The Legal 500

Overview

Social and political tensions between the Federation of Bosnia and Herzegovina and the Serbian Republika Srpska (RS) continue to undermine attempts to build a strong, stable economy. Maintaining a political consensus is vital to investor confidence. However, investors anxious about the sabre-rattling of the Serbian nationalist movement and RS’ secessionist leanings have reason to be reassured by municipal elections in October 2008, which showed encouraging continuity at the lowest tier of BiH’s labyrinthine bureaucracy, with voters retaining more than 80% of the municipal incumbents. Difficulties remain, however. Political problems delayed privatisations in the telecoms and electricity sectors and, despite being scheduled for 2008, observers are far from optimistic that these will materialise even in 2009.

Legislatively, implementation of reform is slow, piecemeal and often fraught. The Germanic notary system, adopted in the Federation at the insistence of Germany-based development fund GTZ, and despite fierce resistance, has proved a broadly successful development in the market. In May 2008, the system was adopted in the RS. In another example of the waning asymmetry between the two entities, the Federation introduced legislation to reduce corporate income tax from 30% to 10% from January 2009, following the lead of the RS, which had been enjoying the investment benefits of 10% corporate income tax for some time.

2008 also saw the 2003 laws on civil procedure and execution procedure come into effect, finally bringing a much-needed reduction in litigation deadlines. These legislative efforts are designed to speed up legal processes within BiH and unclog the nation’s judiciary. Combined with the introduction of the notary system, improvements in enforcement and greater political stability, such legal reform is gradually helping to make BiH a viable destination for foreign investment, though there are fears that the international credit crisis could strangle this economic revival in its infancy.

The courts remain weighed down with outstanding IP cases, and the process remains painfully slow and riddled with inconsistencies in both enforcement and judicial rulings. However, lawyers are becoming increasingly well-versed in the registration and protection of patents and trade marks. Companies feel BiH is better able to offer some form of IP protection and registrations are on the increase. 


The BiH real estate market is enjoying a mini-boom – the result of legislative improvements (including the significant introduction of a new law related to foreign ownership of land, expected in early 2009) and the new notary system, which requires guarantees to be made to public notaries before any purchase agreement can be entered into. This assurance has provided a long-awaited green light to foreign investors, who are tentatively moving into the increasingly investor-friendly market.

Both the Federation and RS have separate laws, courts and bar associations, mirroring political fractures. The Federation accounts for the bulk of the economy and consequently Sarajevo houses the major law firms. Domestically, Maric Law Office continues to dominate, with a reputation amongst foreign clients as the most professional and reliable of the home-grown outfits. Three-partner Lawyers Office Bojana Tkalcic-Dulic, Olodar Prebanic & Adela Draganovic is not far behind and recommended sole practitioner Advokat Karabdic Kerim goes from strength to strength. The only international firms present in the market are regional players Law Office Femil Curt and Wolf Theiss, for whom their Bosnian offices represent the realisation of a general policy of ubiquity across Central and Eastern Europe. Whilst the latter firm continues to lead operations from Vienna, the former changed strategy in 2008 and concentrated on creating a more self-sufficient local practice. Both remain the first port of call for foreign investors and the influence of their respective networks guarantees a level of quality that the domestic market struggles to produce. Both are fending off hostility from Bosnian firms and the two bar associations. BiH’s profoundly illiberal legal market continues to discourage the presence of foreign firms. The RS has only a handful of firms, all operating out of its unofficial capital Banja Luka. Attorney at Law Office Ruzica Topic, Advokatska Firma Sajic o.d. and Stevan Dimitrijevic Law Office in cooperation with Karanovic & Nikolic– the one-partner outpost of Serbian operation Karanovic & Nikolic– are the leading players. Observers agree greater liberalisation is needed if the market is to grow and standards are to rise. Despite the modest demand, there remains a shortfall of highly qualified, multilingual lawyers capable of dealing with international clients.