Montenegro is preparing its first comprehensive system for screening foreign investment, closing a regulatory gap that has allowed politically sensitive projects, opaque ownership structures and state-backed capital to enter strategic sectors without a single institution assessing their combined security and public-interest implications.
The government has adopted a proposed model for a Law on the Screening of Foreign Investments, placing the Ministry of Economic Development at the centre of the process. A new interinstitutional council would provide an opinion on transactions, while the government would retain the authority to approve an investment, impose conditions or prohibit it.
The proposed system represents a substantial departure from Montenegro’s traditionally open investment policy. Since regaining independence in 2006, the country has relied on foreign capital to finance tourism, coastal development, energy projects, infrastructure and property purchases. This openness helped lift construction, employment and tax receipts, but it was not accompanied by a mechanism capable of examining who ultimately controlled an investor, where the money originated or whether a transaction created dependence on a foreign government.
Montenegro currently applies separate controls through legislation governing banking, defence, energy, competition, concessions, critical infrastructure, media, environmental protection and state property. These procedures examine different parts of a transaction, but none provides a consolidated assessment of national-security risk.
A banking regulator may test the financial strength and reputation of a prospective shareholder. The competition authority can assess market concentration. An energy regulator can determine whether an operator satisfies licensing requirements, while an environmental authority examines the physical effects of a project. Those reviews do not necessarily establish whether the ultimate owner is acting under the direction of a foreign state, whether the financing creates political leverage or whether control over infrastructure could be used to disrupt essential services.
The omission has become harder to defend as Montenegro approaches possible EU membership in 2028. The EU adopted a strengthened foreign-investment screening regulation in June 2026, requiring every member state to operate a national review mechanism covering a common minimum range of strategic assets. Member states have 18 months to implement the new requirements, placing the European deadline almost directly alongside Montenegro’s accession objective.
The European rules cover investments involving defence and dual-use goods, advanced technologies, strategic raw materials, critical financial infrastructure, election systems and essential energy, transport and digital assets. They also allow national governments to include additional sectors reflecting their own economic structure and security concerns.
For Montenegro, simply copying the European list would leave some of the country’s most politically sensitive assets outside the system. Tourism and property development are not usually treated as critical industries across the EU. On the Montenegrin coast, however, a resort project can include long-term control over beaches, marinas, water supplies, access roads and land near ports, airports or military facilities.
A large coastal development is therefore not only a hotel investment. It can amount to control over a scarce public resource in a country with just 293 kilometres of coastline, much of it already exposed to intensive construction. Long leases, concessions and development rights can last for decades, creating a level of practical control that resembles ownership even where the underlying land remains formally in state hands.
The Centre for Democratic Transition, or CDT, has argued that the future law should cover strategically located tourism and property developments without turning every hotel or apartment building into a national-security case. The distinction could be based on project value, location, land area, length of concession, proximity to sensitive infrastructure or control over beaches, water and other public assets.
That would place some of Montenegro’s largest developments within the review process while allowing ordinary commercial projects to proceed without an additional approval. It would also require the government to define what it considers strategic before negotiating with investors, rather than applying that label after a political agreement has been reached.
The most important unresolved question concerns investments implemented through bilateral agreements, special laws, concessions or other exceptional legal arrangements. Montenegro’s largest projects have frequently been structured through precisely these channels.
Under Article 9 of the 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. A bilateral agreement can therefore create a special regime that departs from ordinary procurement, concession or administrative rules.
The risk is that the future screening law could apply to conventional private transactions while the largest state-to-state arrangements remain outside its reach. Such an outcome would reverse the intended hierarchy of risk: routine acquisitions would undergo review, while politically sponsored projects involving strategic land or infrastructure could proceed under an exemption.
The experience of the Bar–Boljare motorway illustrates the issue. The 41-kilometre Smokovac–Mateševo section was built by China Road and Bridge Corporation and financed largely through an approximately $944mn loan from China’s Exim Bank. The project delivered critical transport infrastructure but exposed Montenegro to construction-cost, currency, procurement and sovereign-debt risks that continued long after the contract was signed.
The motorway loan contributed to a sharp increase in public debt and contained financing and dispute arrangements that became the subject of sustained domestic and international scrutiny. The project was assessed principally as an infrastructure and fiscal undertaking, rather than through a formal foreign-investment security mechanism examining the contractor, creditor, geopolitical exposure and long-term control implications together.
The lesson is not that Chinese capital should automatically be prohibited. A functioning screening system does not classify every investment from a particular country as hostile. It establishes whether the structure of an individual transaction creates risks that can be removed through contractual protections, limits on control, data-security requirements, refinancing obligations or independent supervision.
The European record suggests that outright prohibition will remain exceptional. In 2024, approximately 86 per cent of formally screened transactions in EU member states were approved without conditions, another 9 per cent were approved subject to mitigation measures and only 1 per cent were prohibited. Screening is primarily a tool for identifying ownership and restructuring risk, not for closing markets to foreign capital.
Montenegro’s agreements with the United Arab Emirates create a more immediate test. In March 2025, the government signed agreements covering economic co-operation and tourism and property development, followed later by an energy agreement. Parliament ratified the tourism and economic arrangements under an accelerated procedure.
The agreements prompted criticism over the possible allocation of state assets without competitive tenders, the relationship with public-procurement rules, environmental safeguards and the limited role given to public consultation. Their constitutionality was challenged, but the Constitutional Court initially lacked the majority required to open proceedings. The court was subsequently completed with the election of two judges in July 2026, leaving room for the issue to be examined again.
The foreign-investment law will have limited credibility unless it expressly covers projects arising from these bilateral structures. Screening must occur before the state makes a binding commitment, transfers control or grants an investor a legally protected position. A review conducted after an international agreement has been ratified would become an administrative formality, since rejection could expose Montenegro to contractual claims, diplomatic pressure or investment arbitration.
The emerging relationship between state utility EPCG and Abu Dhabi-based renewable-energy group Masdar demonstrates the need for a more precise approach. Masdar, owned by Mubadala, ADNOC and TAQA, already has a history in Montenegro through the 72MW Krnovo wind farm. In 2026, it began exploring a joint venture with EPCG covering solar, wind, hydropower, battery storage and hybrid projects.
Such a partnership could accelerate Montenegro’s renewable build-out, reduce dependence on the Pljevlja coal-fired power plant and create additional electricity exports through the undersea interconnector with Italy. It also involves a foreign state-controlled company potentially participating in assets central to the country’s electricity security.
Screening should not treat state ownership as an automatic reason for rejection. It should examine governance rights, access to dispatch and grid data, project-level control, technology dependencies, financing terms, transfer restrictions and the treatment of assets in a political or commercial dispute. Conditions could require EPCG to retain control over strategic decisions, ring-fence operational data and maintain alternative suppliers for critical equipment.
The same questions arise in transmission and telecommunications. Crnogorski elektroprenosni sistem, or CGES, operates the national high-voltage grid and the subsea electricity link to Italy. Its ownership includes the Montenegrin state, Italian transmission operator Terna and Serbia’s Elektromreža Srbije. These strategic shareholdings have commercial and regional-integration value, but any future change in control would need to be evaluated against the role CGES plays in national security and European electricity flows.
Port of Bar, Podgorica Airport, Tivat Airport, telecommunications networks, data centres, cloud infrastructure and payment systems belong in the same category. Montenegro’s limited scale means that control over a single operator can amount to control over an entire national function. A minority investment may be strategically significant where it includes board representation, veto rights, privileged data access or influence over procurement and financing.
The banking sector already has ownership controls administered by the Central Bank of Montenegro, but foreign-investment screening would introduce a separate national-security layer. A prospective bank shareholder can be financially sound and still create concerns about sanctions exposure, politically directed lending or access to sensitive payment data.
The proposed acquisition of banking operations by regional investors, the growing role of cross-border banking groups and the use of Montenegrin lenders to finance coastal property make the distinction increasingly relevant. Regulatory approval tests the stability of the institution; security screening assesses the wider consequences of control.
Media ownership presents a still more politically sensitive case. Montenegro currently addresses changes in media control mainly through licensing, concentration and competition rules. These safeguards do not fully capture an acquisition financed by a foreign government or a politically connected entity seeking influence rather than a commercial return.
The European framework recognises media pluralism and access to sensitive information as legitimate screening considerations. A Montenegrin mechanism could therefore review investments where the buyer’s links to foreign political structures create risks to editorial independence or democratic processes. The test would need objective criteria and judicial oversight to prevent the government from using national security as a pretext to block critical media owners.
Real estate will be the most difficult boundary to draw because it accounts for such a large share of the country’s investment inflows. In the first half of 2025, Montenegro received approximately €448.6mn in gross foreign direct investment. Property purchases accounted for about €228.9mn, or 51 per cent of the total. Intercompany debt contributed almost €162.9mn, while direct equity investment in companies and banks was only €38.9mn.
This structure reveals the central weakness in Montenegro’s FDI model. The country attracts large amounts of foreign money relative to the size of its economy, but much of it purchases existing land and housing rather than financing export-oriented production, technology transfer or new industrial capacity.
Property inflows can support construction, consumption and municipal revenue, yet they also increase land prices and import demand. They do not necessarily generate the recurring foreign-currency income needed to finance Montenegro’s merchandise deficit, which reached approximately €1.92bn in the first half of 2026.
A screening regime will not change that composition by itself. It may, however, force the state to distinguish more carefully between capital that adds productive capacity and capital that acquires scarce assets. The economic value of an investment should not determine the security decision, but it remains essential to wider investment policy.
A €500mn resort proposal with an opaque ownership chain, limited hotel content and extensive apartment pre-sales creates a different risk profile from a manufacturing plant of the same value financed by identifiable shareholders and contracted European lenders. The headline amount is not enough. Authorities need to understand how much is equity, how much is debt, which assets secure the financing, where sales proceeds flow and what obligations remain with the state.
The screening process will become a new condition precedent in acquisitions, project finance and public-private partnerships. Investors and banks will need to establish at the start of due diligence whether notification is mandatory, whether implementation must be suspended pending approval and what information must be disclosed about ultimate ownership and financing.
Transaction documents will require longer completion deadlines, risk-allocation clauses and a clear treatment of mitigation measures. Lenders may refuse drawdown until screening approval becomes final. Sellers will seek protection against a buyer failing to obtain clearance, while buyers will resist obligations to accept any condition the government might impose.
A poorly designed regime could therefore delay investment and raise financing costs. Montenegro’s administration is small, and strategic transactions require expertise across security, competition, energy, finance, technology and foreign policy. Placing the Ministry of Economic Development at the centre creates a clear point of contact, but final decisions by the government could leave the process vulnerable to political bargaining.
The law will need fixed review periods, transparent notification thresholds, confidentiality safeguards and a formal right of appeal. It should distinguish transactions requiring mandatory pre-approval from those that can be called in for review, and it must address indirect acquisitions routed through EU or offshore holding companies.
A foreign state-controlled group should not be able to avoid scrutiny by acquiring a Montenegrin asset through a subsidiary registered in Luxembourg, Cyprus or the Netherlands. The analysis must look through the immediate buyer to the ultimate beneficial owner and the party exercising real control.
Greenfield investments also require careful treatment. Traditional screening mechanisms concentrated on acquisitions of existing companies, but strategic risk can arise when a foreign investor builds and controls new infrastructure. A newly constructed data centre, private port terminal, energy-storage facility or telecommunications network may be more important than the takeover of an established business.
At the same time, thresholds must prevent the system from being overwhelmed. Requiring approval for every foreign-owned apartment company, small solar project or hotel refurbishment would create an administrative bottleneck and encourage informal political intervention. Transaction value alone will not be sufficient because a low-value acquisition can provide control over sensitive data or infrastructure, while a high-value residential development may pose no genuine security concern.
The strongest design would combine sectoral triggers, control tests, location criteria and monetary thresholds. Transactions involving ports, airports, transmission assets, defence suppliers, core telecommunications, payment infrastructure and sensitive government data should face mandatory review regardless of value. Tourism and property projects would enter screening only when their location, scale or associated rights create a strategic exposure.
Predictability will determine whether the new framework strengthens or weakens Montenegro’s investment position. Serious institutional investors generally accept screening when the rules are clear and decisions are time-limited. They are more concerned by political discretion, unclear property rights and the possibility that an approved project will later be challenged because no credible review occurred before signing.
A transparent mechanism can therefore lower rather than increase the country risk premium. It gives lenders evidence that ownership, sanctions, national-security and political-influence risks were assessed before capital was committed. That can reduce the probability of later intervention, cancellation or litigation.
The benefit can extend to sovereign financing. Montenegro is still rated in the speculative-grade category, with public debt around the low-to-mid 60 per cent of GDP range and a large external deficit financed partly by foreign capital. A credible investment-screening system would reinforce the broader EU-accession narrative, supporting the perception that strategic assets are governed through stable rules rather than bilateral discretion.
The opposite outcome would be damaging: a law that examines ordinary private transactions but exempts government-sponsored deals would add bureaucracy without reducing risk. It would signal that screening exists to satisfy Brussels while political agreements continue under separate rules.
Montenegro does not need less foreign investment. It needs a sharper distinction between capital that expands productive capacity and structures that transfer control without adequate scrutiny. The future law will acquire meaning at the moment it is applied to the country’s largest and most politically protected transactions, before contracts turn an avoidable risk into a sovereign obligation.
