Part II of our Special Report on the Bosnian Legal Market before, during, and after the Bosnian War
Aftermath of the War – An Ounce of Growth, a Pound of Development
When the November 1995 Dayton Peace Accords brought an end to the war, the former SFRY republics looked forward to the kind of foreign investment that neighboring countries had been enjoying for many years. But first, some basic rebuilding was necessary, and even when foreign investment did come in, it came in unexpected stops and starts.
“Immediately after the war, there was a wave of foreign humanitarian organizations that flocked to Bosnia & Herzegovina, aiming to dispense aid to post-conflict zones,” recalls Law Firm Sajic owner Aleksandar Sajic. “Actual investment was not anywhere in sight at that time.”
Still, that humanitarian aid meant work for the law firms, and lawyers moved quickly to grab it. “These humanitarian organizations needed basic administrative legal work done,” Sajic says, “and we jumped on it – corporate registrations, employment contracts, etc. But it wasn’t until 2001, as the privatization process that began in 1998 really started taking effect, that foreign capital recognized the potential that Bosnia & Herzegovina had.”
As new opportunities expanded, so did the kinds of work available to lawyers. CMS Partner Andrea Zubovic-Devedzic agrees that “1995 and 1996 saw a boom in terms of corporate registrations,” and she says that, eventually, funds followed. “By the end of the nineties and the turn of the millennium, investments poured in, into industry, services, even agriculture – there was a rush to conquer the market.”
But that encouraging start, Zubovic-Devedzic says, quickly slowed. “Because the political situation in Bosnia & Herzegovina did not uncomplicate as many expected it to,” she sighs, remembering, “following the end of the war, most foreign investments slowed down, and there were even a few exits from the market.”
Ultimately, it took time to create and promote an effective and stable legal system necessary to provide the confidence foreign investors required. “It would seem that investors waited until Bosnia & Herzegovina had a robust, or at least a sounder legal framework and set of laws,” says Maric & Co. Managing Partner Branko Maric. “When the legal framework was laid down foreign companies started coming in as well, not just international humanitarian organizations.”
In fact, the multitude of foreign parties trying to help may have been part of the problem. “The lack of a selective approach,” Maric recalls,” not just in a material fashion but also a consulting one, led to many misguided actions. There were a lot of foreigners seeking to lay down the foundations for exerting their influence on Bosnia & Herzegovina, under the guise of offering to help craft our laws, to undertake our legislative reform for us.” Maric blames Bosnia’s willingness to accept all offers to help, at least in part, for what he describes as a lack of internal legal harmonization that, he says, continues to hold the country back today. “The Bosnian legal regime has many striking similarities to a wide range of legal regimes across the world,” he says. “For instance, we never had any brushes with an Anglo-Saxon conception of law – yet our Criminal Code and Criminal Procedure Act are very, very similar to those of the USA – because it was experts and consultants from that country that helped draft them.” According to him, “this is one of the principal problems we have today: The tissue didn’t graft well because there were so many different donors.”
In fact, Maric insists, most of the foreign “assistance” in helping create a new legal system was unnecessary to begin with, as the system that existed before the war was more than adequate. “During the old regime, the courts were less dependant on the state in all matters – even criminal ones – and worked quite well. The only miscarriages of justice occurred in criminal cases where matters of national security, defense, or socialist/communist policy were brought into question. The fact that the state itself was on one side was never a problem in civil cases as it now might be.”
Indeed, he says, the state had a less advantaged position before the war, if anything. “The state actually lost its fair share of cases and had to cover plaintiff damages,” he insists. “Nowadays whenever you bring a case against a state organ – the process tends to be a bit more skewed towards the institution, there is a bias that seeks to protect the institution rather than justice.”
“The Western Way of Practicing Law”
Over time, the nature of Bosnia’s legal industry started to transform as well. “After the war, with all the economic changes that started to happen, a market for legal services slowly formed,” Maric recalls. “It was then that, for the first time in the history of the legal profession in these parts, that clients started looking for and going after lawyers, rather than the other way around.” Simultaneously, he says, the kind of work for which lawyers were sought started to change. “The lawyer slowly started to transform into an advisor on key transactions,” which he describes as “the Western way of practicing law.”
The change did not come overnight, of course, and even the most successful firms stayed fairly small in the early years. “In the early two-thousands,” Zubovic-Devedzic says, “even with the borders being more open and more work pouring in, the size of law offices was still mostly the same as before: one or two lawyers and two or three associates.”
That started to change, eventually – and, Zubovic-Devedzic says, that change came at a cost. “Back then, and in the days before the war, lawyers were held in high esteem and were spoken of with great respect, whereas today the market bears more resemblance to a service industry. With more and more work, and more and more people practicing law, there is a lot more speed in the job itself.” The end result of this change was not only a shift in the way law was practiced, but also in the way offices built their business. “Lawyers don’t wait for the clients to come to them anymore. Large firms invest heavily in business development and client acquisition which wasn’t the case here, historically.”
And inevitably, what had been an exclusively local market began to face competition from foreign competitors. “Before the war, there were no large mandates, no foreign clients, no foreign offices,” Branko Maric says. “Now, after the privatization process, foreign investors started coming. Naturally, these investors wanted advice from those legal professionals that they were used to, so we’ve had the opportunity to cooperate with a lot of large international law firms, and that allowed our business expertise and know-how to grow.”
Initially that cooperation took the form of providing on-the-ground assistance to foreign firms based elsewhere. “Cooperation with foreign offices did not start in the market until 10 or 12 years ago, I’d say,” Zubovic-Devedzic says. “The complexity of the Bosnian legal framework, as well as the restrictiveness of the regulatory regime, meant that foreign offices were not able to set up shop directly – they had to find a domestic partner first. This means that there are a lot fewer foreign offices in Bosnia & Herzegovina than in the rest of the region.”
Even when those foreign firms did put offices on the ground in Bosnia & Herzegovina, they came primarily from Belgrade-based law firms, capitalizing on the economic, historical, and cultural ties that remain between the former SFRY republics. “There are far fewer foreign offices than there are in, for example, Belgrade,” Sajic points out. “But there are a lot of regional large offices that have their branches here, like Karanovic & Partners and BDK Advokati.” (See Box A)
And with foreign-based firms now working next door, local firms were forced to improve their ability to compete directly for foreign clients. The market as a whole benefited. “The standard of service improved as well, and by 2006 it was no longer rare to have an English-speaking employee in your office and to be knowledgeable to serve international clients,” says Dimitrijevic & Partners founder Stevan Dimitrijevic, who joined Karanovic & Nikolic (now Karanovic & Partners) in 2006 and left a decade later to start his own firm in Banja Luka, Republika Srpska. “And then, all these clients started to engage local firms, either directly or via regional partnerships, and that led to growth and development of the legal profession in Bosnia.”
The Current Situation
Although Bosnia & Herzegovina is far more prosperous than it was 23 years ago (see Box B), its economy continues to lag behind many of the other former Communist countries.
“If it hadn’t been for the war, things would have been much different,” Sajic says. “The traces the conflict left on this country were felt on every level, especially on the economy, the displacement of people, not to mention all the material damage. It set the entire socio-economic system back a few decades. If it hadn’t, the legal profession would have developed much faster.” He also believes that “we would all be a part of the EU by now and things would be much better.”
And, Sajic says, significant structural problems in the country’s legal system and judiciary remain. “A failure to harmonize the system exists,” he says. “There is a lot of corruption in some levels of the justice system, and case law, although not a source of law as it is in the West, means very little these days – the same set of facts may be ruled on differently by two different courts, so there is little predictability. Even the Supreme Court does not have a consistent approach to all the cases it listens to.” Sajic also points to the high number of unresolved criminal cases and says that the “Constitutional Court, although a great administrative body in its own right, is toying with the political a bit too much.”
Maric claims that the country’s political leadership all too often trades statesmanship and good governance for short-term political benefit by manufacturing conflict. “It is more or less a public secret that politicians who are also the leaders of nationalistic parties are passing each other the torch of ethnic and religious friction,” he says. Such individuals often employ tense, divisive statements, “so that they can then use them to rally their supporters and attempt to induce a frenzy in which they forget all else in life other than their nation and religion.” In this way, they keep the focus off the economy and what’s really important, Maric feels. “It is a simple matter of populism, and sometimes it works to great effect, especially in rural areas.”
Sajic sighs in agreement. “This country, this people – they are tired of war and never wish to go back to that. The days of conflict are over, yet the politicians keep fostering hostilities in their acts to gather viewership and power.”
Still, it could be worse. Stevan Dimitrijevic – a Serbian who moved to Bosnia & Herzegovina in 1999 – says that the conflicts he encounters at work are inevitably professional rather than ethnically-based. “There aren’t really any lingering bad feelings today. Conflicts that might occur these days between lawyers are, mostly, of the same type as those that exist between, say, lawyers in Vienna and lawyers in Salzburg. There are no hurdles to being treated nicely in the entirety of the country, before different courts, in different places. The composition of regulatory authorities and public bodies is level and fair, so there’s no envy among any of the groups living here.”
So, he says, nationality is no longer an issue. “I never ran into any sort of tensions over it,” he says. “There were even cases where people viewed me with a lot of sympathy and communicated warmth, although it was evident that I am not originally from Bosnia and Herzegovina. I suppose they saw it as a sign that things can, maybe, go back to the way where all communicate and cooperate and share their lives and experiences.” Back when they were all one people.
This Article was originally published in Issue 7.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.