcement duties and given the new responsibilities once the EU payment 
systems legislation is adopted, additional staff may be needed. 

With reference to anti-money laundering (AML), Montenegrin legislation is partially in line 
with the EU acquis, however additional efforts are needed to eliminate existing shortcomings 
(See also Chapter 24 - Justice, freedom and security). These include the current definition of 
beneficial  owner,  shell  bank,  financial  institution,  customer  due  diligence  (CDD)  measures, 
and politically exposed persons. The Montenegrin legislation does not explicitly prohibit the 
opening  or  keeping  of  anonymous  accounts  and  does  not  provide  for  verification  of  the 
customer’s identity. The national legislation is neither completely 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 activity which is considered particularly likely 
to  be  associated  with  money  laundering  or  terrorist  financing  and  to  complex  or  unusually 
large  transactions,  and  to  report  suspicions  of  money  laundering  or  terrorist  financing.  No 
provisions for terminating business relations and filing 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  the  Financial  Intelligence  Unit  (FIU)  about 
suspicious transactions, persons, and facts discovered during their supervision activities.  

Designated  supervisors  are  the  Central  Bank  of  Montenegro  (CBM),  the  Insurance 
Supervision  Agency  (ISA),  the  Securities  and  Exchange  Commission  (SEC)  and  the 
Administration for the Prevention of Money Laundering and Terrorist Financing (the FIU) 12 
The supervision regime in the area of AML and combating the financing of terrorism (CFT) 
encompasses  inter  alia  banks,  life  insurance  companies  and  agents,  investment  funds, 
stockbrokers, pension funds, leasing companies and 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 constraints 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  current  staff  of  3  out  of  5  officials  envisaged. 

12 

There  are  also  other  supervisors  for  supervising  compliance  in  the  area  of  AML  and  combating 
financial terrorism (CFT): the Agency for Telecommunication and Postal Services for the post offices, 
the administration body for games of chance for lotteries, and the tax authority for pawnshops. 

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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 notaries, while the FIU supervises real estate 
agents. Having identified this sector as an area of particular risk for money laundering the FIU 
took  supplementary  measures,  including  the  collection  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 further 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-tuned.  However implementation and enforcement 
mechanisms still need to be put in place or further enhanced. In particular, Montenegro needs 
to strengthen the capacity of the 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 laundering 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 well as broad involvement of the private 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  the  independence  and  capacity  of  supervisory 
authorities and enforcement agencies.  

3.5. 

Chapter 5: Public procurement 

The  acquis  on  public  procurement  includes  the  general  principles  of  transparency,  equal 
treatment, and non-discrimination. In addition, specific EU rules apply to coordination of the 
award  of  public  contracts  for  works,  services  and  supplies,  for  the  classical  sector,  for  the 
utilities  and  for  the  fields  of  defence  and  security.  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  procedures  and  the  availability  of 
remedies. 

The  Stabilisation  and  Association  Agreement  stipulates  that  EU  companies,  whether 
established  in  Montenegro  or  not,  must  have  access  to  contract  award  procedures  in 
Montenegro  based  on  treatment  no  less  favourable  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 legislation, their implementation and enforcement 
needs to be improved by enhancing understanding and administrative capacity at local level 
and keeping up on policies to fight corruption in public contracts. 

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The award of public contracts is governed by the 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 (Directive 2004/18/EC); however, it 
still  presents  some  procedural  weaknesses  with  reference  to  restricted  tenders,  the 
considerable administrative burden imposed on bidders and too short time limits. In addition, 
an  appropriate  legal  framework  for  procuring  entities  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 policy for green and social procurement has not yet 
been put in place. A new Law on concessions was 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 participation in preparing and monitoring 
the Montenegrin public procurement legislation and its application. 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 properly 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  authority’s  decision  may  submit  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  continue  handling  all  its  tasks  if  the  number  of 
complaints continues to rise. Moreover, the PPC provides statements on correct application of 
the  law.  This  gives  rise  to  questions  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  legislation  to  fully  comply  with  the  EU  acquis.  This  applies  in 
particular to the Utilities, concessions and the new Remedies Directives.  

The requirements of the SAA have been implemented, 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  Montenegro  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 central and local level - for both implementation 

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of the legislation and monitoring - is needed. Furthermore, 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 requirements,  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 consolidated accounts, including simplified rules for 
small  and  medium-sized  enterprises.  Particular  accounting  rules  apply  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  the  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  concern  more  specifically  the  disclosure 
requirements of companies, the grounds for nullity of companies, the electronic operation of 
business  registers  and  capital  maintenance  and  alteration.  Montenegro  has  not  yet  aligned 
with  the  Shareholders’  Rights  Directive  and  the  Takeover  Bids  Directive,  although  the 
Montenegrin  Law  on  takeover  of  joint  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 corporate governance is still to be developed in 
the full sense.  

As  regards  administrative  structure,  the  Ministry  of  Economy,  Ministry  of  Justice  and 
Ministry  of  Finance  are  competent  for  policy  proposals  in  the  area  covered  by  the  business 
organisation  law.  The  Central  Registry  of  commercial  entities  is  an  independent  state  body 
established as part of the Commercial 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 rejection of a company is four days from the application for registration and 
the average period effectively required is two days. The Law on electronic signatures has been 
amended, however it will need to be further aligned with relevant EU legislation. 

Registration  with  the  tax  administration,  employment  agency,  health  insurance  fund  and 
pension  insurance  fund  has  been  unified  at  the  tax  administration,  in  a  single  form.  The 
percentage of limited liability companies 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  Finance  has  the  powers  to  check  the  annual  and 
quarterly  financial  statements  of  joint  stock  companies  and  other  legal  entities  that  issue 
securities, other financial instruments traded on the organised market and parent legal entities 
required to prepare financial statements. In addition, the Ministry of Finance, in coordination 
with the Council for Misdemeanours, has determined the procedure for submitting the request 
for initiating the misdemeanour procedure against legal entities and their responsible persons 
for the non-submission of financial statements.  

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The  area  of  corporate  accounting  is  regulated  by  the  Law  on  accounting  and  auditing  of 
2008  while  by-laws  further  regulate  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 consolidated 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 consultative body whose tasks are to consider and adopt its position 
on  matters  such  as  the  development  and  promotion  of  accounting  and  auditing  practice  in 
Montenegro;  to  provide  advice  to  policy  makers,  regulators  and  government  bodies;  to 
provide technical assistance for improving the quality of financial reporting and other matters 
important  for  the  development  and  promotion  of  accounting  and  auditing  practice  in 
Montenegro, in line with the IFRS.  

As regards statutory audits, the Law on accounting and auditing of 2008 transposes partially 
the  Statutory  Audit  Directive  (2006/43/EC)  and  takes  into  account  some  aspects  of  the 
Commission  recommendations  of  2008  on  external  quality  assurance  and  limitation  of  the 
civil  liability  of  statutory  auditors  and  audit  firms.  A  series  of  by-laws  further  regulates 
particular  areas  of  auditing  such  as  registration  of  audit  firms  and  authorised  auditors, 
requirements for authorised auditor licensing, and mandatory liability insurance of audit firms 
and authorised auditors. However, legislation needs to be developed on the establishment and 
approval of audit firms; the specific requirements for statutory auditors and audit firms which 
carry  out  audits  of  public  interest  entities  such  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  supervisory  authorities;  the  regulation  of  third-
country auditors and audit firms as well as cooperation with competent authorities from third 
countries.  

Conclusion 

In  most  areas  under  this  chapter  Montenegrin  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  alteration,  shareholders'  rights,  takeover  bids  and 
corporate accounting. Further alignment is needed on important aspects of the Statutory Audit 
Directive.  

Beyond  alignment,  Montenegro 
to  effective 
implementation  and  enforcement  in  areas  such  as  the  electronic  operation  of  business 
registers.  All  appropriate  measures  need  to  be  taken  to  improve  the  corporate  culture  and 
further  develop  systems  of  corporate  governance.  Besides,  an  independent  public  oversight 
body for auditors and a quality control system need to be established. 

faces  additional  challenges 

relating 

Overall, Montenegro will have to undertake additional 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 

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rights  of  right-holders  and  the  interests  of  users  and  adapting  the  legal  framework  to  the 
changing  technological  environment.  The  copyright  acquis  harmonises  rules  on  legal 
protection  of  copyright  and  related  rights.  Specific  provisions  apply  to  protect  databases, 
computer  programs,  semiconductor 
topographies,  satellite  broadcasting  and  cable 
transmission.  The  acquis  on  industrial  property  rights  sets  out  harmonised  rules  for  legal 
protection  of  trademarks  and  designs.  Specific  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 requires Member States to set up 
adequate implementing mechanisms, in particular 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  protection  of  intellectual, 
industrial  and  commercial  property  rights  similar  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 important gaps and incompatibilities with the acquis. 
These include key provisions on the resale right, on exercise of the cable retransmission right, 
and  on  the  protection  of  technological  measures.  However,  some  of  these  divergences  are 
expected  to  be  addressed  in  a  revised  copyright  law,  to  be  adopted  by  the  end  of  2010. 
Responsibilities in this area have been shifted from the Ministry of Culture to the Ministry of 
Economic Affairs to consolidate efforts 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 Industrial 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.  Technical  infrastructure,  including  secured  premises,  a  configured 
network,  databases  and  registers,  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 system of industrial property rights.  

The provisions relating to enforcement of intellectual property rights are to be found in legal 
texts  regulating  the  various  intellectual  property  rights.  In  addition  there  is  a  Law  on  the 
enforcement of legislation regulating the protection of intellectual property rights that covers 
administrative  procedures  (inspections,  destruction,  etc.)  and  criminal  sanctions.  Directive 
2004/48/EC is not completely implemented. Too many provisions are not sufficiently aligned 
with  the  Directive’s  standards  (rules  about  evidence  and  measures  to  preserve  evidence, 
provisional  measures,  right  of  information,  corrective  measures)  and  several  tools  are 
completely  missing  (e.g.  recurring  penalties,  measures  in  case  of  alleged  commercial-scale 
infringements).  Considerable  efforts  remain  to  completely  align  the  legislation  with  the 
acquis.  

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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  tourist  inspectorate  and  the  authorised  official  of  the  independent 
regulatory  authority  in  charge  of  broadcasting  are  listed  in  the  Law  on  the  enforcement  of 
legislation  regulating  the  protection  of  intellectual  property  rights.  All  main  enforcement 
agencies suffer from both inadequacies of premises 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. Information exchange and provision is episodic 
and not based on modern IT platforms that would ensure quality and update information. The 
level  of  activities  is  fairly  low  except  for  the  Market  Inspection  Service,  which  in  2009 
reported  a  number  of  activities  considerably  higher  than  for  other  enforcement  agencies. 
Participation of economic operators and consumers in preventing counterfeiting 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 counterfeiting and piracy. Effective coordination mechanisms need to be 
established and awareness-raising activity intensified. So far, Montenegro cannot effectively 
and efficiently fight counterfeiting and piracy, which leads to considerable economic, social 
and development losses.  

Conclusion 

Montenegrin legislative framework on intellectual 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  capacity,  not  least  through 
vocational training and development of necessary competences, especially for judges, is vital 
for  further  progress  in  this  area.  Effective  enforcement  of  intellectual  property  rights  will 
require  substantial  further  efforts  based  on  political  determination  and  the  allocation  of 
adequate  human,  financial  and  technical  resources  to  the  relevant  agencies  and  to  the 
judiciary.  Strengthening  and  rationalisation  of  resources  and  capabilities  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 aid control policies. It includes rules 
and  procedures  to  fight  anticompetitive  behaviour  by  companies  (restrictive  agreements 
between undertakings and abuse of a dominant position), to scrutinise mergers and to prevent 
governments  from  granting  state  aid  that  distorts  competition  on  the  internal  market. 
Competition  rules  are  directly  applicable  throughout  the  Union  and  Member  States  must 
cooperate fully with the Commission 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  and  State  aid  distorting  competition.  The  SAA 
includes rules applying to public undertakings and to undertakings which have been granted 
special and exclusive rights and prohibits quantitative restrictions on imports from the EU into 

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Montenegro. The SAA provides for operationally independent public authorities to supervise 
application of the competition rules. It also includes a protocol laying down rules on State aid 
in steel industry. 

As regards antitrust including mergers, the necessary legal and institutional framework has 
been  put  into  place  satisfactorily,  but  certain  legal  provisions  need  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  applies  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  values’  that  appear  appropriate  to  the  country’s  economic 
conditions.  However,  the  assessment  of  mergers  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 -rather than a function of the firm’s turnover- has 
regressive implications penalising SMEs.  

The  Competition  Protection  Administration,  established  in  2008,  has  investigatory  powers 
and  may  impose  fines  on  undertakings  and  public  bodies  where  the  competition  rules  are 
infringed.  Decisions  by  the  competition  authority  are  subject  to  judicial  review  by  the 
Administrative  Court  of  Montenegro.  The  competition  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  provisions  need,  however,  to  be  aligned  more  closely  with  EU 
rules, e.g. the rights of third parties to file complaints. The Montenegrin Law on state aid, as 
revised in 2009, is in line with the provisions of Article 107 TFEU and Regulations in force at 
the  time  of  its  adoption.  A  State  aid  inventory  was  drawn  up  in  September  2008  and  its 
database is updated regularly. 

As  regards  administrative  capacity,  the  Montenegrin  state  aid  authority  is  the  State  Aid 
Commission  (SAC),  a  collegial  body  that  takes  final  decisions  based  on  an  assessment 
prepared by the State Aid Monitoring Unit (SAMU), a separate office within the Ministry of 
Finance.  The  SAC  consist  of  a  Chairman,  appointed  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  individual  aid.  In  addition,  the  SAC  may  order 
recovery of unlawful aid. If the aid granting body 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  explicitly  allow  third  parties  to 
submit  complaints.  The  SAMU,  with  a  staff  of  5,  performs  professional,  administrative  and 
technical tasks on behalf of the State Aid Commission 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 Montenegro’s ability to assume the obligations of EU 
membership  in  the  field  of  state  aid.  However,  efforts  will  be  needed  to  strengthen  the 

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institutional capacity and independence of the SAC. Its enforcement record and the quality of 
its  decisions  need  to  be  closely  monitored  in  the  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 undertakings enjoy special or exclusive 
rights, e.g. in the field of electricity, pharmaceuticals, 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  issue  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  independence  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 additional 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  safeguarding  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  services  are  to  ensure  financial 
stability,  the  financial  soundness  of  companies  operating  in  the  financial  sector,  and 
appropriate  protection  of  consumers,  investors  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  authorisation,  operation  and  supervision  of  financial 
institutions  in  the  areas  of  banking,  insurance,  supplementary  pensions,  investment  services 
and securities markets as well as on financial market infrastructure. Financial institutions can 
operate across the EU in accordance with the ‘single passport’ and the ‘home country control’ 
principle, either by establishing branches 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 operating 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 comparison with 2008. The official statistics 
show that the Montenegrin banking system is significantly 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  Central  Bank  of  Montenegro  (CBM)  together 
constitute  the  legislation  applicable  to  the  sector.  Both  are  to  a  great  extent  in  line  with  the 
Capital  Requirements  Directive  (CRD).  However,  further  progress  in  the  area  is  needed  for 

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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  process,  the  supervisory  review  process  and  the 
transparency  of  the  banks’  activities  for  building  and  maintaining  a  sustainable  financial 
system  are  not  sufficiently  covered  and  further  intensive  work  in  this  area  is  required.  The 
recent amendments to the banking law also introduced early intervention and bank resolution 
arrangements,  which  are  under  review  and  development  in  the  EU.  The  Financial  Stability 
Council  Law  aims  at  improving  the  identification  and  mitigating  of  systemic  risks  in  the 
financial  sector  to  ensure  financial  stability.  The  current  legal  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 reorganisation and winding up directive of the EU.  

The Montenegrin parliament adopts primary financial legislation. The Ministry of Finance is 
responsible  for  submitting  draft  new  laws  to  parliament  and  for  coordinating  the  legislative 
drafting process between parliament, the CBM and the Securities 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  without  coordinating  the  changes  or  consulting 
the  other  authorities  involved.  The  CBM  participates  actively  in  the  process  of  technical 
preparation  of  legislative  acts,  and  has  established  appropriate  enforcement  mechanisms  for 
their  implementation.  However,  the  establishment  of  a  team  dedicated  to  the  process  of 
alignment with the EU legislative acts is needed. Further progress in the enforcement of some 
areas of legislation needs to be achieved, as regards for example consolidated supervision and 
financial reporting.  

The  supervision  of  banks  is  the  sole  responsibility  of  the  CBM.  In  addition,  the  CBM 
supervises five micro-credit institutions. Under the law it is responsible for the supervision of 
credit unions, so far non-existent in Montenegro. The banking supervision department of the 
CBM,  consisting  of  45  employees,  performs  specialised  supervision  and  supervision  of  the 
systemic risk. This structure is quite new and was introduced two years ago with the aim of 
promoting an effective risk-based supervision process in the CBM. The banking supervision 
department has the right to issue instructions and 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 market and only two of them offer life insurance. 

The main legislation in the field of insurance is the Law on insurance of 2006 while the Law 
on  compulsory  transportation  insurance  regulates  the  minimum  amounts  of  coverage  for 
compulsory motor vehicle insurance. Some important principles are missing and amendments 
are  needed  in  order  to  ensure  compliance  with  the  acquis.  No  cross-border  provision  of 
is  required,  and  minimum  amounts  of 
services 
compensation for personal injuries and material damage are far below the amounts specified 

is  allowed,  national 

incorporation 

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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,  reporting  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 relevant 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 market in Montenegro 
is small. The merger of the two domestic stock exchanges was approved in August 2010 with 
the  consent  of  the  securities  commission,  establishing  a  single  capital  market.  On  30 
September 2010, there were 23 authorized participants on the securities market, of which 10 
have  broker  licenses  and  13  have  broker  and  dealer  licenses;  six  banks  have  a  license  to 
provide  custody  services.  Trade  in  securities  is  performed  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 implementing 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  only  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  prospectus  consisting  of  several  documents;  certain 
requirements for the admission of shares; requirements for notifying major holdings of voting 
rights;  a  series  of  definitions  on  e.g.  systematic  internalisers,  market  makers,  market 
operators,  MTFs,  as  well  as  some  principles  concerning  investment  intermediaries;  and, 
finally, minor aspects concerning the market abuse Directive (MAD). 

The  Montenegrin  Securities  Commission  is  the  competent  regulatory  and  supervisory 
authority for the securities sector. It is composed 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 Understanding 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  exchanging  information  with  all 
important jurisdictions in the world. The Commission manages licensing 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  administrative  or  criminal  courts  for  imposing 
sanctions  on  both  regulated  and  non-regulated  entities.  All  decisions  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 

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be paid to staff competence of the banking supervision department, especially with reference 
to Basel II requirements. Banking supervision needs 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, including enforcement, need to be enhanced.  

Overall, Montenegro will have to undertake additional 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 services 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  effective  regulatory  framework  for  audiovisual  media 
services in line with European standards. 

As regards electronic communications and information technologies, the Stabilisation and 
Accession Agreement specifies the ultimate objective of Montenegro adopting the EU acquis 
in the sector of electronic communications networks and services three 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  transposed  into  Montenegrin  legislation  and  the 
necessary administrative structures for implementation 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,  internet,  fixed  wireless  access,  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 costing 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  electronic  communications  is  set  out  in  the  five-year 
strategy for the electronic communications sector, adopted by the government in June 2006. 
Based  on  this  strategy,  the  Law  on  electronic  communications  (LEC)  was  adopted  in  July 
2008,  replacing  the  Telecommunications  Law  of  2000,  and  establishing  a  new  legislative 
framework  aiming  for  alignment  with  the  EU  regulatory  framework.  Amendments  to  the 
LEC, and the Law on audiovisual media were adopted 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 implementation 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 regulatory decisions, is still 
at  an  early  stage.  Several  decrees  on  universal  services  were  adopted  in  September  2010. 
Despite the alignment of the LEC with the Law on electronic media there are still concerns 
about  several  provisions  of  the  LEC,  not  least  those  regarding  the  regulatory  oversight 
function of the ministry over the regulatory authority and the latter’s independence. 

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The LEC established the Agency for Electronic Communications and Postal Services (EKIP), 
which  became  operational  at  the  end  of  2008.  The  five  members  of  the  agency’s  board  are 
appointed directly by the government, which carries the potential risk of political influence. 
This appointment procedure is not in line with the EU regulatory framework, which aims to 
ensure  that  national  regulatory  authorities  are  protected  against  any  external  intervention 
independent  assessment.  The  LEC  further  grants  comprehensive 
jeopardising 
supervisory  powers  over  EKIP  to  the  Ministry  of  Transport,  Maritime  Affairs  and 
Telecommunications,  which  also  endangers  the  agency’s  independence.  The  administrative 
capacity  of  EKIP  to  adopt  and  implement  regulatory  decisions/secondary  legislation  as 
required  by  the  LEC  is  limited;  the  administrative  capacity  of  the  Ministry  is  even  more 
limited. 

their 

In  the  field  of  information  society  services,  Montenegro  adopted  a  strategy  on  the 
information  society  2009-2013  in  early  2009;  however,  broadband  policy  is  not  addressed. 
The Ministry for the Information Society, established at the beginning of 2009, is in charge of 
its  implementation  and  coordination  with  other  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 trade is now well approximated with the acquis, the 
Law on electronic signatures will need to be further aligned with relevant EU legislation. 

As  regards  audiovisual  policies,  Montenegro  adopted  in  July  2010  the  Law  on  electronic 
media,  which  aims  to  align  Montenegrin  legislation  with  European  standards  on  media 
regulation and the Audio Visual Media Services Directive (AVMSD). The law establishes the 
Agency  for  Electronic  Media,  previously  the  Broadcasting  Agency,  as  an  independent 
regulatory  body  in  this  field  and  defines  its  competences.  It  clarifies,  together  with  the 
amendments to the Law on electronic communications 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.  Overall,  the  Law  on  electronic  media  is  largely  aligned  with  the 
AVMSD.  

As  regards  film  heritage,  the  actions  undertaken  in  this  area  are  satisfactory.  Concerning 
protection of minors, increased efforts will be necessary. Montenegro is party to the Council 
of  Europe  Convention  on  transfrontier  television  and  to  the  UNESCO  Convention  on  the 
promotion of diversity of cultural expressions. 

Conclusion 

As  regards  electronic  communications  and  information  technologies,  Montenegro  has  partly 
aligned  its  legislation  with  the  acquis.  However,  the  country  is  at  an  early  stage  of 
implementation  of  the  legislation.  Market  liberalisation  has  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 been progress in terms of  legislative  alignment 
and  the  focus  now  needs  to  turn  to  implementation,  which  is  at  an  early  stage.  The 
administrative  capacity  of  the  new  established  Ministry  for  Information  Society  is  fairly 

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limited.  Concerning  audiovisual  media,  Montenegrin  legislation  is  largely  aligned  with  the 
Audiovisual  Media  Services  Directive  and  European  standards  on  media  regulation. 
Montenegro will need to step up efforts as regards protection of minors. 

Overall, Montenegro will have to undertake additional 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  efficient  public  administration  are  essential  for  the 
functioning of the common agricultural 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 apply the EU legislation on direct support schemes 
and to implement the common market organisation 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 Agreement on trade and trade-related matters had 
been  in  force  since  1  January  2008  and  already  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  grassland  (88%;  454,138  hectares),  which  is  used 
extensively.  Covering  a  relatively  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  and  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  total  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 follows an upward trend, reaching €440 million in 
2009,  a  16%  increase  on  2007.  Neighbouring  Central  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  agricultural  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  Ministry  of  Agriculture,  Forestry  and  Water 
Management  is  limited,  with  72  staff  covering  policy  formulation  and  undertaking  the 
necessary measures for its implementation. Currently available agricultural statistics are rather 
limited  and  unreliable.  However,  an  agricultural  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)  

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Montenegro’s  agricultural  policy  is  based  on  the  2009  Law  on  agriculture  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 rural areas, grouped under 
four  main  strands:  market  price,  rural  development  policy,  activities  of  public  interest  and 
social transfers to the rural population. Montenegro’s agriculture is still characterised by small 
subsistence  farming  and  traditional  production,  which  results  in  a  less  favourable  structure 
and low productivity. There are many challenges for Montenegrin agriculture, with emphasis 
on  increasing  competitiveness  and  stronger  integration  within  the  food  chain.  Total 
agricultural support by the Ministry 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 elements for the management and control of CAP 
funds — is very demanding, planning and preparation 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, tobacco, headage payments for cows, bulls, sheep 
and  goat  production.  In  all  cases,  a  yearly  budgetary  ceiling  is  fixed  which  limits  the 
individual payments. Therefore, the aid rate can change annually. 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 place 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 subsidies 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,  clover-grass  mixtures).  Potato  production  at  around 
10,000  hectares  is  a  very  important  sector,  which  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  heads  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  Montenegrin  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 rearing of local breeds used for milk and meat, with 

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an  annual  output  of  7,000  tonnes  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 period 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  planting  new  orchards.  This  measure  is  not  in  line  with  the  acquis. 
While there are associations of producers in Montenegro which undertake certain functions, 
these are not producer organisations 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 recent 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 Council, Montenegro applies marketing standards 
on olive oil that are harmonised with the EU. 

Montenegro’s  policy  displays  a  commitment  to  rural  development  with  a  comparable 
approach  to  that  of  the  EU  and  the  existence  of  a  strategy  and  a  national  programme. 
However, certain measures or parts thereof are not compatible with the EU acquis. Selection 
criteria and targeting of measures must be established and monitoring and evaluation further 
enforced.  The  agri-environmental  orientation  of  Montenegro’s  rural  development  policy 
remains weak. In addition, limited attention is paid to  extension and advisory services or to 
the upgrading of human capital. 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 has overall responsibility for rural development 
policy  and  implementation,  albeit  with  limited  capacity.  Thorough  preparations  will  be 
required to adopt EU-compatible delivery mechanisms. The first important step is the timely 
establishment  of  complete  IPARD  (Instrument  for  Pre-accession  Assistance  for  Rural 
Development) structures for implementing pre-accession assistance. Cooperation between all 
concerned departments of the Ministry and related IPA structures should be strengthened. 

As regards quality policy, Montenegro applies a quality management scheme similar to the 
EU scheme of geographical indications and traditional names. The organic farming sector in 
Montenegro  is  relatively  small  but  expected  to  grow  due  to  domestic  support,  ongoing 
international projects and trends. There are 88 producers involved 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 activities strengthened.  

Impact 

The  estimated  impact  of  EU  accession  of  Montenegro  on  the  EU’s  common  agricultural 
policy is linked to the structure and size of Montenegro’s agricultural sector. The agricultural 
sector  in  Montenegro  accounts  for  9.3%  of  GDP  (2008).  Montenegro,  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, beef and sheep would constitute 
a small percentage of total EU-27 production. Crop production is negligible when compared 
to EU production. Overall, a preliminary assessment indicates that Montenegro’s membership 
of the EU would have a limited impact on the CAP. 

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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  require  adjustments,  moving  towards  decoupled 
support  measures.  Montenegro  will  have  to  strengthen  its  administrative  capacity  and  focus 
preparations  on  setting  up  basic  instruments  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 development. 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  means  of  coherent  farm-to-table  measures  and 
adequate monitoring, while ensuring effective functioning of the internal market. The acquis 
lays  down  hygiene  rules  for  food  production  and  veterinary  rules,  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  nutrition.  Member  States  must  have  appropriate 
administrative  structures  for  inspection  and  control  of  food  products,  including  appropriate 
laboratory capacity. 

In  the  area  of  general  food  safety,  the  Ministry  of  Agriculture,  Forestry  and  Water 
Management and the Ministry of Health share the competence for policy planning, adoption 
of secondary legislation and supervision. The main 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  Ministry  of  Agriculture,  Forestry  and  Water 
Management and the department for food  safety  within the Ministry of Health are the main 
administrative bodies responsible for implementation. As regards risk assessment, a National 
Council  for  Food  Safety  Assessment  was  established  in  September  2009,  which  provides 
scientific  advice  and  assistance  towards  all  risk  assessment  activities  concerning  food  and 
feed  safety.  Food  safety  controls  are  performed  by  the  veterinary  and  phytosanitary 
administrations  of  the  Ministry  of  Agriculture,  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) analysis, which is done in foreign laboratories. The 
laboratories’  equipment  is  outdated  and  inadequate,  so  that  overall  food  testing  capacity  is 
limited. Several laboratories are undergoing the process of accreditation for various analytical 
methods. There is currently no rapid alert 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 Ministry of Agriculture, Forestry 

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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 Organisation for Animal Health (OIE) and joined on a 
voluntary  basis  the  EU  Animal  Diseases  Notification  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. Legislation creating a system for the identification of animals and 
registration of their movements has been adopted. However, some secondary legislation (for 
sheep and goats, porcine and equine animals) is still required and the system 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  the  adoption  of  a  law  on  animal  by-products. 
Hygiene rules have already been partially aligned with EU requirements, with the exception 
of  certain  microbiological  criteria  for  foodstuffs.  The  new  hygiene  requirements  are  being 
progressively  implemented,  starting  with  new  establishments.  Legal  provisions  for  hazard 
analysis and critical control point (HACCP) based 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  particular  there  are  no  provisions  for  the  control  of  specified  risk 
material (SRM). Harmonisation will also be necessary in the area of feed hygiene. 

In Montenegro, 76 meat, 22 milk and 9 fish establishments 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 particular 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  Herzegovina  and  Croatia.  It  will  have  to  be 
ensured  that  all  relevant  international  agreements  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 process 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,  notification  of  interception  and 
expenditure.  The  main  competent  authority  is  the  phytosanitary  administration  within  the 
Ministry of Agriculture, Forestry and Water Management. It is in charge of implementation 

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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  Montenegro,  but  tests  performed  abroad  are 
recognised. Laboratory capacity for control of seed and seed material and for pesticide residue 
analysis is limited and will need to be strengthened considerably to meet EU requirements. 

Conclusion 

Montenegro has started the process of aligning its legislation with EU requirements. Overall, 
however, it will have to make considerable and 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 Agriculture, 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  Regulations,  which  do  not  require 
transposition into national legislation. However, it does require the introduction of measures 
to  prepare  the  administration  and  operators  for  participation  in  the  common  fisheries  policy 
(CFP),  which  covers  resource  and  fleet  management,  inspection  and  control,  structural 
actions, market policy and state aid control. In some cases, existing fisheries agreements and 
conventions with third countries or international organisations need to be adapted. 

The  Stabilisation  and  Association  Agreement  regulates  preferential  trade  in  fish  and  fishery 
products and encourages cooperation 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 employed in marine fisheries (full- and part-time) and 36 in 
aquaculture.  The  official  annual  catches  amount  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 collection. Overall, the capacity 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 strategic plan for the fisheries sector 2009–
2013  sets  objectives  for  the  development  of  aquaculture  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 limitations. Montenegro is not a member of the 
International Commission for the Conservation of Atlantic Tunas (ICCAT) and has no quota 

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for  blue-fin  tuna.  The  Montenegrin  fleet  comprises  around  200  small  vessels,  including  21 
commercial  vessels  larger  than  12  metres.  Vessels  are  registered  manually  by  the  local 
harbourmaster’s  office.  A  fleet  register  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  project,  but  is  not  yet  fully  operational.  It  will  need  to  be 
further developed and implemented to become compatible with the EU fishing fleet register. 

The  Ministry  of  Agriculture,  Forestry  and  Water  Management  establishes  the  number  of 
fishing permits annually on a proposal from the Institute of Maritime Biology, based on catch 
data. However, there is a need for more reliable, systematic and improved collection of data 
as  regards  the  fishing  fleet,  catches,  landings  and  the  biological  state  of  the  fish  stocks  in 
Montenegrin waters in order to allow a comprehensive 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  measures  for  the  sustainable  exploitation  of 
fishery  resources  in  the  Mediterranean  Sea,  and  Regulation  2371/2002  on  the  conservation 
and sustainable exploitation of fisheries resources under the CFP. 

As regards inspection and control, the Montenegrin Marine Fisheries Law regulates logbook 
requirements for vessels larger than 10 metres, but its application in practice is problematic. 
There  is  no  systematic  processing  of  logbooks,  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 notes as a matter of priority. 

The  country  will  also  need  to  prepare  for  the  future  obligation  to  record  all  catches  by 
electronic  means  and  to  submit  this  information  also  electronically  to  the  competent 
authorities  (this  ‘electronic  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 neighbouring country to share its facilities. 

Concerning  the  human  resources  involved,  there  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 those provided by the European Fisheries Fund 
(EFF).  Upon  accession,  all  state  aid  measures,  including  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 the sound and efficient management of EFF funds 
in the framework of shared management. This will require strengthening human resources and 
in particular training. 

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Concerning market policy, Montenegro’s market measures are at a very embryonic stage, in 
particular  with  regard  to  establishing  producer  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  fisheries  in  the  Adriatic  Sea’,  which  is  co-
funded  by  the  EU.  The  2002  protocol  on  the  Prevlaka  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  small  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 biological 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  services.  The  transport  acquis 
covers road transport, railways, aviation, maritime transport and inland waterways. It governs 
technical and safety standards, social standards, and market liberalisation 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 and 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  regulated,  but  the  four  criteria  for  access  to  the 
occupation  (professional  competence,  financial  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 arrangements for roadworthiness testing are in place, the 
technical acquis on vehicles' weights and dimensions is not yet implemented. In the area of 
the  social  acquis,  the  legal framework  regulating  driving  times  and  introducing  tachographs 
was adopted in mid-2010. Compliance with mandatory driving times and rest periods and the 
use  of  tachographs  are  still  to  be  verified.  Enhanced  administrative  capacity  is  needed  to 
overcome the delay in the implementation of digital tachographs. As regards the transport of 
dangerous goods, the Law on transport of dangerous substances is in force and the country is 
a party to the European Agreement concerning the international carriage of dangerous goods 
by  road  (ADR).  However,  Montenegro  must  strengthen  its  mechanisms  for  monitoring  the 
implementation  of  relevant  international  rules  and  EU  legislation,  including  that  on 
transportable pressurised equipment, roadside checks on vehicles and safety advisors. 

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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  legislation.  Montenegro  has  signed  a  border 
crossing  agreement  with  Serbia  (based  on  the  Bulgarian  –  Serbian  agreement)  which, 
however,  is  not  in  full  compliance  with  EU  legislation.  The  international  rail  freight  traffic 
with  Serbia  and  Albania  reports  strong  growth  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.  Implementation  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  freight  transport,  is  still  pending. 
The absence of infrastructure charges for passenger 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. However, due to a lack of staff and resources, 
it is not fully operational. The remit of the Railway Authority needs to be enhanced 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 initial phase of its development. 

Concerning  air  transport,  according  to  the  last  European  Common  Aviation  Area  (ECAA) 
experts'  assessment  (September  2010),  Montenegro  has  made  considerable  progress  with 
regard  to  the  implementation  of  the  first  transitional  phase  of  the  ECAA  Agreement  and 
further  requirements  relating  to  the  second  phase.  The  state  of  compliance  of  Montenegro 
airlines  is  satisfactory.  The  country  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 number of changes to the domestic air transport law 
are also necessary in the field of economic regulation, including regarding the implementation 
of  the  working  time  directive.  The  authority  responsible  for  the  National  Civil  Aviation 
Security Plan and the responsible for the Quality 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  implementation  of  the  Single  European  Sky  acquis. 
Montenegro needs to ensure that this legislation is adopted at the earliest opportunity to help 
ensure regulatory convergence in the air traffic management field.  

Montenegro  has  only  a  limited  maritime transport  sector.  However,  considerable progress 
needs to be made in improving both flag state control and port state control. Montenegro is a 
member  of  the  International  Maritime  Organisation  (IMO)  and  the  International  Labour 
Organisation  (ILO).  Even 
the  Paris  Memorandum  of 
though  full  statistics  under 
Understanding  on  port  state  control  are  not  available,  the  detention  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. 

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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 administrative and implementation 
capacities are needed. Particular attention needs to be paid to further alignment of the eco-tax 
and  road  charges  legislation  as  well  as  to  transposition  of  the  third  railway  package. 
Montenegro  need  also  to  ensure  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 market (opening up electricity and gas markets 
in particular), promoting renewable energy sources, energy efficiency, crisis management and 
oil stock security obligations, nuclear energy and nuclear safety and radiation protection. 

Montenegro’s overall energy balance comprises hydropower, petroleum products, coal, wood 
and  wood  waste,  as  well  as  imported  electricity.  In  2008,  the  three  largest  major  energy 
groups  in  the  overall  energy  balance  were  petroleum  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.  Montenegro  currently  has  no  gas  infrastructure; 
however it intends to bring gas to the country.  

As  a  member  of  the  Energy  Community,  Montenegro  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  for  implementing  energy  policy  and  strategy, 
competencies  of  the  government  in  the  energy  sector,  and  the  establishment,  role  and 
responsibility of the regulatory body. This law 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 stocks in accordance with the previous Directive 
on oil stocks. However the law does not set timeframe 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  and  obligations  of  energy  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).  Real  market  opening  still  lags  behind.  In 

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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 vertically integrated utility. There 
is  no  timeline  foreseen  for  the  legal  unbundling  of  the  distribution  system  operator.  The 
transmission company (Prenos) was legally unbundled in 2009. Its operating transparency is 
improving, but it still does not fully meet the requirements of the acquis (such as publishing 
network charges and investment forecasts). The energy regulatory agency, Regagen, develops 
licensing  rules  and  procedures,  tariff  methodology  and  dispute  settlement  rules.  Its 
independence needs further strengthening. 

In  line  with  its  obligations  under  the  Energy  Community,  Montenegro  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 supporting 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 significant hydropower potential. Tenders are 
well advanced to build both large-scale and small-scale hydropower plants.. The country also 
has  potential  for  solar,  wind  and  biomass.  The  new  Energy  Law  aims  to  comply  with  the 
Renewable  Energy  Directive,  which  sets  Member  States  targets  for  minimum  shares  of 
renewable energy by 2020. Through the Energy Community, each contacting 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  renewable  energy  in  2005  (the  base  year  for  the 
calculation). Montenegro’s current renewable energy plans are not sufficient to comply fully 
with  the  2020  target.  Current  efforts  to  increase  renewables  are  focused  on  the  electricity 
sector, but not on transport or heating. There is no timeframe for 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  provisions  relating  to  energy  end-use 
efficiency,  energy  performance  of  buildings,  eco-design  of  products,  labelling  of  household 
appliances,  as  well  as  obligations  of  suppliers  and  distributors  of  energy-using  appliances. 
However this Law does not foresee a specialised implementing body or an Energy Efficiency 
fund.  The  promotion  of  high-efficiency  cogeneration  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  saving  by  2018,  in  compliance  with  the  Energy 

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Community commitments. Montenegro has no plans to implement the new EU Regulation on 
the labelling of tyres. 

As  regards  nuclear  energy,  nuclear  safety  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  Radiation  Protection  Act  provides  the  legal 
framework  for  the  nuclear  sector  in  accordance  with  international  standards.  However, 
Montenegro needs to develop implementing regulations 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  sufficient  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  enhanced.  There  is  no  programme  of  environmental 
monitoring of radioactivity that is in full compliance with Articles 35 and 36 of the Euratom 
Treaty. There is no national emergency plan for radiation/nuclear accidents. The licensing of 
the  storage  facility  for  radioactive  waste  needs  to  be  licensed  following  international 
standards and EU Directives, with special reference to environmental impact assessment.  

In  the  area  of  nuclear  safeguards,  Montenegro  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 Protection of Nuclear Material, but 
not to the amended Convention. 

Conclusion 

Overall,  despite  recent  legislative  developments,  Montenegro  will  have  to  undertake 
additional  efforts  to  align  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 implementation capacities are also needed. 

3.16.  Chapter 16: Taxation  

The acquis on taxation covers the area of indirect taxation as regards value added tax (VAT) 
and excise duties and lays down definitions and principles of VAT. Excise duties on energy, 
tobacco products and alcoholic beverages are subject to EU Directives covering the structures 
of the duties, the levels of minimum rates and the holding and movement of excisable goods. 
Regarding direct taxation, the acquis covers some aspects of corporate taxes and aims mainly 
at removing obstacles to cross-border activities between enterprises. EU legislation in the area 
of  administrative  cooperation  and  mutual  assistance  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 legislative alignment for the concept of the 
zero rate; the investment gold scheme (which is not applied); and the reduced rates applicable 
to e.g. computer equipment.  

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Related  to  excise  duties,  the  energy  taxation  provisions  of  the  Excise  Duties  Law  are  only 
partially aligned, since the law essentially only covers mineral oils. In order to further align 
national  legislation  with  the  EU  acquis  in  the  field  of  energy  taxation,  natural  gas  (used  as 
motor fuel or for heating, industrial and commercial purposes), coke and coal (heating) and 
electricity need to be made subject to excise duties.  

The fiscal marking of mineral oils is not in line with the Union marking level laid down in 
Article 1 of Commission Decision 2006/428/EC.  

The Law on excise duties for tobacco products provides 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 legislation will diverge more significantly 
from  EU  legislation.  The  excise  duties  on  cigarettes  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  fermented  beverages,  intermediate 
alcoholic  beverages  and  ethyl  alcohol)  and  the  product  definitions  are  similar  to  those  laid 
down by EU law. Wine, other fermented beverages and intermediate products are taxed per 
hectolitre, whereas beer and ethyl alcohol are taxed on the content of alcohol by volume per 
hectolitre,  which  is  similar  to  EU  law.  The  rates  of  duty  which  are  applied  either  meet  or 
exceed  the  minimum  rates  specified  in  Directive  92/84EEC.  The  provisions  in  Article  45 
concerning the personal use of alcohol by small 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 approximation 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  currently  only  partially  reflected  in  its  direct  tax 
system. The provisions concerning direct taxation of the limited 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  against  the  criteria  of  the  Code  of  Conduct  by  the 
European Council: tax relief for activities in economically underdeveloped municipalities; tax 
relief  for  hiring  new  employees;  tax  relief  for  NGOs;  tax  relief  for  investments  in  specific 
fixed  assets;  tax  exemption  for  dividends;  tax  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  avoidance  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 will be required to perform additional tasks in 
terms  of  administrative  cooperation  (in  both  the  direct  and  indirect  area)  and  under  the 
Savings Directive. Therefore further efforts are needed to upgrade human resources capacity. 

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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 compliance by taxpayers, by means of transparency, 
including a website, a call centre, training activities, information campaigns and a high level 
of service to taxpayers. As a result, the administration manages to effectively collect the bulk 
of  tax  debts.  However,  the  administration  is  encouraged  to  strengthen  its  risk  analysis  and 
inspection  tools  to  identify  unregistered  taxpayers.  In  addition,  further  efforts  are  needed  to 
regulate  the  legal  effects  for  the  tax  administration  of  the  written  answers  provided  to 
taxpayers.  Internal  and  external  inspection  audits  are  carried  out  on  the  basis  of  flexible 
planning and the results are communicated throughout the organisation. However, the internal 
control mechanism for detecting misconduct or corruption is not yielding results; Montenegro 
is therefore encouraged to investigate 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  control  and  safety,  preparation  of  reports  and 
verification and archiving of data. All units of the Montenegrin tax administration have access 
to the network of the taxation IT system. 

Although the central IT system functions well, the automated application of risk parameters is 
lacking, as well as the possibility of filing automated tax returns. In order to further increase 
the  efficiency  of  the  data  systems,  the  internal  checks  on  information  fed  into  them  by  tax 
officers should be extended. 

In  the  area  of  administrative  assistance  Montenegro  will  only  start  preparing  the  relevant 
legislation  and  setting  up  the  necessary  infrastructure  (CLO,  ELO,  FN,  EMCS,  VIES,  etc.) 
shortly  before  accession.  All  national  parts  of  the  trans-European  taxation  and  excise  IT 
systems should be developed and fully operational by the time of accession. 

The tax administration has the legal and administrative structures and adequate resources to 
sufficiently  enforce  the  relevant  legislation.  As  a  consequence,  this  administration  can  be 
considered  to  have  reached  a  sufficient  level  of  administrative  capacity  to  assume  the 
obligations of the acquis in the medium term. 

Conclusion 

In  general,  the  tax  legislation  in  Montenegro  is  partially  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-compatible. In the excise sector some more energy 
products  need  to  be  covered,  although  the  level  of  excise  duties  on  the  products  that  are 
covered  meets  the  EU  minima.  Apart  from  cigarettes,  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 has 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 harmful. The IT system is functioning and needs 
to be further modernised. In terms of administrative capacity the tax administration functions 

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sufficiently, although some organisational issues remain to be solved. Internal control needs 
to be enhanced in order to effectively prevent and detect corruption and misconduct.  

Overall, despite the fact that the Montenegrin tax administration is still facing challenges in 
the  area  of  legislative  alignment  and  administrative  capacity,  if  it  continues  its  efforts, 
Montenegro should, in the medium term, have the 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 direct financing of the 
public  sector  by  the  central  banks  and  privileged  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 Stability and Growth Pact. The 
national central banks will be subject to the Statute 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  euro.  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 policy 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 underlying 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  introduction  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  November  1999  when  its  government  unilaterally 
decided  to  introduce  the  D-mark,  already  widely  used  as  a  parallel  currency,  as  its  official 
tender, replaced by the euro in 2002. A Central 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  only  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  institutional  independence,  the  reporting 
obligations on monetary policy should only be ex-post, in order to prevent 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 public 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  aims  at  strengthening  economic  planning 
capacity  in  the  country  to  prepare  it  for  eventual  participation  in  the  economic  policy 

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coordination  and  budgetary  surveillance  mechanisms  of  the  European  Monetary  Union 
(EMU). In this context, Montenegro 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  independence,  monetary  financing,  privileged 
access of the public sector to financial 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 within 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  regime  will  be  further  detailed  in  the  future 
accession negotiations. 

3.18.  Chapter 18: Statistics 

The acquis on statistics consists almost exclusively of legislation which is directly applicable 
in the Member States, such as European Parliament and Council regulations and Commission 
decisions or regulations. It also includes a range of methodological handbooks and manuals. 
International agreements provide a further basis for production of statistics.  

In  the  area  of  statistical  infrastructure,  further  efforts  are  needed.  Monstat,  the  national 
statistical institute, is the main producer of official statistics and responsible for coordination 
of  the  Montenegrin  statistical  system.  With  the  independence  of  Montenegro  in  2006, 
Monstat's  functions  and  responsibilities  increased  significantly.  However,  the  corresponding 
increase  in  resources  has  not  been  sufficient  and  the  lack  of  human  resources  remains  a 
critical  issue.  Monstat  currently  has  127  staff,  34  of  which  work  in  the  regional  offices. 
Additional office space is a necessity as Monstat’s current offices are already stretched to the 
limit. The management capacity of Monstat needs to be strengthened urgently and adequate 
resources made available so Montenegro can fulfil all obligations under the acquis. 

The Law on statistics was adopted in 2005 and is broadly aligned with international standards. 
It  guarantees  the  professional  independence  of  producers  of  official  statistics  and  the 
confidentiality of data. However, there are weaknesses in the law which need to be addressed 
to strengthen the position of Monstat in the national statistical system and clarify ambiguities 
with regard to the role of the Statistical Council.  

The national statistical system consists of several 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  programme  of  statistical  surveys  2009-2013  is  very 
ambitious,  but  it  can  only  be  achieved  if  the  appropriate  human  and  financial  resources  are 
made available. Therefore planning needs to be better linked to the resources available. 

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In the area of classifications and registers substantial efforts are needed to become compliant 
with  the  acquis.  The  preparation  of  the  Law  on  the  national  statistical  classification  of 
economic  activities  according  to  the  European  classification  NACE  Rev.  2  is  seriously 
delayed. The revision of the national classification of products by activities according to CPA 
2008  needs  to  start  as  soon  as  possible.  The  statistical  business  register  is  operational,  but 
significant  shortcomings  remain.  A  survey  to  improve  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  statistical  classification  in 
accordance with the EU NUTS Regulation has been agreed with the European Commission. 
According  to  the  classification  Montenegro  constitutes  one  statistical  region  equivalent  to 
NUTS level 1, 2 and 3, so national statistics will 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  phase  and  should  produce  visible 
results  in  the  next  years.  Technical  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). Fishery 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  been  developed  by  the  Ministry  of  the  Interior  and  Public 
Administration  that  will  be  an  important  source  for  population  statistics  in  the  future.  Vital 
statistics  and  migration  statistics  are  mainly  based  on  registers,  but  a  new  migration  survey 
was introduced in 2009. Concerning labour market statistics, Monstat 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 the first time in 2009 for reference year 2008. Job 
vacancy  statistics  are  produced  by  the  Employment  Office.  With  regard  to  other  social 
statistics,  Montenegro  has  carried  out  the  household  budget  survey  annually  since  2005. 
Monstat collects data on education statistics.  

Progress  has  been  made  in  the  area  of  annual  and  quarterly  national  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 improved significantly. Financial accounts are not 
yet  produced.  Government  finance  statistics  are  produced  by  the  Ministry  of  Finance  and 
largely  follow  the  manual  of  the  International  Monetary  Fund  on  Government  Finance 
Statistics.  The  balance  of  payments,  foreign  direct  investment  and  monetary  and  financial 
statistics are compiled by the Central Bank. Foreign affiliates statistics (inward and outward 
FATS) are not yet collected. With regard to price statistics, the consumer price index (CPI) is 
the official inflation index in Montenegro. Improvements in quality 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 improvements is ongoing. The production of statistics on 
own resources is at an early stage. The analysis of available data sources for the compilation 
of  gross  national  income  has  started.  In  the  area  of  external  trade  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  underreported.  The  customs  authorities 
have implemented the single administrative document and apply the latest EU classification, 

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CN2010.  For  short-term  statistics  several  improvements  have  been  made  to  the  existing 
questionnaires and a new quarterly survey established in early  2010. In the area of tourism, 
transport, energy and environmental statistics Montenegro is not compliant with the acquis. 

Conclusion 

Overall, the statistical production of Montenegro is not yet at a satisfactory level of alignment 
with  the  acquis.  Progress  is  being  made  in  several  areas  and  the  range  of  statistics  is 
increasing, but significant challenges remain. Montenegro will have to make considerable and 
sustained efforts to align with the acquis and to implement it effectively 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 agricultural census in June 2010 and 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 housing census planned for 2011 need to be made 
available in due time. Given Monstat's weak institutional status, the statistical law needs to be 
revised  to  strengthen  its  position  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  partners  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  employment  strategy  and  contributes  to  social 
inclusion efforts. 

As regards labour law, Montenegrin legislation, in particular the Labour Law of 2008, covers 
several of the basic principles laid down by the EU labour law 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  the  European  Cooperative  Society,  and  the 
Directive on posting of workers. 

The central piece of legislation 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  workers  at  work  and  also  incorporates  provisions 
relevant  to  certain  specific  areas  and  subjects  (such  as  the  construction  sector,  personal 
protective  equipment,  health  and  safety  signs,  and  chemical  hazards).  There  are  also  other 
related legislative acts in force which were adopted still in the Socialist Federal Republic of 
Yugoslavia,  regulating  both  specific  subject  areas  and  sectors.  In  certain  areas  International 
Labour Organisation (ILO) instruments 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.  Neither  are  there  indicative  limit 
values set for chemical agents at work as required by the acquis. 

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The safety at work inspectorate of the Ministry 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  workers  (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  economic  activities  in  Montenegro.  It  comprises 
representatives  of  the  government  and  workers  and  employers  associations  and  works  with 
seven commissions covering different socio-economic areas. Transparency and effectiveness 
of its work needs to be improved. The plan of the government to develop the technical and 
administrative  capacities  of  the  SC  secretariat  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 little 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 the 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 Trade Unions of Montenegro (UFTUM), which 
split  from  CTUM  in  2008.  CTUM  is  a  member  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 trade union representativeness 
was  adopted  in  May  2010  establishing  new  representativeness  criteria  and  thereby  opening 
the way to trade union pluralism. 

Employers in Montenegro are represented by the 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  disputes  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 economic and financial crisis, and a 
large share of long-term unemployed. 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 north and other parts of the country. Other areas 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  outstanding  issue  in  several  areas,  in 
particular for labour market analysis. 

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Montenegro  has  a  national  strategy  for  employment  and  human  resources  development  in 
place  for  the  period  2007-2011,  which  is  supplemented  by  a  national  action  plan  for 
employment (NAPE), currently covering 2010-2011. However, implementation of the NAPE 
has until now fallen short on its main objective of increasing employment rates, partly due to 
the  impact  of  the  economic  and  financial  crisis.  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  Social  Fund-type  measures.  The  administrative 
capacity  of  all  authorities  involved,  mainly  government  bodies,  but  also  municipalities  and 
education  institutes,  will  need  to  be  strengthened.  Good  progress  in  the  preparation  and 
implementation  of  IPA  component  IV  on  human  resources  development,  including  the 
finalisation  of  the  draft  Strategic  Coherence  Framework  (SCF)  and  the  Operational 
Programme  (OP),  will  be  an  indicator  of  capacity  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 monitor social inclusion and social protection will 
need to be developed. 

As regards persons with disabilities, Montenegro has ratified the UN Convention on the rights 
of  people  with  disabilities  and  national  legislation  is  in  line  with  the  UN  Convention.  A 
strategy  for  integration  of  people  with  disabilities  2008-2016,  with  a  respective  action  plan, 
was  adopted  in  2008.  A  quota  system  for  the  employment  of  people  with  disabilities  was 
introduced  in  May  2009.  However,  most  companies  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  employment  of  women  and  older  workers  need  to 
follow. Further progress is needed in the introduction of internationally comparable indicators 
of adequacy of pensions. In the health care sector, equal access to health care services need to 
be ensured, also for representatives of socially disadvantaged groups, e.g. Roma, Ashkali and 
Egyptians and internally displaced persons. 

As regards anti-discrimination, the Constitution of Montenegro prohibits discrimination ‘on 
any  ground’  and  a  comprehensive  Anti-discrimination  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 

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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  Law,  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  Convention  on  the  elimination  of  all  forms  of 
discrimination  against  women  (CEDAW).  Discrimination  on  grounds  of  sex  in  relation  to 
employment  is  prohibited  by  Montenegrin  legislation,  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  adoption  of  the  Anti-discrimination  Law  in  July 
2010  should  further  improve  the  legal  framework.  Further  legal  adjustments  are,  however, 
necessary,  e.g.  concerning  the  removal  of  over-protection  of  women,  introducing  parental 
leave in accordance with EU legislation or improving the equal pay legislation. Generally, as 
regards  both  anti-discrimination  and  gender  equality,  effective  implementation  of  existing 
legislation and strengthening of related administrative 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 violence by providing various protection measures, 
outlining  the  rights  of  the  victims,  and  related  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 law, 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 work. Social dialogue remains weak. In 
general,  strengthening  capacity  for  policy  development,  implementation  and  monitoring 
constitute  the  key  challenges  for  Montenegro,  also  with  a  view  to  the  country’s  preparation 
for the European Social Fund. Establishing reliable 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  prepare  itself  for  participation  in  the  cooperation 
processes  developed  at  European  level  in  the  fields  of  employment,  social  inclusion  and 
pensions. 

3.20.  Chapter 20: Enterprise and industrial policy 

recommendations,  which  are 

The  acquis  under  the  enterprise  and  industrial  policy  chapter  consists  largely  of  policy 
principles  and  policy 
in  communications, 
recommendations  and  Council  conclusions.  The  EU’s  enterprise  and  industrial  policy, 
including  its  small  and  medium-sized  enterprises  (SME)  policy,  seeks  to  promote  the 
competitiveness  of  the  economy.  It  is  strongly  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  comprises  policy  instruments,  including  financial 

reflected 

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support and regulatory measures. It also includes sectoral policies, such as recommendations 
for more targeted policy analysis and for new initiatives 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 approximately 62% of employment, and their 
contribution to gross value added amounted to approximately 60%. The contribution of SMEs 
to Montenegro’s total 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 prepared. The main body in 
charge  of  the  SME  policy,  the  Directorate  for  development  of  SMEs  (SMEDA)  within  the 
Ministry  of  Economic  Affairs,  has  11  regional  and  local  centres  and  runs  the  European 
Information  and  Innovation  Centre  (EIIC).  The  centres  provide  information  to  local 
businesses,  advise  on  the  preparation  of  business  plans  and  implement  SMEDA’s  projects. 
Business  representatives  are  consulted  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  definition,  and  different 
providers of statistics on SMEs (the Central Register of the Commercial Court, the statistics 
agency — Monstat, and the tax administration) use different criteria in monitoring registered 
companies. 

Montenegro’s  industrial  policy  is  relatively  weak  as  regards  overall  policy  design,  even 
though  the  development  of  specific  policy  components,  such  as  enterprise  policy,  is  fairly 
satisfactory.  Montenegro  has  faced  a  strong  decline  in  the  relative  size  of  industry  to  GDP 
(from 20.7% to GDP in 2001 to 13.5% in 2009), with the manufacturing sector going down 
from  12.8%  to  5.9%  for  the  same  period.  Industrial  production  has  kept  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 focuses 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  enterprises  and  unemployed  people  establishing  their 
own business. However, there is no indication 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  Development  Fund  (with  a 

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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 privatising 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  Montenegrin  industry  is  manufacturing. 
Approximately  80%  of  gross  value  added  in  manufacturing  in  2009  came  from  two  sectors 
with similar contributions: production of foodstuffs, beverages and tobacco and production of 
basic metals and standard metal products. At this stage, no sectoral policies have been drawn 
up, with the exception of tourism.  

Tourism is an important sector of the Montenegrin 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  supports  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  Organisation  and  works  with  other  international 
organisations in developing its strategic framework.  

The  production  of  basic  metals  and  standard  metal  products  is  the  largest  sector  of  the 
manufacturing  industry.  The  capacity  of  the  iron  and  steel  industry  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  privatised  in  2005,  being  acquired  by  the  Central 
European  Aluminium  Company.  The  plant  is  the  biggest  single  contributor  to  Montenegrin 
GDP and exports (until recently 51% of the country’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  manufacturing  in  2008).  Other  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 enterprise policy in line with EU principles, 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 the 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 
transport, 
telecommunications  and  energy  infrastructures,  including  the  EU  guidelines  on  the 

trans-European  networks  policy 

the  areas  of 

in 

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development of trans-European networks and the support measures for developing projects of 
common  interest.  The  aim  of  establishing  and  developing  trans-European  networks  and 
promoting  proper  interconnection  and  interoperability  of  national  networks  is  to  take  full 
advantage  of  the  internal  market  and  contribute  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 understanding on development of the South East 
European  Core  Network  and  Observatory  and  has  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  interest  with  neighbouring 
countries. Regarding the current state of the Core 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  financial  resources.  This  affects  in  particular  the 
secondary network, hampering connection to the Core Network of the remote rural areas. The 
port  of  Bar,  which  is  among  the  deepest  water  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  electricity  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  capacity  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 reliable supply, the transmission system operator is 
expanding  several  transformer  stations  and  building  new  national  transmission  lines.  The 
priority  project  to  upgrade  the  interconnection  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  infrastructure  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  the  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 Energy Community countries in the region, towards 
the construction of gas transmission lines and interconnectors under 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 undertake additional efforts in the field of trans-European 
transport and energy networks to align with the acquis and to implement it effectively in the 
medium term. Regarding TEN-T infrastructure, Montenegro needs to develop in particular the 

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road Core Network in line with the expected volume of traffic. Rail needs specific attention, 
in particular the rail link from the port of Bar, which plays an essential role in the country’s 
development.  Balance  needs  to  be  found  between  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  account.  Some  projects,  in  particular  motorway 
links,  might  need  to  be  delayed.  Regarding  the  TEN-E  network,  given  the  dependence  on 
electricity imports and the problems caused by the outdated transmission system, Montenegro 
has  to  develop  its  policy  concerning  electricity  as  well  as  gas  interconnections  with 
neighbouring  countries  (within  the  concept  of  Energy  Community  Gas  Ring)  and  has  to 
update the national transmission system. 

3.22.  Chapter 22: Regional policy and coordination of structural instruments 

The  acquis  on  regional  policy  and  coordination  of  structural  instruments  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 organisation. These programmes are negotiated and agreed 
with the Commission. Implementation is a shared responsibility of the Member States and the 
Commission. Member States must comply 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  sustainable  development,  when  selecting  and 
implementing projects. 

As regards the legislative framework, regional development in Montenegro 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 law is not mandatory. Policy measures with a 
regional  or  local  focus  are  currently  based  on  several  pieces  of  legislation,  e.g.  the  spatial 
plan, the Law on territorial organisation, and the Law on local self-government.  

two 

levels  of  governance:  national/central  and 

local  authorities 
Montenegro  has 
(municipalities), which are self-government units. Montenegro’s territory is organised into 19 
municipalities, the capital Podgorica and the historic royal capital Cetinje. There are neither 
regions,  as  an  administrative  form  of  territorial  organisation,  nor  bodies  competent  for 
decision making at regional level. The competences of the municipalities are determined by 
the Law on local self-government. Their financing is ensured by own revenues (local taxes) 
and by budgetary transfers from the central government. 

The  Budget  Law  does  not  explicitly  provide  for  multi-annual  budget  programming,  but 
allocations  for  implementing  multi-annual  policies  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 between 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  plays  a  coordinating  role  among  the  multiple 
stakeholders.  A  department  for  regional  development  has  been  established  in  the  ministry, 

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which is, among other things, responsible for coordinating and monitoring the implementation 
of Montenegro’s regional development strategy and related legislation.  

Montenegro is currently preparing for components III (regional development) and IV (human 
resources  development)  of  the  IPA  programme,  which  will  become  available  once 
Montenegro  is  granted  candidate  country  status.  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 has 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  component  I  will  remain  in  effect,  namely  the 
national  IPA  coordinator,  national  authorising  officer  (NAO),  the  National  Fund  and  the 
Audit Authority. Capacity developed in the Central 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 prepare 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  financial  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 respect. IPA assistance and in particular 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  promote  sectoral  policies  for  regional  development 
purposes.  A  Regional  Development  Strategy  was  adopted  in  July  2010,  which  sets  policy 
objectives  and  strategic  directions  to  create  the  conditions  for  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 2025, the transport development strategy and 
the  strategic  master  plans  for  waste  management  are  some  further  strategic  documents.  In 
addition, Montenegro aims, with IPA project assistance,  to  draw  up  a  national  development 
plan.  In  the  framework  of  preparing  for  IPA  components  III  and  IV,  drafts  of  the  Strategic 
Coherence  Framework  (SCF)  and  of  the  operational  programmes  have  been  elaborated; 
however, they need further improvement before adoption. 

Progress is needed on the availability of reliable statistics. In particular, Montenegro needs to 
strengthen its capacity to gather and prepare adequate statistical data. 

The  implementation  of  actions  under  IPA  component  I  (transition  and  institution  building) 
and  II  (cross-border  cooperation)  has  allowed  the  Montenegrin  authorities  to  familiarise 
themselves  with  the  requirements  for  monitoring  and  evaluating  EU  (co-)funded 
programmes  and  projects.  But  adequate  national  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. 

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With regard to financial management and control, the Ministry of Finance is the main body 
responsible.  Within  the  context  of  IPA  components  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  has  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  Montenegro.  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 appointed within the State Audit Institute. Its full 
independence will need to be ensured 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 accession would only marginally reduce the EU’s average GDP per 
capita  (PPS)  compared  to  today’s  data  and  hence  would  slightly  influence  the  eligibility  of 
regions. 

Given  that  GDP  per  capita  is  considerably  below  the  EU  average,  Montenegro  would  be 
entitled  to  receive  EU  cohesion  policy  contributions  under  the  convergence  objective. 
Following a preliminary assessment of Montenegro’s, economic situation 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  preparations  for  regional  policy 
instruments,  structures  and 
mechanisms  are  at  an  early  stage.  A  positive  start  was  made  with  preparation  for  IPA 
components  III  and  IV  and  with  the  definition  of  some  strategic  directions;  however, 
considerable  and  sustained  efforts  to  set  up  sound  procedures  and  competent  administrative 
structures will be necessary to allow Montenegro, in the medium term, to apply EU rules and 
channel the funds from the EU structural instruments. 

3.23.  Chapter 23: Judiciary and fundamental rights 

EU  policies  in  the  area  of  the  judiciary  and  fundamental  rights  aim  to  maintain  and  further 
develop  the  Union  as  an  area  of  freedom,  security  and  justice.  The  establishment  of  an 
independent  and  efficient  judiciary  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 resources and training. Legal guarantees 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  are  required  to  underpin  a  coherent  policy  of  prevention  and 
deterrence of corruption. Member States must ensure respect for fundamental rights and EU 
citizens’ rights as guaranteed by the acquis and by the Charter of Fundamental Rights. 

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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  disproportionate  political  influence.  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  Court  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-based career system needs 
to  be  established  to  strengthen  independence,  professionalism  and  transparency  in  the 
judiciary. 

Accountability  in  the  judiciary  is  ensured  by  means  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  fighting  corruption  in  the  judiciary  has  started  to  be  established. 
interest  rules  are  not  sufficiently  monitored. 
However,  corruption  and  conflict  of 
Accountability in the judiciary needs to be improved.  

Prosecutors are appointed and dismissed by parliament. Deputy prosecutors are appointed by 
the Prosecutorial Council, the members of which 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 discretionary implementation is high.  

Impartiality  of  judges  is  ensured  by  random  allocation  and  by  conflict  of  interest  rules  and 
disqualification provisions established by law. However, the rules for random allocation are 
not  sufficiently  sound  and  do  not  guarantee  the  genuinely  random  allocation  of  cases, 
especially in small courts. The recent introduction of a computerised court case management 
system  and  random  allocation  is  expected  to  change  this.  Disqualification  rules  apply  to 
prosecutors as for judges. The financial position of judges and prosecutors has considerably 
improved.  Both  judges  and  prosecutors  enjoy  functional  immunity.  The  lifting  of  immunity 
for judges and deputy prosecutors is within the competence of the Judicial Council and of the 
Prosecutorial  Council  respectively  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  Centre  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 systematic approach to training. Planned training with set curricula for 
all members of the judiciary needs to be established. This should include systematic training 
on new legislation and EU law. 

13 

the Law on Courts, Law on Public Prosecutors and Law on the Judicial Council, as well as in the Rules 
of Procedure of the Judicial and Prosecutorial Councils. 

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Montenegro  has  made  efforts  to  improve  the  efficiency  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 administration of justice. Montenegro has suffered from a large 
backlog  of  unresolved  court  cases  but  the  authorities  introduced  measures  since  2008  to 
address this problem. Data presented by the authorities suggest a reduction of over 75% on an 
annual  basis  in  the  beginning  of  2010.  Yet,  there  are  concerns  as  to  the  soundness  of  the 
approach  and  the  transparency  of  the  methodology  used.  Enforcement  of  both  civil  and 
criminal decisions is weak. Additional measures 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 envisaged in the government strategy on the reform of 
the judiciary but it has not yet been implemented. Such a reorganisation should be carried out 
following an objective analysis on the basis of reliable court statistics 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  public  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 effectively, 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  and  other  services,  including  non-governmental 
organisations.  Free  legal  aid  is  regulated  by  the  provisions  of  the  Criminal  and  Civil 
Procedure Codes. Local Self-Government is in charge of organising the provision of legal aid 
to citizens. However, the law is not implemented 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 key anti-corruption conventions, including the Council of Europe 
Criminal and Civil Law Conventions on corruption, the Additional Protocol to the Criminal 
Law Convention and the Council of Europe Conventions on laundering, search, seizure and 
confiscation of the proceeds from crime and on the financing of terrorism. Montenegro also 
acceded  to  the  United  Nations  Convention  against  corruption.  However,  the  alignment  of 
national  law  with  provisions  of  international  conventions  has  not  yet  been  completed. 
Montenegro is a member of GRECO, 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 prevention 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 organised crime was adopted in 2005 followed by two Action Plans. 

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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  institutional  set  up  needs  to  be  streamlined  and  properly 
coordinated. The National Commission monitors implementation of the strategy papers. The 
Directorate  for  Anti-Corruption  Initiatives  (DACI),  to  which  54  other  institutions  report  on 
corruption,  has  mainly  a  consultative  role  focusing  on  soft  prevention  measures  such  as 
education and awareness-raising. There is no single authority with 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  Police  Directorate,  the  Public  Prosecutor's  Office 
and  the  Administration  for  Prevention  of  Money  Laundering  and  Terrorism  Financing  (the 
FIU). Efforts have been made to strengthen cooperation between various law enforcement and 
other bodies on the national and international level. 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  department  operated  within  the  police  service  until  the  end  of  2009.  In 
2010 it was moved to the Ministry of Interior and Public Administration. However its work so 
far has been limited to cases of petty corruption. Anti-corruption monitoring in the judiciary 
has had limited effectiveness so far.  

The law enforcement authorities possess the basic skills for prosecuting corruption, however 
the track record of investigations, prosecutions and final convictions in corruption cases at all 
levels remains low. There is a need for a proactive approach in investigating and prosecuting 
corruption. 

The track record of investigations, prosecutions and final convictions in corruption cases at all 
levels remains low. Although, operational and investigative capacity of the law enforcement 
authorities  have  been  strengthened,  it  remains  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 statistics has not significantly improved, despite 
the establishment of a tripartite commission to unify data collection methods. 

Despite an improved legal and institutional framework, corruption remains a widespread and 
prevalent  problem  in  Montenegro.  The  perception  of  corruption  across  many  sectors  and 

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institutions  remains  very  high  with  certain  sectors  and  areas  particularly  concerned,  i.e. 
construction  and  inspection  supervision  as  well  as  urban  and  spatial  planning,  including 
cadastre.  Other  risk  areas  are  public  administration,  the  judicial  system,  the  police, 
privatisation,  public  procurement,  health,  education  and  local-government.  Furthermore, 
capacity for financial investigations is still insufficient. The use of financial investigation and 
confiscation as a means of targeting corruption (and organised crime) based on unexplained 
wealth  needs  to  be  used  as  a  basis  of  investigations.  Lack  of  proactive  approach  in 
investigations (which are triggered mainly by complaints) including the collection of evidence 
from various sources affects efficiency in this field.  

Politicised  appointments  of  prosecutors  and  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  political  will  is  needed  to 
significantly improve performance in combating corruption and establishing a track record of 
final convictions at all levels.  

(See also Political criteria — Democracy and the rule of law) 

Montenegro is well advanced 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  implementation  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 awareness and sensitivity of the administration, 
police  and  the  judiciary  to  European  and  international  fundamental  rights  standards  are 
needed. 

As regards the prison system, further upgrading of facilities is needed as well as the alignment 
of detention conditions with European standards. 

Montenegro  has  made  some  progress  as  regards  the  fight  against  torture  and  ill-treatment 
including  impunity  but  serious  efforts  are  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  high-level  fines  applied  in 
defamation cases. Investigative journalists 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 generally respected in Montenegro, 
as  shows  the  State's  financial  support  to  NGOs  and  the  June  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 definition 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. 

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As  regards  anti-discrimination  policies,  direct  or  indirect  discrimination  on  any  ground  is 
forbidden  by  the  Constitution  and  addressed  through  several  pieces  of  legislation,  including 
the recently amended general law on prohibition of discrimination. However, implementation 
of mechanisms for preventing, monitoring, sanctioning and prosecuting discrimination cases 
need to be strengthened. Discriminations against Roma, Ashkali and Egyptian, persons with 
disabilities (including children) and lesbian, gay, bisexual  and transgender (LGBT) persons, 
including on the part of state authorities, 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  harmonisation  of  the  national  legal 
framework  with  international  standards,  more  needs  to  be  done  to  improve  the  legal 
framework  and  to  ensure  its  proper  implementation,  including  as  regards  the  situation  of 
children with disabilities and the development of alternatives to institutionalisation. 

The labour rights and freedom to join trade unions is guaranteed by the Constitution and the 
issue of trade union representativeness  was  properly addressed with the 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  institutional  framework  for  protection  of  minorities. 
However,  cooperation  of  the  government  with  Minority  Councils  is  still  insufficiently 
developed. Persons belonging to minorities claim under-representation in the administration, 
judiciary and police. Roma, Ashkali and Egyptian persons remain the most vulnerable group 
as regards access to political, economic and social rights.  

(see also political criteria - Human Rights 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 framework is not in line with EU 
acquis  in  the  area  of  free  movement  of  EU  citizens  and  major  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 implementation of EU law. Montenegro is on the right track 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 citizens of the European Union by diplomatic and consular 
representations and the Decision on the establishment of an emergency travel document. 

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Conclusion 

Overall,  Montenegro  will  have  to  make  considerable  and  sustained  efforts  to  align  with  the 
acquis in this chapter and in particular to effectively implement and enforce it in the medium 
term. Considerable strengthening of administrative and implementation capacities 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  migration,  asylum,  border  control,  visas,  judicial 
cooperation in criminal and civil matters, police cooperation, the fight against organised crime 
and terrorism, cooperation in the field of drugs and customs cooperation, Member States need 
to be properly equipped  to  adequately implement the  growing  framework of  common  rules. 
Above  all,  this  requires  strong  and  well-integrated  capacity  within  the  law  enforcement 
agencies and other relevant bodies to attain the 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 Schengen 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  visa  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 the area of justice, freedom and security.  

Currently,  the  migration  flow  to  Montenegro  is  limited  and  migrants  come  primarily  from 
neighbouring  countries.  The  approach,  structure  and  concepts  introduced  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  reference  to  legislation  on  family 
reunification,  foreign  workers,  foreign  students  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 rules concerning residence permits for victims of 
trafficking. 

Montenegro implements the readmission agreement 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  the  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  implementation  of  the  new  legislative  framework, 
which  requires  adequate  resources  and  administrative  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,  procedures  and  reception  conditions  for  asylum 

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seekers. The essential institutions have been set up, staffed and are operating. The completion 
of the asylum centre has delayed. It is planned to become operational by mid-2011. Although 
Montenegro  faces  a  low  number  of  asylum  seekers,  there  are  challenges  related  to  their 
reception,  including  access  to  health  care,  employment,  identity  documents  and  integration. 
Relevant  pieces  of  primary  and  secondary  legislation  in  this  area  need  to  be  adjusted  and 
practices  must  be  improved.  With  a  view  to  preparing  for  possible  future  participation  in 
Eurodac,  the  country  needs  to  develop  a  national  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 issuing of visas by the Ministry of Foreign 
Affairs and by its diplomatic and consular missions. There is no electronic database linking 
consular  offices  issuing  visas  with  the  Foreign  Ministry.  Furthermore,  the  high  number  of 
visas issued at the border remains a concern, taking into account the fact that applications are 
processed  on  paper,  which  undermines  the  effectiveness  of  checks.  Upgrading  of 
administrative capacity, including 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  international  cooperation.  An  integrated  border 
management (IBM) strategy is in place, but monitoring of its implementation remains weak.  

The Border Police Department is organised within the Police Directorate. Its organisation is 
generally  in  line  with  EU  standards.  Human  resources  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  police  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  strengthened.  Cross-border  cooperation  needs  to  be  further  strengthened. 
Montenegro  and  Frontex  signed  a  working  arrangement  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 commercial matters is broadly in line with the 
EU  acquis.  However,  further  efforts  are  necessary  to  ensure  its  efficient  enforcement. 
Furthermore,  Montenegro  has  not  ratified  all  relevant  international  instruments  in  this  area 
area, in particular those related to the framework of the Hague Conference on Private Internal 
Law.  Practical  enforcement  of  both  national  and  international legal  frameworks  needs  to  be 
improved. 

Montenegro has adopted legislation, ratified relevant 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 including on applying legislation on the European 
evidence  warrant  and  the  principle  of  mutual  recognition  to  judgments  and  probation 
decisions.  The  main  challenge  concerns  implementation.  The  capacity  of  the  Ministry  of 
Justice  for  judicial  cooperation  needs  to  be  strengthened  and  effective  implementation  of 
legislation must be ensured. Its internal organisation and procedures, administrative capacity 

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and IT systems need to be further improved. Montenegro 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  organised  crime  activities. 
Money  laundering  and  drug  smuggling  are  key  areas  of  concern.  The  legislative  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 ratified  international  conventions,  which  have  not  been  fully 
transposed in the national legislation, are still poor and have a rather limited impact. 

The  new  Criminal  Procedure  Code  (CPC)  entered  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  tools  and  concepts,  including  the  use  of  special 
investigative means and the reverse burden of proof for property of suspicious legal origins 
and extended confiscation of criminal assets. The capacity of public prosecutors to implement 
the  new  legislation  and  to  ensure  guidance  and  coordination  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.  Montenegro  needs  to  fully  engage  in  sound 
implementation of the CPC and to provide the necessary means to ensure it. 

The  level  of  inter-agency  cooperation,  information  flow  and  exchange  among  the  different 
laundering 
law  enforcement  agencies  (police,  customs, 
administration) and with the prosecutor’s office is not satisfactory. The framework also needs 
to  be  streamlined  and  duplications  avoided.  Montenegro  also  lacks  proper  risk  assessment, 
crime  mapping  and  a  forward-looking  approach  to  organised  crime  risks  and  threats. 
Intelligence-led  policing  needs  to  be  enhanced  and  implemented  across  the  country. 
Considerable  improvements  are  needed  with  regard  to  crime  statistics  produced  by  law 
enforcement and judicial authorities.  

tax  authorities,  anti-money 

Montenegro cooperates with Interpol (ICPO) and the SECI Centre/Selec. Montenegro needs 
to  enhance  usage  of  the  available  Interpol  tools  leading  to  operational  results.  Regional 
cooperation  in  law  enforcement  matters  needs  to  be  further  improved.  In  October  2010,  an 
agreement establishing  a  regional  office  in  Belgrade  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 protection in particular.  

Activities  in  the  fight  against  terrorism  are  broadly  aligned  with  the  existing  international 
regulatory framework. The national legal framework 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 linked 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 

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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 for its implementation are weak and need to be 
further  strengthened.  Particular  attention  needs  to  be  paid  to  reinforcing  law  enforcement 
cooperation and coordination, especially at the borders. In particular drug trafficking via the 
blue  border  has  increased.  Investigative  and  prosecution  capacities  need  to  be  continuously 
developed  and  improved.  Policies  and  activities  in  this  area  need  to  be  underpinned  by 
adequate human and financial resources. With regard to drug reduction, more information and 
precise data are needed. The creation of the National Office for Drugs is only the first step as 
far as the preparation for future participation 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  and  sexual  abuse.  Following  the  regional 
trend, a low number of cases have been registered. The number of staff and other resources 
are adequate. However, investigative techniques and victims' identification need to be further 
enhanced.  Substantial  work  was  accomplished  in  the  field  of  prevention  and  public 
awareness-raising.  The  government  authorities  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  criminal  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  shown  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 limited, 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 maintains active contacts, in particular with the Egmont Group. In 
March  2010,  MONEYVAL  has  identified  several  weaknesses,  which  need  to  be  addressed. 
The legislative framework on seizure and confiscation 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. 

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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  have  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 international instruments also need to be signed, 
ratified  and  implemented  in  the  medium  term.  Considerable  strengthening  of  administrative 
and  implementation  capacities  are  needed,  in  particular  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  implementation  across  the  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 contributing to the creation of the European 
Research Area. This requires good administrative capacity (adequate staffing and knowledge 
of  research  cooperation)  and  scientific  excellence  in  order  to  be  successful  in  carrying  out 
research and innovation projects together with scientific partners from EU Member States and 
in creating growth and jobs in an economically sustainable way. 

Montenegro,  as  a  potential  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 Ministry of Education and Science. 
A  special  department  for  science,  research  and  technological  development  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 consists of nine members, three 
from  the  government  and  six  from  the  research  community.  The  Agency  for  International 
Scientific,  Educational,  Cultural  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 Montenegro, founded in 1974, comprises 19 faculties and 3 
research  institutes.  The  privately-owned  University  Mediterranean  also  engages  in  research 
through its independent faculties for scientific research. 

In July 2008, the government  adopted a strategy for scientific research activities 2008-2016 
(including an action plan) in which increased research 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  research,  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 private sector, there are no reliable figures on 
investment in research by the private sector available. The lack of reliable statistics makes the 

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monitoring of identified targets very difficult. Montenegro is, however, working on the reform 
of statistics in science and research 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  universities,  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 brain drain following the wars in the 1990s. The 
government  has  launched  some  measures  to  attract  young  researchers,  in  particular  PhD 
students,  to  the  University  of  Montenegro.  A  database  on  scientific  diaspora  is  also  being 
established.  Montenegro  suffers  from  a  lack  of  modern  research  infrastructure  and  state-of-
the-art  equipment  which  hampers  its  engagement  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,  with  a  focus  on  information  and  communication 
technologies,  environment  and  food  safety  projects.  Montenegro  is  actively  participating  in 
several FP7 regional projects which allows for the exchange of researchers and programmes 
with  the  countries  in  the  region.  Montenegro  organises  at  regular  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). Montenegro participates as an observer in the 
Standing Committee on Agricultural Research (SCAR). 

Montenegro  has  concluded  science  and  technology  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. Montenegro’s strategy for research activities is 
largely in line with the EU research policy and contributes to the targets set at EU level in the 
context  of  the  ERA.  However,  close  monitoring  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 requirements of the acquis. 
However,  it  will  have  to  undertake  additional  efforts  in  strengthening  human  capital  and 
infrastructure capacities for its effective participation in research framework 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  coordination  (OMC),  which  aims  at  convergence  of 
national  policies  and  attainment  of  shared  objectives.  In  the  field  of  education  and  youth, 
Member  States  need  to  ensure  sound  management  of  decentralised  EU  programmes.  The 
acquis  also  requires  Member  States  to  facilitate  the  education  of  children  of  EU  migrant 

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workers and to prevent discrimination against EU nationals. In the field of culture, the 2005 
UNESCO  Convention  on  the  protection  and  promotion  of  the  diversity  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  education  were  adopted  or  amended.  A  very 
ambitious roadmap has been established, which aims to bring Montenegro’s education system 
into  line  with  European  principles  and  developments  by  2014.  The  main  objective  of  the 
reforms  is  the  modernisation  of  the  education  system,  with  the  focus  on  the  design  and 
structure of various education subsystems. However, 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  primary  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  needs  remain  to  be  enforced  more  vigorously. 
The  Montenegrin  vocational  education  and  training  (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  entering  the  labour  market,  a  high 
percentage of graduates from VET schools enrol in university. 

As  a  member  of  the  Bologna  process,  Montenegro  has  already  started  reforms  in  higher 
education  since  2003.  However,  improving  quality  assurance  mechanisms  and  designing  a 
national qualification framework remain the main challenges. The 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  priority  areas  (education,  employment,  health,  social  inclusion, 
human  rights,  culture,  leisure  time,  access  to  information  and  mobility,  family)  and  is 
implemented  via  annual  action  plans.  In  February  2010  the  responsibility  for  youth  policy 
implementation was assigned to a directorate for youth and sports, linked to the Ministry of 
Education  and  Science.  However,  it  is  too  early  to  assess  the  impact  of  this  measure  and 
implementation capacity so far is limited. 

As  regards  the  Directive  on  education  of  children  of  migrant  workers,  Montenegro’s 
legislation already covers most of its requirements. 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 participation in the decentralised EU programmes in the 
fields  of  education  and  training  and  youth,  the  relevant  authorities  will  need  to  develop  its 
capacities for sound financial management and financial control. 

As regards culture, Montenegro ratified the 2005 UNESCO 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 

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for  cultural  policy,  incorporating  goals  and  principles  promoted  by  the  2005  UNESCO 
Convention.  Montenegro  has  a  well  developed  state  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.  Ljubljana  process,  Council  of 
Ministers of Culture of Southeast Europe). 

Conclusion 

Montenegro has started its preparations towards the alignment with the acquis in the area of 
education,  youth  and  culture.  However,  the  country  now  needs  to  shift  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-discrimination  of  EU  nationals  within  the  Montenegrin 
education  system  will  need  to  be  ensured.  Inclusive  education  of  vulnerable  groups  and 
children  with  special  needs  deserves  continued  attention.  Overall,  if  it  continues  its  efforts 
Montenegro should, in the medium term, have the capacity to comply with the requirements 
of the acquis in this area. 

3.27.  Chapter 27: Environment  

EU environment policy aims to promote sustainable 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, chemicals and noise. Ensuring compliance with the 
acquis requires significant investment, but also brings significant benefits. A strong and well-
equipped  administration  at  national  and  local  level  is  imperative  for  the  application  and 
enforcement of the acquis. 

The Constitution defines Montenegro as an ecological state. It enshrines the key principles of 
sustainable  development  and  environmental  protection,  provides  for  a  universal  right  to  a 
sound environment and makes it mandatory for everyone, in particular the state, to preserve 
and  improve  the  environment.  The  national  environment  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 implemented 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  Agency  (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  environmental  protection.  A  precise  division  of 
responsibilities between the ministry, the EPA, other relevant ministries and local authorities 

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needs  to  be  defined.  Heavy  reliance  on  temporary  staff  and  trainees  and  a  high  turnover  of 
staff, as well as limited resources in both the ministry and the EPA, raise concerns as to the 
overall  capacity  of  these  institutions  to  guarantee  continuity,  sustainability  and  due 
accountability.  

A  legal  and  institutional  framework  for  inspections  is  in  place.  The  EPA  has  an  annual 
inspection  and  monitoring  programme  implemented  by  inspection  bodies  at  national  and 
municipal level. However, the number of inspections carried out remains limited. The number 
of  prosecutions  for  breaches  of  environmental  law  is  extremely  low  and  no  prosecution  for 
major breaches has been completed. A more effective system is required. Overall enforcement 
levels  are  low,  due  to  the  lack  of  human  and  financial  resources,  low  awareness  of 
environmental  compliance  requirements,  scattered  responsibilities  and  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  international  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  access  to  environmental  information  remains 
weak.  Further  efforts  are  needed  to  build  a  solid  partnership  between  government  and  civil 
society.  There  are  some  mechanisms  for  integrating  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 align 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 effective 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. 
this  field  require  considerable 
legislation 
Implementation  and  enforcement  of 
strengthening.  In  particular,  environmental  impact  assessments,  including  due  consideration 
of  viable  alternatives,  need  to  be  properly  carried  out  wherever  legally  required  and  proper 
coordination among different authorities as well as with all stakeholders needs to be ensured.  

in 

Montenegro is progressing in its alignment with air quality legislation. The Air Quality Law 
has been adopted, but implementing measures and air quality standards have not been drawn 
up  yet.  Montenegro  needs  to  identify  conurbations  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,  inventories,  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 integrated waste management system is being set 
up,  including  the  preparatory  work  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 

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facilities.  The  lack  of  suitable  infrastructure  hampers  adequate  waste  disposal,  including  of 
hazardous  waste.  The  establishment  of  an  efficient  system  for  data  collection,  analysis  and 
reporting  is  essential  for  sound  policy  making.  Particular  attention  needs  to  be  given  to 
implementation  of  the  waste  management  strategy  at  local  level.  Administrative  and 
enforcement capacity needs to be considerably strengthened and investments 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.  Montenegro  is  quite 
advanced  in  alignment  with  the  Water  Framework  Directive  and  its  daughter  directives. 
Further efforts are needed, however, as regards alignment with the Drinking Water Directive, 
the Urban Waste Water Treatment Directive and the  Marine Strategy Framework  Directive. 
Furthermore, implementation and enforcement of the water legislation needs to substantially 
improve:  Montenegro  will  have  to  make  significant  investments  in  the  area  of  waste  water 
collection  and  treatment  as  well  as  drinking  water  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  establishment  of  the  Natura  2000  network.  An  increased  effort  is 
needed,  however,  to  develop  scientific  information  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  protected  either  through  national  legislation  or  in  compliance  with 
international obligations. However, illegal hunting and logging in the protected areas as well 
as widely spread unauthorised construction, particularly in the coastal area, remain significant 
concerns. Implementation measures, and particularly management of the protected areas, need 
to  be  significantly  strengthened,  as  does  capacity  building  at  all  levels  and  ensuring  proper 
coordination among public authorities. Inspection measures and sanctions have not yet been 
adopted. Further awareness-raising 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 labelling 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 dangerous chemicals. The Rotterdam Convention has 
not  been  ratified  and  alignment  with  the  Biocides  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 authorities have now been designated for most 
of the chemicals directives, the introduction of implementation measures is at an early stage.  

As  regards  industrial  pollution  and  risk  management,  -Montenegro  has  the  necessary 
national legislation regarding Integrated Pollution Prevention and Control (IPPC) installations 
and  a  clear  plan  for  BAT  (best  available  technique)-based  permitting  within  a  reasonable 
timeframe  (existing  installations  to  be  permitted  until  the  end  of  2015).  Capacities  of 
inspectorates  should  be  strengthened.  Alignment  with  the  Directives  on  industrial  risks 
(Seveso II) and large combustion plants has not been achieved and competent authorities for 
implementation have not been designated. Further progress is needed also in aligning with the 
Waste Incineration and Solvents Emissions Directives.  

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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  Kyoto  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  climate  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  effort  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  obligations  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  estimation  of  GHG  emissions  in  2006  with 
external help, but a national system 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 System (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 compliance with the Protocol.  

Administrative capacity as well as technical and financial resources need to be strengthened 
considerably for Montenegro to be able to align with and implement all the requirements of 
the climate change legislation.  

As regards noise, transposition has started, while implementation is at an early stage.  

Civil  protection,  which  falls  under  the  responsibility  of  the  Ministry  of  the  Interior,  is 
regulated by the Law on protection and rescue. A national strategy for emergency situations is 
in place. Civil protection units have been established in all municipalities but only 20% of the 
planned  staff of  2,000 have been recruited  and 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  vulnerability  reduction  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  nuclear  accidents.  It  has  signed  international 
agreements on cooperation and exchange of information and is very active in the framework 
of the disaster preparedness and prevention initiative (DPPI) in South-East 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 forest 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 

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implementation 

While the basic elements of a legislative framework 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  identify  sustainable  funding  for  implementation.  The 
environment  has  to  be  integrated  into  other  sectors  more  systematically,  including  at  the 
policy 
implementation  and 
level.  There  are  serious  weaknesses 
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 consultation process which sufficiently incorporates 
comments and suggestions received needs to be envisaged. Implementation of legislation and 
particularly  management  of  protected  areas,  need  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. 

in 

The environmental administration will need to be significantly strengthened to implement the 
EU environmental acquis. Streamlining management of responsibilities currently fragmented 
between  different  ministries  and  bodies  and  ensuring  proper  horizontal  and  vertical 
coordination is needed. Particular efforts are needed to ensure that local self-government units 
have the necessary resources to implement their responsibilities effectively. Inspectorates and 
enforcement  capacities  need  to  be  strengthened  while  cooperation  with  the  judicial  system 
needs to be reinforced.  

Overall, Montenegro will have to make 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 the necessary technical and human capacities and 
resources  in  this  area  within  the  next  few  years.  Effective  compliance  with  EU  legislation 
requiring a sustained high level of investment and considerable administrative efforts can only 
be achieved in the long term. However, 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  safety  of  consumer  goods  as  well  as  the 
protection  of  the  economic  interests  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 market surveillance and 
enforcement. Appropriate judicial and out-of-court dispute resolution mechanisms, consumer 
information and education, and a role for consumer organisations should be ensured as well. 
This chapter also covers rules in the area of public health.  

The Stabilisation and Association Agreement provides for enhanced cooperation in the area of 
consumer  protection  aimed  at  aligning  the  standards  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 with the Law on consumer protection are carried 
out by the Ministry through its market inspectors, other ministries 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  implementation  has  been  established.  There  has 

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also  been  an  arbitration  board  responsible  for  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 been broadly aligned with the General Product Safety Directive 
(GPSD)  and  the  Food  Imitating  Products  Directive.  However,  provisions  included  in  acts 
adopted by the European Commission to implement the GPSD are not aligned. Inspection for 
product safety is shared between the Health Inspectorate, 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  contracts,  distance  contracts, 
contracts  negotiated  away  from  business  premises,  misleading  and  comparative  advertising, 
and the indication of product prices. Unfair commercial 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  timeshares  (the  old  Directive  94/47/EC).  The  new 
Timeshares  Directive  has  not  yet  been  addressed  by  Montenegro.  Distance  marketing  of 
consumer financial services is covered by the regulations on the securities market.  

Montenegro’s  legislation  has  not  been  aligned  with  the  Consumer  Credit  Directive  and  the 
Directive on injunctions.  

While  Montenegro  has  a  basic  institutional  infrastructure  for  market  surveillance  regarding 
product safety, with competences shared between market, health and ecological inspectorates, 
there  are  serious  problems  of  coordination  among  these  bodies.  There  is  no  systematic 
approach  to  re-active  and  pro-active  surveillance.  Although  an  interdepartmental  working 
group  on  coordination  was  set  up  recently,  there  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  essential  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  not  effective  enough  in  preventing  infringements  of  consumer 
laws.  Inspection  authorities  do  not  have  adequate  powers  to  take  measures  when  consumer 
rights are breached, such as imposing sanctions. 

There are two consumer NGOs, which are cooperating with the government but have limited 
impact  on  the  substance.  Information  and  awareness  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  Montenegro  lies  with  the  Ministry  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 and integrate Montenegro’s health system with the European and 

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global  health  development  process.  The  development  of  the  health  sector  in  Montenegro  is 
guided by a Master plan for 2010 – 2013, which is broadly in line with the 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  use  of  tobacco  products  was  adopted  in  2004. 
However,  missing  elements  concern  the  sponsorship  of  sports  and  similar  events  and  the 
maximum levels of tar, nicotine and carbon monoxide for export products. Generally, there is 
a  need  to  closely  monitor  implementation  of  tobacco  legislation.  Smoking  is  a  persistent 
problem  in  Montenegro  and  implementation  of  the  provisions  regarding  limiting  the  use  of 
tobacco in public spaces needs to be strengthened. 

the  population  against  communicable  diseases  and 

The basic act regulating communicable diseases in Montenegro is the Law on the protection 
of 
the  Rulebook  on  reporting 
communicable diseases and hospital infections. However, some case definitions for reporting 
communicable  diseases,  including  clinical,  laboratory  and  epidemiological  criteria,  are 
missing.  Legislation  provides  for  reporting  mechanisms  which  go  beyond  the  existing 
epidemiological  surveillance  system  in  Montenegro.  Overall,  the  legal  basis,  national 
structures  and  resources  are  generally  in  place  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 transfusion are still to be adopted, while administrative and technical capacities 
need to be strengthened.  

Regarding mental health, Montenegro’s national strategy identifies a series of efforts needed, 
but the administrative capacity is inadequate to ensure its implementation. 

On  cancer  prevention  and  control,  Montenegro  is  still  at  an  early  stage  of  development.  A 
national  programme  on  early  detection  of  breast  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 are 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  policies  and  child/youth  policies.  Alcohol  is  also  addressed  in  the 
mental health strategy and as part of the secondary prevention of TB and diabetes. In the field 
of HIV/AIDS, Montenegro broadly has the necessary legal basis for prevention and control. 
Montenegro’s efforts in the field correspond to the broad lines of the EU Communication on 
combating HIV/AIDS.  

Conclusion 

Montenegro  has  aligned  its  legislation  with  a  significant  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 particular in the field of unfair commercial practices 

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and by amending and fully implementing the Law 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 general 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 effectively in the medium term. 

3.29.  Chapter 29: Customs Union 

The acquis in this sector consists of the EU Customs Code and its implementing provisions; 
the Combined Nomenclature; the Common Customs Tariff, including trade preferences, tariff 
quotas  and  tariff  suspensions;  and  other  customs-related  legislation  outside  the scope  of  the 
Customs Code. Member States must ensure that the necessary implementing and enforcement 
capacities,  including  links  to  the  relevant  computerised  EU  customs  systems  (e.g.  tariff-
related  systems,  NCTS,  ECS,  ICS  and  EOS)  are  in  place.  The  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 external trade, health and security.  

The Stabilisation and Association Agreement (SAA) provides for establishment of a free trade 
area with the EU and the immediate or progressive 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  rules  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 classification rules are largely in line with the acquis although classification 
practice is not always consistent.  

Montenegro applies a system of binding tariff information, which is similar to the EU system, 
but the service is not provided for free.  

Tariff quotas are currently managed 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  contains  provisions  similar  to  those  in  the  EU  Regulation  on  duty 
relief  (EC  1186/2009)  but  on  accession  they  will  have  to  be  replaced  in  full  by  the  EU 
provisions.  Montenegro  applies  several  administrative  fees  that  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  participating  in  the  European 
Union’s Stabilisation and Association Process. 

The legislation in  the  field  of  intellectual property rights is not fully in conformity with the 
EU customs enforcement legislation since, for example, plant variety rights are not covered. 

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The customs procedures are aligned with the rules of the Trade-related aspects of intellectual 
property rights (TRIPS) Agreement and 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 details and procedures for taking cash in or out 
of the country, and penalties for failure to declare 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  structures  in  place  and  adequate  resources  to 
implement  and  enforce  the  customs  legislation.  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, internal control needs to be enhanced in order 
to effectively prevent and detect corruption and misconduct. 

Post-clearance controls and risk analysis are widely used, but the actual effectiveness of these 
procedures  is  unclear.  The  department  in  charge  of  post-clearance  controls  needs  to  be 
strengthened  in  order  to  be  able  to  systematically  plan  and  operate  a  posteriori  controls 
compensating  for  reduced  physical  and  documentary  checks.  The  Customs  Administration 
needs  to  further  encourage  the  use  of  simplified  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 Customs Information System (CIS). The CIS is 
able to process customs declarations electronically, 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,  electronic  tariff  and  accounting  systems,  the  Customs 
Administration  collects  statistical  information  on  trade.  The  country  has  implemented  its 
national TARIC system, used also 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  the  Customs  Administration  is  responsible  for 
developing the systems’ administrative and operational capacity.  

Overall,  Montenegro  has  progressed  in  customs  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 rights, 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 challenges, it will need to be reinforced. Particular 

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attention needs to be given to interconnectivity and interoperability with the EU IT systems. 
Internal control needs also to be enhanced in order to effectively prevent and detect corruption 
and misconduct. 

Overall,  Montenegro  needs  to  address  some  challenges  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  transposition  into  national  law.  In  the  area  of  humanitarian  aid  and 
development  policy,  an  applicant  country  needs  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  Agreement  includes  a  core  trade  part  establishing  a  free 
trade area between Montenegro and the EU. It includes provisions requiring the parties to act 
in  accordance  with  the  rules  of  the  WTO  or  relevant  international  obligations.  Montenegro 
shall  also  enhance  trade  liberalisation  within  the  Western  Balkans  and  with  other  countries 
involved in the enlargement process. 

Upon accession, Montenegro will be bound by the common commercial policy. Montenegro 
will  have  to  apply  all  the  autonomous  trade  regimes  that  the  EU  grants  to  certain  third 
countries, including the Generalised System of Preferences (GSP). Montenegro will also have 
to  terminate  all  its  current  preferential  trade  agreements  with  third  countries  and  bring  all 
other agreements, including non-preferential trade agreements, into line with the obligations 
of  EU  membership.  Moreover,  Montenegro  will  become  party  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 bilateral 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  Services  (GATS)  in  December  2008,  and  both 
horizontal limitations and sector-specific commitments are generally in accordance with those 
undertaken by the EU. However, the final commitments 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 most favoured nation (MFN) ad valorem tariff rate for agricultural 
products is 13.16%, for fish and fishery products 8.6%, and for industrial goods 3.9%, with an 
overall average of 5.9%. The EU average MFN ad valorem tariff rate for agricultural 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 implementing bylaw include provisions on anti-dumping 
and  countervailing  measures.  Upon  accession,  Montenegro  will  have  to  repeal  national 
legislation related to its trade defence instruments and measures based on this legislation and 
apply the EU rules and measures. 

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Montenegro does not apply any GSP scheme. Upon 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  with  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 legislation are different from Regulation 
428/2009.  

As regards free trade agreements with third countries, Montenegro 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 Montenegro 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 investments between the signatory 
countries  and  feature  pre-establishment  national  treatment  for  third-country  investors  with 
respect  to  services.  Montenegro  has  also  signed  three  agreements  on  trade  and  economic 
cooperation  and  currently  is  negotiating  agreements  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  involved  in  any  donor  activities.  There  is  no 
legislation  on  development  policy  and  no  relevant  administrative  structure  in  place. 
Humanitarian  contributions  are  decided  on  a  case-by-case  basis,  without  a  legislative 
framework.  

Conclusion 

Overall, if it continues its efforts, Montenegro should, in the medium term, have the capacity 
to comply with the requirements of the acquis. In preparing for membership, Montenegro will 
need  to  ensure  that  its  actions  and  commitments  concerning  international  organisations  are 
aligned and coordinated with 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. 

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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  binding  international  agreements,  and  on 
political  documents.  The  acquis  consists  of  political  declarations,  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 and apply agreed 
restrictive  measures.  Applicant  countries  are  required  to  progressively  align  with  EU 
declarations, and to apply restrictive 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 Treaty on European Union, by the date of accession. 

The  Ministry  of  Foreign  Affairs  coordinates  all  activities  related  to  foreign  policy;  its  EU 
directorate is responsible for and has a coordinating role regarding 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 accession process, the Ministry of Foreign Affairs 
aims to further develop its capacities (a one-third 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 independence 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  institutionalised  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 field 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  foreign  policy.  Montenegro  participates  actively  in  regional 
organisations  involving  the  South-Eastern  region  of  Europe  and  is  chairing  the  Central 
European  Initiative  (CEI),  the  South-East  European  Cooperation  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 plans to adopt by the end of 2010 
a  law  on  restrictive  measures  that  would  regulate  the  application  of  such  measures  and  the 
competences of specific state bodies in this field. 

In relation to non-proliferation and strategy on weapons of mass destruction/small arms and 
light  weapons  (WMD/SALW),  Montenegro  participates  in  some,  but  not  all,  international 
export control regimes and instruments concerning the non-proliferation of weapons of mass 
destruction.  It  is  very  active  in  arms  export.  It  complies  through  national  laws  and  control 
systems with international commitments on small arms and light weapons, including the aims 

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of  the  EU  strategy  on  SALW.  Montenegro  has  also  communicated  its  intention  to  join  the 
Wassenaar  Arrangement  on  export  controls  for  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  other  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  security,  including  on  handling  of  classified 
information.  Montenegro  has  concluded  the  Agreement  on  Security  Procedures  for  the 
Exchange and Protection of Classified Information with the EU.  

On  civil  and  military  crisis  management,  Montenegro  participates 
international 
peacekeeping  operations  such  as  UNMIL,  ISAF  and  UNFICYP.  Since  August  2010, 
Montenegro participates with three navy officers 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. 

in 

Conclusion 

Overall,  assessment  of  Montenegro's  foreign  and  security  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  agreed  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 external 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  discussed  in  the  other  relevant  chapters  (e.g.  on 
agriculture  and  rural  development,  regional  policy,  coordination  of  structural  instruments  or 
fisheries). This chapter covers the more general aspects of internal control and external audit 
of  national  funds.  It  also  covers  protection  of  the  EU’s  financial  interests,  including 
administrative  cooperation  and  criminal  law  protection  (the  PIF  Convention  and  its 
protocols). Finally, the section on protection of the euro against counterfeiting deals with the 
first-pillar aspects of this issue. 

Montenegro  is  still  at  an  early  stage  in  implementing  its  public  internal  financial  control 
(PIFC)  system.  However  it  has  adopted  a  strategy  for  the  development  of  public  internal 
control  which  maps  out  the  future  development  actions  necessary.  The  legal  framework, 

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including a law on PIFC and specific implementing 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  FMC  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 coordinate 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  standards.  Various  pieces  of  secondary  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 certification 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 internal audit can be fully operational. 

The existing internal audit units perform compliance audits and systems audits. Further effort 
will be required in order to enhance capacity 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  fully  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 ensured 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 supreme national audit authority. It 
also provides that it is to report to parliament. In addition, external 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  reports.  Its  annual  report  is 
submitted to parliament. The SAI is currently drawing up a five year development strategy, in 
order to guide further reform. 

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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 scope of the PIFC Law needs to be limited to 
governmental bodies and not independent organisations 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 Ministry 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  SAI  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  line  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 criteria 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  financial  interests  and  protection  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  Commission’s  Anti-fraud  Office,  OLAF.  Finally,  legal 
and administrative provisions need to be in place to guarantee the effective protection of the 
euro against counterfeiting. 

Montenegro indicates that its national penal legislation already contains many elements of the 
PFI legislation (Convention on the protection of the EU’s financial 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  international  financial  resources,  the  definitions  of  active 
and passive bribery, penalties, liability of legal entities, abuse of official status, various types 
of fraud, smuggling, money laundering, etc.  

However,  in  order  to  properly  analyse  the  current  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 translation of the criminal code and of the 
criminal procedure code. Montenegro needs to establish continuous bilateral contacts with the 
Commission  in  order  to  provide  such  in-depth  analysis  of  the  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 obligations arising from Article 325(3) of the TFEU 
and  application  of  the  provisions  of  Regulation  (EC)  No  2185/96  concerning  on-the-spot 
checks and inspections carried out by the Commission, in particular the obligation to provide 
assistance to Commission inspectors from the day of accession at the latest. 

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Montenegro’s current legislation covers protection of the euro against counterfeiting, but only 
to a certain extent. For further alignment of Montenegro’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 regulations on the subject. 

Further  progress  also  needs  to  be  made  in  respect  of  the  roles  of  national  authorities  in  the 
detection, analysis and processing of counterfeit currency.  

Conclusion 

Montenegro is at an early stage in the 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  the  key  phase  of  implementing  the  PIFC  legislation.  Attention 
needs to focus on developing an understanding of greater accountability within line ministries 
and  other  budget  beneficiaries.  Considerable  training  and  awareness-raising  efforts  will  be 
required in order to embed the new control environment 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 SAI independence and is 
against international standards. The proposed strategic development 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  against  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 financial resources necessary for funding the EU 
budget  (‘own  resources’).  These  own  resources  are  made  up  mainly  of  contributions  from 
Member States based on traditional own resources deriving mainly from customs duties and 
sugar  levies;  resources  based  on  VAT;  and  resources  based  on  the  level  of  GNI  (gross 
national income).  

The  acquis  under  this  chapter  consists  of  EU  legislation  that  is  directly  binding  on  the 
Member States and  does not require  transposition 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  for  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  national  accounts  and  GDP  are  based  on  ESA95 
standards.  GNI  is  not  yet  compiled  by  the  National  Statistical  Institute.  Further  progress  is 

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needed  for  full  implementation  of  the  ESA  95  standards  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 Montenegro’s accession on the EU budget is expected to 
be limited. This applies both in terms of its likely receipts under the various EU expenditure 
programmes as well as its expected 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 the policy areas underlying application of the own 
resources  rules. Overall, if it continues its  efforts, Montenegro 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  obligations  of  membership  has  been  evaluated 
according to the following indicators: 

–  the obligations set out in the Stabilisation and Association Agreement; 

–  progress with adoption, implementation and enforcement of the EU acquis. 

Montenegro  has  overall  smoothly  implemented  the  obligations  under  the  Stabilisation  and 
Association  Agreement.  However,  there  have  been  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 approximation of national legislation to the EU acquis. 
Important  progress  in  adopting  legislation  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  capacities  remain  overall  limited  and  the  country  will  need  to 
make sustained efforts to strengthen them in order to assume the obligations of membership in 
the medium-term. 

If it continues its efforts Montenegro 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 

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125 

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- 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 capacities 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 

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- Fisheries  

- Statistics 

- Social policy and employment 

- Regional Policy and coordination of structural instruments 

- Judiciary and fundamental rights  

- Justice, freedom and security 

- Financial control 

Considerable  adjustments  of 
legal  and 
strengthening of administrative and implementation capacities are needed in these areas. 

institutional  framework  and  significant 

the 

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  administrative  capacity  for  the  enforcement  of  legislation  in 
order  to  achieve  compliance  on  the  most  important  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. 

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Statistical Annex 

STATISTICAL DATA (as of 14 October 2010) 
Montenegro 

Basic data 
Population (thousand) 
Total area of the country (km²) 

National accounts 
Gross domestic product (GDP) (million national currency) 
GDP (million euro) 
GDP (euro per capita) 
GDP (in Purchasing Power Standards (PPS) per capita) 
GDP per capita in PPS (EU-27 = 100) 
Real GDP growth rate (growth rate of GDP volume, national currency, % change on previous year) 
Employment growth (national accounts, % change on previous year) 
Labour productivity growth: GDP growth per person employed (% change on previous year) 
Real unit labour cost growth (national accounts, % change on previous year) 
Labour productivity per person employed (GDP in PPS per person employed, EU-27 = 100)  
Gross value added by main sectors (%) 

Note

Note

1) 

Agriculture and fisheries 
Industry 
Construction 
Services 

Final consumption expenditure, as a share of GDP (%) 
Gross fixed capital formation, as a share of GDP (%) 
Changes in inventories, as a share of GDP (%) 
Exports of goods and services, relative to GDP (%) 
Imports of goods and services, relative to GDP (%) 

Industry 
Industrial production volume index (2000=100) 

2000 
612 

2003 
2006 
624 
619 
13 812  13 812 13 812 13 812 13 812 13 812 13 812

2005 
623 

2002 
617 

2001 
615 

2004 
621 

2007 
625 
13 812 

2008 
628 
13 812 

2009 
630 
13 812 

2001 

2003 

2000 
2004 
2002 
1 066  1 295  1 360  1 510  1 670 
1 066  1 295  1 360  1 510  1 670 
1 750  2 113  2 208  2 435  2 684 
: 
: 
1.9 
-19.9e
21.8 
: 
: 

: 
: 
2.5 
-8.9e 
11.4 
: 
: 

: 
: 
4.4 
2.7e 
1.7 
: 
: 

: 
: 
1.1 
: 
: 
: 
: 

: 
: 
: 
: 
: 
: 
: 

12.4 
19.2 
4.3 
64.1 
91.9 
16.9 
5.5 
36.8 
51.1 

11.6 
12.2 
11.9 
19.2 
20.0 
20.7 
3.4 
4.0 
3.9 
63.4 
65.8 
63.8 
100.2  105.8  101.0 
13.3 
14.6 
17.5 
2.1 
4.1 
5.9 
30.6 
35.4 
38.4 
47.0 
59.9 
62.0 

10.9 
18.7 
3.5 
66.9 
99.4 
17.0 
-0.4 
42.0 
58.1 

2005 
1 815 
1 815 
2 912 
6 900.0 8 500.0 10 000.0 10 700.0 10 200.0 

2006 
2 149 
2 149 
3 443 

2007 
2 681 
2 681 
4 280 

2008 
3 086 
3 086 
4 908 

2009 
2 981 
2 981 
4 720 

30.7 
4.2 
-11.4e 
15.6 
: 
: 

10.4 
17.1 
3.6 
68.9 
99.8 
18.0 
-0.3 
43.6 
61.1 

35.9 
8.6 
-5.0 
13.6 
: 
: 

10.1 
16.0 
4.3 
69.5 
104.2 
21.9 
3.6 
49.4 
79.1 

40.2 
10.7 
-11.7 
22.4 
: 
: 

9.2 
13.6 
7.3 
70.1 
108.5 
32.3 
1.5 
44.4 
86.7 

42.6 
6.9 
: 
18.1 
: 
: 

9.3 
13.4 
7.7 
69.6 
113.8 
38.3 
2.3 
39.6 
94.0 

Note

2001 
2000 
100.0b  99.0 

2004 
2003 
2002 
100.0  102.0  116.0 

2005 
114.0 

2006 
115.0 

2007 
115.0 

2008 
113.0 

43.2 
-5.7 
: 
: 
: 
: 

10.0 
13.6 
6.5 
69.9 
106.2 
26.7 
0.4 
32.1 
65.4 

2009 
77.0 

2009 
3.4 

Inflation rate 
Annual average inflation rate (CPI, % change on previous year) 

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
: 

2006 
: 

2007 
: 

2008 
7.4 

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Balance of payments 
Balance of payments: current account total (million euro) 
Balance of payments current account: trade balance (million euro) 
Balance of payments current account: net services (million euro) 
Balance of payments current account: net income (million euro) 
Balance of payments current account: net current transfers (million euro) 

of which government transfers (million euro) 
Net foreign direct investment (FDI) (million euro) 
Foreign direct investment (FDI) abroad (million euro) 

of which FDI of the reporting economy in EU-27 countries (million euro) 

Foreign direct investment (FDI) in the reporting economy (million euro) 

of which FDI of EU-27 countries in the reporting economy (million euro) 

Public finance 
General government deficit/surplus, relative to GDP (%) 
General government debt relative to GDP (%) 

Financial indicators 
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 deposits, million euro) 
Money supply: M2 (M1 plus deposits with maturity up to two years, million euro) 
Money supply: M3 (M2 plus marketable instruments, million euro) 
Total credit by monetary financial institutions to residents (consolidated) (million euro) 
Interest rates: day-to-day money rate, per annum (%) 
Lending interest rate (one year), per annum (%) 
Deposit interest rate (one year), per annum (%) 
euro exchange rates: average of period - 1 euro = … national currency 
Effective exchange rate index (2000=100) 
Value of reserve assets (including gold) (million euro) 

External trade 
Value of imports: all goods, all partners (million euro) 
Value of exports: all goods, all partners (million euro) 
Trade balance: all goods, all partners (million euro) 
Terms of trade (export price index / import price index) 
Share of exports to EU-27 countries in value of total exports (%) 
Share of imports from EU-27 countries in value of total imports (%) 

Demography 
Natural growth rate: natural change (births minus deaths) (per 1000 inhabitants) 
Infant mortality rate: deaths of children under one year of age per 1000 live births 
Life expectancy at birth: male (years) 
Life expectancy at birth: female (years) 

Note

2) 

2) 

Note

Note

3) 
4) 
5) 

6) 

Note

Note

2000 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
: 

2000 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2000 
: 
: 
: 
: 
: 
: 

2000 
6.1 
11.1 
71.1 
76.3 

2001 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 

2001 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 
: 

2001 
: 
: 
: 
: 
: 
: 

2001 
5.5 
14.6 
71.4 
76.5 

2002 
-175 
-433 
100 
76 
83 
: 
76 
0 
0 
76 
73 

2002 
: 
: 

2002 
: 
: 
: 
: 
: 
125 
: 
: 
: 
: 
: 
55 

2002 
: 
: 
: 
: 
: 
: 

2002 
4.8 
10.8 
70.9 
75.7 

2003 
-102 
-359 
112 
88 
58 
: 
39 
-5 
0 
44 
32 

2003 
-2.4 
: 

2003 
: 
: 
285 
403 
494 
199 
: 
: 
: 

2004 
-120 
-416 
148 
86 
62 
: 
51 
-2 
-1 
53 
38 

2004 
-2.0 
: 

2004 
: 
: 
291 
437 
547 
279 
: 
: 
: 

1.000  1.000 

: 
50 

: 
60 

2003 
: 
: 
: 
: 
: 
: 

2003 
4.3 
11.0 
70.4 
74.9 

2004 
: 
: 
: 
: 
: 
: 

2004 
3.4 
7.8 
71.0 
75.3 

2005 
-154 
-514 
196 
18 
147 
6 
381 
-4 
-3 
384 
319 

2005 
-2.0 
: 

2005 
: 
: 
351 
615 
867 
374 
: 
12.1 
: 
1.000 
: 
173 

2006 
-531 
-849 
197 
31 
90 
7 
467 
-26 
-78 
493 
377 

2006 
2.9 
: 

2006 
: 
: 
484 
1 099 
1 587 
843 
: 
10.3 
: 
1.000 
: 
329 

2007 
-1 061 
-1 574 
439 
15 
59 
2 
558 
-115 
-72 
673 
527 

2007 
6.6 
: 

2007 
: 
: 
592 
1 557 
2 728 
2 213 
: 
9.3 
3.3 
1.000 
: 
490 

2008 
-1 564 
-2 082 
399 
46 
73 
9 
552 
-74 
-58 
625 
430 

2008 
-0.4 
: 

2008 
: 
: 
512 
1 209 
2 339 
2 754 
: 
9.4 
4.1 
1.000 
: 
337 

2009 
-896p 
-1 371 
385 
5 
85 
5 
911 
-33 
-74 
944 
854 

2009 
-3.5 
: 

2009 
: 
: 
: 
: 
: 
2 358 
: 
9.4 
3.9 
1.000 
: 
397 

2009 

2008 

2007 

2006 

2005 
974.3  1 482.7 2 317.8  2 527.2  1 652.2 
460.6 
287.9 
-513.7 
: 
53.5 
45.3 

433.2 
-1 717.0 -2 094.0 -1 364.3 
: 
61.3 
41.2 

627.5 
-855.2 
: 
62.2 
45.5 

: 
71.1 
35.7 

: 
48.3 
37.8 

600.8 

2005 
2.4 
9.5 
70.4 
74.9 

2006 
2.5 
11.0 
70.7 
74.8 

2007 
3.0 
7.4 
71.2 
76.1 

2008 
4.1 
7.5 
71.2 
76.1 

2009 
: 
5.7 
71.7 
76.6 

EN 

129 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Labour market 
Population (15-64): total of population aged 15-64 (thousand) 
Population in economic activity (15-64): total of population aged 15-64 that is economiclly active 
(thousand) 
Total employment (15-64): total of population aged 15-64 that is employed (thousand) 
Economic activity rate (15-64): share of population aged 15-64 that is economically active (%) 
Employment rate (15-64): share of population aged 15-64 in employment (%) 

Employment rate male (15-64) (%) 
Employment rate female (15-64) (%) 

Employment rate of older workers (55-64): share of population aged 55-64 in employment (%) 
Employment by main sectors (%) 

Agriculture 
Industry 
Construction 
Services 

Unemployment rate: share of labour force that is unemployed (%) 

Share of male labour force that is unemployed (%) 
Share of female labour force that is unemployed (%) 

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 (%)

Social cohesion 
Average nominal monthly wages and salaries (national currency) 
Index of real wages and salaries (index of nominal wages and salaries divided by the CPI) 
(2000=100) 
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 
Number of passenger cars per 1000 population 
Number of subscriptions to cellular mobile telephone services per 1000 population 

Infrastructure 
Density of railway network (lines in operation, per 1000 km²) 
Length of motorways (thousand km) 

Innovation and research 
Spending on human resources (public expenditure on education in % of GDP) 
Gross domestic expenditure on R&D in % of GDP 
Percentage of households who have Internet access at home (%) 

Environment 
Greenhouse gas emissions, CO2 equivalent (tons, 1990=100) 
Energy intensity of the economy (kg of oil equivalent per 1000 euro GDP) 
Electricity generated from renewable sources in % of gross electricity consumption 
Road share of inland freight transport (% of tonne-km)  

7) 
7) 
7) 
7) 
7) 

Note

Note

Note

Note

Note

Note

2000 
: 

2001 
: 

2002 
: 

2003 
: 

2004 
: 

2005 
431.2 

2006 
430.7 

2007 
428.6 

: 

: 

: 

: 

: 
181.8  176.6  177.6  168.5  187.3 
51.7 
59.1 
60.4 
37.4 
37.7 
38.5 
46.5 
46.6 
46.2 
28.8 
29.0 
30.6 
: 
: 
: 

57.1 
37.1 
45.6 
29.0 
: 

58.9 
36.2 
44.5 
28.1 
: 

3.4 
22.4 
3.5 
70.8 
19.3 
: 
: 
: 
: 

3.1 
25.8 
2.1 
69.1 
21.2 
: 
: 
: 
: 

3.0 
26.0 
2.1 
68.8 
20.7 
: 
: 
: 
: 

1.8 
25.7 
2.0 
70.6 
22.7 
: 
: 
: 
: 

10.9b 
16.5b 
3.4b 
69.2b 
27.7 
: 
: 
: 
: 

254.3 
176.5 
59.0 
40.9 
46.2 
35.6 
: 

8.6 
16.3 
2.9 
72.1 
30.3 
: 
: 
: 
: 

251.5 
176.7 
58.4 
41.0 
47.8 
34.8 
: 

6.8 
14.8 
4.7 
73.7 
29.6 
: 
: 
: 
: 

261.5 
210.7 
61.0 
49.2 
56.6 
41.9 
: 

8.1 
13.8 
3.8 
74.3 
19.3 
18.1 
20.9 
: 
: 

2008 
431.6 

264.2 
219.4 
61.2 
50.8 
58.3 
43.5 
: 

7.6 
15.3 
6.1 
71.0 
16.8 
15.9 
17.9 
: 
: 

2009 
434.3 

262.1 
211.7 
60.3 
48.7 
56.0 
41.6 
: 

6.5 
14.0 
6.7 
72.8 
19.1 
18.0 
20.4 
: 
16.7 

2004 
2002 
2000 
181.0  211.0  149.1  173.9  195.3 

2003 

2001 

2005 
213.1 

2006 
246.0 

2007 
338.0 

2008 
416.0 

2009 
463.0 

100.0 

91.6 

109.7  119.3  130.9 

139.7 

156.4 

179.9 

195.2 

: 

: 

: 

: 

: 

: 

: 

: 

: 

2001 

2000 
2004 
2002 
185.3  161.0  166.8  171.8  176.1 
639.6  775.5  674.4  778.7 

2003 

: 

2008 
2005 
190.9 
298.5 
872.0  1 127.5 1 097.9  1 611.5 

2007 
285.6 

2006 
244.7 

2000 
18.1 
: 

2000 
: 
: 
: 

2000 
: 
: 
: 
: 

2001 
18.1 
: 

2001 
: 
: 
: 

2001 
: 
: 
: 
: 

2002 
18.1 
: 

2002 
: 
: 
: 

2002 
: 
: 
: 
: 

2003 
18.1 
: 

2003 
: 
: 
: 

2003 
: 
: 
: 
: 

2004 
18.1 
: 

2004 
: 
: 
: 

2004 
: 
: 
: 
: 

2005 
18.1 
: 

2005 
: 
: 
: 

2005 
: 
: 
: 
: 

2006 
18.1 
: 

2006 
: 
: 
: 

2006 
: 
493.8 
: 
: 

2007 
18.1 
: 

2007 
: 
: 
: 

2007 
: 
384.4 
: 
: 

2008 
18.1 
: 

2008 
: 
: 
: 

2008 
: 
436.9e 
: 
: 

: 

: 

2009 
284.0 
: 

2009 
18.1 
: 

2009 
: 
: 
: 

2009 
: 
: 
: 
: 

EN 

130 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy 
Primary production of all energy products (thousand TOE) 
Primary production of crude oil (thousand TOE) 
Primary production of hard coal and lignite (thousand TOE) 
Primary production of natural gas (thousand TOE) 

Net imports of all energy products (thousand TOE) 
Gross inland energy consumption (thousand TOE) 
Electricity generation (thousand GWh) 

Note

2000 
: 
: 
: 
: 
: 
: 
2.7 

2001 
: 
: 
: 
: 
: 
: 
2.5 

2002 
: 
: 
: 
: 
: 
: 
2.3 

2003 
: 
: 
: 
: 
: 
: 
2.7 

2004 
: 
: 
: 
: 
: 
: 
3.3 

2005 
: 
: 
: 
: 
: 
: 
2.9 

2006 
982 
: 
982 
: 
-49 
933 
3.0 

2007 
795 
: 
795 
: 
9 
804 
2.1 

2008 
1 136 
: 
1 136 
: 
-25 
1 111 
2.8 

2009 
: 
: 
: 
: 
: 
: 
2.8 

Note

2002 

2003 

8) 
9) 
9) 
9) 
10) 
11) 

518e 
183e 
22e 
241e 
198e 
5e 
: 
: 

518e 
175e 
24e 
252e 
203e 
4e 
: 
: 

2005 
99.0 
517e 
118 
11 
255 
186 
3e 
: 
: 

2000 
95.0 
518e 
179e 
19e 
293e 
197e 
3e 
: 
: 

2001 
2004 
107.0  106.0  101.0  104.0 
518e 
518e 
169e 
178e 
27e 
21e 
254e 
244e 
209e 
194e 
3e 
4e 
: 
: 
: 
: 

Agriculture 
Agricultural production volume index of goods and services (producer prices, previous year=100) 
Total utilised agricultural area (thousand hectare) 
Livestock: cattle (thousand heads, end of period) 
Livestock: pigs (thousand heads, end of period) 
Livestock: sheep and goats (thousand heads, end of period) 
Production and utilisation of milk on the farm (total whole milk, thousand tonnes) 
Crop production: cereals (including rice) (thousand tonnes, harvested production) 
Crop production: sugar beet (thousand tonnes, harvested production) 
Crop production: vegetables (thousand tonnes, harvested production) 
: = not available 
p = provisional value 
e = estimated value 
1) The data are without Financial Intermediation Services Indirectly Measured (FISIM). FISIM is calculated separately and at the 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 1000 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 1000 euro); mid-year estimate of population used to calculate per capita values. 
2) The balance of payments sign conventions are used. For FDI abroad a minus sign means investment abroad by the reporting economy exceeded its disinvestment in the period, while an entry without 
sign means disinvestment exceeded investment. For FDI in the reporting economy an entry without sign means that investment into the reporting economy exceeded disinvestment, 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 national definition of M11 are provided. The monetary aggregate M11 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 EUR 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 comprises M2 increased by the Central Government’s time deposits in EUR 
and other currencies. 
6) No official national currency exists. Euro is the currency in use. 
7) Age group refers to persons aged 15 or more years until 2004; from 2005 onwards age group 15-64 is used. 
8) Agricultural area includes: arable land, area under pastries, fishponds and ponds. 
9) Number of livestock in 1000; including enterprises, cooperatives and households. 
10) Calculated net quantity in 1000 tonnes; including enterprises, cooperatives, and households. 
11) Including households, enterprises and cooperative 

2006 
102.0 
517 
115 
13 
249 
178 
3 
: 
: 

2007 
89.0 
516 
109 
10 
222 
173 
2 
: 
: 

2008 
: 
516 
106 
10 
209 
160 
3 
: 
: 

2009 
: 
516 
101 
12 
200 
152 
3 
: 
: 

EN 

131 

EN