Navigating Legal Barriers: Filip Jovović on the Challenges and Solutions for Montenegro’s Business Landscape
Filip Jovović, lawyer and junior partner in the law office “Jovović, Mugoša & Vuković”
The Montenegrin corporate sector seeks stability amidst a fluctuating legislative environment, highlighting the necessity for more comprehensive and permanent solutions. For this reason, we consulted Filip Jovović, an attorney at law and junior partner in the reputable law office “Jovović, Mugoša & Vuković”, from Podgorica. With rich experience in commercial law and a deep understanding of systemic shortcomings, Jovović presents concrete insights into the legal barriers that hinder business initiatives, as well as proposals for creating a more efficient, transparent and predictable legal environment. His call for dialogue and a strategic approach to legislation comes at the right moment – because, as he himself points out, it is time for systemic solutions.
Mr. Jovović, based on your experience as a lawyer, what are the most common legal challenges faced by entrepreneurs and companies in Montenegro, and how can lawyers help them overcome them?
The primary problem encountered by entrepreneurs and businesses in Montenegro is undoubtedly the duration of court processes. Regrettably, commencing in 2021, the length of court processes will only further extend. As attorneys, we encounter the issue that the first phase of the procedure, whether to the service of the complaint or the response to the complaint, is too lengthy. A substantial number of sessions have been postponed, resulting in the courts being inundated by an influx of cases. This pertains to both trial courts and appellate courts. From my perspective, the courts have made minimal progress in addressing this issue. It is observed that repeated ad hoc adjustments to the legislation, intended to address specific societal issues, sometimes result in the emergence of more significant problems. The longterm implications of this bill remain uncertain as of tomorrow.
In the past five or six years, legal norms have grown significantly politicized, compromising minor objectives. I contend that the Bar Association of Montenegro, as a professional entity, ought to engage more extensively in the formulation of legislation and in discussions with judicial authorities. I believe that such collaboration is frequently deficient. I believe the Bar Association is not opposed to achieving this cooperation; rather, the legislative and executive authorities do not perceive the Bar Association as a collaborator in these processes. Furthermore, we are frequently regarded as “disruptors,” despite being the individuals most frequently summoned to implement the legislation appropriately in conjunction with the authorities. The duration of court proceedings significantly contributes to the disillusionment of entrepreneurs, as it frequently occurs that cases extend from two to five years. As time elapses, the likelihood of failing to recover your claim increases due to the debtor’s bankruptcy or account restrictions. Entrepreneurs encounter a multitude of regulations that are enforced, making it challenging for them to stay abreast of the modifications. They frequently possess limited opportunities, so restricting their access to certain knowledge. Ultimately, there is an absence of education necessary to enhance their commercial operations.
How do you comment on the current Law on Business Undertakings? Do you think that it is necessary to introduce certain changes and additions to it in order to facilitate the business of businessmen in Montenegro?
As far as I know, the current Law on Business Undertakings is in the process of amendments. Thus, we are working on amendments to the Law. It is rumored that a working group has conducted extensive work on the required modifications. It is unfortunate that since the law’s enactment in 2020, a relatively brief duration has elapsed before necessitating further intervention, which, as I have heard, is quite extreme in certain aspects. On the other hand, the law in question did not present any legal innovations in the area of business entities, resulting in a gradual adjustment for entrepreneurs to its implementation. A brief interval has elapsed, preventing us from conclusively assessing the efficacy of this legal solution. I believe this law is beneficial and has effectively addressed certain practical issues. Nonetheless, in the application of existing legislation, it frequently occurs that official entities interpret and implement the legal text according to their own discretion. This necessitates that persons pursue the safeguarding of their rights through the appropriate judicial authorities. And then the story just goes round and round.
How would you evaluate the effectiveness of administrative procedures in connection with the establishment and operation of companies in Montenegro? What are the most common administrative barriers that slow down business processes, and how could they be overcome?
The education of entrepreneurs, particularly the youth, is essential, as I indicated in the initial question. Administrative obstacles are exceedingly complex for the average resident of Montenegro. For instance, to establish a Limited Liability Company (LLC), it is imperative to engage a consultant who can educate you on the Law on Prevention of Money Laundering, the Law on Accounting, the aforementioned Law on Business Undertakings, and numerous other laws that pertain directly or indirectly to your prospective business. Conversely, you are at the outset and lack a definitive understanding of your required tasks and expected knowledge. Consequently, you may accidentally find yourself in a situation of noncompliance due to insufficient information, lack of expert guidance, or inadequate time to thoroughly understand all legal requirements. The ancient legal principle states, “Ignorantia iuris nocet” (not knowing the law is harmfu). Consulting with professionals is essential to prevent potential errors and penalties, as well as to establish a robust basis for sustained business success. Ultimately, I reiterate that the education of entrepreneurs is essential. I believe it would be beneficial for the executive branch to provide a manual on company management, aimed at entrepreneurs. It should delineate in full the essential procedures that entrepreneurs, particularly youth, must undertake to establish their business on a legitimate and lawful foundation. Historically, such activities have been undertaken by the Chamber of Commerce of Montenegro and the Federation of Employers of Montenegro, indicating that it is imperative for the Government to acknowledge this matter as a priority and address it systematically.
To what extent and in what way does the harmonization of Montenegrin legislation with European company law really contribute to the improvement of the business environment – and where do the challenges of that process lie?
This matter is somewhat sensitive, as we frequently align our legislation with European standards, often without fully understanding the implications of our actions. Montenegro’s primary foreign policy objective is to achieve full membership in the European Union. However, this goal requires that the entire range of current legislation be harmonized with European directives. This, in itself, leads all of us who work in the field of law, including businessmen, to often not comply with changes in domestic regulations, because we are not in a position to follow the fast pace of such changes. Although a lot of work is being done to harmonize domestic legislation with European legislation, there is really little time to harmonize in practice in the right way. Also, I personally think that certain solutions should not be simply copied, but must be adopted in accordance with the spirit of the society in which we live. Therefore, this means that those legal solutions that work well in Croatia, Austria or another EU member state do not necessarily work in Montenegro. I believe that there is room to create a clear harmony between European directives and our real needs. Certainly, in order to do this, it is first necessary to map the problems and define the ways in which they could be overcome.