Investment protection between Serbia and major economies: Germany

Investment Flows

We enter the new year with a post on Germany within our series on investment protection between Serbia and major economies. Our previous posts covered the United States, China, and Russia.

According to the Development Agency of Serbia, Germany is the top country of origin of foreign investments in Serbia, with a 15.1% market share in terms of the number of projects. It is the fourth country of origin, with a 9.6% market share, if one takes into account the value of projects. German investments in Serbia grow constantly and that trend is likely to continue in the future.

Investment Protection Regime

The former Socialist Federal Republic of Yugoslavia and the Federal Republic of Germany signed a bilateral investment treaty in 1989, which entered into force in 1990 (“BIT“). The BIT continues to bind Serbia to the present day. The BIT was signed in German and Serbian, both versions being equally authoritative, and therefore English and French versions registered with the UN and published in the UN Treaty Series are only informative.

The BIT provides for a broad definition of “investment”, but includes the legality requirement, i.e. the requirement that investments must be established in compliance with the host state’s domestic laws. It covers investments made prior to its entry into force. Substantive protections include fair and equitable treatment, full protection and security, protection against arbitrary and discriminatory measures, national and most-favoured nation treatment, protection against expropriation (including an explicit reference to indirect expropriation), compensation for losses, and freedom of transfers. The umbrella clause is broad and covers “any other obligation [a contracting party] may have entered into with regard to investments by investors of the other Contracting Party in its territory”.

The BIT is accompanied by a protocol containing some practical clarifications, such as the meaning of the terms “treatment less favourable” and “business activity”, as well as detailed rules in respect of some guarantees.

The investor-state dispute settlement clause is broad and covers “differences of opinion regarding investments”. After a 6-month cooling-off period, investors can resort to ICSID arbitration. Notably, the BIT does not offer access to any other institutionalized or ad hoc arbitration.

The Serbian Investment Act applies to German investors and investments, just like to any other investment, but, as already mentioned in the previous issues, it does not provide access to arbitration.

Recognition and Enforcement of Judicial and Arbitral Decisions

The general procedure for recognition and enforcement of foreign court decisions (see our initial post within the series) applies to the recognition and enforcement of German court decisions in Serbia, given that there is no treaty on this matter between the two countries. That includes the requirement of reciprocity. There are no public precedents stating expressly that there is or that there is no reciprocity with Germany in general.

Both Serbia and Germany are members of the New York Convention, which facilitates recognition and enforcement of arbitral decisions. While both Serbia and Germany reserve the application of the Convention only to awards made in another contracting state (as opposed to any other state), Serbia also reserves the application of the Convention to commercial matters.


German investors in Serbia benefit from very broad international investment protections and have access to ICSID arbitration. Recognition and enforcement of German court decisions in Serbia needs to go through the general procedure which includes the requirement of reciprocity.

In two weeks we will cover Italy.


Photo by Christian Lue on Unsplash