Doing Business In... 2019

Last Updated July 15, 2019

Trends and Developments


Author



CMS Reich-Rohrwig Hainz d.o.o., Sarajevo in co-operation with local attorneys is the Bosnian presence of CMS. It is led by widely recognised office head Nedžida Salihović-Whalen, who gained an extraordinary reputation in BiH and the SEE, and maintains access to a network of regional opinion leaders enabling the team to be the first choice for foreign investors seeking local advice. About 80% of the firm's work consists of mostly foreign investment issues for our international clientele. The firm advises a variety of foreign investors, on their – compared to local standards – relatively large investments into various sectors of the BiH economy, as well as on a variety of commercial, employment and financing issues. It is a large benefit to clients that the team of 11, including attorneys-at-law, can advise them with native speakers in Bosnian, Serbian, Croatian, German and English. Some of the firm's recent experiences, among many others, have been with FINNFUND and KPA UNICON GROUP, Badeco Adria dd Sarajevo, CID GmbH, Piksel Interactive, HETA Asset Resolution, and KKR.

This article addresses the Law on Notaries and the notary public service effected by the most recent Constitutional Court of the Federation of Bosnia and Herzegovina decision U-22/16, dated 6 March 2019, by which the relevant provisions of the five laws, ie, the Law on Property Rights, the Law on Registration of Business Entities, the Law on Enforcement Procedures, the Law on Inheritance Procedures, and the Family Law (hereinafter: the Relevant Laws) were found unconstitutional. Please note that the first three laws mentioned, ie, the Law on Real Estate Rights, the Law on Registration of Business Entities, and the Law on Enforcement Procedures, are very important laws concerning doing business in Bosnia and Herzegovina.

The Constitutional Court decision was adopted based on a request from the Vice President of the Federation of Bosnia and Herzegovina, who asked the Court to proclaim as unconstitutional certain provisions of the above-stated Relevant Laws. The provisions proclaimed as unconstitutional were based on Article 73 of the Law on Notaries; namely, Article 73 was previously proclaimed unconstitutional based on the Constitutional Court decision U-15/10 dated 2 February 2015. The stated Article 73 of the Law on Notaries regulated and considered a notary deed as the mandatory form for contracts in connection with the transfer of real estate and the establishment of business entities, as well as confirmation of Statutes, ie, the highest company (internal) bylaw, contractual relations between married couples and couples who live together in a non-marital status, as well as transactions regarding the assets of minor persons and persons without legal capacity/ability.

Bearing in mind the importance of the provisions of the laws proclaimed unconstitutional as well as the relevance of the notary services, we would like to provide a brief background on the legal reasons for adoption of the Law on Notaries and the method used to establish notary services.

For a better understanding of the legal system in Bosnia and Herzegovina (hereinafter: BiH) it is important to introduce its constitutional structure. BiH consists of two entities, the Federation of Bosnia and Herzegovina (hereinafter: FBiH) and Republika Srpska (hereinafter: RS) and the separate administrative unit the District Brcko (hereinafter: DB). The Laws on Notaries are adopted on the Entities level and the level of DB. Please note, however, this article will address only those matters regarding the Law on Notaries of FBiH.

The Laws on Notaries were adopted in BiH after several years of preparation within the desired scope of achieving complete legal reform in order to integrate more closely with other European countries' laws and was based on recommendations of the Council of Europe to increase legal security and to reduce the workload of the judicial bodies for those countries in transition.

While the Law on Notaries of FBiH was adopted several years earlier, the Law on Notaries finally entered into effect on 6 May 2007 in the FBiH, while in Republika Srpska and the District Brcko these laws were adopted a few years later. The Laws were adopted based on the ‘latin type of notaries' services’ which provides the mandatory form of a notary deed for certain contractual relations, as listed in Article 73 of the Law on Notaries of FBiH. However, this Article was of a temporary duration, ie, it provided that its provisions would only remain in effect until the other Relevant Laws adopt the relevant articles in accordance with this Article 73.

Although adopting Laws on Notaries brought certain benefits for legal security in BiH, especially regarding transfers of real estate, during which, in addition to the mandatory form of the sale-purchase agreement in the form of a notary deed, it was further required that a seller has to have registered ownership over the real estate which is the subject of sale, ie, the seller has to have a clear ownership title in the relevant court register where the real estate is located. In other words, this approach, in concluding the sale-purchase agreement, annulled transfer of property for which the seller has no clear ownership title, and was therefore considered as a ‘non-registered owner’, ie, where the ownership was proven by the existence of the sale purchase agreement (which was not perfected in the relevant court registry for that real estate) that was allowed prior to the Law on Notaries entered into effect.

Therefore, even though the Law on Notaries of FBiH improved legal certainty in several areas, the manner in which the Law on Notaries was drafted and dealt with the conditions which a person has to satisfy to be entitled to pass a notary exam, as well as to be appointed as a notary public, violates the basic human right to work of an attorney at law in FBiH and consequently attorneys at law are discriminated favourably over notaries. Therefore, the Law on Notaries is found as discriminatory regarding citizens of FBiH who have the same qualifications, skills and experience and are thus deprived of the rights to pass the notary exam and to be appointed. In other words, the Law on Notaries provided that only persons who have passed a bar exam and have worked for at least three years in a notary office may apply for a notary exam, and only a limited number of notaries may be appointed based on the number of citizens living in a municipality, ie, one notary public for 20,000 citizens in one municipality. If a municipality does not have 20,000 citizens, one notary may be appointed for two or more municipalities. These provisions of the Law on Notaries prevented even judges, prosecutors, public defenders or similar professionals from applying for the notary exam and therefore, afforded them no chance to apply for a notary public appointment.

In addition to the above-stated, although the Parliament of FBiH defended the above provisions as being in the public interest, ie, for such legal services to be in the form of a notary deed, this conclusion was proven untrue since citizens of FBiH were deprived of the freedom to decide who would be helping them with drafting of relevant documents, ie, whether they would do so by themselves or with the assistance of attorneys at law or other professional persons. Furthermore, the fees of notary publics are related to the value of the subject of a notary deed, and therefore the citizens of FBiH paid much more for the same scope of work before the Law on Notaries entered into effect. Furthermore, the Law on Notaries was claimed to be in violation of human rights to have free access to public services, which freedom was limited by mandatory use of notaries’ services.

Due to all the above-stated, the Constitutional Court of FBiH, based on the request of the Vice President of FBiH on 2 December 2015, adopted the Decision U-15/10 on 2 December 2015, and proclaimed a certain number of Articles of the Law on Notaries (ie, Article 6 paragraph 2, Article 27 and Article 73) unconstitutional and ordered the Parliament of FBiH to amend the Law on Notaries in accordance with this Decision.

However, the Parliament of FBiH was not efficient in this matter and did not implement the stated Constitutional Court Decision until 2018, ie, nearly three years after adoption of the Decision U-15/10 initiated discussion regarding the proposal for change and amendment of the Law on Notaries, which was finally presented to the  Parliament for further discussion. Currently, this proposal is still the subject of Parliamentary discussion without any deadline for its adoption.

Due to the slow reaction of the Parliament of FBiH and lack of implementation of the Decision U-15/10, the Relevant Laws regulating services to which Article 73 of the Law on Notaries refers adopted changes and provided a notary deed as the mandatory form for certain contractual relations, therefore notaries continued to work as they did prior to adoption of the Decision U-15/10, which may be considered as a direct violation of this Decision and creates legal uncertainty in FBiH.

Following these changes to notaries' practice, the new Vice President of FBiH initiated another procedure before the Constitutional Court with the request to proclaim as unconstitutional the relevant provisions of the Relevant Laws which provide for a notary deed as the mandatory form. After several public court hearings and pleadings from the Parliament of the FBiH, ie, the party against which the claim was initiated, the Constitutional Court of FBiH adopted the second Decision, U-22/16, on 6 March 2019 by which the relevant provisions of the stated Relevant Laws were proclaimed unconstitutional.

In addition to the same reasons for which the first Constitutional Court Decision was adopted, the Constitutional Court of FBiH further concluded that no legal act can minimise or limit the above-stated human rights except for the reason of public interest, with the intention to improve these rights and not to limit them. The Constitutional Court of FBiH proclaimed the relevant provisions of the stated Relevant Laws adopted in accordance with annulled Article 73 of the Law of notaries to be the provisions which limited citizens' freedom regarding access to the public services which were transferred to notaries and provided the mandatory form of documents made in front of them, which services were further connected with costs much higher than the citizens were paying prior to the entering into effect of the Law on Notaries, and therefore these provisions are not in the public interest, since they do not improve the position of citizens of FBiH but rather the opposite and worsen their position.

¬Therefore, the Decision U-22/16 determined, as did the Decision U-15/10, that the relevant provisions of the stated laws of the FBiH are, in the same way as Article 6 paragraph 2, Article 27 and Article 73 of the Law on Notaries, in violation of the Constitution of FBiH, the European Convention for Human Rights Protection, the International Pact on Economical, Social and Cultural Rights, and the Universal Declaration on humans’ rights, since the relevant provisions of the stated laws directly violated the rights of the attorneys at law regarding their work and in that way discriminated in their favour in comparison to notaries, as well as violated the rights of citizens of FBiH concerning their voluntary selection of who will prepare contracts/agreements for contractual relations into which they want to enter, and limited their access to public services.

Based on all the above-stated Decision U-22/16, the Constitutional Court ordered the Parliament of FBiH, no later than within the six months following the adoption of this Decision, to find an alternative solution for notaries' services, stating that while pending the final solution, notaries may continue providing these services in the interim period.

It is now the responsibility of the Parliament of FBiH to implement the Constitutional Court Decision within the given timeframe. However, since in 2018 the Parliament proposed amendments and changes to the Law on Notaries, it is expected that this proposal of changes and amendments of the Law on Notaries will be subject to adoption by the Parliament of FBiH. The proposed changes introduced a different type of notaries' services, ie, the proposed changes do not stay with the ‘latin type’ of services but they propose ‘solemnisation’ of documents, which provides for confirmation of validity of documents and their verification. Stated differently, a notary deed as a form will no longer be required for the contractual relations for which in the current Law on Notaries it is a mandatory form. These kinds of notaries' services are already in existence in the region, for example in Republika Srbija, and therefore this type of notaries’ service does not represent a novelty in the work of notaries in the territory of former Yugoslavia.

¬However, unless the proposed amendments and changes are adopted by the Parliament there is no certainty in which direction the changes will proceed, as parliamentary procedures for adoption of laws provides the possibility for amendments by representatives of the Parliament, and therefore the final adopted text of the changes will only be valid grounds for possible further changes of the relevant laws regulating notaries' services.

In addition, it could be concluded that this legal saga is far from ending in BiH, as one could expect that similar changes may be requested in other parts of BiH (RS and BD) in order to harmonise basic legal systems in the whole territory of the country.

¬

CMS Reich-Rohrwig Hainz d.o.o., Sarajevo in co-operation with local attorneys

Ul. Fra Anđela Zvizdovića 1
71000 Sarajevo
Bosnia and Herzegovina

+387 33 94 4600

+387 33 94 4690

sarajevo@cms-rrh.com www.cms.law
Author Business Card

Author



CMS Reich-Rohrwig Hainz d.o.o., Sarajevo in co-operation with local attorneys is the Bosnian presence of CMS. It is led by widely recognised office head Nedžida Salihović-Whalen, who gained an extraordinary reputation in BiH and the SEE, and maintains access to a network of regional opinion leaders enabling the team to be the first choice for foreign investors seeking local advice. About 80% of the firm's work consists of mostly foreign investment issues for our international clientele. The firm advises a variety of foreign investors, on their – compared to local standards – relatively large investments into various sectors of the BiH economy, as well as on a variety of commercial, employment and financing issues. It is a large benefit to clients that the team of 11, including attorneys-at-law, can advise them with native speakers in Bosnian, Serbian, Croatian, German and English. Some of the firm's recent experiences, among many others, have been with FINNFUND and KPA UNICON GROUP, Badeco Adria dd Sarajevo, CID GmbH, Piksel Interactive, HETA Asset Resolution, and KKR.

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.