In Brief: Key Features of Bosnia and Herzegovina Merger Control Legislation

Legislation and jurisdiction

Relevant legislation and regulators

What is the applicable law and who enforces it?

In Bosnia and Herzegovina, merger control, as well as other aspects of competition law, is mainly governed by the competition law (the act). The law entered into force on July 27, 2005. It was enacted at state level and applies throughout the territory of Bosnia and Herzegovina, i.e. in both entities (the Federation of Bosnia and Herzegovina and the Republic of Srpska) and in the District of Brčko. The law was amended in 2007 and 2009.

In addition to the law, numerous regulations have been adopted by the Competition Council (the Council), which is the authority responsible for enforcing the law and controlling competition in the market. This regulation establishes the procedural framework and defines the standards for the application of the law. The most relevant regulations for merger control are the RMerger Notification and Merger Assessment Criteria Regulationsand the Regulation on the definition of relevant markets.

Competition law in Bosnia and Herzegovina generally conforms to the rules and principles of the EU competition law regime. Moreover, in practice, the Council often uses EU competition law standards as a guide in deciding cases before it.

The Council is an independent authority established by law. It has exclusive jurisdiction to rule on the existence of activities prohibited by competition law in the Bosnia and Herzegovina market. The Board has six members. Three members are appointed by the Council of Ministers of Bosnia and Herzegovina, with one representative from each of the constituent nations; two members are appointed by the government of Bosnia and Herzegovina; and one member is appointed by the government of Republika Srpska.

The term of all Board members is six years and can be extended for another six years. A new Chairman of the Board is appointed each year. The Council submits its annual reports to the Council of Ministers of Bosnia and Herzegovina.

For more information on the Council and its activities, visit www.bihkonk.gov.ba.

Scope of legislation

What types of mergers are affected?

The Act defines a concentration as:

  • a merger by absorption or a merger by incorporation of a new entity;
  • the acquisition of control or a majority interest by one or more undertakings over another undertaking or part thereof, or a group of undertakings or part thereof by the acquisition of a majority holding , or the acquisition of the majority of the voting rights, or in any other way under the corporate law of Bosnia and Herzegovina; Where
  • the creation of a full-service joint venture.

Intra-group acquisitions and restructurings are not affected by merger control rules.

What types of joint ventures are covered?

Joint ventures carrying out on a lasting basis all the functions of an autonomous economic entity (full-function joint ventures) are covered by the law.

Joint ventures which aim to coordinate the behavior on the market of two or more undertakings, each of which retains its legal and economic autonomy, are not subject to the merger control regime but may be covered by the provisions relating to agreements restrictive.

Is there a definition of “control” and are minority and other interests less than control taken into account?

The law gives a fairly general and broad definition of “control”, without specifying any detail that could lead to the existence of control within the meaning of the law.

According to the wording of the law, control exists when one or more enterprises jointly exercise dominant influence over another enterprise or group of enterprises, whether by law, agreement or otherwise, and taking into account all the circumstances and legal facts. Control is deemed to exist when one or more companies have jointly:

  • a controlling interest in a business;
  • the majority of the voting rights; Where
  • the right to appoint more than half of the members of the management board, members of the supervisory board or of the appropriate body which manages or controls the operations, or otherwise has the right to manage the operations of the company.

Given this broad definition of control, the acquisition of a minority stake enabling its holder to exercise a dominant influence over a company or a group of companies is subject to the merger control regime.

Thresholds, triggers and approvals

What are the jurisdictional reporting thresholds and are there any circumstances in which transactions below these thresholds may be investigated?

By law, the Board must be notified of a proposed merger if, during the previous fiscal year:

  1. the combined worldwide turnover of the undertakings concerned exceeds 100 million convertible marks; and
  2. That is:
    • the individual turnover of each of at least two undertakings concerned in Bosnia and Herzegovina amounts to at least 8 million convertible marks; Where
    • the undertakings concerned together hold a market share of more than 40% on the relevant market in Bosnia and Herzegovina (according to the interpretation adopted by the Council, this threshold can be reached by a single undertaking).

The Merger Notification and Assessment Criteria Regulation (the Regulation) adopted by the Council, with effect from 5 May 2010, provides that if the companies concerned have a registered office in Bosnia and Herzegovina, the concentration is notified to the Board if the local threshold referred to in point (2) is reached, whether or not the global threshold referred to in point (1) is also reached.

The Council intended to clarify the wording of the law with this provision; however, his interpretation has been confusing. In particular, it was not clear whether the Council was competent to interpret the law in this way in a legally binding manner and whether this provision would also have an impact on mergers between foreigners; therefore, we have filed a request for clarification with the Commission.

In its rather broad response, the Council indicated that if some of the companies concerned are headquartered outside Bosnia and Herzegovina, or if some companies concerned are headquartered abroad but have subsidiaries in Bosnia and Herzegovina, both the local threshold in point (2) and the global threshold referred to in point (1) must be reached to trigger a reporting obligation; therefore, it can be concluded that the “clarification” made by the Council in the Regulation (i.e. that notification is required if only the local threshold referred to in point 2) is reached) only applies in cases where all the enterprises concerned are purely national enterprises (i.e., enterprises which have local shareholders and which are not subsidiaries of foreign legal persons).

The combined turnover of the undertakings concerned must be calculated on a consolidated worldwide basis. The turnover generated by sales between the undertakings concerned is not taken into account.

In the event of the acquisition of one or more parts of a company or a group of companies, whether or not these parts constitute independent legal entities, only the turnover relating to the parts covered by the concentration is taken into account. If there is more than one concentration of the companies concerned within a period of two years, they will be considered as a single operation and it will be considered that the operation took place on the date of occurrence of the last operation.

If the company concerned is a bank or a financial institution, turnover includes interest and similar income, income from transferable securities, commissions, the net result of financial operations and other operating income.

For insurance and reinsurance undertakings, turnover includes gross premiums, which include all premiums received and expected, as well as reinsurance premiums, but after deduction of taxes and duties levied by reference to premium amounts individual or the total amount of the premiums .

Is the deposit compulsory or voluntary? If required, are there any exceptions?

As a general rule, the Board is advised of any concentration exceeding the thresholds set by law.

An exemption from the reporting obligation exists in cases where banks, financial institutions or insurance companies acquire shares in the normal course of their activities with the intention of reselling them within the following 12 months, provided that, in the meantime, the shares are not used to influence the behavior of the undertaking concerned on the market. In addition, the taking of control by a bankruptcy administrator or a liquidation administrator during bankruptcy or liquidation proceedings does not require the Board to be informed.

Do mergers between foreigners have to be notified and is there a local effects or nexus test?

Concentrations between foreigners are subject to the law if the turnover thresholds are exceeded.

We are not aware of any cases or discussions in which the Council indicated that an exemption based on the effects of the reporting obligation (when the turnover thresholds were reached) would be accepted. To date, the Council seems reluctant to consider arguments in this regard.

Are there also rules on foreign investment, special sectors or other relevant approvals?

There are no special rules regarding foreign investments, special sectors or other relevant approvals in the competition law of Bosnia and Herzegovina; however, in certain business sectors, such as banking, telecommunications, energy and pharmaceuticals, there are additional regulatory provisions that must be complied with.

For example, certain changes in the shareholding structure of a telecommunications operator must be notified or approved by the competent telecommunications agency. This notification or approval by the telecommunications agency is required in addition to the approval of the concentration by the competition authority, if applicable.

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