Legal Reform in Bosnia & Herzegovina

The legal environment continues to be complex and challenging. Some significant reforms have occurred in the past but more are needed. For some areas of law the EBRD has concluded that the country has laws on the books that meet or exceed the standard found in other EBRD countries of operations; however in practice the application of those laws tend to be poor due to the failings of key institutions.

 

Access to Finance

At the state level of BiH, the creation of pledge is governed by the Framework Pledge Law (adopted on 21 May 2004, and subsequently amended in November 2004) and the Law on the Protection of Personal Data.
Mortgages are regulated at the entity level. Each of the entities has its own legal system, a separate court and registry system. Real estate ownership and property rights are registered in land books which are maintained by the municipal courts in FBiH and by the basic courts in the RS.
 
In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Bosnia and Herzegovina.
 
 
 

Capital Markets

The securities markets regulator is the Securities Commission, while the Banking Agency of the FBiH oversees the banking sector. The basic legislation on the securities market is the Law on Securities Markets, enacted in December 2008. The law regulates trading and issuance of securities and aims at aligning national legislation with the Acquis Communautaire. Other relevant laws include the Law on Companies, the Law on Takeovers and the Law on Investment Funds.
The securities markets legislation lacks comprehensive provisions governing issuance and trading of bonds. There is also uncertainty in terms of enforceability of derivatives transactions and close-out netting.
 
 

Corporate Governance

The Federation of Bosnia and Herzegovina (“FBiH”)
The EBRD’s 2007 Corporate Governance Sector Assessment ranked the FBiH as in “medium compliance” with the OECD Principles of Corporate Governance, and the regulatory framework does not appear to have changed significantly since the Assessment.
 
Republika Srpska (“RS”)
Similar to the FBiH, the EBRD’s 2007 Corporate Governance Sector Assessment ranked the RS as in “medium compliance” with OECD Principles.
 
(2013 Assessment of Corporate Governance of Companies – country report)
 
Corporate governance assessment – country report (2007):
 
 
Corporate Governance Codes
 
 
 

Debt restructuring and bankruptcy

The EBRD’s 2009 Insolvency Sector Assessment found that the Insolvency Law is in “high compliance” with international standards, based on five core areas most relevant to the sector.  Although these core areas performed exceptionally well, the EBRD’s assessment reveals that there is still some room for improvement of the Insolvency Law. The results of the 2009 EBRD Assessment also reveal that the legislative framework relating to insolvency administrators is weak and should be improved.  The 2009 Assessment revealed that this particular aspect of the Insolvency Law is in “low compliance” with internationally recognised standards.
 
 
 

Dispute Resolution

The judiciary of the Federation consists of Municipal Courts, Cantonal Courts and Federation Courts.  Municipal Courts are the courts of first instance for civil and commercial matters.  The Cantonal Courts normally serve as appellate courts but in more serious matters they can directly seize jurisdiction.  The three Federation Courts form the summit of the judicial pyramid in the Federation. The Constitutional Court resolves conflicts among the various levels of administration (Municipalities, Cantons and the Federation) and conflicts among the institutions of the Federation.  It also examines the constitutionality of laws adopted by the Parliamentary Assembly of the Federation.
 
 
EBRD Legal Reform Projects
Competition Law Training for Federal Judges
 
The aim of this project, completed in 2012, was to prepare and deliver a module of judicial training in competition law for judges of the Administrative Division of the Court of Bosnia and Herzegovina (Court of BiH), a federal court with jurisdiction to hear appeals against decisions of the competition authorities of the two constituent entities of the state.
 
 

Electronic Communications

The main legislation governing the electronic communications sector in BiH includes: the Law on Communications of BiHa, enacted on 21 October 2003 and amended on 19 September 2006 and 22 April 2010; the Law on General Administrative Procedure enacted on 25 June 2002; the Law on Consumer Protection enacted on 21 February 2006; the Law on Personal Data Protection enacted on 23 May 2006; and related legislation. The legislative framework largely conforms with EU framework requirements in several important areas, including interconnection and access to infrastructure, tariff regulation, market analysis, significant market power designation and the imposition of market remedies. BiH’s legal framework lags behind the other countries in the region. The electronic communications law is mainly based on the EU 1998 regulatory framework and the country does not appear to have made much progress in drafting a new electronic communications law or cybercrime legislation.
 
 
 
 

Energy legal and regulatory reform

In July 3013, the FBiH Parliament finally adopted a new Electricity Law (the Law), which was published at the very end of August 2013 in the Official Gazette of FBiH
The Law is entirely a new enactment, since the previous law regulating this area had been amended numerous times. The solutions provided by the Law are harmonized both with European Union directives and certain provisions of the Electricity Law of the RS.
Development of Bosnia and Herzegovina’s legal and regulatory gas framework is
in its nascent stages, with only the RS establishing a regulator and little gas legislation in place. The RS law anticipates that RERS will define a threshold for
the status of eligible customer, and that after 1 January 2008 such status was to be
given to all non-household customers, but the regulatory framework to implement market opening has not yet been established. Third Party Access is negotiated and there is no capacity allocation mechanism.

Bosnia and Herzegovina performs satisfactorily overall, slightly above the average for Energy Community contracting parties and observers, but below the average for fellow Energy Community contracting parties. Bosnia and Herzegovina’s primary challenge is its unique political structure, which complicates and slows development of the regulatory framework and operations thereunder.
 
 
 

PPP/Concessions

PPPs/concessions in Bosnia and Herzegovina are regulated by a composite set of laws, reflecting the country’s complex federative structure. The Concession Law of Bosnia and Herzegovina of 2002 is the central piece of legislation at the federal level, co-existing along several acts at the entity and regional levels.
In the recent EBRD PPP/Concessions Laws Assessment, the quality of laws was rated as “in medium compliance with the international best standards”, and their workability in practice was ranked “medium effectiveness,” largely due to somewhat unclear PPP policy, inconsistent legal framework as well as underdeveloped institutional capacity.
 
 
 

Public Procurement

Public procurement in BiH is regulated by the Law no. 49, 2 November 2004 (PPL). In the EBRD 2010 assessment the PPL scored low to medium compliance in the region. In the 2010 assessment the BiH PP regulation scored below 50 per cent compliance on efficiency of public contract indicators, and in general scored low in the economy of the PP process and proportionality indicators (65 per cent compliance rate only). These results are mainly due to unsatisfactory regulation of the pre-tendering and post-tendering phases of public procurement.