The last four years have seen the achievement of considerable legislative reform in Serbia in several important sectors of the economy. The underlying objective of some of the reforms is clearly the recognised need to accelerate the harmonization of the Serbian legal system with EU regulations in preparation for full EU membership of the country.
Among the various new laws enacted over the last few years, it is worth mentioning the new Law on Capital Market which became applicable in November 2011 aimed at making the Serbian capital market more attractive to domestic and foreign investors. The new Companies Act was also enacted in 2011 and constitutes a clear improvement compared to the previous regime, although mainly related to joint stock companies. Most recently the new Public Procurement Law became applicable on 1st April 2013. The new law stipulates a number of new solutions aimed at increasing transparency, effectiveness and cost-efficiency of the procedure, as well as at combating corruption by both the contracting authorities and the bidders. Finally, new regulations on renewables and efficient use of energy were adopted in the first quarter of 2013.
- Serbia: Access to Finance
- Serbia: Contract Enforcement and Judicial Capacity
- Serbia: Corporate Governance
- Serbia: Debt Restructuring and Bankruptcy
- Serbia: Electronic Communications
- Serbia: Energy Regulation
- Serbia: PPPs/Concessions
- Serbia: Public Procurement
In 2001, with EBRD technical assistance, Serbia undertook to reform its secured transactions and a Law on Registered Charges over Movable Property was adopted by the Serbian parliament in May 2003. It provided for the first time in the country the legal means by which lenders, investors and borrowers could secure their operations with non-possessory pledge over movable property and rights. After ten years of usage it can be said that the reform proved to be a very successful one as the introduced system is highly appreciated and used by the market players which consider it reliable. The quality of the law is also reflected in the fact that no amendments were needed or proposed since its introduction, a rare case for Serbia.
In July 2013, the Serbian Ministry of Finance has officially requested EBRD’s assistance for the reform of the Mortgage Law. The request is being considered. In addition, EBRD is currently conducting a feasibility study with the aim to establish the feasibility and marketability of a national reverse factoring programme and is assisting Serbian Ministry of Agriculture to introduce crop receipts – a pre-harvest financing tool based on taking collateral over future agricultural production.
EBRD Legal Reform Projects in Serbia:
Secured Transactions Legal Reform
The project, completed in 2006, assisted the Republic of Serbia in adopting a modern legal framework for security over movable assets and implementation. The Law on Registered Charges, adopted in May 2003 closely adopts the EBRD Core Principles on Secured Transactions, and enables security to be taken over a variety of asset classes.
Agrarian Receipt Programme
Financial Law Unit of the EBRD Legal Transition team is providing legal support to EBRD Agribusiness team and local consultants in preparing new legislation on pre-finance of agricultural production and taking security over future agricultural products requested by the Ministry of Agriculture.
The EBRD Judicial Decisions Assessment (2010) found court judgments in commercial matters to be fairly predictable and of reasonably good quality, with judgments of commercial courts being of slightly better quality than those of other courts. The EU candidacy process has prompted a modernisation of the country’s legal system in line with higher standards, contributing to an increase in the quality of judgments over recent years. However, the pace of legislative change has inevitably caused some instability and created difficulties for judges. The slow pace of judicial proceedings has long been a problematic area for the Serbian judiciary. This is reflected in data from the EBRD / World Bank Business Environment and Enterprise Performance Survey, where only 11% of Serbian respondents considered that the court system was sufficiently quick. Recent reforms aimed at addressing this issue have included the enactment of the new Civil Procedure Code, in force since early 2012, which empowers the courts to impose stricter deadlines on parties to litigation, and to render judgment without a formal hearing in certain cases. Importantly, it provides that hearings are generally to be conducted by a single judge, with panel hearings now a rare exception.
EBRD Legal reform projects in Serbia
Training of judges re application of competition law
The Bank has been working with the Administrative Court to develop training for Serbian judges on economic concepts affecting the application of competition law in appeals from decisions of the competition authority.
Corporate governance in Serbia is mainly regulated by the Law on Business Entities published in the Official Gazette of the Republic of Serbia on 27 May, 2011. The Law came into force on 4 June 2011 and fully applicable from June 2012.
With reference to corporate governance of banks, the Law on Banks, enacted in 2005 as amended, regulates the operations, organization and management of banks.
In 2008, the Belgrade Stock Exchange issued the Corporate Governance Code of the Belgrade Stock Exchange” to be applied by listed companies under the so-called “comply or explain” mechanism.
EBRD Legal reform projects in Serbia
Reform of the Law on Business Entities
The Ministry of Economy and Regional Development created a working group for preparing amendments to the Law on Business Entities. The working group lacked the necessary expertise in reforming the Serbian corporate framework and therefore approached the EBRD for technical assistance. The project was completed in 2012.
Bankruptcy proceedings in Serbia are governed by the Law on Bankruptcy which became effective as of 23 January 2010, and replaced the earlier 2004 law. The Bankruptcy Law, which is generally of a high quality, facilitates both the reorganisation of the debtor’s business by means of a reorganisation plan or its liquidation. There have been significant developments in bankruptcy legislation to encourage reorganisation in bankruptcy proceedings, which appear to have had a positive effect also on the consensual (out of court) restructuring environment. In 2011, amendments were made to the Bankruptcy Law to enable debtors to file a bankruptcy petition accompanied by a ‘pre-packaged reorganisation plan’, which involves the debtor obtaining the necessary level of creditor support for a reorganisation plan prior to filing the bankruptcy petition.
On 21 August 2013 the Legal Transition Team of the EBRD launched a project in Serbia, in partnership with the CCIS in support of effective implementation of the Consensual Financial Restructuring Law. To date, the number of consensual financial restructuring cases before the CCIS has been low. This appears to be due, at least in part, to lack of stakeholder awareness of the new procedure and its benefits, as well as unfamiliarity of local stakeholders with the mediation framework in which the consensual financial restructuring cases are conducted.
The main activities of the EBRD project are intended to take place over the next 12-18 months and to consist primarily of raising stakeholders’ awareness and understanding and ultimately, confidence in the consensual financial restructuring procedure.
- Assessment of Insolvency office holders – country profile
- Assessment of Insolvency office holders – country results
EBRD Legal reform projects in Serbia
Insolvency Legislative Implementation Assistance Phase I
The Law on Bankruptcy in Serbia was significantly amended pursuant to legislation passed in August 2004. This new law is in significantly greater compliance with international standards than the previous Serbian legislation. The EBRD has been working with the Serbian Bankruptcy Supervisory Agency (BSA) to assist the development of an insolvency regulatory regime since 2005. A written assessment of the state of insolvency practices has been prepared together with a report comprising best insolvency practices, international standards and recommendations relating to the regulation and training of insolvency administrators. These reports have been delivered and recommendations submitted to the local authorities. The project was completed in March 2010
Insolvency Regulatory Capacity Building (Phase I)
The primary objective of this project was to assist the government of Serbia to develop the capacity of the Bankruptcy Supervisory Authority (BSA) to carry out its functions. The BSA is intended to supervise, license, regulate, and train insolvency practitioners, as well as monitoring insolvency cases in Serbia. This project has a regional component as well, in that it involves the development of comprehensive standards and guidelines for the establishment of such agencies in the Balkans and beyond. The results of the survey and the Principles were officially released at the launch of the autumn 2007 online edition of the Bank’s legal journal, Law in Transition, in Bucharest on 26 October 2008.
Serbia is one of the largest markets in south Eastern Europe but was the last one to be fully liberalised. The latest attempt to privatise the incumbent fixed and mobile operator Telkom Srbija collapsed in June 2011. Although the 2010 Telecommunications Law transposed the EU’s 2003 regulatory framework for communications into national law, promising improved market prospects for competitors, it still needs the implementation of the normally expected competitive safeguards before investor confidence is fully restored. The recent abolition of the special tax on mobile revenues was seen as a good step and the overall tax burden on the sector is now relatively low.
- Electronic Communications sector assessment – country report (2012)
- Electronic Communications sector assessment – country report (2008)
EBRD Legal reform projects in Serbia
Telecommunications Regulatory Development
This project, completed in 2008 assisted the Telecommunications Agency with the adoption of a clear and predictable regulatory framework likely to attract private investment and to enable the overall development of the sector in Serbia. More particularly, this project provided assistance with the elaboration of a telecommunications sector policy, licensing policy and interconnection and tariff policy, together with assistance with the establishment of an independent regulatory authority.
The Energy Sector Development Strategy of the Republic of Serbia by 2015 (adopted in May 2005) (the “Strategy”) and the Energy Sector Development Strategy Implementation Programme of the Republic of Serbia until 2015 for the period 2007-2012 (adopted in 2009) (the “Programme”) are the two main policy documents, which underline the significance of renewable energy and place its development high on the government’s agenda.
The Energy Law of 2011 (the “Energy Law”), replacing the previous Energy Law of 2004, is the key piece of legislation for the RES sector. Covering a broader energy sector, the Energy Law has marked a significant step in aligning the sector legislation with the EU acquis.
Serbia has also ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “Kyoto Protocol”) as a non-Annex I country, thus it is not bound to reduce the greenhouse gas emission and is eligible for implementation of the CDM projects, but cannot trade emissions.
Several international donors work closely with the government in promoting sector development. Donor programmes include support with research and feasibility studies with respect to RES potential, including wood waste and biomass (USAID), capacity building of government agencies tasked with various aspects of project development (EBRD) and financing of RES projects (KfW, IFC, EIB and the EBRD). EBRD has established two credit lines for the broader Western Balkans region (WeBSECLF and WeBSEDFF) for direct financing as well as through local banks.
The Serbian Law on Public-Private Partnership and Concessions was adopted on 22 November 2011. The new law, which was prepared with EBRD technical assistance, has a fairly wide scope and covers institutional PPPs in addition to contractual arrangements. The law takes into account the EU principles of equal treatment, fair competition and is largely
based on the EU procurement fundamentals. Following the EBRD technical assistance with preparation of the new law and with institutional capacity of the newly set up PPP Commission, the key issue remains the enhancement of local officials’ capacity for project initiation and preparation involving proper project identification and training at the municipal level.
PPP/Concessions Law Development Advice
The Ministry of Economy and Regional Development of Serbia has requested the Bank’s assistance with the upgrading of the concessions laws. The project was completed in 2012.
In the EBRD 2013 assessment regulatory gaps in public procurement legal framework in Serbia were recorded between 17 % and 21 % in key regulatory areas: transparency safeguards, efficiency instruments and institutional and enforcement measures. This result indicates that further reform work is needed to align legal and institutional framework with international best practice; however, comparison of the 2010 and current EBRD assessment confirms that public procurement regulation is being modernised and has been significantly improved since 2010. The government of Serbia cooperates with EU agencies and OECD/SIGMA supporting public procurement reform work in the region. In 2012 the EBRD signed a MoU on cooperation in the public procurement area and the EBRD Procurement Department is developing policy dialogue instruments with the Serbian government.