US embassy cable - 05ZAGREB1413

UNCLAS ZAGREB 001413 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, ECIN, ETRD, HR, Trade 
SUBJECT: CROATIAN BAR ATTEMPTS TO BROADEN 
RESTRICTIONS ON FOREIGN LAW FIRMS 
 
1.  SUMMARY:  An attempt to restrict access to the Croatian 
market for legal services was brought to post's attention by a 
multinational (including U.S.) law firm.  The law firm 
registered a branch in Croatia in October 2004.  In January 
2005, the Croatian Bar Association (HOK) published a circular 
letter stating that no foreign law firm could provide services 
in Croatia or form branches.  In February 2005, the HOK, as an 
interested party, appealed the decision by the Commercial Court 
to register the law firm.  The case has not been decided. 
 
2.  Econoffs spoke to contacts at the Trade Department, 
Ministry of Economy, and asked them to review the issue.  Their 
position is that HOK's appeal is contrary to Croatia's GATS 
commitments, which according to Croatian law, supersedes 
national law but not the Constitution.  The Ministry of Economy 
sent a position letter to the HOK but is not willing to submit 
the letter to the Commercial Court as an amicus brief.  A 
contact at the Ministry of Justice intimated that such an 
action would constitute improper influence on the judiciary by 
the executive branch. Representatives from the Ministry of 
Economy are in contact with Justice and are requesting that the 
case decision be expedited.  END SUMMARY AND COMMENT. 
 
3.  Under Croatia law (specifically, the Law on the Legal 
Profession and Croatia's GATS -- General Agreement on Trade in 
Services --schedule), branches of foreign law firms located in 
Croatia cannot provide legal services relating to Croatian law 
but may provide legal services relating to foreign and 
international law.  Unlike Slovenia's GATS schedule, Croatia's 
schedule does not grant the national bar association power to 
approve the establishment of branch offices of international 
law firms. 
 
4.  HOK appealed the American firm's registration pursuant to 
Article 6 of the Croatian Law on the Legal Profession.  Under 
this article, the HOK is authorized to take legal action 
against unauthorized legal services.  HOK asserted that the 
registration of the foreign firm was unlawful because, among 
other reasons, such registration was not permitted by HOK and 
because the firm's limited liability registration put it in a 
more favorable position than Croatian law firms which have a 
different liability structure.  HOK also asserts that according 
to Croatia's GATS schedule, foreign companies are not allowed 
to establish branch offices for legal services but only for 
consulting services on foreign and international law. 
 
5.  Post has been in contact with the Trade Department at the 
Ministry of Economy about this issue since April 2005. Our 
interlocutors were familiar with the issue but had not 
previously been approached for assistance.  At our request, 
they reviewed the case and contacted the HOK.  They sent a memo 
to the HOK and have met with the Ministry of Justice to request 
that the case be concluded in a timely manner.  Per our 
contacts, the HOK is very confident they will win their case. 
The law firm is equally confident that the case will be decided 
in their favor. 
 
6.  Note: this is not the first attempt to restrict market 
access for foreign service providers in Croatia, in apparent 
violation of Croatia's GATS commitments.  Earlier in the year, 
the Croatian Association of Accountants tried to introduce 
legislation that would require accounting firms to be over 70% 
Croatian capital.  Luckily, this effort died under the weight 
of its own obvious illegality. 
 
7.  Post will continue to press for Croatia to adhere to its 
GATS commitments and promote access to the Croatian legal 
services market by U.S. firms. 
 
DELAWIE# 
 
 
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