DRAFT LAW ON PENSION AND DISABILITY INSURANCE ADOPTED

Based on the Pension System Reform Strategy in the Federation of BiH, adopted by the Parliament of FBiH, and in line with the Reform Agenda, the Interdepartmental Working Group prepared and submitted the Preliminary Draft, and on 12.02.2016, the Government of the Federation of BiH determined the Draft Law on Pension and Disability Insurance.

The law is based on guidelines derived from unfavorable forecasts of the social sustainability of the pension system in the Federation of BiH and poor demographic outlooks. In short, it is estimated that if the current pension system in the Federation of BiH is not reformed, and if current economic and demographic trends continue, the decline in the working-age population will burden employees/insured persons and contribution revenues, which under the existing "coefficient" system (i.e., paying out only as much as is collected) would inevitably impact the future amount of relative pensions and the regularity of payments.

During the preparation of this law, a series of meetings were held with stakeholders, including the Confederation of Independent Trade Unions of BiH, the Employers’ Association of the Federation of BiH, and, importantly, the Federation Pensioners' Association, which submitted written proposals, comments, and suggestions on the Preliminary Draft. These were reviewed, partially adopted, and incorporated into the text of the law. It was then concluded that the Preliminary Draft could serve as a solid basis for establishing the Draft Law and proceeding with the legislative process, with the remaining comments to be considered during public consultations and direct discussions.

The novelties of this law include a new system for determining pension amounts by introducing a point-based formula. The pension amount is thus based on insurance service years and contributions paid, leading to a certain level of fairness since individuals who contribute more will receive higher pensions. It is also important that the new law provides a protection mechanism for the most vulnerable categories through the so-called minimum pension, in its current amount, which will continue to be adjusted to the cost of living.

The value of the general point is set at 13.6 BAM, which will be adjusted according to the percentage increase in the average gross salary in the Federation of BiH in the previous year, while pensions will be adjusted according to the percentage increase in the annual cost of living in the Federation of BiH in the previous year, based on data from the Federal Bureau of Statistics. The proposal includes abandoning the coefficient system and introducing regular and transparent pension adjustments, thereby introducing the best global practices into the pension system of the Federation of BiH.

The law also prescribes treasury operations for insurance carriers, so that all contribution revenues for pension and disability insurance are paid into a single “budget account” from which pensions will be paid. Such an approach would ensure greater transparency in the spending of public funds and payment stability. Due to the complexity of implementation, a transitional period of up to two years from the law’s entry into force is envisaged for introducing treasury operations, during which financial and technical capacities must be established. The Government of FBiH may decide to implement this earlier.

Other legal provisions also aim to reduce pressure on the pension system by gradually tightening the conditions for obtaining old-age and survivor pensions, with exceptions appropriate to the socio-economic conditions in the Federation of BiH. They also expand pension coverage and create conditions for introducing fair contribution rates for pension and disability insurance in relation to service with extended duration.

The Government has assessed this as a very important law, crucial for ensuring the financial stability of the Federal Institute for Pension and Disability Insurance and for maintaining the regularity of pension payments.

Therefore, during the public consultation on the determined Draft Law, the Government will organize a round table with representatives from academia and all interested public to present their proposals on the proposed legal solutions.

The text of the Draft Law on Pension and Disability Insurance is published on the website of the Government of the Federation of Bosnia and Herzegovina: http://www.fbihvlada.gov.ba/.

ADOPTION OF THE LAW ON FINANCIAL OPERATIONS IN THE FEDERATION OF BiH

The Parliament of the Federation of BiH will consider the proposal of the Law on Financial Operations in the Federation of BiH in May 2016. This law defines payment deadlines and consequences for failing to fulfill monetary obligations, as well as actions that a company must take once it becomes unable to fulfill its monetary obligations within prescribed payment terms.

The law contains provisions aligned with Directive 2011/07/EU of the European Parliament and the Council of Europe of 16 February 2011 on combating late payment in commercial transactions. This law regulates the financial operations of entrepreneurs and public entities, payment deadlines, and the legal consequences of delays in fulfilling payment obligations arising from contracts between entrepreneurs, or between entrepreneurs and public entities, in the course of business activities conducted by at least one of them. It also regulates business and obligations in conditions of insolvency, and financial operations under contracts concluded between entrepreneurs and public entities.

Most goods and services of economic entities are supplied to other entities on the domestic market, and many payments in these commercial transactions between entrepreneurs or between entrepreneurs and public entities are not made within the deadlines specified in signed contracts. Instead, obligations for goods and services are paid after the agreed deadline, which negatively impacts the liquidity and solvency of entrepreneurs and complicates financial management. This also affects competitiveness and profitability, especially when seeking external financing. Payment delays have negative effects on business operations and increase risks, particularly during economic crises when financing and payment are more difficult.

The introduction of behavioral rules for company boards and supervisory boards is considered particularly important, obliging them to take all necessary measures to ensure liquidity and systematically monitor, assess, and strategize the maintenance or achievement of adequate capital levels relative to the type, scope, and complexity of the business, as well as the risks involved.

To combat payment delays, the law provides for provisions on supervision, supervision procedures, supervisory measures, and penalties. These measures aim to improve financial discipline and ensure timely fulfillment of payment obligations in contractual relationships between entities.

DRAFT LAW ON FORESTS ADOPTED

Recognizing the functions of forests and the fact that forests and forest land in the Federation of BiH make up about 50% of the total living space, and that managing and utilizing forests and forest land is of undeniable vital national interest, the Government of the Federation of BiH, at its session on 27.05.2016, adopted and submitted to parliamentary procedure the Draft Law on Forests.

Compared to the 2002 Law on Forests, which had incomplete definitions of forests and forestry terms, the new law, through 98 articles grouped into eleven chapters, corrects and supplements these terms to align with internationally accepted definitions, as well as the specific characteristics of forest ecosystems and forestry science in BiH.

As specified, forests and forest land are of general interest and, as natural resources, enjoy special care and protection by the Federation of BiH, cantons, and local governments, and are used under conditions and in a manner prescribed by this law.

Forests and forest land are in state ownership (state forests) and in private ownership of individuals and legal entities (private forests). In the territory of FBiH, state forests and forest land are represented in terms of ownership by the Federal Ministry of Agriculture, Water Management, and Forestry, in accordance with the provisions of this law.

Unlike the previous law, the section on Planning and Forestry Operations simplifies the procedure and stipulates that the decision to establish forest management areas and revise their boundaries is made by the Government of the Federation of BiH, based on a professional study and the opinion of the competent cantonal ministry.

The new law continues the current forest management system, whereby state forests are managed by a single forestry company established by the cantonal assembly. However, it leaves the possibility of establishing multiple forestry companies at the cantonal level if justified by a professional study.

The law also prescribes that the main strategic planning document is the Forestry Program of FBiH, which, in compliance with international and domestic legislation, defines general forestry policy, forest and forest land management, and wildlife management. It consists of a general part, defining the main goals, principles, and guidelines for sustainable forest management in FBiH, and an implementation part, specifying goals, methods of realization, and financing.

Due to the exceptional importance of forests for nature protection, environmental preservation, and the economy, the law prohibits the sale of state forests and forest land, except for specific purposes such as land consolidation.

The law prescribes determining state forest and forest land boundaries, which must be visibly marked with permanent signs on the ground, and that private forest ownership is proven with land registry documents. Private forests are managed by their owners in accordance with this law.

To maximize economic benefits, the law requires that forest products be sold at market prices and transparently, with detailed procedures to be set by the Government of FBiH. It also introduces fines for non-fulfillment of obligations related to the use of state forests.

The law prescribes a fee of 8% of revenue from the sale of forest products for the use of state forests.

The text of the Draft Law on Forests of the Federation of BiH is published on the website of the Federal Ministry of Agriculture, Water Management, and Forestry: http://www.fmpvs.gov.ba/.

GUIDELINES FOR HANDLING WORKBOOKS AFTER 30.06.2016

The website of the Federal Ministry of Labor and Social Policy (http://www.fmrsp.gov.ba/) has published the following guidelines for handling workbooks after 30.06.2016:

In accordance with Article 176 of the Labor Law ("Official Gazette of the Federation of BiH", No. 26/16), the provisions of Articles 163–165, relating to workbooks, ceased to be valid as of 30.06.2016. Employers are obliged to return the workbook to the employee no later than two months after this date, i.e., by 31.08.2016.

Workbooks that ceased to be valid under the Labor Law still retain the status of a public document.

Before returning the workbook to the employee, the authorized person of the employer must cross out all unfilled sections, with the employer’s stamp and signature. Unfilled sections do not need to be crossed out individually; the entire page may be crossed out with a single diagonal line, with the stamp and signature placed in the “notes” section indicating that all unfilled sections have been crossed out.

The employer does not close the workbook with the date 30.06.2016 if the employment relationship continues. In such cases, the employer will not enter the duration of employment but will cross out the relevant empty sections. If the employee’s employment ends before returning the workbook, the employer will enter the date of termination of employment.

The employer must refer to the legal provision in the “notes” section, stating: “Unfilled sections crossed out in accordance with Article 176 of the Labor Law”, along with the date, signature, and stamp.

Employers with many workbooks may authorize multiple persons to return them in accordance with the procedure.

This obligation also applies to employers who accepted persons for professional training without an employment relationship.

The workbook returned in this manner remains a public document and may be used to prove data recorded in it. From 01.07.2016, relevant data for exercising pension, disability, health, or unemployment rights can be obtained from the Federal Institute for Pension and Disability Insurance or the Tax Administration of the Federation of BiH.