Serbia sets new laws for infrastructure

Serbia has recently enacted thirteen laws and regulations in the area of infrastructure, which should expedite the construction of roads, railways, airports and ports and utility infrastructure in the new investment cycle. The most important of these laws include:

Act on the Confirmation of the Loan Agreement between the Republic of Serbia (as the borrower) and T.C. ZIRAAT BANKASI A.Ş. and DENIZBANK A.Ş. (as lenders)

Serbia has confirmed a Loan Agreement between the Republic of Serbia (as the borrower) and Turkey’s DenizBank and Ziraat Bank (as lenders) in relation to financing the design and construction of two Serbian motorways: the reconstruction of the Novi Pazar - Tutin section, the construction of the Sremska Rača - Kuzmin section, a bridge over the River Sava, and the design of the Požega - Kotroman section. Loan facilities amounting to approximately EUR 220 million will be extended to the Serbian Ministry of Construction, Transport and Infrastructure.

CMS Turkey, CMS Serbia and CMS Romania assisted Turkey’s DenizBank and Ziraat Bank in this transaction.

Amendments to the Land Conversion Act

The Amendments to the Land Conversion Act alter who is exempted from paying compensation for conversion of the right of use of construction land into ownership. A novelty to this aspect of the law is that the land that was, at the time of privatisation, subject to an assessment of socially owned capital of privatised companies and including pre-privatisation ownership transformation procedures, is now exempt from the conversion-fee payment.

An additional specific payment exemption also includes locations acquired by mortgage creditors under subsequent agreements with the mortgagee (i.e. the transfer of mortgaged buildings with the associated right of use of the land from the mortgagor to the mortgagee upon maturity of the outstanding claim).

The Amendments have introduced new grounds for reducing the conversion fee. The fee will no longer be payable for the land on which parking, pavements or legal facilities are located, and will be reduced by the amount of rent paid for a long-term lease.

A significant novelty is the possibility to continue the conversion process despite the existence of a restitution claim that pertains to the land in question. But this only applies if the Restitution Agency issues a confirmation that the return of the property in kind is not possible (before the final outcome of the restitution procedure).

In addition, it is now clarified that the compensation for conversion also applies to persons who have acquired the right of use after 11 September 2009 by purchasing facilities with the associated right of use from privatised companies (this rule was already applicable in practice, but is now based in law).

Finally, investors who still find the conversion expensive and wish to obtain a building permit are allowed to enter a long-term lease agreement with a five-year bank guarantee covering a five-year lease amount, which was not possible in the past.

Amendments to the Planning and Construction Act

These amendments were passed to harmonise the provisions of the Planning and Construction Act with EU legislation related to the regulated professions. In addition, another set of changes attempts to solve specific challenges that have appeared in practice during the implementation of the law.

The law, among other things, addresses the question of development of condominium projects and property rights on plots where condominiums are to be located.

It also allows and provides for the preparation of urban projects that develop facilities to generate energy from biomass as a renewable source, which is a by-product of agricultural production, at locations not covered by a planning document suitable for direct application.

Amendments to the Navigation and Ports in Inland Waters Act

The latest amendments to the Navigation and Ports in Inland Waters Act shift jurisdiction from the Agency for Port Management to the Ministry of Construction, Transport and Infrastructure. This has been done to expedite implementation of capital projects that develop Serbian ports, especially through the procedure for port concessions.

The other goal of this law is to regulate the so-called minimum level of rentability of port services.

Law on the special procedures for implementation of projects of construction and reconstruction of linear infrastructure of special importance for the Republic of Serbia

Through hard experience, the Ministry of Construction, Transport and Infrastructure has reached the conclusion that solving property rights relations takes up considerable time before the necessary licences can be issued in a construction project. Consequently, works are often delayed.

This refers to the implementation of parcellation and re-parcellation (land division) procedures, cadastre procedures, and the process of expropriation. These are all time-consuming when it comes to linear infrastructure (e.g. roads, railroads, etc.) since they are planned, designed and constructed on several thousand cadastral plots.

Finalising such procedures can take a year or more depending on the problems encountered during expropriation (e.g. illegally built facilities, awaiting the facilities' legalisation, facilities not entered in the cadastre register, eviction of occupants, appeals to the decisions of registration in the cadastre, etc.)

In its 2020 work plan and budget (with a plan for 2021 and 2022), the Ministry of Construction, Transport and Infrastructure intends to implement projects from the new investment cycle, estimated at around EUR 5 billion for investment in infrastructure projects.

These highly important transport infrastructure projects include:

• sections of highway E-763: Preljina - Požega and Požega - Boljare;
• the “Morava corridor” section: Novi Sad - Ruma;
• the state highway: Ruma - Šabac (highway) and Šabac - Loznica (fast roads);
• the highway: Bograd (Belgrade) - Zrenjanin - Novi Sad;
• the highway: Niš - Merdare;
• the Belgrade bypass: sectors 4, 5, 6 and sector C;
• the state highways: Kragujevac - Batočina and Valjevo - Iverak;
• the newly planned road: “Vožd Karađorđe”, which will connect Šumadija with East Serbia;
• the Belgrade - Budapest express railway; and
• the Belgrade subway.

Reconstruction projects include:

• the Jajinci - Mala Krsna railway;
• the Nis - Dimitrovgrad railway;
• the Niš - Brestovac railway; and
• regional railways.

The Ministry passed this special law to speed up the start of these infrastructure projects. The legislation enables the projects to be implemented faster and simpler from the process of land acquisition to obtaining the necessary licences and permits. The law also expedites public procurement procedures.

Note that in regard to changes to the Land Conversation Act, Partner Ivan Gazdić of CMS Belgrade was elected member of a working group for drafting these amendments.

For more information on this law and the other legislation and projects mentioned above, contact local CMS experts Ivan Gazdić or Dragana Jandrić or your regular CMS advisor.