Two Steps Forward Two Steps Back

Early in 1989 an unattractive legal model was finally replaced by solutions reached in the practice of other countries; that was when all attempts at applying the "idiosyncracies" of the domestic legal arsenal in dealing with foreigners, stopped. But the answer to the simple question if the current Yugoslav regulations encouraged foreigners to invest or domestic businessmen to enter into investments with foreigners, shows that the level of regulating affairs which could be regarded as satisfactory from the practical and professional point of view has not yet been reached.

After the "turnabout" carried out on the basis of the 1988 Constitution, law-makers have been given a chance of correcting legal omissions and gaps in the system and of coordinating the law on Foreign Investments with the FRY Constitution. This opportunity has not however, been taken advantage of, and some familiar mistakes have been repeated, even though experts in the field have pointed them out. The fact remains that no corrections were made and the Law has to a great extent been copied out. The changes which were made would have been better not to have been done - they were clumsy and not thought out, and from the point of legislative technique and craft, the already problematic text was definitely ruined. Is this because those who worked on the expert part of the material were not familiar with the problem, or does the matter concern a stand that all those doing business with foreigners "are on the wrong side of the law", so that the law-maker finds it necessary to "safeguard the state"? The solutions contained in the final version of the Law on Foreign Investments are not the result of dedicated research, but the ad hoc stand of some "competent" organ's expert team. There is no ideology or policy, just arrogance and ignorance. This is the only explanation of the great disparity between the publicly proclaimed intention of encouraging foreign investments, and that which happened in practice, and which can be found in laws regulating this field of activity.

Luckily, the most recent undertakings in the sensitive field of foreign investments have not destroyed the key characteristic that our regime, is, at heart, liberal. Those who try to explain the basic elements of the regime to potential foreign investors, will have a hard time. With regard to the regulations they will have to explain that the material was not processed in one place (there is a great variety of sources, and it is necessary to be familiar with, and to implement a number of federal and republican laws, including lower ranking regulations).

Many areas have been left to be worked on at a later date (through republican laws and Federal Government regulations), and the free will of the contracting parties is limited in certain questions considered to be irrelevant from the state's point of view. The legal technology of the regulations is bad and inconsistent, there are incomplete and contradictory solutions, incomprehensible norms, the language is illiterate. The executive organs have not given clear instructions on how to behave in certain situations, nor is the scope of the competencies determined (which allow for arbitrariness and self-will, which have already been seen at work). In some details the Law does not take into account any of the fundamental standards from Comparative Law, and here it is necessary to give an example - foreigners can now found branches (this novelty was introduced after practice made it necessary), but they must have the status of a legal entity (which is contrary to the generally accepted interpretation of a branch; foreigners have up until now had the right to found private companies).

Those elements of the contracts which refer our citizens are dealt with in great detail (even though it is difficult to see what interest the state would have in going into such detail, unless they the matter concerns left overs from earlier periods when the wish to "protect" and "teach" domestic subjects was pronounced). On the other hand, some fields (investing in concessions, project investments) which cannot be left just to contractual arrangements, have not been dealt with at all. Compared to earlier solutions, the "competent" federal executive organ is given new competencies (not just in that contracts are registered with it, that it registers certain arrangements, but it now approves certain foreign investments).

The deadline in which the federal organ has to adopt a decision has remained unchanged, and if it does not do so in the given period, then it is taken for granted that a positive decision has been made. These decrees are an exception to the rule on what has to be done in the event that "the Administration remains silent", and has been adopted at the insistence of domestic investors and their foreign partners when the procedure was prolonged unnecessarily. Even though they were justified as a wish to show foreigners that friendly measures would be taken in an important field such as direct investments, the matter does, however, show what our administration is like. And this perhaps, is the answer to the question why the Law on Foreign Investments hasn't turned out better this time either.