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ANALYSIS OF THE EFFECTS
OF ANTICORRUPTION POLICIES
IN MONTENEGRO 2012-2013
- AND RECOMMENDATIONS
FOR IMPROVEMENT
September, 2013
ANNUAL REPORT ON IMPLEMENTATION
OF ANTICORRUPTION POLICIES
IN MONTENEGRO
ANALYSIS OF THE EFFECTS OF ANTICORRUPTION POLICIES IN MONTENEGRO
2012/2013 AND RECOMMENDATIONS FOR IMPROVEMENT
Publisher:
Center for Monitoring and Research CeMI
Ul Beogradska 32
81 000 Podgorica
e-mail: cemi@t-com.me
www.cemi.org.me
Publisher:
Author:
Design:
Dragana Koprivica
Print:
Studio Mouse - Podgorica
Circulation:
100 copies
Creation of the study was supported by Open Society Foundation – Think Tank Fund
from Budapest
Disclaimer:
The contents of this publication are the sole responsibility of CeMI, and it doesn't nec-
Contents
ABSTRACT ................................................................................................................................................................. 8
INTRODUCTION .................................................................................................................................................... 9
I Part – Political corruption ............................................................................................................... 11
1. ....... 11
1.1 Characteristics of institutional and legal framework ................................................................ 11
1.2 Conclusions and recommendations .................................................................................................. 13
2. Financing of political parties ....................................................................................................................... 14
2.1 Characteristics of institutional and legal framework ............................................................... 14
2.2. Effectiveness of legal and institutional framework .................................................................. 16
2.3. International standards ........................................................................................................................ 18
2.4 Conclusions and recommendations ................................................................................................. 18
............................................................................................................. 20
3.1 Characteristics of institutional and legal framework ................................................................ 20
3.2 Effectiveness of institutional and legal framework .................................................................... 22
a) ................................................................................. 22
b) Submitting reports on property .................................................................................................... 23
c) Changes of property status and receiving of gifts .................................................................. 23
d) Conducting multiple functions ...................................................................................................... 24
e) Control of accuracy of data from reports on income and property and coordination
with other institutions ............................................................................................................................. 24
f) Sanctions imposed ............................................................................................................................... 25
25
3.3. International standards ......................................................................................................................... 26
3.4. Conclusions and recommendations ................................................................................................. 26
II Part - Economic corruption ......................................................................................................... 28
1. 28
1.1 Characteristics of institutional and legal framework ................................................................ 28
a) Adoption of the Budget ..................................................................................................................... 28
b) State Audit .............................................................................................................................................. 28
c) External audit of the EU funds ........................................................................................................ 29
d) Financial management and control, internal audit ............................................................... 30
e) Taxation .................................................................................................................................................... 30
1.2 Effectiveness of the legal and institutional framework ............................................................ 30
a) Adoption of the Budget ..................................................................................................................... 30
b) State Audit .............................................................................................................................................. 31
c) External audit of the EU funds ........................................................................................................ 32
d) Financial management and control, internal audit ............................................................... 32
e) Taxation ................................................................................................................................................... 33
1.3 Conclusions and recommendations .................................................................................................. 33
2. State property and property expropriation .......................................................................................... 34
2.1 Characteristics of institutional and legal framework ................................................................ 34
2.2 Effectiveness of institutional and legal framework .................................................................... 36
2.3 International standards .......................................................................................................................... 38
2.4 Conclusions and recommendations .................................................................................................. 39
3. Public procurement .......................................................................................................................................... 40
3.1. Characteristics of institutional and legal framework ............................................................... 40
3.2. The effectiveness of the institutional and legal framework ................................................... 43
3.2.1 Restrictions in the regulations ................................................................................................. 43
3.2.2 Shortcomings in implementation ............................................................................................ 44
3.4. International standards ......................................................................................................................... 45
3.5 Proposals for the improvement .......................................................................................................... 45
4. Exchange and Securities Market ................................................................................................................ 46
4.1 Characteristics of legal and institutional framework ................................................................ 47
4.2 Effectiveness of legal and institutional framework .................................................................... 48
4.2.1 Limitations of existing system of control ............................................................................. 50
4.3 Conclusions and recommendations .................................................................................................. 52
III Part - Preventive mechanisms - the integrity and transparency .......................... 53
1. Integrity plans and ethical codes ............................................................................................................... 53
1.1 Characteristics and effectiveness of the legal and institutional framework .................... 53
1.2 Conclusions and recommendations .................................................................................................. 57
2. Protection of Whistleblowers ..................................................................................................................... 58
2.1. Characteristics and effectiveness of the legal and institutional framework ................... 58
2.2. Conclusions and recommendations ................................................................................................. 60
3. Free Access to the Information ................................................................................................................... 61
3.1. Characteristics of institutional and legal framework ............................................................... 61
3.2. Recommendations for improvement ............................................................................................... 66
CONCLUSION .............................................................................................................................................. 67
Used abbreviations
AFCOS - The system for combating frauds
CDT- Center for Democratic transition
CHU- Central Harmonization Unit of the Ministry of Finance
DEU - Delegation of the European Union in Montenegro
DRI - Department of Revenue Investigation
EC - European Commission
EU- European Union
FMC -Financial Management and Control
GIZ- German Agency for International Cooperation
GOPAC -Global Organization of Parliamentarians against Corruption
GRECO - Group of States against Corruption
IPA - Instrument for Pre-accession Assistance
IA - Internal Audit
OECD- Organization for Economic Co-operation and Development OSCE –
Organization for Security and Cooperation in Europe
PA - Property Administration
PPA - Public Procurement Administration
PTM - Public Broadcasting Center
SEC- State Electoral Commission
SAI - State Audit Institution
SIGMA - Support for Improvement of Governance and Management
8
ABSTRACT
This study is divided in three parts: political corruption, economic corruption and
corruption prevention and integrity. Under the term political corruption, for purposes
of this study, we imply abuse of political function for personal gain. In this area we
interests and control mechanisms used by the Parliament of Montenegro for prevention
of corruption. Second part is dedicated to economic corruption, i.e. corruption in the
process of creation and execution of state budget. In this part we processed areas of
part we evaluated preventive mechanisms and mechanisms of integrity building, such
as free access to the information, protection of the whistleblowers, codes of ethic and
integrity plans.
In each of these parts we analyzed characteristics of institutional and legal framework,
i.e. institutional and legal changes that took place in the last year, results of these
successful prevention and reduction of corruption. Within each area we gave a set of
recommendations, which encompass concrete interventions on legal or institutional
framework or more consistent implementation of existing mechanisms.
9
INTRODUCTION
By opening of accession negotiations to the EU, Montenegro has continued with
against corruption and organized crime, Period 2011 – 2012 was characterized with
especially active legislative activity, while in the last year we can monitor implementation
of these laws and their effects.
Center for Monitoring and Research CeMI, for the second year in the row, monitors
effects of anti-corruption policies on national level and suggests recommendation for
welcomed with positive reaction by both decision makers and general public. Second
policy study “Analysis of the effects of anti-corruption policies and recommendations
for improvement” is supported by the Open Society Foundation, Think Tank Fund from
Budapest. This policy study draws on last year’s results, measuring progress in the
in three areas: political corruption, economic corruption and corruption prevention and
integrity.
Methodology for creation of the policy study was created with expert help of the
Research Board of CeMI, composed of: Drago Kos, Commissioner of the International
Commission for Fight against Corruption in Afghanistan and Chairman of the OECD
methodology consultant for numerous international organizations. Aim of this study is
analysis of effectiveness of anti-corruption policies in Montenegro and formulation of
proposals for their improvement through analysis of relevant international standards,
and comparative experiences. For measuring of achieved results in listed areas a set
of qualitative and quantitative indicators was used, with the aim to reply on following
questions:
»How and in which degree are improved institutional and legal frameworks in the
last year?
»Which mechanisms for implementation of anti-corruption policies are at disposal
to relevant institutions? To which degree were these mechanisms utilized?
»What are the limitations of existing mechanisms?
»To which extent are Montenegrin laws aligned with international standards in
given areas?
»What is necessary to amend in order to increase effectiveness of existing
mechanisms, and which new mechanisms are needed?
In our research, we faced with few methodological limitations:
Action Plan for the Fight against Corruption and Organized Crime encompasses large
number of heterogeneous areas, which are impossible to analyze in detail in one
10
document. CeMI has chosen those areas for which is considered that they represent
priority in this moment.
features of Montenegro and available examples of good practice.
Data collection techniques included in-depth interviews of relevant stakeholders,
analysis of legal texts, free access to the information demands and analysis of media
articles.
Long-term control of corruption is rare and precious achievement, which is not out of
reach of decisive and intelligent political reformers. Convinced in this statement, we
hope that this study will represent useful support to all reformist forces in the state and
that it will provide contribution to forthcoming efforts for decreasing of corruption in
Montenegro.
POLITIČKA
KORUPCIJA
POLITICAL
CORRUPTION
11
1.
corruption in Montenegro
1.1 Characteristics of institutional and legal framework
The Parliament of Montenegro, after last changes of their Rules on Procedure has
1 and
modalities of their use. The most effective instrument of control which is at disposal
to MPs is parliamentary investigation. This control mechanism is established in the
Constitution of Montenegro, Article 109, which sets that “The Parliament can, on
proposal of at least 27 MPs, form the Inquiry Committee for gathering information and
facts on events related to work of state bodies”. Rules of Procedure of the Montenegrin
Parliament2 are further regulating procedure of implementation of this mechanism.
3
with good examples of international practice, where the number of MPs, required for
up to 1/5 of total number of MPs.4
After numerous problems with procedure of parliamentary investigation were
1 Control mechanisms, used by the Parliament in their activities of control over the work of the Government
can be sorted in two groups: (1) group of mechanisms for collecting of information on the work of the
Government and (2) group of mechanisms of effective control of the work of the Government. In the
consideration of interpellation
31/12/2010, 39/11 from 4/8/2011.
3 In order to conduct parliamentary investigation Inquiry Committee is formed, headed by the representative of
the opposition. Inquiry Committee has the right to request data and information from state bodies, individuals and
certain organizations, and upon conducted parliamentary investigation it submits report to the Parliament. When
proposal is set on the agenda of the parliamentary session, in order to open parliamentary investigation, support of
the majority of total number of MPs is requested.
4 Read more about it in the study Hirorary, Y., Tools for parliamentary oversight - A comparative study of 88 national
parliament, Inter-parliamentary Union 2007, page 41.
POLITIČKA
KORUPCIJA
POLITICAL
CORRUPTION
12
Parliamentary Investigation is adopted5
Law is limitation of Inquiry Committees in regard to persons who could be invited to
testify. Law determines circle of persons who are obliged to obey to the invitation by
the Inquiry Committee. Those persons are: “managers, civil servants and employees in
state bodies, bodies of local self-administrations, institutions, legal entities, previous
bearers of public functions in executive and legal branch of power (Prime Minister,
President of the Parliament, Minister, MP), ex and current functionaries of local self-
administrations”. They’re obliged to “give statements and reply to questions of members
of Inquiry Committee on facts regarding the subject of parliamentary investigation“.
parliamentary investigation are decreased. Law on Parliamentary Investigation does not
foresee sanctions for those persons in case that they refuse to testify, or testify falsely.
This kind of obligation and sanctioning could be set only by the Law on Parliamentary
Investigation, which is not done in 2012.
Tendency of the Parliament to additionally strengthen its control function is
noticeable, which is good, but sometimes it goes too far – even beyond of its jurisdiction,
to the extent where recommendations of EC are disobeyed, as in the case of elimination of
part of powers of the Council of the Agency for Electronic Media.6 Within the framework
of control function, Parliament reviews reports of numerous institutions that are
of Interests, Commission for Control of the Public Procurement Procedures, State Audit
.
During 2012, the Parliament conducted one parliamentary investigation and 2013
was initiated another one, both ended with technical report. Both investigations were
related to potential cases of corruption („Telekom“ 2012 and „Recordings“ 2013). Both
parliamentary investigations were under high attention of media and work of inquiry
committees was highly politicized. Practicing of the instrument of parliamentary
investigation has shown that it’s not useful for cases of corruption which involve
parliamentarians, due to politicized atmosphere in which MPs take care only about
their party’s interests.
four special sessions were held, out of which two were dedicated to the Prime Minister’s
hour and the other two encompassed both Prime Minister’s hour and Question Time.
In total 25 questions were posed to the Prime Minister and 111 question was posed by
MPs, during Question Time, as well as 11 additional questions. On sessions of working
bodies 3 control and 8 consultative hearings were held.
Establishing of the Anti-Corruption Committee in 2012, was also recognized as
5 Law foresees that Inquiry Committee is made out of equal number of MPs of parliamentary majority and opposition,
while President of the Board is from the opposition and his deputy from parliamentary majority. Decision is made
by majority of votes. Law has authorized Inquiry Committee to “ask of all state bodies, bodies of self-administration,
institutions and legal entities to provide insight into all necessary documentation“ needed for implementation of the
6 In the span of expansion of its jurisdictions the Parliament has altered legal framework and committed regulatory
dimension in case of the Agency for Electronic Media, media regulator, who lost its independence with these legal
changes. In spite of warnings, the Parliament didn’t show readiness to align its behavior with recommendations of
the European Commission.
1 Chapter - political corruption
13
idea was intensively advocated by two civil society organizations: MANS and CeMI,
as well as the part of oppositional parties. Anti-Corruption Committee is composed
out of 13 members: 8 from parliamentary majority and 5 from the opposition. Such
composition could be problematic in decision making. Also, problem arises with revising
anti-corruption laws- namely, Anti-Corruption Committee is not considered as the main
committee in revising any laws or reports, but only as “interested committee” which
decreases its importance and area of action. Although obliged to send their Report on
7 of this board, related to reconsidering of
corruption and organized crime, and their amendments, is very widely set. Relation
among National Commission and the Parliament is regulated inadequately, due to the
fact that the Parliament is represented in this body with President of the Parliamentary
Committee on Finance and Budget. Decision of the National Commission to invite
Parliament of Montenegro to appoint the president of the Anti-Corruption Committee
for a member of the National Commission is encouraging, although the president of
the Anti-Corruption Committee has refused this appointment. However, it seems that
the biggest obstacle for effective work of the Anti-Corruption Committee represents
the procedure of further reviewing and processing of submitted proposals of the Anti-
Rules of Procedure of the Parliament of Montenegro, in a manner which would provide
possibility for Anti-Corruption Committee to conduct its jurisdiction in adequate
manner.
directives for improvement of control and monitoring mechanisms of the Parliament
necessary to use existing new mechanisms of control of executive branch of power
more intensively. Very important instrument for achievement of this goal is possibility
of citizens to submit applications to newly founded Anti-Corruption Committee. As a
special recommendation, pointed out in the Action Plan is inclusion of NGOs in the anti-
corruption agenda, i.e. inclusion of representatives of civil society in the composition of
the Anti-Corruption Committee in accordance with rules and regulations.
1.2 Conclusions and recommendations
improve its control mechanisms it is necessary to::
1. Reconsider decrease of the number of MPs, necessary for proposal of parliamentary
investigation, which will provide to open parliamentary investigation on demand
7 The Committee has following mandate: (1) to monitor and analyze work of the state bodies, institutions and
amendments; (3) to propose additional measures for improvement of action plans, strategies and other documents
bodies.
14
of 1/3 present MPs during regular session of the Parliament;
2. Improve content of the Law on Parliamentary Investigation with provisions
which foresee sanctions for concealing of information, refusal to testify and false
testimony;
3. Expand subjects to the Law on Parliamentary Investigation, introducing obligation
for all entities to provide information to the Inquiry Committee, give statements,
reply to questions of the Committee on facts which are related to the subject
of parliamentary investigation and obligation to provide to the Committee all
documentation that they posess regarding the case;
4. Institutionalize cooperation of civil society and the Parliament, i.e. to include
representatives of civil society in the Anti-Corruption Committee, as foreseen with
the Action Plan for the Chapter 23;
5. Intensify use of control mechanisms of the Parliament in part of control of
and organized crime, and use of this mechanisms should result with concrete
conclusions, measures and activities.
2. Financing of political parties
area. This statement is supported with the fact that in the last 15 years six laws was
adopted in this area, each of them with different institutional monitoring mechanisms,
which in consequence had numerous improvisations in implementation and lack of
2.1 Characteristics of institutional and legal framework
The last in the row Law on Financing of Political Parties, was adopted in December
8 The Law was adopted with the aim of
work and electoral campaign of political parties, as well as the methods of control of
parties has introduced some positive changes in line with GRECO recommendations: (1)
provisions regulating in kind donations were introduced; (2) rules prohibiting abuse of
for acquiring funds for non-parliamentary parties was revised and it rose from previous
5% to 10% of total funds which parliamentary parties receive for their regular work;
Audit Institution. However, the new Law hasn’t eliminated all weaknesses, which were
pointed out in reports of GRECO, European Commission and civil society.
By setting a model of control and audit of political parties, unknown in comparative
1 Chapter - political corruption
15
practice, based on limited powers of State Audit Institution and State Electoral
Commission, this Law made a step backwards in regards to the previous Law.9
shown in the brief period of implementation of the Law on Financing of Political Parties,
the Government of Montenegro has established Working Group for Creation of the New
Law on Financing of Political Parties and Electoral Campaigns, whose members are
representatives of state institutions and civil society organizations.
Bylaws, which are clarifying and further developing provisions of the Law on Financing
10
Regulation of the activities of political parties is done by the set of laws, which
include also Law on Political Parties and Law on Financing of Electoral Campaigns
for President of Montenegro, Mayor, and Presidents of Municipalities.11
Law on Financing of Electoral Campaigns for President of Montenegro, Mayor, and
Presidents of Municipalities 12 sets methods of acquiring and securing of funds for
President of Montenegro, Mayor and President of Municipality. This Law contains an
important contradiction in relation to the Law on Financing of Political Parties – namely
control and audit in accordance of this Law is entrusted to internal auditor of Ministry
of Finance in the Government of Montenegro. Obvious “systemic inconsistency” of these
in electoral campaigns. While audit of political parties and electoral campaigns of
political parties is done by the State Audit Institution, audit of electoral campaigns of
candidates on presidential elections is done by executive power – Ministry of Finance,
i.e. their authorized auditor. Bylaws, which are developing provisions of the Law on
Financing of Electoral Campaigns for President of Montenegro, Mayor, and Presidents of
Municipalities, are adopted by the Ministry of Finance in February of 2013, four years
after adoption of this law.13
State Electoral Commission still has no developed capacities for control of
capacities. In current practice of implementation of the Law on Financing of Political
Parties, SEC has regularly published all reports of political parties, but unfortunately
its function is reduced to simple informing of the public through publishing of reports
9 In Report on screening of legislation for Montenegro fotr Chapter 23 of negotiations of Montenegro and EU –
10 State Electoral Commission and Ministry of Finance have adopted: Rules on Accounting and Reporting on In-kind
Donations of Poliotical Parties; Guidelines on Contents of Report on the Contributions of Legal Entities and Individuals
to Political Parties during the Election Campaign; Guidelines on the form of reports on the origin, structure and the
amount of collected funds used for the election campaign; Rules on the form of the annual report on income, assets
and expenditure of political parties.
11 Besides mentioned laws there aew also elctoral laws, Law on the Election of Councilors and the MPs (from 1998
with amendments), Law on Election of the President from 2007. The and the Law on Election of Mayor from 2003 are
governing various technical aspects of the implementation of various electoral processes.
13 Adopted bylaws are: Guidelines on the form of reports on the origin, structure and the amount of collected funds
used for the election campaign; Guidelines on reporting forms on funds spent for the election campaign; Guidelines
on reporting forms of the income and assets of candidates for the election of the President of Montenegro.
16
without any kind of control mechanisms for content of these reports.
On the other hand, State Audit Institution
accounts of political parties and reports on expenditures from electoral campaign. In
accordance with the Law on The State Audit Institution14, this body is established as
institutional, external, independent, professional and objective control of spending of
budgetary funds and management with public property in Montenegro. SAI controls
2.2. Effectiveness of legal and institutional framework
Both presidential and parliamentary elections were held in the last year, providing
Cash Payment:
registered electoral lists, thirteen of them, have submitted reports on origin, amount
and structure of acquired and spent funds for electoral campaign for national and local
elections. Findings from the report are showing that political parties and coalitions
expenses weren’t done on the basis of appropriate documentation at certain parties and
coalitions. Also, SAI concluded that parties and coalitions were paying remunerations to
properly taxed.
SAI has, in their report, pointed out that submitted reports don’t contain amount
of funds collected on the basis of election result, as well as the data on expenditure of
these funds, due to the fact that Ministry of Finance allocates these funds only upon
Membership fee:
for their members. These are: Democratic Party of Socialists, Social Democratic Party,
Bosniak Party, Croatian Civic Initiative and Positive Montenegro. One of problematic
circumstances in decisions on membership fees is the question- in which manner
a political party can foresee a percentage which will be deducted from the personal
link between state/local budget and account of the political party.
Lack of regulation for use of bank credits by political parties: Law on Financing
of Political Parties is not developing in detail issues related to credit debts of political
parties, such as issue of entitlement of political parties to obtain bank credits, question
to which extent these funds can be used, out of which resources and in which deadline
these funds will be returned, as well as methods of their securing, registering, etc.
State Audit Institution has recommended regulating of issues of bank credits through
amendments to the Law on Financing of Political Parties, especially to set upper limit for
bank credits and deadlines and sources from which bank credits will be repaid.
Loans:
14
1 Chapter - political corruption
17
political parties use as one form of crediting. In the report of the State Audit Institution
it’s stated that one part of political parties has conducted crediting of individuals through
loans, as well as that parties were credited through personal loans from members of the
political party. It is also concluded that certain parties pay expenses of their electoral
of the audit are showing that parties and coalitions were repaying loans from budget
of Montenegro and budgets local self-administrations, i.e. from funds allocated on the
basis of obtained mandates. Bearing in mind frequent use of this crediting instrument
by parties, State Audit Commission recommended mandatory regulation of issue of
loans through new Law on Financing of Political Parties.
Inadequate sanctioning policy: In the period of implementation of the current
Law on Financing of Political Parties State Electoral Commission has submitted
27 demands for initiating of misdemeanor procedures against political parties, i.e.
responsible individuals in parties, due to failure to provide decisions on the amount of
the membership fee, i.e infringement of the Article 8 of the Law on Financing of Political
Parties. In addition, SEC has submitted 31 demand for initiation of misdemeanor
procedures against political parties and responsible individuals due to failure to provide
report on annual assets, property and expenditures. State Audit Institution didn’t submit
any demands for misdemeanor or criminal procedures on the basis of irregularities in
If we have in mind that 2012 was year of parliamentary elections in Montenegro,
and that SAI entered in this process with own capacities, without new auditors for
has shown high degree of independence and professionalism in implementation of
their duties in accordance with the Law on Financing of Political Parties, by conducting
audit and publishing reports. However, even though SAI has shown high degree of
effects, due to the fact that breach of existing regulations, pointed out in their report,
order to contribute to more effective implementation.
lack of
regulations
is currently effectuated on the basis of the Law on Accounting and Audit, and not on
the basis of the Law on the State Audit Institution, as it is stipulated for other budget
Management of Political Parties, but it still remains undone.
In accordance with the Law on Financing of Electoral Campaigns for President of
Montenegro, Mayor, and Presidents of Municipalities, Ministry of Finance was in charge for
presidential elections. According
to allegations of representative of Ministry of Finance, there were no irregularities in
parliamentary elections, as well as difference in quality of reports on audit. Report of
SAI systematically points out weaknesses and gives recommendations for improvement
18
2.3. International standards
In the general conclusions of the Report on the Screening for the Chapter 23 it
is stated that current legislation in this area (Law on Financing of Political Parties, Law
on Financing of Electoral Campaigns for President of Montenegro, Mayor, and Presidents
political parties. Also, it is stated that it’s necessary to further strengthen accounting
obligations and obligations of submitting annual reports of political parties. Analysis
institutional framework it is stated that State Electoral Commission merely publishes
reports, without further control of their content. It is stated that professional capacities
of SEC should be enhanced in order to provide total, effective and independent scrutiny
of the implementation of the Law. It’s also pointed out that State Audit Institution, in
expenditures of electoral campaign, lacks access to the information and capacities to
identify fraudulent behavior. Finally, Report on Screening for the Chapter 23 concludes
sanctioning by an independent body. It is also recommended to strengthen capacities
of control bodies (SEC and SAI) and insurance of clear division of tasks and framework
of cooperation. Also, it is recommended to increase accounting obligations of political
parties and to strengthen reporting of in-kind donations.
In GRECO Report of the III Evaluation Round it’s concluded that following
for usage of public resources for party activities and electoral campaigns; 2. Giving of
of political parties; 3. Strengthening of the political parties audit especially through
(I) assessment of the need to adapt the current rules in order to set consistent and
clear obligations of audit for political parties, including an evaluation of the existing
threshold for audit of accounts for the campaign (i.e. that total amount of acquired and
spent funds from private sources during one electoral campaign exceeds 50 000€); (II)
introduction of provisions which would ensure independence of auditors who conduct
audit of political parties. 4. To better adapt existing sanctions for violation of rules on
including the expansion of the scale and range of possible sanctions and to cover all
possible violations of the law.
2.4 Conclusions and recommendations
1. It is necessary to adopt new Law on Financing of Political Subjects and Electoral
Campaigns which will establish sustainable system of control and audit of political
for imposing sanctions to political subjects and responsible individuals for violation of
the provisions of the Law. New Law should contain amendments in following areas:
conducted by an independent institution. Taking in consideration that currently
is impossible to provide independent and professional establishment of the
1 Chapter - political corruption
19
State Electoral Commission, due to the lack of political will, CeMI has advocated
in previous period creation of the independent Agency for the Fight against
Corruption
of political parties and electoral campaigns in Montenegro. Establishment of
the Agency was proposed in the Action Plan for the Chapter 23, as one of the
corruption. Agency should conduct investigative actions in the procedure of
usage of budgetary funds. It means that possibility of administrative investigation
should be part of Agency’s powers. This investigation would encompass control
of individuals, etc. Only such investigative mechanism would provide effective
New Law on Financing of Political Subjects and Election Campaigns should
encompass solutions which will adapt existing sanctions in order to be effective,
proportional and dissuasive, including expansion of scale and spectrum of
possible sentences in accordance with GRECO recommendations in this area. In
this part it is necessary to reconsider introduction of new forms of sanctions
and prison sentences for serious breaches of the law.
In accordance with SAI recommendation, it is necessary to precisely regulate
issue of loans, used by certain parties as type of crediting;
In accordance with SAI recommendation, it is necessary to precisely regulate
which parties can use this instrument and determine deadlines and sources from
which the debt will be repaid;
In accordance with SAI recommendation, it is necessary to precisely determine
issue of space rent for activities of political parties, on national and local level;
abuses of state resources during electoral processes, establishment of clear institutional
mechanisms of control of this occurrence and adequate penal policy. Also, control and
processing of abuse of state resources during electoral processes should be entrusted
with Agency for the Fight against Corruption, which would implement this mandate in
cooperation with police and prosecution.
3. It is necessary to improve degree of respect and implementation of
recommendations suggested by the State Audit Institution, exposed in report on
recommendations should be particularly followed:
It is necessary that subjects of audit ensure legal, economical and successful
system of internal controls.
20
In accordance with earlier recommendations of SAI and CeMI, the Parliament of
Montenegro should conduct transfer of funds on bank account of parties in a way
in which transferred funds will not exceed determined limit of 0,5% of current
allocated for regular work of political parties, or the Parliament of Montenegro
should directly pay remunerations to these persons on their bank accounts.
resources, all revenues of political subjects should be paid on their main account.
of institutions authorized for monitoring of the Law on Financing of Political Parties.
5. It is necessary to provide higher level of respect of provisions of the Law on
Financing of Political Parties by local self-administrations.
6. Amend or supplement bylaws adopted by SEC. In this sense, it is necessary to
amend the Form for reporting on donations of individuals, and to supplement it with
7. It is necessary to examine legality of decisions on membership fees of certain
political parties, which foresee percentage that would be deducted of the salary of elected
8. Decrease amount of the membership fee to 50€ on annual level, which represents
only real limitation which would prevent possibility of abuses. It is also necessary to
sum of the membership fee and donation of an individual can’t exceed 2000€.
parties on the basis of recommendations from Screening Report and recommendations
of GRECO.
10. It is very important that Ministry of Finance in shortest possible deadline
practice and more effective control of this process.
corruption and regulation of this area has advanced very slowly through nine years of
was changed twice since, gradually expanding subjects of the Law, as well as jurisdiction
and powers of the implementing institution.
3.1 Characteristics of institutional and legal framework
15, has been amended and supplemented
1 Chapter - political corruption
21
most recently in August 2011, and it started with implementation on March 1st, 2012
(except for the provision regarding membership of MPs in governing boards, which
started with implementation in November 2011). New
of Interests
text. Key novelty of the Law, which has attracted greatest attention of public, is expansion
MPs of the Montenegrin Parliament can’t simultaneously cover positions of presidents of
local self-administrations, or positions of directors of public enterprises and institutions.
According to this provision, MP’s were obliged to leave their parallel functions until
November 1st 2011, while directors and presidents of local self-administrations could
exercise function of MP’s until March 1st, 2012.
»16;
»Obligation of reporting of incomes from permanent or temporary working bodies
and mixed commissions, created by the authority, was introduced;
»Sum of all gifts, given by one person or entity, can’t exceed 50 euro during one year,
and value of all gifts from various persons and entities can’t exceed 100 euros;
»Evaluation of presents value is determined by an independent expert, not by the
Commission, as it was done before;
»Deadlines for reporting on assets and on discharge from the other public function
More strict sanctions were prescribed, which are ranging from 300 to 1.500 euro
for physical entities, and from 1.000 to 10.000 for legal entities. Also, the Law
»
10.000 euro) and responsible persons in institutions (ranging from 300 to 1500
eura) in cases of violation of legal obligation to report registries of gifts, and in
cases of failing to report dismissal, suspension or discipline measure for public
functionary to the Commission.
»
data contained in reports of public functionaries). Now, Commission has the duty
to verify data from reports on income and property, in coordination with other
relevant institutions (Tax administration, Central Registry of Economic Entities,
Real Estate Administration, Directorate for Public Procurement, Securities and
Exchange Commission, etc.).
a State Party, whether appointed or elected, whether permanent or temporary, whether paid or unpaid, irrespective
of that person’s seniority; (ii) any other person who performs a public function, including for a public agency or
law of the State Party and as applied in the pertinent area of law of that State Party- UNCAC
22
adopted following bylaws: Regulation on procedure before Commission for Prevention
Assets and Property of Public Functionaries; Form of Registry of Gifts and Form for
Public catalogue of gifts. Regulation on procedure before Commission foresees three
types of control: administrative and technical control; control upon report and in-depth
control.
Control over implementation of the Law is exercised by the Commission for Prevention
. Commission has the President and six members, appointed by
procedure and decides on infringements of the Law; gives opinion on existence of
interest; gives initiative for amendment and supplement of the laws, other regulation and
general acts, in order to align them with European and other standards in area of anti-
corruption initiative and transparency of business transactions; submits demands for
initiating of misdemeanor procedure and cooperates with international organizations
Commission has its Professional Service, dedicated to professional and administrative
works, whose activities are coordinated by the Secretary of the Commission.
Commission has expressed attitude that funds allocated for its work were not enough
for implementation of planned activities of the Commission, which were increased in
accordance with the new Law.
3.2 Effectiveness of institutional and legal framework
a)
However, this shows that there is still no mechanism of automatic recognition and
– such as the status of deans of private faculties. Namely, the Commission still hasn’t
are not submitting their reports on income and property, even though they’re heading
institutions which are using public funds.
1 Chapter - political corruption
23
Interest is in charge of control of implementation of the Law by MPs, who are appointing
the President and members of the same Commission- and this brings Commission itself
17
b) Submitting reports on property
(31/03/2013).18
and submitted demands for initiation of misdemeanor procedure to relevant authority.
procedure of reporting on property often occur, such as manual entering of data in reports
are still waiting for the last moments of the deadline to submit their reports, which
procedure. 19
Procedure of submitting demands for initiation of misdemeanor procedure provides an
property during court procedure, most commonly are sanctioned by admonition. Direct
sanctioning by the Commission, by the Commissions misdemeanor order, would be
and property yet, as Commission doesn’t possess their data necessary for initiating
c) Changes of property status and receiving of gifts
property status higher than 5000 €. Through analysis of the reports on income and
property until April 1st
changes in their property status higher than 5000 € (buying of apartment, land, car, etc.).
Upon determination of these facts Commission has brought decision stating that those
reported total of 105 gifts.
Avoiding to report changes in property status, higher than 5000€, can indicate that
this property was acquired illegally. Commission still has no jurisdiction or power
property. Montenegrin legal system still doesn’t recognize term “illicit enrichment”, nor
17 This possibility is pointed out in SIGMA Report of Integrity in Public Sector in Montenegro from 2009
24
procedures related to this criminal act, which opens space for diverse abuses of function
and acquiring of personal gain by damaging the state.
Also, Law doesn’t prescribe obligation of reporting changes in property status higher
d) Conducting multiple functions
In regards to conducting multiple public functions, available data of the Commission for
incompatible functions, and 11 of these corrected their conduct in accordance with the
companies, which is prohibited by the law. Commission has brought decisions in these
position and Magistrates’ Court initiated misdemeanor procedure against him.
Problem with the Law, related to incompatibility of functions is that the Law bans
it doesn’t prohibit engagement on other positions in public institutions, companies, and
e) Control of accuracy of data from reports on income and property and
coordination with other institutions
During 2012, Commission has conducted control of 731 reports on property and assets
local level haven’t declared accurate data in their reports on property and assets. For
decisions on infringement of the Law were brought by the Commission and demands for
The Commission pointed out important problem in technical processing of the data from
reports - lack of unique electronic system of state institutions, which would provide
simple access and exchange of data, where Commission could easily verify declarations
201
of Interests 5954 different information on change of property status of 3069 public
1 Chapter - political corruption
25
21, but this type of reporting is done on the annual basis and in retrospective (in
2013 for 2012 etc.). Backdated reporting on securities transactions caused that some
transactions as a simple change of type of already existing property (money instead of
securities), question arises whether those criteria are applied also for selling of land
and real estate.
Commission still has no possibility of requiring information from banks, insurance
f) Sanctions imposed
During 2012, the Commission has brought 882 decisions on infringement of the Law on
remedied their actions, upon decision of the Commission. In 442 cases, Commission has
discharge, suspension or discipline measure, due to infringements of the Law by public
directly by citizens) sanction of discharge from the public function can’t be imposed.
Similar to the previous law, problem in part of implementation of measures occurs
back to Commission on sanctions imposed. The Law sets deadline for reporting to the
Commission upon bringing the decision on sanction (30 days) but it doesn’t set the
deadline for brining the same decision.
despite imposed sanctions, is Opinion of the Agency for Protection of Personal Data
and Free Access to the Information, which prohibits publishing of names of sanctioned
protection can contribute to occurrence or continuation of corruptive behavior.
Increased jurisdiction and powers of the Commission are demanding increase in human
Systematization of Professional Service foresees 17 working positions in total, including
Finance. Also, it should be mentioned that so far internal and external calls were
published for Higher Counselor and Professional Service Secretary, without success.
Currently, activities of counselor and secretary are conducted by other employees of
the Professional Service. The Commission also points out that monthly incentives of
employees, regardless of their request, is still being allocated in accordance with old
21 Securities and Exchange Commission of Montenegro, No. 05/1-1396/3-2013 Response to demand on Free Access
to the Information 5/7/ 2013
26
22
For 2013, demanded funds from Ministry of Finances were 422. 259 €, while approved
and allocated funds are 271.986 €.
3.3. International standards
Analyses and reports of GRECO, SIGMA and European Commission contained very
often harsh critics of regulation in this area. However, upon adoption of the new Law,
published reports have marked improvements in this sector. Even though the new
Law had brought important progress in comparison with previous legal solutions, in
sense of alignment with international standards, some posed benchmarks still remain
unachieved:
1. 23
2.
24
3. Criminalization of illicit enrichment and expansion of control of data from income
and property reports to control of origin of property as well25
4.
through obtaining information from banks, insurance companies and pension
funds.26
5. Wide spectrum of deterrent sanctions foreseen for infringement of the Law.27
6. Improved system of reporting on property, especially through enhancement of
control mechanisms and professional capacities of the Commission for Prevention
functions at the same time28
3.4. Conclusions and recommendations
Action Plan for Chapter 23 of the Negotiations with the EU was adopted in March 2013,
which foresees establishment of the independent Agency for the Fight against Corruption,
since 2004. So far, majority of legislative changes was made, but it is necessary to
create strong institutional framework for good results, consistent implementation and
maximum utilization of given powers.
1.
Displacement of appointment of members and President of the Agency/
Commission from the Parliament in order to avoid political compromises
23 Sigma Assessment Montenegro 2011
24 Ibid.
25 Progress Report Montenegro 2012, EC
26 Ibid
27 GRECO, II Round of evaluation, Montenegro 2007
28 Screening report 2012
1 Chapter - political corruption
27
Possibility of administrative investigation, including authorization for
obtaining information from banks, insurance companies, pension and
investment funds, as well as control of property origin
Introduction of deadlines for implementation of Agency/Commission’s
decision and sanctioning relevant authorities which fail to implement these
decisions
Commission upon assuming of the duty
2. Income from monetary sanctions shouldn’t be directed to the state Budget, but to
provide additional funds for work of this body and improve its effectiveness.
3. Criminalization of illicit enrichment – with reverse onus
4.
registries of Real Estate Administration, registries of public procurement and
property.
5.
28
1.
Montenegro has committed by numerous international documents to provide
of public funds. This is characterized by very dynamic reform of legislative framework
in last few years, with the aim of alignment with international standards. Regarding
anti-corruption policies in this area, we consider that it is important to point out and
analyze following areas susceptible to the risk of corruption:
a) Adoption of state budget
b) Financial management and control, internal audit
c)
d) Taxation
1.1 Characteristics of institutional and legal framework
a) Adoption of the Budget
Organic Law on budget sets methods if budget planning, revising, adoption, as well as
methods of control of its spending.
b) State Audit
Area of state audit is under jurisdiction of the State Audit Institution. State Audit
Institution performs the auditing of legality and effectiveness of management of state
are public or acquired using state property. Legal basis for functioning of DRI is the Law
on State Audit Institution, adopted in 2004. This Law was only slightly amended in the
(2007), as well as in the part of penal provisions, in order to align it with the Law on
Misdemeanors (2011). Law on SAI also regulates area of audit of budget users, i.e. all
bodies and organizations that manage the budget and state property and the property of
local governments, foundations, the Central Bank of Montenegro and other legal entities
partially owned by the state.
Audit of the real sector is based on the Law on Accounting and Auditing, which
allocated to jurisdiction of the Tax Administration, and renamed to Central Registry of
ECONOMIC
CORRUPTION
2 Chapter - economic corruption
29
Tax Administration by March 31st each year. Deadlines are prolonged and conditions for
functioning of auditing companies.29 The new Law also sets new inspection jurisdiction
with this Law; control of bookkeeping and the accounting records in accordance with
relevant authorities.30
Parliamentary Committee for Economy, Finance and Budget, on their session held in
2011, has created draft Law on Amendments and Supplements of the Law on State
Audit Institution. Among other provisions, amendments were aimed at providing:
Financial independence of SAI in relation to the executive power, so that the
budget of the SAI is determined by the competent working body of the Parliament,
based on the proposal of the SAI Senate. Such proceedings are not to be subject of
the discussion on a governmental level, under which the determined SAI budget is
automatically integral part of the Annual State Budget. Also, it is foreseen that the
special law;
Political independence of SAI. The political independence of the SAI, through
the proposition to adopt a provision based on which members of the SAI Senate
cannot be members of a political party 31;
The effectiveness in the implementation of recommendations of the SAI, by
stipulating that the audited entity is required to submit a report to the SAI on the
realization of the DRI recommendations contained in its Report on the audit, within
a deadline established by this institution 32;
However, after opinion of the Legal and Constitutional Affairs Committee, this draft was
returned to procedure and in 2013 the new draft law was created. This new draft was
also withdrawn from the procedure and the new working group will be formed in this
year, which will work on drafting of the new proposal, until the end of 2013.33
c) External audit of the EU funds
Law on Audit of the EU Funds,
subjects to the audit and regulates work of Audit Authority for the Audit of the EU
by the Audit Authority in cases when auditors are denied access to the premises of the
subject to the audit, or when full documentation necessary for the audit is not submitted.
in case that in the audit process is found that there are grounds for suspicion that a
30 Ibid, Article 18
31 Current Law regulates that members of Senate can’t be members of managerial bodies of political parties
of its recommendations in all controlled subjects.
33 Intervju sa predstavnicima Senata DRI, septembar 2013
ECONOMIC
CORRUPTION
30
criminal offense has been committed.
Audit Authority for the Audit of the EU Funds existed as a unit within SAI, during
2010. As an independent body Audit Authority started functioning in October 2012. Law
on Audit of the EU Funds sets conditions for appointment of the Chief Auditor, deputy
and authorized auditors, and they’re appointed by the Government.
d) Financial management and control, internal audit
Financial management and control encompasses activities which are especially related
to planning and execution of the budget; conducting public procurement procedures;
payment of the obligations on grounds of concluded contracts and other commitments;
protection from the loss of property, improper use and the fraud; as well as the other
34
(hereinafter Law on PIFC), was
adopted in November of 2008; it was amended in 2011 and in 2012, with provisions
for the most part, completed the legal framework in this area.
internal audit (CHU) is situated within the Ministry of Finance. Key task of the CHU is
coordination in establishment and development of the PIFC on central and local level.
development of IA (Internal Audit).
e) Taxation
The Law on Tax Administration
the Law on Amendments to the Law on Tax Administration. The adopted amendments
provided new authorities to the Tax Administration, in the sense that this body, beside
the registration of taxpayers and maintenance of the Tax Registry, now performs
registration of businesses and maintains a separate registry for them. Also, the Tax
while the scope of penalties has been expanded and aligned with the new Law on
Misdemeanors.
1.2 Effectiveness of the legal and institutional framework
a) Adoption of the Budget
In order to increase transparency of the budget and use of public funds, the
Government of Montenegro has prepared draft amendments to the organic Law on
34 Zakon o PIFC „(”Sl. list Crne Gore”, br. 73/08 od 02.12.2008, 20/11 od 15.04.2011)
2 Chapter - economic corruption
31
Draft Law on Budgetary and Fiscal Responsibility was placed on public discussion until
st of 2013, but due to numerous amendments, it was returned to Ministry
of Finance for revision. Main problems of current legislative framework, as well as
the new draft of amended Law are lack of transparency in process of budget planning
and execution, especially in the area of creation of the capital budget, lack of sanctions
and effective mechanisms for its implementation. New draft Law contained following
»
one month is still not enough for revision of budget;
»Procedure of creation of capital budget remains the same. Neither Parliament, nor
public have the right of participation in creation of this budget;
»Execution of the budget is not transparent enough– The Government submits report
on execution of the budget only a month before submission of the new draft budget;
»New Law foresees establishment of the unit within MF, which would monitor
execution of the budget, which is in direct opposition with the Law on PIFC;
»Managing of public debt remains in hands of the Government and Ministry of
Finances, while the Parliament and SAI don’t have the right of participation in this
process
»
»Given deadlines are so extended, that misdemeanors won’t be processed due to
statute of limitations;
»Penalties are too low, and they are not dissuasive;
»Sanctions are foreseen for only 8 misdemeanors, while many illegal actions remain
without sanction;
»It is not clear who will monitor implementation of the law.
b) State Audit
In period October 2011 –October 2012 SAI has conducted audit of the Final Account
of the Budget of Montenegro, as well as 10 general audits, one control audit, 4 controls
of implementation of recommendations from previous audits and audit of 12 political
subjects.35
Numerous irregularities were pointed out in the Annual Report of SAI, in different budgets
limit of allowed amount of funds for direct procurement), to showing of more than 100
funds were spent. SAI has given one negative opinion as well (Montenegrin Academy of
Control audit has shown that very few recommendations given by SAI were implemented
of SAI, compromises authority of this institution and contributes to excessive spending
of budgetary funds. The Government has formed Coordination Body for monitoring of
35 Annual report on work of SAI
32
implementation of SAI recommendations, but so far there were no reports on work of
this body.
In the SAI’s annual report it is pointed out that cooperation of SAI with Prosecution
and Administration for Prevention of Money Laundering and Financing of Terrorism,
but there are no statistical data on results of this cooperation, nor there are individual
success examples of cooperation of these institutions.
charges, while SAI can supply all necessary documents, which are required from this
among institutions and perpetrators remain unpunished.
c) External audit of the EU funds
Law on Audit of the EU funds
Law on Accounting and Audit: provision on protection of liability for expressed opinions
lacks deadlines for conducting of the audit, submitting of reports and methods for
choosing of the subject of the audit. Since it is registered, Audit Authority was working
only on internal regulations (formulation of the Act on internal systematization and
organization, Operational Rules, etc.). There were no concrete audits, due to the fact
that transfer of authorities related to the audit of the EU funds, from European Union
to Montenegro, is still not executed, i.e. the EU still conducts centralized management
of these funds. It is foreseen that transfer of authorities from the EU to Montenegro
cross border cooperation; regional development; development of human potential), will
component (rural development). The Audit Authority currently employs 3 civil
servants. Although it was foreseen to employ 8 people, currently there are only 3 and
Audit Authority obtained consent to employ two more people. By the end of 2015, it is
foreseen that the number of employees of this institution should be 20.36
d) Financial management and control, internal audit
Although the legal framework for this area is in substantial degree aligned with
international standards, implementation is still not on the satisfactory level. Until
August of 2013, on central and local level, 34 subjects have established internal audit
153 recommendations in total, out of which 70 were implemented by now.37
of Finance is continuously working on their education and training. So far 8 internal
were held, with total of 40 participants.
37 VI Report of National Commission on implementation of the Action Plan for the Fight against Corruption and
Organized Crime, September 2013
2 Chapter - economic corruption
33
internal audit, which amounts only to 56%. The SAI has also given critics on the work of
internal audit: „Improper spending of funds determined by the state auditors in several
instrument of control of expenditures - payment request, should provide payment in
accordance with the approved budget, or control of the use of designated funds.”38
Auditors of internal audit are not enough protected in their work. Namely, Law on PIFC
discharged due to opinions expressed in conducting of the duty. However, there are no
sanctions, which would provide adequate guarantee for this provision.
e) Taxation
The evidence of progress in this area is 32 million euro greater collection of the tax
debt compared with 2012, and 52 million euro greater collection in comparison with
2011. However, total unpaid tax debt in Montenegro amounts closely to 354 million
of euro, out of which 119 are the debt for taxes and contributions on personal income.
This is earlier debt, which dates more than 10 years in the past, i.e. since introduction
to 24 million, but this debt cannot be collected, since these are companies which exist
only on paper. Governing bodies of these companies should be held under material and
criminal responsibility, due to negligent management of the company, and criminal
39 In order to decrease this debt, the Government
of Montenegro has adopted The Regulation on procedure of collection of tax claims
by property of taxpayers in April of 2013, i.e. solution which provides possibility to
pay tax debts by real estate property of taxpayers (apartments and business premises
with paid utilities), which mean that any tax debt over 100 000€ can be paid with real
estate. Commission of the Ministry of Finance for consideration of the tax debt discusses
such requests, and the Government gives consent on settlement of the tax debt by real
this method. By August 2013, 10 companies has applied to pay taxes through real estate,
out of which 1 application was approved.
the Decree of the Government. This list contains names of 100 biggest tax debtors and
50 of those who failed to pay taxes and contributions on personal income. It is planned
to supplement this list with another 200 of tax debtors and subjects who failed to pay
excise tax debts.
Central Register of Economic Entities is not updated adequately – namely, companies
which no longer exist are still registered as active, which prevents adequate control
of taxation and represents an obstacle in numerous anti-corruption activities, such as
etc.
1.3 Conclusions and recommendations
1. Adopt the Law on Budgetary and Fiscal Responsibility which would guarantee:
38 Annual Report on work of SAI
34
Reasonable deadlines for revision of the budget – at least two months from
submission of the draft budget;
Inclusion of the Committee on Economy, Finances and Budget in process of
creation of capital budget
Shortening of deadlines for submission of reports on execution of the budget;
debt;
Setting of strict sanctions for violation of this Law and for illegal and improper
use of budgetary funds, as well as determining of relevant authority, which would
determining of relevant authority which will monitor implementation of this law.
2. Adopt amendments of the Law on State Audit Institution that foresee: full
which fail to report on implemented recommendations of SAI in the deadline set
by SAI.
3. Establish the structure for implementation of the PIFC: establish units for
4. Organize structured training of all auditors
5. Improve IT support of Tax Administration – update and stabilize Central Registry
of Economic Entities and link it to registries of: real estate, public procurement,
6. Amend the Law on Commercial Companies and set sanctions for irresponsible
management, i.e. bringing the company in insolvent status, causing bankruptcy,
etc.
2. State property and property expropriation
2.1 Characteristics of institutional and legal framework
Prevention of abuse during the use, and management of state property is regulated
by the Law on State Property40, by Articles 19 and 20 of the Law on Financing of Political
Parties41, as well as by the Article 71 of the Law on Civil Servants and Employees.42 Area
of the management and disposing with expropriated property is regulated by the Law on
Temporary and Permanently Expropriated Assets43, while the procedure of temporary
or permanently expropriation of property obtained by illegal actions is regulated by
Articles 91 - 97 of the Criminal Procedure Law of Montenegro44. Moreover, there are
many bylaws that regulate the area of use and management of the state property, and
2 Chapter - economic corruption
35
during 2013, numerous amendments of these bylaws are made45.
The mentioned Law on the state property has established two bodies in charge for
management and supervision of the state property: the Property Administration and
the Protector of Property and Legal Interests of Montenegro. According the Article 20
of this Law, jurisdictions of the Property Administration are the following: to manage a
unique record and register of the state property; to take care of the property which by
Law belongs to the state; to take care of affairs of cadastral registration, land dividing,
delineation, exchange, drafting of contracts and monitoring of their implementation,
collection of rent and other matters related to the state property, to ensure conditions
for protection of property and to perform other duties upon requests of the Government
ordinance on organization and methods of work of state administration.46 Those new
jurisdictions are: maintenance of the building of state institutions, facilities of state
representation bodies and diplomatic-consular delegations of Montenegro abroad,
aligning of data from their registries with data from registry of real estate, registration
of property of ex socio-politic organizations and their entry in real estate register, taking
care of enrollment of property of Montenegro in real estate register, registry keeping on
concluded contracts on acquisition and disposal with stationary and the movable assets
and other goods of greater value in the state property, reporting to relevant authorities
within deadlines foreseen by the law and conducting of additional work necessary for
the functioning of state bodies.
On the other hand, primary obligation of the Protector of Property and Legal
Interests of Montenegro47 is to advocate and protect property and legal interest of the
state, i.e. units of local self administration and public services founded by the state, which
don’t have a legal personality, in different procedures before courts and managerial
bodies. Also, obligation of the Protector of Property and Legal Interests of Montenegro
is to advocate and give legal opinion in relation to concluding contracts on acquisition
and disposal with state property and in relation with other legal and property issues, on
demand of state bodies. All state institutions are obliged to submit requested information
and documentation to Protector. This institution is independent and it undertakes legal
actions which arise and are related to civil law area, administrative law area and criminal
law area. The Protector of Legal and Property Interests of Montenegro is appointed by
the Government, on the proposal of Minister of Finances, to 5 years mandate. It has one
or more deputies, also appointed and dismissed by the Government, on the proposal of
the Protector.
45 Thus are adopted:
Gazette of Montenegro 17/13); Regulation on Amending the Regulation on conditions and manner of use of buildings
19/13); Regulation on Amending the Regulation on conditions and manner of use of art and cultural assets owned by
47 Institution of Protector of Legal and Property Interests of Montenegro was established on April 30, 2010, when it
overtook jurisdiction of advocating for the state, its bodies and public services in property litigations from supreme
prosecutor.
36
2.2 Effectiveness of institutional and legal framework
What was represented as a problem in the previous reporting period, and
remained unchanged by now, is the fact that Property Administration still has not
established registry of stationary and movable property of the state, even though this
system of registration should have been established in March 2010, in accordance with
the Law48. Main reason for failure to establish this system is lack of the adequate electronic
data processing software that was supposed to be created by Ministry of Finances in
also lack of human resources of the department for records and informing. Namely, in
this department there are not enough trained employees who would in adequate manner
conduct work under jurisdiction of this department. Additional problem in registering
of state property is also the fact that certain number of institutions is not submitting to
the Property Administration report on registering of movable and stationary property,
or they are submitting these reports after the legal deadline49. Namely, state bodies are
obliged to submit cumulative data to Property Administration on value of their property
according to the structure of basic funds. In relation to the previous reporting period,
a progress was made – Property Administration has appointed a person responsible
for data entry and computer protection of those data was established. According to
statement of deputy Director of Property Administration, control of veracity of the data
entered into registries is not conducted, due to the fact that all institutions are keeping
electronic registries which can be controlled at any moment50.
of property acquired as a result of criminal activity. Up until now in Montenegro
are placed on the special account in central bank in Montenegro where they are being
Property Administration does not undertake management of such property. Also,
Property Administration does not have exact information on credit obligation to banks
on the basis of loan or mortgages which were approved to Kalics and Sarics. During
given to banks. Responsible persons are not appointed for management of temporarily
companies are blocked on different grounds, and in such situations is impossible to
for use to families of incriminated persons, without remuneration (cases Loncar, Kalic),
since those are the old family houses which are not acquired illegally. On the other hand,
Property Administration still hasn’t signed protocol on cooperation with Directorate
of Police, but there was a progress in education of civil servants who are managing
them were implemented in cooperation with OSCE and Republic of Serbia.
In the end, what was also recognized as a problem which Property Administration
faces during the implementation of the Action Plan for the Fight against Corruption is
48 Provisions in Articles 70, 66 and 67 of the Law on state property.
49 Note form the meeting held 13/06/2013 with Osman Nurkovic, Deputy Director of Property Administration.
50 Ibid.
2 Chapter - economic corruption
37
lack of independency of this body, since it is situated within Ministry of Finance which
limits its powers.
Protector of Property of Legal Interest of Montenegro is independent institution
which undertakes legal actions which arise and are related to civil law area, administrative
law area and criminal law area. Despite its independence, in the system of state
in wider sense. Earlier representatives of the state had such status e.g. Public Defender
as well as State Prosecution. Such position in the system of power is given also to legal
representatives of surrounding states. Main characteristic of the work of Protector in
the reporting period is overtaking of cases from administrations which lost their legal
subjectivity, i.e. which no longer have status of legal entity (Customs Administration,
Directorate of Police etc.) and which will be represented by the Protector in all property
reporting period, professional service wasn’t enhanced and the capacities of this
institution weren’t strengthened.
It’s necessary to mention that the Protector has established adequate registries
51. Aim of these registries is to provide
procedure, as well as to familiarize all parties with all cases and determine responsibility
of any employee for mistake or untimely action.
However, the Protector still does not possess his own web presentation52, which
brings into the question availability of data and transparency of work of this institution.
Also, there is a necessity53 to make certain amendments and supplements to the Law
on Litigation Procedure54. Namely, the Law on Litigation Procedure does not contain
provision which would regulate the right of the State as a party, to obtain reimbursement
of costs regarding participation in civil proceedings. That’s why the Protector had
initiated on December 14, 2011, amendments and supplements of provisions in the
Chapter XII of the Law on Litigation Procedure in a way to add an Article which would
state as follows:
»For representation of the State, the Protector has the right on reimbursement of
expenses under the Rules on Compensation of Lawyer’s Services.
»Funds from the Paragraph 1 are assets to the budget of Montenegro55.
As a consequence of the current provisions of the Las on Litigation Procedure we have the
situation in which the State as a party in the procedure has the obligation the pay court
51 Following registries have been established: registry of litigation cases „PZ“, register of not litigation and other civil
cases „RZ“, registry of administration cases „UZP“, registry of executive cases „IZ“ and registry of legal opinions „M“.
Also register of protective management „ZU“ which contains, besides solving issues relevant for work processes also
guidelines for procedure in individual characteristic subjects. These registers must be closed in December 31 (Report
of the Protector of Property and Legal Interest for the period from April 30th 2010 to December 31st 2011).
52 Note from the meeting held 14/06/2013 with Mirjana Milic, the Protector of Property and Legal Interest.
53 Ibid
procedure costs, determining content, extent and other relevant issues for realization of the right of party to
reimbursement of expenses which they had during litigation procedure. Obligation of reimbursement of expenses
has the party which loses complete litigation procedure and in remaining cases the court decides on reimbursements
depending of result of litigation. Therefore, the right, or obligation to reimburse expenses of the procedure is
conditioned with result of litigation.
55 Initiative of the Protector for supplement and amendment of the Law on Litigation Procedure from 14/12/2011.
38
expenses, but it doesn’t has the right to get reimbursement of these expenses under the
Law. Also, all states in the region, without exception, have the right to reimbursement of
expenses of civil procedure.
On the basis of exposed facts, it’s not hard to conclude that the legal framework regulating
the area of state property is still not applied adequately. We will list few most important
1. A credible record of entire state property, including property of local self-
administration units is not established;
2. Registration of the state property is done in incomplete and inadequate manner,
i.e. without enrollment of all legally foreseen data;
3.
Administration registries of movable and stationary property that they use,
violating legally foreseen obligations and deadlines;
4. Ministry of Finances is not initiating misdemeanor procedures on the grounds of
those violations;
5. Montenegro does not have Bureau for Restitution of Property. Thus, Montenegrin
legislation is not aligned with Decision 2007/845/PUP on cooperation among
bureaus of restitution of property in member states in the area of discovering and
connected with criminal.56
2.3 International standards
GRECO in evaluation report for Montenegro recommends measures which would
directly or indirectly contribute to control of possible abuse of state property. We will
list some of those recommendations:
1.
of criminal activities with characteristic of corruption, should be published.
2. It is necessary to create a common program of education for representatives of
Police and Prosecution in order to enable, promote and improve use of practice
from criminal activities including corruption.
3. It is essential to introduce legal provision which provide implementation of
in the earlier phase of investigation, even when these are not criminal acts of
organized crime.
4. Continuous scrutiny of organizations obliged to report suspicious transactions
and improve level of education in order to achieve higher responsibilities of
reporting of suspicious transactions, especially for those organizations which
haven’t reported any suspicious transactions, is highly needed.
http://www.mip.gov.me/en/
images/stories/EI_download/Izvjestaji/Izvjestaj_o_skriningu_za_poglavlje_24.pdf.
2 Chapter - economic corruption
39
Action Plan for Chapter 23 (justice and fundamental rights)57 underlines
from this area are:
1.
criminal actions and enhance professional capacities of Property Administration.
2.
and its management and propose model for its improvement within the framework
of Analysis of the Organizational Structure, Capacity and Authorizations of State
and Administrative Bodies in Fight against Organized Crime and Corruption.
3.
the property containing evaluation of its management by Property Administration,
recommendation for its improvement.
4.
5. Strengthen administrative capacities of Property Administration through increase
of number of civil servants on responsible for management of the temporarily and
6. Develop internal working procedures of the Property Administration, set criteria
for management of different kinds of property.
7.
»Number of decision;
»
»
»
8.
the site of Property Administration half - annual report (which should mandatory
9. Adopt plan of education and conduct education for employees of Property
10. Conduct education of employees of Police Administration, state prosecutors and
by criminal actions in accordance with annual program of education.
11.
2.4 Conclusions and recommendations
57 Action Plan for Chapter 23 availbale at: http://www.bos.rs/ceiblog/uploaded/Akcioni_plan_za_poglavlje_23.
pdf.
40
effectiveness of anti-corruption policies in area of management and disposal of state
in GRECO report and Action Plan for Chapter 23, we consider that following measures
should be undertaken:
1. It is necessary to establish, publish and daily update unique registry of all movable
and stationary items and other goods owned by the state and units of local self-
administration. In that sense, relevant ministries should implement project of
Property Administration – electronic software for data processing which would
be used for registry keeping and unique records of state property.
2.
Administration.
3.
in legally foreseen deadline, submit accurate registries of property to Property
Administration. Ministry of Finances should initiate misdemeanor procedures
against subjects which are not submitting registries of property. Also, it is
to determine in what way registering and value estimation are done.
4. It is necessary that Property Administration signs protocol on cooperation with
5. It is necessary to create web presentation of the Protector of Property and
Legal Interests of Montenegro, which would be regularly updated and make all
data proactively available. That would increase transparency of the work of this
institution.
6. Reconsider possibility of adoption of the Law on Protector of Property and
strengthen independency of this institution.
7.
activities.
8. It is necessary to regulate procedures of overtaking of property through
3. Public procurement
3.1. Characteristics of institutional and legal framework
Current Law on Public Procurement
into force in 201258. This Law which represents one of systemic anti-corruption laws
regulates the conditions, manners and procedure for the procurement of goods and
2 Chapter - economic corruption
41
services, the protection of rights in public procurement procedures and other matters
relevant to public procurement. This Law is to a great extent aligned with relevant
regulations (directives) of the EU, additional anti-corruption measures, individual
additional separation of jurisdictions of institutions was made.
The Law has introduced possibility to unify procurement59, and a step forward
was made in improvement of transparency and monitoring of entire process, by
well as committing them to publish call for public procurement and award notice on the
web site of public procurement, as well as full public procurement contract. The Law
has also improved control of the process of the public procurement, by introduction of
inspection control for procurement in value less than 500.000 €, and mandatory control
of procurements value of which exceeds mentioned amount. When it comes to regulation
and bidder, Articles 15, 16, 17 and 18 of the Law are prescribing anti-corruption rule
60.
In accordance with provisions of the Law, institutional framework for management,
control and monitoring of public procurement in Montenegro is constituted of:
Ministry of Finances prepares strategic documents in the area of public
procurement and draft Law on Public Procurement in cooperation with the Directorate
for Public Procurement. In cooperation with the Directorate, also prepares and adopts
bylaws (rules) in the area of public procurement for which has the authority, decides on
complaints against administrative/individual acts adopted by the Administration, gives
consent on public procurement plans of contractors, conducts control over legality of
the work of the Directorate and reports to the Government of Montenegro on situation
in the system of public procurement.
Directorate for Public Procurement (hereinafter: DPP), which was
established in 2006 with jurisdictions of monitoring of implementation of the Law
on Public Procurement. Current Law sets that Directorate, among others, monitors
implementation of the system of public procurement; maintains the web portal of
public procurement, gives consent to contractor on accomplishment of conditions for
implementation of relative public process etc. DPA has status of independent institution
of state administration61. By rules on systematization and internal organization of
59 In accordance with the regulations of the Government of Montenegro (Regulation on organization and
operation of state government
no.7/11), establishing of central bodies of public procurement was enabled. By this centralization of the procurement
60 Bylaws were adopted necessary for adequate implementation of this Law:
- Regulation on the forms in public procurement process
- Rulebook on the methodology of translation of sub criteria in the appropriate number of points, methods of
evaluations and comparison of bids
- Regulation on the method of record keeping and contents of anti-corruption registries
Montenegro“, no. 63/11;
- Regulation on records if public procurement procedures
Also was adopted the Regulation on the program and manner of taking professional exam for the work on
public procurement jobs
42
public procurement administration62 it is composed of four organizational units: the
Department for Monitoring Procurement Procedures and Management of Electronic
Procurements, the Department of Vocational Training and International Cooperation
For conducting of work of jurisdiction of DPP,
18 civil servants including the Director of DPP are allocated. The DPP prepares annual
reports on public procurement which is adopted by the Government.
The Commission for the Control of Public Procurement Procedures was
established in 2006, while its jurisdictions were overtaken by the State Commission
for the Control of Public Procurement Procedures in February, 2012 (hereinafter:
State Commission) Under the new Law, State Commission has jurisdiction to: consider
complaints submitted by bidders with regard to the public procurement procedures
and decide on them; to examine whether the Law on Public Procurement has been
correctly applied and propose and undertake corrective measures in order to provide
competitive behavior among bidders and transparency of the procurement process;
lay down principles and policies aimed at uniform law application; control public
procurement procedures valued over 500.000€, etc.
same Law provide legal remedy for its decisions. Since the Law on Public Procurement
Commission, but the Article 16 and 17 of this Law prescribe only the cases and how to
March 19, 201263
and Members of the State Commission. According to Article 142 of the same Law, the
State Commission shall submit an annual report to the Parliament of Montenegro for
Directorate for Inspection - Department for Inspection of Public Procurement
and the relevant public procurement inspector performs inspection in relation to the
regularity of the public procurement from 3,000€ to 500,000€. Also, it is in charge to
control the timeliness of submission of procurement plans, invitation to tender, the
decision of the public procurement procedures; public contracts; etc.64 Prior to the
establishment of the Directorate for Inspection65, workplace of the inspector for public
procurement was positioned within the Directorate for Public Procurement. Directorate
for Inspection shall prepare an annual report and submit it to the Government.
The Administrative Court of Montenegro, in administrative proceedings
provides legal protection in the public procurement procedures. In fact, Articles 136
and 146 of the Law on Public Procurement provide that administrative dispute may
be carried out against the decisions of the State Commission for Control of Public
Procurement Procedures in order to review the legality of its decisions.
State Audit Institution (SAI)
62 Available at: http://www.ujn.gov.me/wp-content/uploads/2013/05/Sistematizacija.pdf
64 Article 148 of the Law on Public Procurement
65 Directorate for inspection was established by Regulation on Organization and manner of work of the State
Commission
2 Chapter - economic corruption
43
the audit of SAI are required to purchase goods and services and contracting of works
carry out in accordance with the provisions of the Law on Public Procurement. SAI, in
accordance with the Law on the State Audit Institution, reports on its activities to the
Parliament and Government.
3.2. The effectiveness of the institutional and legal framework
3.2.1 Restrictions in the regulations
The Law on Public Procurement provides that the contractor signs the contract on
public procurement with the supplier whose tender is selected as the most favorable.
However, the Law does not specify how to proceed if the contracting authority (the
competent authority of the contracting authority) does not accept the proposal decision
on the best offer. Such case, i.e. the contracting authority did not accept the decision of
the Commission for Opening and Evaluation of Tenders, occurred in practice, and the
aforementioned decision was published on the website of the State Commission66. Also it
is unclear whether the responsible person of the contracting authority, the Procurement
process, particularly members of the Commission for Opening and Evaluation of Tenders,
Interest67, and are not obliged to submit reports on income and property, which brings
procedures by shopping method, especially in the part of determination of eligibility for
planning process of public procurement and how to combat inexpediency in planning.
For the control of public procurement procedures whose value does not exceed
500 000€, as we have noted, is in charge the Directorate for Inspection, namely the
Department for Inspection of Public Procurement. Considering that in this department is
employed only one (main) inspector who inspects at the entire territory of Montenegro68,
it is obvious that an adequate and effective control of the accuracy of implementation
of the above procedures cannot be achieved, especially if we take into account that the
number of such procedures is annually close to 62 000, and that in Montenegro there
are over 650 subjects to the Law on Public Procurement69. Also, jurisdiction and powers
relation to the Public Procurement in terms of decision making and giving instructions.
Within the framework of the Strategy for Development of the System of Public
Procurement for the period 2011 - 2015, and the Action Plan for implementation of
the Strategy70, which are adopted in December 2011, was not adequately prescribed
the manner of achievement of goals, in particular those relating to the prevention of
66 http://www.kontrola-nabavki.me
68 „Report on the work of Directorate for Inspection for 2012“, p.88, available at:
www.gov.me/ResourceManager/FileDownload.aspx?rId=126710&rType=2
69 Ibid, str. 13
70 Available at: http://www.ujn.gov.me/wp-content/uploads/2012/01/25_46_22_12_2011.pdf
44
corruption and irregularities in the public procurement process, as well as the objectives
of the process of harmonization with the European standards in the long term. Also,
functions of the Directorate for Public Procurement and State Commission for Control
3.2.2 Shortcomings in implementation
According to Article 18 of the Law on Public Procurement, the contractor is obliged
about it. The Ministry of Finance has adopted “Rulebook on maintaining records and
content of violations of anti-corruption rules”71, which was published on the website of
the Directorate for Public Procurement72
rulebook contains the manner of managing of the record, content of the record, report
information on violations of anti-corruption policies. Contracting authorities are obliged
to which the body prepares an annual report to the Government of Montenegro, with
the deadline May 31st for the previous year. However, from the annual report of the
Directorate73, it is evident that a very small number of contractors submitted reports.
In the period from February 23, 2012 to September 1, 2012, the Administrative
Court rejected 65 decisions of the State Commission for Control of Public Procurement
Processes74, and in the period from September 1, 2012 to March 31, 2013, 76 decisions
were rejected and 76 were refused75. As we were told by representatives of the State
Commission76, the Administrative Court annulled the decision of this institution
under the provisions of the Law on Administrative Procedure77, not referring, to the
provisions of the Law on Public Procurement. These data, however, bring into question
the effectiveness of the State Commission.
There is no regular two-way communication between Directorate for Public
Procurement and Directorate for Inspection, which raises the questions about the
effectiveness of inspections in this area78.
The State Audit Institution controls the legality of the conduct of public
procurement procedures, but there is still no effective control of the implementation of
the signed contracts on public procurement.
72 www.ujn.gov.me
73 “Report on public procurement of Montenegro for 2012“, available at: www.ujn.gov.me
74 Annex to the report of the European Commission on the progress of Montenegro for 2012 (for the
period of April 25 to September 1, 2012)
75 Annex to the report of the European Commission on the progress of Montenegro for 2013 (for the period of
September 1 to April 25, 2013)
76 Note from the conversation with Suzana Pribilovic, President of the State Commission for Control of the Public
Procurement Procedures, held on September 18, 2013.
78 Transcript of the interview with the Director of Directorate for Public Procurement PHD Mersado Mujevic, held
st, 2013.
2 Chapter - economic corruption
45
3.4. International standards
usually start from the OECD principles which are designed as starting point and
baseline for the implementation of the international instruments to combat fraud and
irregularities in public procurement. In OECD principles it is emphasized that a good
management is crucial for the suppression of corrupt actions and protection of state
1. To provide an adequate level of transparency during the entire procurement
process in order to promote fair and equitable treatment for potential bidders;
2. To improve the transparency of tender procedures with maximum precautions in
order to improve accuracy;
3. Public funds in procurement must be used in accordance with predetermined and
actual needs;
4.
level of education, skills and integrity;
5. To provide adequate mechanisms for prevention of risks of corruption and breach
of integrity;
6. Private sector and Government should work together in order to maintain high
standards of accuracy, especially in the implementation phase of the contract;
7.
the imposing of sanctions in cases of unlawful conduct;
8. To develop and establish a clear system of responsibilities with effective
mechanisms of control;
9. To consider complaints from potential bidders in a fair manner and reasonable
deadline;
10. To strengthen the role of civil society organizations, media and general public in
the control of public procurement procedures79.
3.5 Proposals for the improvement
in this area, we believe that it is necessary to take the following actions:
1.
public procurement (especially the members of the Commission for Opening
and Evaluation of Bids) and other persons involved in the public procurement
process. Regular control of personal and family property records and information
on incomes would increase supervision of the work of employees who are a key
link in the procurement process.
2.
79 Translation of the document of OECD titled: „Recommendations of the Council of OECD for the improvement
of integrity in public procurement“, C(2008)105, containing the above principles available at: http://parco.gov.ba/
cyrl/?page=25&kat=5&vijest=2986
46
procurement procedures, including the phase of monitoring of contractual
obligations. To conduct a regular safety audits of delivery and performance of
obligations from the contracts.
3. To consider the possibility to clearly establish by law the competent (an
independent) authority to control the implementation of public procurement.
4. To monitor the effectiveness of the public procurement planning. To do detail
higher value, for example, through the control of existing supplies.
5. To ensure that contracting authorities regularly and in legal timelines submit to
the Public Procurement the report on actual corrupt practices, as well as forms
corruption policies and to misdemeanor sanction the entities which are not
recording violations of anti-corruption policies.
6.
7.
in relation to the Directorate for Public Procurement. To ensure that Directorate
for Public Procurement has clear integrations and authority regarding decision-
making and giving instructions to the Department of Inspection of Public
Procurement.
8. To recommend strengthening of the competence and the capacities for inspection
in the public procurement with amendments to the Law on Public Procurement.
9. To reduce formalism and unnecessary bureaucracy - the public procurement
number of bidders (original proof of eligibility to seek only from the winner, to
10. To develop manuals for customers and for suppliers on the rights and obligations
that they have, but with warnings about the type of sanctions in cases of bid rigging.
11.
the Law on Public Procurement. Previously, it is needed to prepare the appropriate
which public procurement and responsible body for enforcement of procedures).
4. Exchange and Securities Market
Due to relatively poorly explored area of corruption in exchange and securities market,
we will list main forms of corruption, which can occur in this area:
»Insider trading - when a person in possession of a secret information related to
securities, initiates their buying or selling
»Manipulations with security prices – where participants at the exchange and
or increase of price of shares
»Short selling – investors can borrow securities and sell them, expecting that prices
of securities will keep falling, so they can buy them again by lower price and gain
2 Chapter - economic corruption
47
a price difference. This is a practice in many countries, however it carries risk for
securities while their owner remains the same.
Also, it is important to mention possibility of money laundering trough exchange and
etc.
4.1 Characteristics of legal and institutional framework
Control of exchange and securities market is governed by the Law on Securities, Law
the Criminal Code in Chapter XXIII. Laws regulating some aspects of exchange and
securities market are: Law on Privatization of Economy, Law on Secured Claims, Law
on Ownership and Management Transformation, Law on Pension Funds, Law on Banks,
Law on Bankruptcy The Law on Enterprises, the Law Accounting and Auditing , Law on
Current and Capital Transactions with Foreign Countries, Law on Prevention of Money
Laundering and Financing of Terrorism, Property Relations Act, Law on Restitution of
Funds and the Law on Insurance.
Law on Securities determines types of securities, regulates issuing and trade with
securities; rights and obligations of subjects on the exchange and securities market;
organization, jurisdiction and powers of Exchange and Securities Commission.80 This
law recognizes series of misdemeanors and prescribes sanctions for infringement of the
advantage over other participants in trading with securities (insider trading); causing
inaccurate perception on prices of securities by false statements (manipulation with
prices); giving false statements which can cause selling or buying of securities, as well
81 Law on Securities doesn’t
recognize practice of short selling, nor does it address possible related abuses.
However, this Law is not applicable on following procedures: procedures of privatization
of economy, procedures regulating outstanding shares issued in accordance with the
Law on Ownership and Management Transformation, procedures related to open
investment fund, or transactions with securities issued by central (national) banks.82
Adoption of the Law on Exchange and Securities Market was foreseen by legislative
plan of the Parliament for IV quarter of 2012, was delayed for IV quarter of 2013. This
Law should address existing ambiguities in legislative framework which regulates this
area and to align standards of trade on exchange and securities market with European
directives.
Law on Overtake of Joint Stock Companies sets conditions, modalities and procedures
73/10 from 10/12/2010, 40/11 from 08/08/2011, 06/13 from 31/01/2013)
73/10, 40/11, 06/13),
48
for public offering of takeover and the rights and obligations of participants in the
takeover.83 This Law was brought in 2004 and it was innovated in 2011 for the last time.
Key novelties introduced in the Law are:
»The threshold for mandatory takeover of joint stock companies has shifted from
40% of ownership stake to 30% of ownership stake. Namely, when acquirer buys
from issuer over 30% shares, he is obliged to publish a takeover bid for shares of
every shareholder in that company at the same price.
»Compulsory acquisition of shares from small shareholders (squeeze out) was
introduced. This practice gives the right to major shareholder, who acquires 95%
of shares in joint stock company can purchase remaining 5% of shares at the same
price he acquired remaining shares, without consent of minority shareholders.
Important document for prevention of corruption and economic crime is Guidelines on
risk analysis for money laundering and procedures for the detection of suspicious
transactions, adopted in 2008, on the basis of the Law on Prevention of Money
for acceptance of a client, possibilities of control of high risk transactions and clients,
on exchange and securities market have the obligation to lead registries of politically
exposed persons in electronic databases, as well as to conduct in depth inspections of
transactions.84
Criminal Code in Chapter XXIII sets prison sentences for following crimes: forging
securities, illegal conducting of stock exchange, issuing of fraudulent securities and
disclosing of business secret. Also, amendments of the Criminal Code, which are in
parliamentary procedure, are addressing insider trading and manipulation of the stock
market.85
Exchange and Securities Commission is an independent institution elected by the
Parliament of Montenegro on proposal of the Government. Criteria for election of
Commission independent in their functioning. Annual report of Commission shall be
submitted to the Government and the Parliament.
Central Depository Agency - is a joint stock company which is founded by the state and
its shareholders be: the state, authorized participants on the exchange and securities
market, stock markets, banks and other legal entities. Biggest shareholders of CDA
are: 35% - Central Bank of Montenegro, 25% - Private Investment Fund „Aureus“ from
Croatia, 15% - OTP bank (CKB), 10% - Collective custody account, 7% - Atlas Fin and
four minor banks 2%.
4.2 Effectiveness of legal and institutional framework
Exchange and Securities Commission (hereinafter: ESC) is authorized to conduct control
84 Guidelines on risk analysis for money laundering and „know your client“ and other procedures for the detection
of suspicious transactions
2 Chapter - economic corruption
49
of operations of subjects to the Law on Securities. Also, the Commission can conduct
investigation in cases of fraud, deception and embezzlement as well as to demand
information from all registered security owners, entities who have rights from securities,
as well as from entities who presumably own securities or rights from securities.86
Besides regular controls conducted by the Commission, Guidelines are setting 10 risk
indicators which are requiring in-depth investigations of transactions with securities:
geographical risks (state of origin of the client, or entities trading with client is on the
list of off-shore countries), client or entities that are trading with client are on the list
of persons against which were conducted measures for ensuring international peace
and security, unknown or unclear source of funds of client, suspicion that client acts on
demand of a third party, unusual way of transaction, indications that the client conducts
suspicious transaction, client is a politically exposed person, accounts of other persons
87
Securities and Exchange Commission, in accordance with its jurisdictions, has had
C has directly submitted 2 demands for initiation of misdemeanor procedure and
of 23 transactions, on the basis of violation of Articles 102-106 of the Law on Securities.
securities exchange market, in 2012 ESC has submitted to the Administration for the
88
Central Depository Agency (hereinafter: CDA), Brokers and Stock Markets, through
regular activities and reports of suspicious transactions are notifying Administration
transactions on securities market. Reports are submitted to the Administration in hard
copy and electronic form. Through analysis of reports, certain transactions are extracted
by application of indicators. If there are enough data which are indicating on possible
money laundering, Administration is opening an analysis for this entity.89 However, these
analyses are encompassing a large amount of data on physical or legal entity, so there is
no statistics on number of processed cases of money laundering through exchange and
securities market.
assessment from money laundering in period 2013/2014, in 5 different areas, one of
73/10, 40/11, 06/13),
87 Guidelines on risk analysis for money laundering and „know your client“ and other procedures for the detection
of suspicious transactions.
88 Exchange and Securities Commission– replies to questionnaire of CeMI
89 Administration for the Prevention of Money Laundering and Financing of Terrorism – Reply to Free Access t the
Information Demand No. 0601-9/2-13, 4/07/ 2013
50
which is exchange and securities market. This assessment should provide guidelines for
of money laundering through securities market.
4.2.1 Limitations of existing system of control
Taking in consideration that Central Depositary Agency is a joint stock company,
other subjects on exchange and securities market arises. Namely, there is a possibility
for shareholders of CDA, who are at the same time participants at the securities market,
to other competitors on securities market. Also, bearing in mind that membership in
CDA is necessary in order to perform transactions on securities market, the possibility
of delay and refusal of decision on membership, which is left to CDA is problematic.
This possibility is offered through Rules of Central Depository Agency, in the part of
the accession procedures, by provision 3.7 „Agency can delay bringing of the decision
on membership, up to the moment in which it will possess adequate capacities and
equipment for data processing or other working material to provide services for new
members“. Although such cases in practice were not documented, provision of this kind
leaves the impression that membership in CDA could be prevented or delayed on the
basis of unclear criteria. When we are speaking about functioning of central depositary
bodies, in the region there are only two depositary agencies which are established
as shareholder companies – Central Registry of Securities in Macedonia and Central
Registry of Securities from Banja Luka, while depositary agencies of Slovenia, Croatia,
and Serbia, are state institutions. Additionally, Rules on functioning of Central Registries
of Securities from Banja Luka and Macedonia are foreseeing possibility of declining
Important segment of securities market – privatization through acquisition of
majority package of shares, is still not adequately regulated. Namely, this procedure
is still being regulated by the Law on Privatization of Economy of Montenegro, adopted
in 1999, and in period 1999-2013 only amendment was shortening of the Law for
several articles. This Law still envisages Agency for Reconstruction of the Economy and
Foreign Investments as relevant authority for control of the implementation of this Law,
and this Agency seized to exist several years ago. This jurisdiction is later entrusted
to Ministry of Economy, by special law. Legal acts controlling this area are not treating
information. Previous contracts on privatization are not published entirely, although
that is commitment of Montenegro foreseen in Open Government Partnership. Members
of 3 tender commission who are conducting privatization processes, are appointed by
the Privatization Council, on the basis of professional criteria and working experience90,
commissions.
Privatization through acquisition of majority package of shares can be done through
market or non-market transaction, but in both cases there is no control of this transaction
by an independent institution, in a way it is regulated for other securities transactions.
90 Interview with Secretary of the Privatization Council, 19/06/2013.
2 Chapter - economic corruption
51
One of the key problems of transactions on securities and exchange market is a concept
of squeeze out of minority shareholders
of a shareholder company to acquire remaining 5% stocks from minority shareholders,
at the same price by which remaining shares were acquired, without their consent. This
provision of the Law is very problematic from the point of constitutionality, taking in
consideration that the Constitution of Montenegro guarantees inalienability of personal
property, which is endangered by this provision. Main purpose of the Law on Overtake
Finally, coordination with other institutions and civil society in the process of the
Administration for Prevention of Money Laundering and Financing of Terrorism. By the
requires data on real estate, private companies and transactions on securities market
order for this body to have insight not only in annual data, but also in interests of public
conclusion that electronic linkage of data of SCE, CDA, custodians and CPCI is a priority
for the next period.91
Lack of transparency of shareholder companies’ ownership structure also
publishes a list of 10 major shareholders of stock company, but not the list of minority
shareholders. Also, some of majority shareholders are collective custody accounts,
whose identity is known only to custody bank. This prevents access to the information
to pass the procedure of requesting and obtaining of information, exclusively on their
Lack of transparency of transactions conducted through custody accounts Namely,
transactions on the exchange and securities market can be conducted by banks for the
client, through two types of custody accounts: owners’ custody accounts and collective
custody accounts. While owners’ custody accounts are opened in the name of the client
and for the client, and those transactions can be easily controlled, collective custody
accounts are opened in the name of the bank at CDA, and for the client, so institutions
don’t have information on owners of those accounts until banks themselves notify them
on risky transactions, on the basis of which institutions can request data on owners of
these accounts.
As it was mentioned, Law on Prevention of Money Laundering and Financing of Terrorism,
as well as the Guidelines are setting the obligation for participants at the exchange and
securities market to keep electronic registries of politically exposed persons and to
notify Administration for Prevention of Money Laundering and Financing of Terrorism
91 Interview with SCE representatives, September 2013
52
on risky transactions of these persons. Taking in consideration that institutions don’t
have direct insight in the registry of politically exposed persons, question of
interests arises when politically exposed persons, or persons connected with them, are
also shareholders in the custody banks. Will those banks treat their owners the same way
they treat other clients, and will they report on their owners’ suspicious transactions?
During controls conducted by SCE, in the last three years, cases of concealing of risky
transactions by custody banks were not found.
4.3 Conclusions and recommendations
1. Type of ownership status of CDA should be reconsidered. Although the biggest
shareholder with 35% of shares is Central Bank of Montenegro, majority of shares
are in hands of private banks and investment funds which are governed by private
interests. In case that CDA still remains shareholder company, it is necessary to
increase stake in the ownership of the Central Bank to 51%.
2. Privatization process through acquiring of majority package of shares should be
better regulated. Current legislative framework doesn’t provide protection from
abuses and corruption. It is necessary to introduce control of professional, not
only politic body over this process, which could be achieved by inclusion of this
process in framework of the new Law on Exchange and Securities Market and Law
Commission would, as independent and professional institution could conduct
control of this process and prevent possible abuses..
3.
Companies, because the concept of squeeze out violates constitutional and human
rights and freedoms of minority shareholders.
4.
of Interests should be improved in part of control of data from reports on income
5. It is necessary that CDA provide higher transparency of ownership structure and
publish at least 15 biggest shareholders of each shareholder company, as well as
to keep record on owners of custody accounts.
6. Improve statistics related to money laundering through exchange and securities
market Administration for Prevention of Money Laundering and Financing of
Terrorism should keep the registry of all controlled transactions on securities
market, in accordance with the item 38 of the preamble of EU Directive 2005/60/
EC
7. Taking in consideration that banks are obliged to keep registries on transactions
control these registries in banks where such clients have stake in ownership.
8. It is necessary to strengthen responsibility of banks through reporting obligations
and suitable control procedures.
PREVENTIVE MECHANISMS
- THE INTEGRITY AND
TRANSPARENCY
2 Chapter - economic corruption
53
1. Integrity plans and ethical codes
Given the fact that Montenegro does not have embedded culture of awareness of the
harm and the moral dimension of accession and acts of corruption, great importance
should be given to the awakening of awerness of the citizens so they will not commit acts
that may create corrupt relationships. In addition, the main role has moral standards,
codes of ethics and integrity plans of the individual and society.
1.1 Characteristics and effectiveness of the legal and institutional framework
Integrity plans92 are one of the most modern preventive methods for establishing the
legal and ethical work of government and other institutions in society, which prevents
and combat possibility for development of corruption in the certain institution. It can be
order to eliminate ways of corruption and prevention of the occurrence of possibility for
corruption within the organization as a whole or parts of the organization and individual
and implementation of the integrity plans in Montenegro must be institutionally and
professionally supported and plans have to be legally binding.
The Law on Civil Servants and State Employees,93 which started being implemented
plans, recognizing integrity plans as an effective mechanisms for improvement of the
institutions’ integrity and strengthening institutional capacities for protection from
Civil Servants and State Employees, based on the estimation of susceptibility of a certain
positions to the occurrence and development of corruption and other forms of biased
actions, stipulates that each state agency should adopt an integrity plan that includes
measures to prevent and eliminate the possibility of the emergence and development
of corruption. At the same time, this Law obliges the administrative authority in charge
92 Integrity means also the way of behaviour of the institution and persons who are acting fair, indipendent ,
impartial, transparent, etc. The person which has integrity acts in accordance with the moral and is not not
subject to unethical or immoral (corrupt) activities.
http://www.usscg.me/docs/Zakon%20o%20drzavnim%20sluzbenicima%20i%20namjestenicima.pdf
PREVENTIVE MECHANISMS
- THE INTEGRITY AND
TRANSPARENCY
54
of anti-corruption policies, to adopt guidelines for the adoption of Integrity Plans of
institutions. The body in charge of monitoring of the implementation of integrity plans
is the Directorate for Anti-Corruption Initiative.
Obligation to adopt integrity plans in all organs of state administration is also stated
in the Innovated Action Plan for the Implementation of the Strategy for the Fight
against Corruption and Organized Crime for the period 2013-2014.94 The action
plan includes the obligation which obliges the administrative authority that is in charge
of anti-corruption, to adopt guidelines for the adoption of Integrity Plans of authorities.
Although it is the requirement to adopt integrity plans in all public administration
the Innovated Action Plan for the Implementation of the Strategy for the Fight against
Corruption and Organized Crime for the period 2013-2014, this obligation was met
95,
Ministry of Finance, Customs Administration, Real Estate Administration and Tax
Administration.
adopting the document containing guidelines for the adoption of integrity plans whose
application relates to the state authorities. 96
Directorate for Anti-corruption Initiative, the body in charge for monitoring the
implementation of integrity plans, created a form and draft of integrity plan which helps
97
In order to achieve better implementation of guidelines for developing integrity plans,
Directorate for Anti-Corruption Initiative has conducted six trainings for managers
of integrity, for representatives of 26 Montenegrin institutions, in order to facilitate
effective implementation of guidelines for development of integrity plans.
During 2012 and 2013, the Human Resource Management has implemented 8 seminars
Ministry of Economy, Ministry of Transport, Ministry of Culture, Pension Insurance Fund,
and Administration for the Prevention of Money Laundering. Earlier Human Resource
Ministry of Interior, Ministry of Health, Ministry of Sustainable Development, Ministry
of Foreign Affairs and European Integration and Ministry of Defense and Directorate
for Gambling.98 At the same time, HRM has implemented several trainings with the
aimed at detecting and combating of corruption, as well as to promote creation of
organized crime for the period 2013-2014 http://www.antikorupcija.me/index.php?option=com_
phocadownload&view=category&id=7:&Itemid=91
95 Integrity Plan adopted by the Directorate for Anti-corruption Initiative
http://www.antikorupcija.me/
index.php?option=com_phocadownload&view=category&id=31:integritet-smjernice-i-obrasci
97 http://www.antikorupcija.me/index.php?option=com_phocadownload&view=category&id=31:integ
ritet-smjernice-i-obrasci
98 Data about implemented trainings of Human Resource Management, on the topic of integrity, are collected
3 Chapter - preventive mechanisms -
the integrity and transparency
55
procedures susceptible to risk of abuse of powers as well as establishment of procedures
and standards that promote integrity and also reduce the risk of corruption.
During 2013, Directorate for Anticorruption Initiative, with help of experts from the
75 representatives from 52 institutions, as well as numerous seminars and trainings on
the promotion and implementation of integrity plans.
From the data on a very small number of institutions that have adopted integrity plans,
in Montenegro integrity plan is still not used as an important anti-corruption measure,
which should be the result of the assessment of exposure of a certain institution to
risks for formation and development of corruption and undertaking of ethical and
professionally unacceptable activities.
Code of Ethics, whose adoption
national level. These codes are set of regulations and they include a set of ethical rules
Code of Ethics for Civil Servants and State Employees was adopted in March 2012
2013.99 Code of Ethics stipulates an obligation of institutions to ensure establishment
of mechanisms for the implementation of the Code through the work of disciplinary
authorities, as well as obligation of periodic reviews of compliance with the code in
order to ensure that service-oriented government administration builds the trust
and rules of conduct for civil servants and state employees in ministries, government
institutions, service of the President of Montenegro, the Montenegrin Parliament, the
the same time, the Code of Ethics is applying to the employees of the Pension Insurance
Fund of Montenegro, Health Insurance Fund of Montenegro, Employment Agency of
Montenegro, Labor Fund and the Agency for the Peaceful Resolution of Labor Disputes.
Aim of adoption of Code of Ethics is preservation, recognition and improvement of
dignity and reputation of civil servants and state employees and strengthening of the
public trust in the work of authorities.
Violation of the provisions of the Code of Ethics is subject to disciplinary responsibility
the Code of Ethics provides the establishment of the Ethics Committee, which is
responsible for monitoring the implementation of the Code itself. The Board consists of
four members: three representatives employed in the judiciary, public administration,
the Parliament of Montenegro and one representative of the representative trade union
organization. All the members are appointed by the Government, at the proposal of
the state government. Although it was founded in March 2013, the Committee had met
of the Ethics Committee, but without concrete work results. 100 However, according to
http://www.uzk.co.me/index.
php?option=com_content&view=article&id=1536&Itemid=237&lang=sr
56
the Regulation on the work of the Ethics Committee, the Committee shall meet when
needed, but at least once a month. At the same time, the competencies of the Committee
»
»provides opinions regarding the implementation of the new Code of Ethics;
»
»promotes ethical standards and rules of conduct in public bodies.101
What is particularly remarkable is that the Ethics Committee at its meetings gives an
votes of the members of the Ethics Committee. Therefore, with the complaint is initiated
the disciplinary proceeding itself is initiated by the head of the state authority on a
proposal of direct superior.
However, in state bodies in Montenegro there is no routine of implementation of
disciplinary procedures in cases of violation of ethical standards and rules of conduct
prescribed by the Code.102 In fact, implementation of disciplinary proceedings and
imposing of disciplinary measures in cases of violations of the above rules and standards,
especially in cases of acts of corruption, is a real rarity. 103
The Code of Ethics also foresees for the employees of the certain state institutions,
following the ethical standards and rules of conduct prescribed by the Code of Ethics,
104
of which is monitored by the Ethics Committee, in order to establish the mechanism for
At the same time, the Code of Ethics of the Agency for the Protection of Personal Data
and the Free Access to the Information came into force in 2010.
Ethics, the Action Plan for Fight against Corruption and Organized Crime has foreseen
the implementation of several training programs, as well as the commitment to respect
101 Article 19 of the Code of Ethics
102
103 From 46 respondents of the state authorities, only the Tax Administration had two cases of disciplinary
of Ethics. It is especially interesting that until now there were no disciplinary proceedings against judges for
corrupt actions.
104 Article 20 of the Code of Ethics
3 Chapter - preventive mechanisms -
the integrity and transparency
57
government bodies, as well as trainings on ethics in the conduct of civil servants, which
was attended by 54 civil servants.
In particular, it is important that the authorities are obliged to prepare annual reports
expected early in 2014.
1.2 Conclusions and recommendations
1.
systems based on integrity, and in that way, in accordance with the tradition of
against corruption, it is necessary to legally regulate this area by adopting a
duty of all state bodies to develop integrity plans, by a special law, which is very
important in the context of risk assessment for occurrence of corruption. Also of
a great importance is to clearly set the control over implementation of these legal
integrity plans.
2. Bearing in mind that Montenegrin state bodies haven’t adopted integrity plans,
deadlines. In addition, it is very important to strengthen the integrity plans, and
and the imposing of appropriate sanctions for them. At the same time, in order
to effectively reduce corruption, development and implementation of integrity
plans and codes of ethics should be institutionally and professionally supported,
adapted to the needs of each individual institution. It is also necessary to include
risk assessments for occurrence of corruption, description of work processes,
methods of decision-making and evaluation of corruption susceptibility for all
corruption.
3. It is necessary to strengthen the capacities and powers of the Ethics Committee.
4.
corruption are very limited. In accordance with the recommendations of CeMI,
which are integrated in the Action Plan for the Chapter 23,105 strengthening of the
105 In accordance with the recommendations contained in the Action Plan for 23, in order to further
corruption body, based on the law. In this sense, it would be established the Anti-Corruption Agency as an
independent and autonomous anti-corruption body (in accordance with the Article 6 of the UNCAC and
ACA standards) that will enhance competencies of the existing jurisdiction of UAI, CPCI and competence
of the SEC in the control over the funding of political parties and election campaigns, and responsibilities
organized crime. The agency will combine human and technical capacities, UAI and CPCI and part of the
staff in the service of SEC, ie. and also employ a number of new staff to meet the new requirements of the
Agency’s responsibilities.
58
the further development and progress in this area. Among other responsibilities,106
the Agency should have the jurisdiction over coordination of institutional actions,
against corruption with supporting action plans, coordination and supervision of
the protection of whistleblowers and the responsibility to initialize conclusion of
the international agreements and submitting amendments to existing regulations
aimed at the full implementation of international anti-corruption standards.
2. Protection of Whistleblowers
Persons who report corruption, so-called “Whistleblowers”107 are very important in
the process of detection and prosecution of various offenses of corruption, particularly
process of substantiation of such acts. Due to this important role of these people in
detection and suppression of acts of corruption, modern democratic states guarantee
protection of these persons through laws, in particular job protection against dismissal
or potential abuse by employers.
2.1. Characteristics and effectiveness of the legal and institutional framework
According to the existing legal regulations in Montenegro, a person that has knowledge
or suspicion of committed corruptive act, or who can provide information of interest
for the detection of corruption offenses and on their perpetrators, in accordance with
to receive reports on corruption. In Montenegro, it is possible to report corruption to
numerous institutions including: Directorate for Anti-Corruption Initiative108 and Police
(by phone, fax, mail, e-mail, on-line at the website or directly at the premises of these
institutions), while other institutions have open phone lines through which citizens can
report cases of corruption. Among these institutions are: Ministry of Health, Ministry
Administration, Tax Administration, Directorate for Gambling, Directorate for Public
Procurement, Investment and Development Fund of Montenegro, National Commission
for the Implementation of the Strategy for the Fight against Corruption and Organized
Crime.
However, systemic protection of whistleblowers doesn’t exist in Montenegro. The area
106 Responsibilities of the agnecy would be related to coordination and monitoring of the implementation
supervision of the implementation of integrity plans; direct implementation and application of the Law on
whistleblowers and the initiation of the international agreements and amendments of reglations aimed
at the full implementation of international anti-corruption standards.
107 The term whistleblower comes from the English word “whistleblower”, and refers to a person who
reports illegal conduct to the competent authorities.
108
not trained to receive reports and further process it to authorities.
3 Chapter - preventive mechanisms -
the integrity and transparency
59
of protection of whistleblowers is regulated by the following documents:
Labor Law and Amendments to the Labor Law109 provide the protection of all
employed persons, while there are not explicitly mentioned mechanisms and ways of
employee protection on the grounds of reporting corruption cases.
110 guarantees the protection of all
persons who report criminal acts of corruption. This protection provides protection
for disclosure of the identity to unauthorized persons and protection from abuse,
deprivation or restriction of the rights guaranteed to employed persons by the law.
The Law also provides the protection, in accordance with the special regulations on the
protection of witnesses, if a person is exposed to real and serious danger to life, health,
physical integrity, freedom or property.
for the period
2010 - 2014, as well as the Action Plan for its implementation for the period 2013-2014,
foresees concrete actions to improve the mechanisms and measures for the protection
of whistleblowers. Based on the Action Plan for the Fight against Corruption and
Organized Crime, in 2008 the Police have adopted Technical Manual on Procedures
for Reporting Criminal Acts of Corruption and Protection of Persons who Report
these Crimes to the Police. This Instruction stipulates procedures for reporting
reports of corruption, protection of citizens who report corruption and methods
conducting protective procedures. The person who reports corruption to the Police
can do it in several ways: in writing or verbally, by mail, telephone, fax, electronic or
protect both the identity of the whistleblower and the contents of the application and
must comply with the following principles: respect for human rights and dignity of the
prohibition on the use of data, contrary to the purpose for which it was collected and the
obliged to: protect the identity of the whistleblower; protect contents of the report or
data on corruption; take immediate security assessment of the threat focused on the
corruption or who revealed information about it; take measures to protect persons in
protection of witnesses in accordance with the relevant law.
Directorate for Anticorruption Initiative and other relevant institutions in Montenegro
over the past two years have carried out several anti-corruption campaigns in order
to ways that they can use to report corruption to authorities. On the other hand, the
Human Resources Administration in the past few months has organized four trainings
the protection of citizens who report acts of corruption.
50/08 from August 19, 2008)
60
However, in Montenegro, as in many other countries, people are very reluctant to notify
the competent institution of corruption offenses about which they are informed. Therefore
it is very important that national regulations are very clear, and at the same aligned with
the international regulations when it comes to the protection of whistleblowers.
of the Strategy for the Fight Against Corruption and Organized Crime for the period
2013-2014, the mandatory reporting on semi-annual analysis of the application of
regulations concerning the protection of whistleblowers, which included information
on the number of reports of acts of corruption in the private and public sectors, the
number of new investigations, the number of prosecutions, court judgments and the
number of persons for suffered consequences because they reported corruption, the
relevant institutions have not carried out this kind of analysis.
According to data provided by the police, in the last year there have not been cases of
complaints on the grounds of suffered consequences due to reporting the corruption.
At the same time, according to data from reporting documents, there were no reports
data are showing that over the past two years, the competent institutions submitted
178 corruption reports, of which 140 are referred to local prosecutors and police for
further procedure.
When it comes to international regulations in this area, we should bear in mind that the
111 as well as the Article
22 Council of Europe’s Criminal Law Convention on Corruption stipulate protection
of collaborators and witnesses.112 In this Scope, especially important document is the
Legal Guide for the implementation of the UN Convention against Corruption which
stipulates that “as long as people don’t feel free to witness and report their experience
or knowledge on corruption, all the objectives of the UN Convention against Corruption
will be threatened”.113 In accordance with this, states signatories have the duty to
undertake necessary measures to prevent possible revenge or intimidation of witnesses,
victims, or experts. States are also encouraged to adopt rules to enhance protection
of whistleblowers. Additionally, it is recommended to adopt special law which would
contain mechanisms of witness protection, and protection of experts and other persons
2.2. Conclusions and recommendations
1. It is necessary to adopt a comprehensive law on protection of whistleblowers, in
of corruption, clear reporting and processing procedures and further measures
of protection and sanctions in cases when whistleblowers are threatened or
penalized.
2. The area of protection of whistleblowers in existing legal regulations should be
http://www.unodc.
org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf
112 Criminal Law Convention on Corruption, 1999. http://conventions.coe.int/Treaty/en/Treaties/html/173.
htm
113 Legal Guide for the implementation of the UN Convention against Corruption, 2006, Article 141.
3 Chapter - preventive mechanisms -
the integrity and transparency
61
expanded and strengthened. Namely, in the Labor Law and the Law on Civil Servants
and Employees more attention should be paid to methods and mechanisms of
protection of these persons, both in domain of protection of their identity and in
domain of protection against discharge or abuse on their working place on the
within the existing legislative in Montenegro, it is very important to bear in mind
European and international standards regarding clear rules, standards of ethic
and conditions under which persons could report on corruption: reporting of
and substantiation of corruption should be clear and precise, with guaranteed legal
remedies against harmful consequences; discrimination on any grounds in these
procedures must be banned; relevant authorities should undertake all measures
to stimulate reporting corruption and strengthen internal order.
3.
whistleblowers are employed on the basis of intimidation, limitation or castigating
of these persons, is very important for improvement of this area in Montenegro.
4. In accordance with abovementioned CeMI’s initiatives, integrated in
recommendations of international community for improvement of the institutional
anticorruption body would have important authorizations for oversight of
adoption and monitoring of strategic and legal documents that regulate area of
protection of whistleblowers.
3. Free Access to the Information
3.1. Characteristics of institutional and legal framework
Free access to the information is of crucial importance for civil control of the
governance. The new Law on Free Access to Information114
17th
Implementation of the Law on Free Access to Information is within jurisdiction of all
of local self-administrations, companies and other legal entities founded, co-founded
or partially owned by the state, legal entity mainly funded from public funds, as well as
entrepreneur, physical or legal entity who conducts public authority, or manages public
funds.
Besides the Law on Free Access to Information, laws applied in the process of obtaining
information of public interest are: the Law on protection of Personal Data, Law on Data
Secrecy, the Law on Administrative Procedure, Law on Administrative Disputes and the
Law on inspectional supervision.115
114
http://www.sluzbenilist.me/
115
sistema pristupa informacijama
62
2012, as one of the measures from Innovated Action Plan for the Fight against Corruption
and Organized Crime (2013-2014) it is very important to assess provisions of this law
against recommendations of the international community for improvement of this area.
Within the analysis we will also point out novelties in respect to the previous Law. In
this context it is important to point out following provisions:
»By the new Law principles on the regulation of the procedure for the free access
to information are precisely regulated. However, urgency of procedure contained
the extension of the deadline for the state authorities to resolve the requests
for access to information, from initial 8 to 15 working days. This solution can be
considered understandable in the case of delivering comprehensive and extensive
information, but it is not favorable for the applicant in cases of emergency;
»The new law further elaborated provisions on the access to information, especially
in the part of regulation of the guides for the access to information. Each authority
is obliged to provide clearer insight into the data that may be of public interest, and
to facilitate the process of obtaining the necessary information to stakeholders.
This practice is still not accepted in the work of institutions, and thus it slows
Government. Regularly updated guides for access to information should contribute
exercise their rights on free access to information;
»
the publishing of the information and deadlines for action, through a proactive
approach to information, which is a novelty comparing to the previous law.
Through this way of action the authorities allow interested parties to, through the
availability of all relevant documents, get the information they are interested for
without the request.
»The Law precisely lists the situations in which the authorities have the right to
restrict access to information:
- The novelty of the new Law in this area is that it contains provisions that
harm test for disclosure of
information. Provision of the harm test for disclosure of information does not
stipulate in which way this test should be performed and by what criteria, which
leaves an opportunity of various abuses by the authorities.
- The law allows the restriction of access to information in the interest of
security, defense, monetary, foreign and economic policy of Montenegro, in
also leaves possibility for authorities to assess prevailing public interest, without
guarantee that the responsible body will objectively assess the interest.
- represents a positive
solution in domain of access to the information, due to the fact that
3 Chapter - preventive mechanisms -
the integrity and transparency
63
after expiring of this period;
»The new Law foresees detailed procedure for access to information, and
introduces a novelty- possibility of verbal request for access to information, which
is improvement in comparison to the earlier legislation which only provided
a written request. A verbal request shall be submitted to the authorities when
direct access to an information is needed or when the applicant is located in the
premises of the authority;
»The new law insists on the commitment of authorities to, in accordance with their
responsibilities, assist the applicant to gain access to the requested information.
This legal arrangement implies that the authority should not refuse a request
for free access to information, if it can determine to which information request
creation of this policy study;
»Another novelty of the Law is provision which stipulates that there’s no need for
the authority to pass a decision on request for free access to the information, when
this access is granted through direct insight into public register, immediately upon
submission of the request;
»The new Law also sets deadlines for execution of the decision, which is a positive
change, since it leaves no room for delay in the proceedings. The deadline for
implementation of the decision is three working days from the day of the delivering
proof of payment of court costs, if they are foreseen by the decision;
»The new Law has transferred jurisdiction of control over its implementation, from
the Ministry of Culture and Media to the Agency for the Protection of Personal
Data and Free Access to Information;
»Majority of objections to the previous law, emphasized by the European Union, were
related to lack of a second instance appellate authority for the implementation of
this Law, and lack of balance between the Law on Free Access to Information and
the Law on Protection of Personal Data116, the most important novelty introduced
by the Law, is the process of deciding on the appeal against the decision of the
public authority which decides upon the request for access to information. Namely,
by the new Law jurisdiction to decide on the appeal was given to the Agency
for the Protection of Personal Data and Free Access to Information, which is an
the Agency and of the Council of the Agency, as well as the operation and cooperation
with other authorities. This legal decision on the two-instance procedure is an
important solution for progress in this area. Disputable issue arising in relation
address the complaints, having in mind the importance of exercising the right to
information. On the other hand, although the Law allowed possibility of appeal to
for cases of „ administration silence “, i.e. in cases when the governmental body
does not respond to the request of the applicant at all, which is a very common
case in Montenegro;
116 The report of the European Commission on the progress of Montenegro for 2011, p 61
64
»
subjects to the law, i.e. “public authority” are also companies founded by the state,
or partially owned by the state, but it does not specify what percentage of the
shares is necessary in order to observe a company as the public authority, subject
to the law. So far, this provision was interpreted in the way that the state must be
a major shareholder in a company, in order to be observed as public authority,
budget, beyond the scope of the Law.
»Also, the new Law introduces an exception for appeals on decisions restricting
administrative dispute. These provisions are also specifying valid reasons for
submission of appeals. The Council of the Agency for Protection of Personal data
and the Free Access to Information decides on the appeal. This body is consisted
of President and two members who shall be appointed by the Parliament of
Montenegro, at the proposal of the competent working body. 117
117 The Council of the Agency decides by majority of votes from total number of the members of the
Council. The key responsibilities of the Council of the Agency are to make rules of the Agency; adopts
statute and act on systematization, with consent of the working body, as well as other acts of the Agency;
prepares annual and special report in the condition of protection of personal data; determines annual
plan and balance sheet; makes decisions upon requests for protection of rights and in other cases after
no. 79/08 and 70/o9).
3 Chapter - preventive mechanisms -
the integrity and transparency
65
a decision on termination of the procedure, while in 176 cases a decision is made. Below
is a statistics of the number of submitted requests to the Agency for the Protection of
118, as well as
the tabulation of the number of complaints submitted to the Agency for the protection
procedures.
Other responsibilities of the Agency for the Protection of Personal Data and Free Access
to Information are related to the control over the implementation of the law and legal
proceedings for violations of the law. The Council of the Agency initiates the cooperation
with the authorities through the right to require providing of documents and information
which are necessary for decision upon a request and initiates an inspection control that
determines whether a public authority holds the requested information.
In order to enable the Agency to conduct a unique information system that provides access
to information and databases, it is necessary to strengthen the capacities of this body
and to create the information system so the Agency can be able to apply this provision
in practice, as well as a very substantial part of cooperation between all authorities with
the Agency. This legal determination absolutely was not implemented in the practice.
Furthermore, this causes the fact, that keeping the registry, although provided by the
118 For the preparation of this report the data were obtained during interviews with the competent persons of the
Agency.
Total of received demands
254
Approved
154
Partially approved
10
Transferred to another body
1
Rejected
77
Dismissed
3
Withouth decision
9
Lack of information
49
Published information
8
Not in jurisdiction of the Agency
7
Rejected as groundless
6
Rejected because it requested a
new information
3
Rejected because of privacy
1
Rejected without stating any
1
Total received complaints
140
Adopted compalaints
94
Suspended proceedings by
conclusion
33
Partially adopted complaints
2
Rejected complaints - total
11
Rejected complaints on grounds
of “legal entity is not subject to
the law”
1
Rejected complaints on grounds
of “legal entity is not prevalently
�inanced from the public funds”
7
Rejected complaints on grounds
of “improper implementation of
the Law on FAI”
1
By decision is fully adopted
request of the FAI
1
Information published on the
Web site of the body
1
protection
reasons
66
new Law, is not implemented in practice and there is no reliable data showing that the
percentage of answered requests increased. According to data provided by the Agency,
The inspection supervision over the implementation of the Law was assigned to the
Ministry of Interior, in difference to the previous law, which was determining for the
supervisory authority the Ministry responsible for the media and the Ministry of Culture.
offense.
3.2. Recommendations for improvement
1. It is necessary to very precisely determine sanctions for bodies that do not respond
to free access to the information demands and implement these provisions in
practice. At the same time, in creation of this new legal solution, it is necessary
to refer to the EU Regulation no 1049/2011 on public access to documents of the
European Parliament, Council and Commission, which foresees the submission of
the applicant has the right to appeal, because it is considered that the answer is
negative.
2.
public interest for disclosure of information or denial of access to the information.
3. It is necessary to pay more attention to informing the public of its right to access
adequate training of civil servants on their responsibilities regarding facilitation
of exercising of that right.
4. In order to promote transparency of state administration and improvement
interest, it is recommended that the public authority itself, on its own initiative
and in accordance with the legal and ethical requirements and standards, disclose
information in their possession.
5. It is necessary to precisely determine exact percentage of ownership that state
authority and subject to the Law. Our proposal is that it should be every company
in which the state has over 10% of shares, or it is in the top 10 shareholders.
6. It is necessary to strengthen the capacities of the Agency for Protection of Personal
Data and Free Access to Information through engagement of additional staff and
67
CONCLUSION
In the past year it was possible to monitor the implementation of the set of anti-
corruption laws passed in 2011-2012: Law on Financing of Political Parties, the Law on
engagement of the civil society and the international community’s recommendations,
a number of necessary changes were not introduced to these laws, which was later
noted through the problems in their implementation. In this reporting period, through
the adoption of measures for the Action Plan for Chapter 23, the decision makers have
acknowledged that the legislative framework was not designed properly, and that it
two years. An additional problem is too extensive period for the establishment of the
Agency, which is supposed to deal with the implementation of most of these laws, which
leaves us in doubt whether the laws will be changed twice in the next 3 years - before and
after the establishment of the Agency? A number of changes to the laws don’t provide
time for the track record of its implementation, which is one of the essential conditions
for the successful closure of the Chapter 23.
capacities to enforce the law; Laws based on international standards and their consistent
each separate area of this study.
In the area of the economic corruption, legislative activity is much slower, and for a long
time there have not been a change of the fundamental laws necessary for the prevention
and suppression of corruption in the creation of the state budget and disposition of
public funds and property. The Law on Budget and Fiscal Responsibility, Law on SAI,
needs of anti-corruption policies.
In order to successfully combat and prevent economic corruption, it is necessary
to ensure a participatory and transparent procedure for the adoption of the budget,
institutions that would guarantee timely investigations and appropriate sanctions for
budget users who consciously manage funds or misuse them; greater responsibility
independent control of the privatization process.
political will than was shown in the past and de-politicization of public administration
step in converting the quantitative results, which we had so far, to qualitative results
that indicate substantial and not nominal law enforcement at all levels.