03 Nov 2017

Overhaul of the Serbian Competition Law – Where Are We Now?

A series of interesting developments, unorthodox actions and landmark decisions surrounding the Serbian Protection of Competition Act that took place in recent months seem to be approaching its final resolution in the form of a brand new competition act that will enhance market competition and at the same time protect companies’ human rights.

As this peculiar story approaches its final chapter, we analyse the chronological developments and measure expectations on a potentially milestone development for both Serbia, the region and the European antitrust discourse as a whole.

The Uprising

The first signs of what was to come happened in late May 2017, when the Commission for Protection of Competition (the Serbian competition authority (SCA)) suddenly opened investigations against a number of local and foreign companies suspected of committing competition infringements (see The dawn of dawn raids or the twilight of due process in Serbia?).

The SCA carried out an unusually high number of unannounced inspections, thus allowing itself to benefit from the (quite favourable) temporal scope of the New Administrative Act that came into force only couple days later, after a 18-month vacatio legis [statutory delay between promulgation and coming into force, in order for authorities to better prepare for the new statute], stating that “all proceedings that have been initiated but not completed by the date of entry into force of this act will be governed by the provisions of the previous act [with much lower standards of human rights protection]”.

Human rights protection introduced by the New Administrative Act slipped through the fingers of the ‘accused’ companies and threatened to potentially find a way around future competition cases, with the SCA announcing a new competition act that could, as both lex specialis and lex posterior, reverse the course of due process developments, given its explicit aim to ‘increase work efficiency’ of the national competition authority and contribute to ‘easier and more effective competition enforcement’.

Against this backdrop, the SCA’s ‘ambitious’ attitude raised many doubts as to the true intention behind it. Specifically, did the Serbian watchdog initiate the aforementioned proceedings and announce the revamp of the Competition Act only to safeguard its broad and discretionary powers, now at risk of being overruled by the New Administrative Act, or was it all just an innocent coincidence?

As a reminder, before the New Administrative Act, the SCA was able to carry out dawn raids and fishing expeditions without a court order, force companies to self-incriminate, and impose fines in closed sessions in the amount that could exceed the general criminal maximum—all this with negligible judicial control.

The Market Strikes Back

 The uproar among private and public stakeholders, academics and experts, reached its climax when the Chamber of Commerce and Industry of Serbia (Chamber of Commerce) issued an invitation for consultations to the members of its Assembly and Managing Board regarding the implementation and announced revision of the Competition Act (see Serbian Chamber of Commerce proposes total revamp of Serbian Competition Law).

In its invitation, the Chamber of Commerce pointed out the need for normative improvement in the field of competition protection on the domestic market and called for a revamp of the Competition Act that would secure a stable, predictable and stimulating economic environment.

It outlined the best examples that could serve as a role-model, placing special emphasis on the Austrian model which accentuates the role of judiciary in competition protection (also present in Sweden, Finland and USA). By this push, a broad and vigilant debate on advancement of competition law in Serbia – particularly in terms of due process, human rights and legal certainty – was finally underway.

Following the invitation from the Chamber of Commerce, the Ministry of Trade, Tourism and Telecommunications and the SCA announced the commencement of work on a new competition statute. Albeit the process is still in its early stages, the Chamber of Commerce remains the most proactive independent party, providing extensive commentary on the current Competition Act and offering proposals for its amelioration.

The Serbian Menarini

 Along with the Chamber of Commerce, another initiative materialized on 5 September 2017, when the Association for Protection of Constitutionality and Legality (UZUZ), the Lawyers’ Committee for Human Rights (YUCOM) and Gecić Law submitted a constitutional challenge against the Competition Act, thus drawing attention of the Constitutional Court to the SCA’s blatant (mis)use of powers, lack of effective judicial review in Serbian competition law, and the important issue of due process and protection of human rights in competition cases that is completely neglected under the current Competition Act.

The challenge came as a sequel to the original constitutional challenge by Professor Dijana Marković Bajalović, founder and a prominent president of the SCA, who along with others submitted the challenge against the very same act back in 2015.

Professor Bajalović, together with other legal experts, presented an in-depth case for the flagrant unconstitutionality of the Competition Act highlighting the need to align it with the European Convention on Human Rights (ECHR), two years before other stakeholders got involved. Following the recent developments, the famous trust-buster spoke up once more against the competition framework in Serbia, in a daring interview “Judge, Jury and Executioner” (in Serbian only).

The Legal Alliance

 During September 2017, the three largest bar associations in Serbia (the national Bar, the Belgrade Bar Association and the Regional Bar Association of Vojvodina) submitted three separate constitutional challenges against the Competition Act, thus bringing together the efforts for a better competition statute, and joining the fight for human rights and due process in competition cases. It is a rare occasion for such renowned professional organisations, representing the voice of more than 10,000 lawyers in Serbia, to recognize the importance of an issue and actively stand up for its disentangling.

Prior to the submission of the challenge, the Regional Bar Association of Vojvodina held a panel on the topic of (in)adequacy of the current Competition Act and possible implications that said challenge could have for the SCA’s proceedings against the national Bar (and all local and regional bars therein). An extensive and constructive discussion raised a number of questions to be solved in the future, but have also led to one important conclusion – there is a broad and strong consensus in Serbia that fundamental changes in the field of competition law are more than necessary (see Bar Association of Vojvodina Discusses Constitutionality of the Current Competition Act).

The EU is All Ears

 Recent developments in the field of competition law in Serbia did not go unnoticed in Europe. After an extensive local media coverage on the matter, Chillin’Competition, a pre-eminent competition blog in Europe and the world, released a piece reflecting on the current state of affairs in Serbia, recognizing its far-reaching impact on the local market, and also acknowledging it as “a good appetizer for what is likely to come the day the EU finally adheres to the ECHR” (see The Serbian Menarini).

Furthermore, during the 3rd annual Chillin’Competition conference that took place in Brussels in October 2017, the European Commission representatives confirmed once more that any divergence between EU law and acceding countries’ national laws, in particular in terms of competition enforcement, would make an important part of the Commission’s agenda and an essential talking point in accession negotiations.

May the Odds Be Ever In Your Favour

 Two parallel processes are currently underway:

  • Several constitutional challenges have been submitted to the Constitutional Court, awaiting for a final and binding decision on the matter of constitutionality of the Competition Act and its conformity with the ECHR.
  • The SCA, in cooperation with the representatives of the State ministries, the Chamber of Commerce and YUCOM, has set up the stage for designing a completely new competition statute that will put an emphasis on human rights.

It remains to be seen what the final outcome of the two processes will look like, but one thing is for certain – key stakeholders in Serbia have finally showcased an appetite and ability to stand-up and fight for an open and transparent debate, and everyone is listening.

Author: Tatjana Sofijanić, Gecić Law

This article was previously published by Thomson Reuters/Practical Law and available on our website with the permission of the publisher.