Montenegro about to get EU-shaped FDI regime

This is a significant milestone, as Montenegro has announced the establishment of its first dedicated FDI regime, modelled on EU principles. Montenegro currently lacks a unified legal and institutional screening mechanism of foreign direct investments. The existing Law on Foreign Investments contains only limited provisions on the approval of investments in companies engaged in the production and trade of weapons and military equipment.

While the Proposal provides an initial framework for regulating foreign investment, definitive details and practical implications will become clearer once the law and accompanying bylaws are adopted.

The legislative process is expected to involve a public consultation, followed by the preparation and publication of the final draft.

What does the Proposal announce:

Institutional framework: The Ministry of Economic Development would be the central authority responsible for implementing the screening procedure and the national contact point for cooperation with the EU. The Ministry would be supported by a Foreign Investment Review Council. The final decision on the investment would be made by the Montenegrin Government, on the proposal of the Ministry and following a prior opinion from the Council.

• Investors: The regime would apply to investors from non-EU countries, as well as to undertakings in Montenegro or the EU that are controlled by third-country investors.
  
• Investments: The screening would be initiated for investments through which control, significant influence or at least 10 % of the ownership interest or voting rights in a company operating in strategically sensitive sectors is acquired.

Sensitive sectors: The list of covered sectors is broad and includes, among others: energy infrastructure; transport and logistics (ports, airports and railways); electronic communications and digital infrastructure; water management; healthcare and biotechnologies; financial infrastructure; media; the defence industry; access to sensitive personal data of citizens; critical raw materials; land adjacent to critical infrastructure; and agricultural land and food production. A detailed list would be set out in an annex to the law and could be amended by a Government bylaw.

Screening procedure: The procedure is based on prior authorisation submitted by the investor. An initial screening is conducted within 45 days; if no risks to security or public order are identified, the investment is approved. Otherwise, an in-depth screening is initiated. There are three possible outcomes: unconditional approval; approval subject to conditions and mitigation measures (e.g. restricting access to data, requiring the retention of infrastructure in Montenegro, appointing security-vetted individuals to certain positions); or prohibition of the investment.

Sanctions: The Ministry may initiate proceedings ex officio if an investment subject to the notification obligation has not been notified. Monetary penalties are envisaged for failure to notify and the completion of a transaction without prior authorisation. Additionally, the law would introduce corrective measures, which may include the subsequent submission of a notification, suspension of management rights, or an order for divestiture of the acquired interest or restoration of the pre-transaction situation.

•  Legal remedies: The investor is guaranteed the right to bring proceedings before the administrative court to challenge the lawfulness of the procedure, the application of substantive law and the adequacy of the reasoning underlying the decision.
  

Looking ahead

The adoption of the new law will mark a significant milestone, as Montenegro will establish its first dedicated FDI regime. While the Proposal provides an initial framework for regulating foreign investment, the definitive details and practical implications will become clearer once the law and accompanying bylaws are adopted. The new framework is expected to align with the EU legal framework, particularly the relevant EU regulations.

We will continue to closely monitor these developments and share further insights as more information becomes available.