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The Buzz in Bosnia and Herzegovina: Interview with Naida Custovic of Law Office Custovic in Cooperation with Wolf Theiss

The Buzz in Bosnia and Herzegovina: Interview with Naida Custovic of Law Office Custovic in Cooperation with Wolf Theiss

Bosnia and Herzegovina
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Among the biggest challenges in Bosnia and Herzegovina is attracting foreign investment, says Naida Custovic, Partner at Law Office Custovic in Cooperation with Wolf Theiss. “Our economy relies heavily on foreign investments,” she says. “Unfortunately our legal system and overall investment climate is not yet satisfactory.”

Custovic explains that while the government, most political parties, and the business community identify foreign investment as an important tool for economic growth and as a source of employment and competition in the market, “there is a significant lack of political will to focus on this kind of legislation.” Still, she notes that local associations and agencies that promote foreign investments, such as the Foreign Investor Council, continue to push for legislative changes.

In addition, Custovic reports, Bosnia & Herzegovina is continuing to harmonize its legislation with EU requirements, though the legal framework in the country, at the moment, remains unpredictable. In addition, burdensome bureaucracy, problems in debt collection and the judicial system, and problematic tax collection and customs procedures continue to complicate the environment for investors.

The country’s upcoming October 7, 2018 general elections are not promising either, Custovic reports. “I think we are leaning towards a more pessimistic view, so there will not be many changes,” she says, though she concedes that, “however, it is very difficult to predict.” Indeed, she notes that despite the negative outlook, according to statistics the vast majority of investors intend to continue investing in the country. “So it is kind of a paradox,” she smiles.

Of course, Custovic reports, Bosnia & Herzegovina is undergoing some positive changes as well – including changes to the banking laws in both the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS) that came into force in 2017 and 2018 and more recent changes in implementation bylaws [adopted by the FBiH Banking Agency and the RS Banking Agency, as the competent regulatory bodies]. “I think this is one of the most important reforms to legislation that we have had within the last few years,” she says. According to her, the new regulations improved the overall banking sector, particularly by introducing a legal framework for the sale of non-performing loans. “This is something that we did not have before, so this was a completely unregulated kind of market,” she explains. “And now for the first time we have a substantially-regulated NPL market in the country.” She says that the new banking legislation also vastly improved the legal framework for restructuring and rescue of banks in distress.

The Bosnian legal market is also about to change, she reports, as a new Advocacy Law has been drafted and circulated among members of the BiH Bar association for improvements. “We hope that many comments will be taken into consideration,” she says, emphasizing the importance of the amended law for law firm operations, and specifically for foreign firms, which currently face various restrictions in their ability to operate in the country. “This is kind of an issue in Bosnia,” she says. “I am hoping that the entire community of attorneys will loosen up and embrace competition that comes locally or from abroad, because anything that raises competition is good.” 

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