Montenegro is preparing a new foreign investment screening system aimed at reviewing transactions in strategically important sectors, addressing a regulatory gap that has allowed sensitive projects, complex ownership structures and state-backed capital to enter the economy without a unified security and public-interest assessment.
The government has adopted a proposed model for the Law on the Screening of Foreign Investments, placing the Ministry of Economic Development at the centre of the process. The proposed framework would establish an interinstitutional council responsible for issuing opinions on investments, while the government would retain the authority to approve projects, introduce conditions or prohibit transactions.
New framework changes Montenegro’s open investment model
Since regaining independence in 2006, Montenegro has relied heavily on foreign capital to support tourism, coastal development, energy projects, infrastructure and real estate investment. This investment openness contributed to construction activity, employment growth and higher tax revenues, but the country did not have a mechanism capable of assessing the ultimate ownership of investors, the origin of funds or potential dependence on foreign governments.
Existing legislation already provides separate controls in areas including banking, defence, energy, competition, concessions, critical infrastructure, media, environmental protection and state property. These procedures examine individual aspects of transactions rather than providing a consolidated review of national-security risks.
A banking regulator may assess the financial strength and reputation of a shareholder, a competition authority may examine market concentration, an energy regulator may review licensing conditions, and environmental authorities may assess project impacts. These processes do not necessarily determine whether an investor is linked to a foreign state, whether financing creates political leverage or whether control over essential infrastructure could affect national resilience.
EU accession increases pressure for screening rules
The introduction of the screening mechanism comes as Montenegro advances towards possible EU membership in 2028. The EU adopted a strengthened foreign investment screening regulation in June 2026, requiring member states to maintain national review systems covering a common range of strategic assets. Member states have 18 months to implement the updated requirements.
The European framework covers investments involving defence and dual-use goods, advanced technologies, strategic raw materials, critical financial infrastructure, election systems, and essential energy, transport and digital assets. National governments may also include additional sectors based on their own economic structure and security considerations. For Montenegro, applying only the EU minimum list could leave some domestically sensitive assets outside the screening system, particularly in tourism and property development.
Coastal tourism projects create specific review challenges
Tourism and property development are not generally classified as critical industries across the EU. However, on Montenegro’s coast, major developments can involve long-term control over beaches, marinas, water systems, access roads and land located near ports, airports or military facilities.
With only 293 kilometres of coastline, much of which is already under intensive development pressure, large coastal projects can involve control over scarce public resources. Long-term leases, concessions and development rights may provide practical control over strategic locations even when ownership of the underlying land remains with the state.
The Centre for Democratic Transition (CDT) has argued that the future law should include strategically located tourism and property developments while avoiding the classification of every hotel or residential project as a security issue. Possible criteria could include project value, location, land area, concession duration, proximity to sensitive infrastructure and control over beaches, water resources or other public assets.
Bilateral agreements remain a key unresolved issue
A major question concerns investments implemented through bilateral agreements, special laws, concessions and other exceptional legal arrangements. Under Article 9 of Montenegro’s Constitution, ratified and published international treaties form part of the domestic legal order and take precedence over national legislation when they regulate an issue differently.
This creates a possibility that certain state-to-state arrangements could operate outside standard investment review procedures. The future screening system would have limited effect if it applied only to conventional private transactions while politically negotiated projects involving strategic assets remained exempt.
Bar-Boljare motorway highlighted as previous example
The Bar–Boljare motorway illustrates the challenges surrounding large foreign-backed infrastructure projects. The 41-kilometre Smokovac–Mateševo section was constructed by China Road and Bridge Corporation and financed mainly through an approximately $944 million loan from China’s Exim Bank.
The project delivered major transport infrastructure but also created long-term considerations related to construction costs, currency exposure, procurement and sovereign debt.
The motorway was assessed primarily as an infrastructure and fiscal project rather than through a formal foreign investment security review examining contractor ownership, creditor influence, geopolitical exposure and long-term control implications together. The proposed screening system is not intended to automatically prohibit investments from specific countries. Instead, it would assess whether individual transaction structures create risks that can be managed through contractual protections, limits on control, data-security requirements, refinancing arrangements or independent supervision.
Foreign investment screening focuses on risk management
European experience shows that screening systems generally do not result in widespread investment bans. In 2024, approximately 86% of formally screened transactions in EU member states were approved without conditions, around 9% were approved with mitigation measures and only 1% were prohibited. The purpose of screening is primarily to identify ownership, control and security risks rather than restrict foreign investment.
UAE agreements create first major test
Montenegro’s agreements with the United Arab Emirates represent one of the first major tests for the future framework. In March 2025, the government signed agreements covering economic cooperation, tourism and property development, followed later by an energy agreement. Parliament ratified the tourism and economic arrangements through an accelerated procedure.
The agreements generated criticism regarding possible allocation of state assets without competitive tenders, compliance with public procurement rules, environmental safeguards and limited public consultation.
Their constitutionality was challenged, but the Constitutional Court initially lacked the required majority to open proceedings. The court was completed with the election of two judges in July 2026, allowing the matter to potentially be reviewed again. The credibility of the foreign investment screening system will depend on whether it applies before the state enters binding commitments, transfers control or grants legally protected investor rights.
Renewable energy partnerships require detailed assessment
The emerging cooperation between state utility EPCG and Abu Dhabi-based renewable energy company Masdar represents another important case. Masdar, owned by Mubadala, ADNOC and TAQA, already operates in Montenegro through the 72MW Krnovo wind farm.
In 2026, the company began exploring a joint venture with EPCG covering solar, wind, hydropower, battery storage and hybrid energy projects. The partnership could support renewable energy development, reduce reliance on the Pljevlja coal-fired power plant and increase electricity exports through Montenegro’s undersea interconnector with Italy.
At the same time, it involves a foreign state-controlled company potentially participating in assets linked to electricity security. The screening process would need to examine governance rights, access to grid and dispatch data, technology dependencies, financing terms, transfer restrictions and operational control. Possible safeguards could include maintaining EPCG control over strategic decisions, protecting operational data and ensuring alternative suppliers for critical equipment.
Strategic infrastructure and financial systems included in review debate
The same considerations apply to transmission and telecommunications infrastructure. Crnogorski elektroprenosni sistem (CGES) operates Montenegro’s high-voltage electricity network and the subsea electricity connection with Italy. Its ownership includes the Montenegrin state, Italian transmission operator Terna and Serbia’s Elektromreža Srbije.
Future ownership changes involving CGES would require assessment due to its role in national energy security and European electricity flows. Other potentially sensitive assets include the Port of Bar, Podgorica Airport, Tivat Airport, telecommunications networks, data centres, cloud infrastructure and payment systems.
Montenegro’s small size means control over a single operator can represent control over a major national function. Even minority investments may become strategically relevant if they include board representation, veto rights, privileged data access or influence over procurement.
Real estate remains central investment challenge
Real estate represents the most difficult area for defining screening boundaries because it accounts for a large share of foreign investment inflows. In the first half of 2025, Montenegro recorded approximately €448.6 million in gross foreign direct investment.
Property purchases accounted for around €228.9 million, or 51% of the total. Intercompany debt contributed nearly €162.9 million, while direct equity investment in companies and banks amounted to €38.9 million. The structure shows that Montenegro attracts significant foreign capital, but much of it is directed towards existing land and housing rather than export-oriented production, technology transfer or industrial capacity.
Property investment supports construction, consumption and municipal revenues, but it does not necessarily generate recurring foreign currency income needed to finance Montenegro’s goods deficit, which reached approximately €1.92 billion in the first half of 2026.
Future law must balance investment and security
A foreign investment screening system would require authorities to distinguish between capital that expands productive capacity and capital that acquires strategically important assets. The assessment would need to consider ownership structures, financing arrangements, control rights, asset security and long-term obligations rather than relying only on investment value.
The new framework would become relevant for acquisitions, project finance transactions and public-private partnerships. Investors and lenders would need to determine whether approval is required, whether implementation must be delayed and what ownership and financing information must be disclosed. A functional system would require clear deadlines, confidentiality protections, appeal mechanisms and defined criteria for mandatory review.
The review process would also need to examine indirect ownership structures, ensuring that foreign state-controlled entities cannot avoid scrutiny through subsidiaries registered in third countries. A balanced framework would combine sector criteria, control tests, location requirements and financial thresholds. Ports, airports, electricity networks, telecommunications, payment infrastructure and sensitive government data systems would likely require mandatory review, while ordinary commercial projects would remain outside the process unless they create strategic exposure.
