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05ZAGREB1413 2005-08-29 13:22:00 UNCLASSIFIED Embassy Zagreb
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					  UNCLAS ZAGREB 001413 


E.O. 12958: N/A

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.