1. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 4 –Free movement of capital Bilateral screening: Chapter 4 PRESENTATION OF MONTENEGRO Brussels, 21 February 2013

2. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital CHAPTER 4 CAPITAL MOVEMENTS AND PAYMENTS Mira Radunović Central bank of Montenegro mira.radunovic@cbcg.me Chapter 4: Free movement of capital

3. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Chapter 4 : Free movement of capital MONTENEGRIN LEGAL FRAMEWORK 1.Constitution of Montenegro (“Official Gazette of Montenegro”, no. 1/07); 1.Constitution of Montenegro (“Official Gazette of Montenegro”, no. 1/07); 2.Law on Foreign Current and Capital Operations with Abroad (“Official Gazette of Republic Montenegro”, no. 45/05, and “Official Gazette of Montenegro” no 62/08, 40/11); 3.Law on Foreign Investments (“Official Gazette of Montenegro”, no. 18/11); 4.Law on Ownership Rights (“Official Gazette of Montenegro", no. 19/09); 5.Law on State Proprety (“Official Gazette of Montenegro", no. 21/09 i 40/11); 6.Law on State Surveying and Cadastre of Immovable Property (“Official Gazette of Republic Montenegro", no.29/07, “Official Gazette of Montenegro", no. 73/10, 32/11, 40/11); 7.Law on Securities (“Official Gazette of Republic of Montenegro” 59/00, 10/01, 43/05, 28/06,“Official Gazette of Montenegro”, no 53/09, 73/10, 40/11); 8.Insurance Law (“Official Gazette of Republic of Montenegro”, no. 78/06, 19/07, “Official Gazette of Montenegro”, no. 53/09, 73/10, 40/11, 45/12); 9.Law on Investment Fund (“Official Gazette of Montenegro”, no 54/11).

4. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital THE BASIC FREEDOM Chapter 4: Free movement of capital Law on Current and Capital Operations with Abroad  The general regime for free movement of money and capital has been introduced in 2005;  Article 2 of the Law prescribed free movements of capital: “Current and capital operations, including transfers of property from and to Montenegro, shall be performed freely, unless otherwise prescribed by law. ”  Residents and nonresidents are free to have ownership and disposition over means of payment and to perform business and payment operations, in accordance with law.

5. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital DIRECT INVESTMENT (INWARD) Chapter 4: Free movement of capital

6. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital DIRECT INVESTMENTS Chapter 4: Free movement of capital The Law on Foreign Investments  The Law provides a clear definition of foreign investors; national treatment of foreign investors  The major principle of foreign investment policy is national treatment of foreign investors (Article 6): “In Montenegro a foreign investor can establish a company and invest in it in the manner and under the conditions which are the same as for domestic persons “, unless otherwise prescribed by the Law”  Legal entities with foreign capital, established and registered under rules of Law, can acquire real estate under the same conditions as legal entities with domestic capital.

7. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital DIRECT INVESTMENTS (cont.) Chapter 4: Free movement of capital The Law on Foreign Investments (cont.)  Legal restriction for foreign investors is prescribed by Article 7; “ Foreign investor may invest assets in domestic legal entity, i.e. only with national legal entity or individual establish the enterprise for manufacturing and trade of armament and military equipment. Foreign investor may not have more than 49% of share in capital or interest, i.e. voting rights in the enterprise referred to in paragraph 1 of this article”.

8. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital DIRECT INVESTMENT (OUTWARD) Chapter 4: Free movement of capital

9. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital DIRECT INVESTMENTS (OUTWARD) Chapter 4: Free movement of capital Law on Foreign Current and Capital Operations with Abroad There are no restrictions Article 2, par.1 of the Law establishes the principle of freedom of current and capital movements

10. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital ACQUISITION OF REAL ESTATE BY FOREIGNERS Chapter 4: Free movement of capital

11. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital INVESTMENT IN REAL ESTATE Chapter 4: Free movement of capital Constitution of Montenegro (OG MNE, no. 1/07) Constitution of Montenegro (OG MNE, no. 1/07) Guarantee the ownership right and the right of foreign person to have an ownership right in accordance to Law; Law on ownership rights ( OG MNE, n o. 19/09)  Article 415 of the Law prescribes restrictions on acquisition of real estate by foreign persons;  Article 63 point 3 of the Stabilization and Association Agreement - Montenegro has granted national treatment to EU nationals acquiring real estate on its territory.

12. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital SECURITIES AND OTHER CAPITAL MOVEMENTS Chapter 4: Free movement of capital

13. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Law on Securities  Non-residents may freely buy and sell domestic and foreign securities in Montenegro in accordance with regulations governing transactions with securities. (Article 112v, paragraph 1);  Non-residents may freely issue securities in Montenegro in the manner determined by regulations governing transactions with securities. (Article 112v, paragraph 2). Chapter 4: Free movement of capital OPERATION IN SECURITIES TRADED ON THE CAPITAL MARKET

14. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Law on Securities  Residents may freely buy and sell domestic and foreign securities abroad and in Montenegro in the manner determined by regulations governing transactions with securities (Article 112g, paragraph 1 and 2);  Residents may freely issue securities abroad, provided that the Commission for Securities is previously informed thereof (Article 112g, paragraph 3);  Technical reserve funds are deposited and invested in forms defined by Article 90 of the Law on Insurance and Rulebook on restrictions related to depositing and investing of technical reserves of insurance companies. Chapter 4: Free movement of capital OPERATION IN SECURITIES TRADED ON THE CAPITAL MARKET

15. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Chapter 4: Free movement of capital OPERATION IN SECURITIES TRADED ON THE CAPITAL MARKET Law on Capital Market will be harmonized with EU directives concerning the area of trading securities. New Law on Capital Market, which will replace current Law on Securities, is going to be adopted in the first quarter of 2013.

16. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Law on Securities  Provisions of Articles 112v to 112d of the Law shall accordingly apply to cross border transactions with interests of the investment fund, unless otherwise determined by the Investment Fund Law;  According to the Law, admission of units of national collective investment undertakings to a foreign capital market is allowed, not conditioned upon fulfilling any legislative requirements; Law on Investment Funds  The Law does not prescribe any further obligations in regard to this. Chapter 4: Free movement of capital OPERATIONS IN UNITS OF COLLECTIVE INVESTMENT UNDERTAKINGS DEALT ON THE CAPITAL MARKET

17. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Law on Securities  The selling of units of foreign undertakings, that are considered as securities under the law, not dealt in on a stock exchange is not regulated by the Montenegrin legislation. If that occurs, the risk of that transaction shall be borne by acquirer;  According to the Law, trading in securities shall not be carried out on securities markets in the following cases:  when securities are offered through the closed offering;  in the case of implementation of the public offering for taking over a joint stock company in accordance with separate regulations;  in the case of implementation of trade in block securities, in accordance with special regulations and  when the Commission allows by its rules trade in short-term debt securities (Article 45). Chapter 4: Free movement of capital OPERATIONS IN UNITS OF COLLECTIVE INVESTMENT UNDERTAKINGS NOT DEALT ON A STOCK EXCHANGE

18. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Chapter 4: Free movement of capital OPERATIONS IN CURRENT AND DEPOSIT ACCOUNTS WITH FINANCIAL INSTITUTIONS No restrictions for foreign persons Fully equal rights of foreign legal and physical persons along with domestic legal and physical persons with regards to current and deposit transactions in banks and financial institutions

19. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital FINANCIAL LOANS AND CREDITS Chapter 4: Free movement of capital  No limitation in domestic legislation;  The principle of freedom of trade in foreign exchange regime of Montenegro, without legal restrictions on residents in using all modes of loans and credits from non residents, with obligation to submit the data to the Central Bank of Montenegro for statistical purposes.

20. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital TRANSFERS IN PERFORMANCE OF INSURANCE CONTRACTS Chapter 4: Free movement of capital Insurance Law  Non-residents may conclude contracts with domestic insurance companies under the same conditions as residents, with some exceptions prescribed by Article 6;  Residents may be insured with insurance companies established in the Montenegro, with the operating license issued by the Agency for Insurance Supervision of Montenegro.

21. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital PHYSICAL IMPORT AND EXPORT OF FINANCIAL ASSETS Chapter 4: Free movement of capital 1. Law on Current and Capital Operation with Abroad; 2. Decision on the amount of cash that may be brought into or leave Montenegro without declaring:  Physical import and export of financial assets is free;  Physical import and export of means of payment to Montenegro is free, with obligation to declare the amount above 10,000 EUR to the custom authorities.

22. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital REPORTING OBLIGATION Chapter 4: Free movement of capital

23. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital REPORTING OBLIGATION Chapter 4: Free movement of capital Law on Current and Capital Operations with AbroadLaw on Current and Capital Operations with Abroad  For statistical (BOP) purposes prescribed by Article 6a: “Bank or other foreign payment operations service provider is obliged to inform the Central Bank on statistical data related to any payment in foreign payment system in the manner stipulated by the Central Bank regulation Resident – legal person is obliged to keep separate records on current and capital transactions with abroad, in a manner prescribed by Central bank, and to submit the data from evidence to the Central bank on request.”

24. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital REPORTING OBLIGATION Chapter 4: Free movement of capital Law on Current and Capital Operations with Abroad (cont.)  For the purpose of monitoring of the Projection the Balance of Payments of Montenegro, and control against money laundering and terrorism financing prescribed by Article 10: “ Resident and non-resident is obliged to declare physical import and export of means of payment at the point of entry or departure to or from Montenegro to administration body in charge of customs affairs at a border crossing point ”  The Central Bank prescribed the amount of cash which resident or nonresident is obliged to declare – above 10,000 EUR.

25. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital SAFEGUARD MEASURES Chapter 4: Free movement of capital

26. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital SAFEGUARD MEASURES Chapter 4: Free movement of capital Law on Current and Capital Operations with Abroad (cont.)  Article 11 of the Law prescribed following: “The Central Bank may prescribe protective measures, if capital movements seriously jeopardize or threaten to jeopardize monetary policy or financial situation of Montenegro”, with approval of the Government”  Article 2, paragraph 3 of the Law prescribed following: “State authorities’ measures shall not be undertaken for discriminatory restrictions of free capital movement...“  Article 63, point 6 of the Stabilization and Association Agreement.

27. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital AGREEMENTS WITH THIRD COUNTRIES Chapter 4: Free movement of capital

28. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital BILATERAL INVESTMENTS AGREEMENTS Chapter 4: Free movement of capital  Montenegro has not undertaken commitments in agreements on direct investments from third countries, which would be contrary to Article 64, paragraph 2 of the Treaty on the functioning of the European Union;  The list of bilateral agreements on promotion and mutual protection of investments with the third countries has been submited.

29. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital MULTILATERAL AGREEMENTS Chapter 4: Free movement of capital Stabilization and Association Agreement (entry into force 1 May 2010) WTO membersh ip since of 29 April 2012 EFTA States (MNE – Swiss and Lichtenstein - 1 September 2012, MNE – Island – 1 October 2012, MNE – Norway – 1 November 2012) CEFTA Agreement (22 July 2007)

30. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital Chapter 4: Free movement of capital  Special voting rights, golden shares or other special powers reserved for the government after the privatisation of companies are not recognized in Montenegro. SPECIAL RIGHTS EXERCISED BY THE STATE IN PRIVATISED COMPANIES (GOLDEN SHARE)

31. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union  Open - due to the size and characteristics of economy;  Fully harmonized with acquis;  With focus on competitiveness. Chapter 4: Free movement of capital Chapter 4: Free movement of capital FURTHER DEVELOPMENT – SUSTAINABLE GROWTH PATTTERN

32. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 4: Free movement of capital THANK YOU FOR ATTENTION! Chapter 4: Free movement of capital