Montenegro stands at a crossroads: Will it normalise exceptional, deal-driven investment practices, or set regional standards for transparent and rule-based development? The EU has a critical opportunity to guide this process, supporting Montenegro’s commitment to the rule of law and ensure that growth strengthens institutions rather than erodes them. As deal-based investment frameworks gain traction across the region, the EU must act to prevent corrosive capital from becoming the norm.
Across the Western Balkans, large-scale foreign investment increasingly follows a recognisable pattern. Projects arrive fast, promise transformation, and rely on exceptional frameworks rather than ordinary rules. Investors seek scale, speed, and certainty, often through bilateral agreements, strategic partnerships, or bespoke legal frameworks. These arrangements compress decision-making timelines and elevate political discretion over procedural scrutiny. What initially appears as development-driven investment often produces a different outcome: legal contestation, public resistance, and growing distrust in how decisions unfold.
Corrosive capital privileges exceptions over procedures.
In Rules or Deals? The EU’s Challenge in Regulating Corrosive Capital in the Western Balkans, I describe this dynamic as corrosive capital – not because of where capital originates, but because of how it interacts with institutional environments. Corrosive capital reshapes governance instead of submitting to it. It privileges exceptions over procedures and negotiates safeguards after commitments form. Over time, this logic transforms investment from an economic tool into a rule-of-law challenge.
How Promising Looking Projects Undermine Legal Safeguards
Concrete cases across the region illustrate how this pattern materialises. In Serbia, the Belgrade Waterfront project embedded planning exemptions and opaque governance structures into a flagship urban development, redefining public space through executive control. In Albania, large waterfront projects such as the Durrës marina proceeded under “strategic investor” status and bespoke contractual frameworks that sidelined ordinary planning and competitive procedures. Across the region, executives increasingly rely on such designations to grant preferential access to land, fast-tracked permits, and procurement exemptions – undercutting precisely the safeguards that Chapter 5 (public procurement) of the EU accession process is meant to entrench.
Only after these projects take shape do their spatial consequences become visible. Recent analyses of urban development reveal towns dominated by luxury apartments with minimal permanent occupancy – “dark window cities” that signal speculative ownership rather than lived communities. Developers deliver buildings, but institutions fail to deliver infrastructure, services, or affordability. Planning systems react rather than guide. These outcomes do not reflect isolated misjudgments. They reflect a shared governance model that allows investment to shape institutions instead of requiring institutions to govern investment.
Good Governance Is the Decisive Variable
The central insight follows directly. Foreign investment does not undermine democratic systems; weak governance does. When decision-makers privilege deals over rules, they transfer long-term costs onto institutions, communities, and future governments. EU accession frameworks recognise this risk. Chapters on public procurement, competition, and the rule of law exist precisely to prevent discretionary development and selective enforcement. They aim to anchor growth in predictability rather than negotiation – an essential condition for attracting credible, long-term investment to the region in the first place.
Foreign investment does not undermine democratic systems; weak governance does.
Yet enlargement policy still struggles to address treaty-based investment frameworks that sit at the intersection of foreign policy, economic strategy, and constitutional law. Governments often frame these agreements as external commitments beyond ordinary regulatory reach. In practice, they shape domestic legal orders more deeply than standard legislation. The challenge for both the EU and candidate countries lies not in rejecting capital, but in enforcing governance standards at every level – including international agreements presented as strategic shortcuts.
Montenegro as the Most Acute Case
Montenegro now concentrates these regional dynamics in their most explicit form. In June, Parliament adopted – in a second vote – the Law confirming the Agreement between Montenegro and the United Arab Emirates on cooperation in tourism and real-estate development, with 41 of 81 MPs voting in favour. After publication in the Official Gazette, the agreement entered the domestic legal order. Authorities designated Ulqin/Ulcinj’s Long Beach as the core development zone.
This site carries exceptional social and symbolic weight. For decades, Albanians, Montenegrins, Serbs, Bosniaks, and Croats experienced this coastline as shared commons – a space of everyday coexistence where identity politics rarely intruded. The agreement transformed that perception. Political leaders, legal experts, and citizens now contest the future of a place long defined by neutrality. What once functioned as a common horizon has become a focal point of national mobilisation and institutional scrutiny. Ulqin’s Long Beach is also an environmentally sensitive coastal zone, where large-scale, exception-based development would carry irreversible biodiversity and ecosystem risks.
Civil Society and Constitutional Court Oppose the Agreement
Civil society organisations, such as the Centre for the Protection and Research of Birds, legal experts, and local actors responded by challenging the agreement before the Constitutional Court. They argued that the law confirming the agreement violates constitutional provisions governing property regimes, the rights of foreigners, and parliamentary voting thresholds. On December 15. the Court convened a public hearing and invited competing interpretations from constitutional scholars and practitioners. The hearing also carried institutional significance, marking a return to functionality of the Constitutional Court and the first public hearing convened in nearly eight years.
The experts and the government disagreed on several points, but one principle gained particular clarity: international agreements cannot override constitutional limits. As one constitutional judge observed during the hearing, a bilateral agreement could not redefine Montenegro’s constitutional order – it could no more establish a monarchy than bypass constitutional safeguards on property and governance. Legal experts also raised a procedural concern. Article 91 of the Constitution requires a two-thirds majority for laws affecting the property rights of foreigners, yet Parliament ratified the agreement with a simple majority, prompting questions of procedural compliance alongside substantive issues. If the Constitutional Court were to conclude that the agreement required a two-thirds majority, the law ratifying it could be annulled, leaving Parliament to decide whether to re-adopt it in accordance with constitutional requirements.
International agreements cannot override constitutional limits.
The Court acts strictly a posteriori. It does not negotiate policy or assess economic merit. It clarifies constitutional boundaries after political institutions act. That clarification shapes the legal and political landscape. The Court has now closed the public hearing phase and will issue its opinion following internal legal analysis.
Montenegro Has a Choice: Dilute the Rule of Law or Set a Good Example?
What is at stake now reaches far beyond Montenegro. By confirming the agreement, authorities signaled to the region that exceptional deals can substitute for institutional reform. Other countries face strong incentives to follow this path, particularly where stakes appear higher and political costs diffuse. Yet comparative evidence points elsewhere. Countries that consistently rank high in quality of life, education outcomes, and citizen trust – the Nordic states, the Netherlands, Germany, Canada – build development on predictable rules, transparent procurement, and constitutional discipline.
Montenegro still retains strategic room to choose. With fewer entrenched megadeals than Serbia or Albania, it can align development more closely with its EU accession commitments. It can become a multiplier of legally fragile arrangements – or a trendsetter for high-standard, rule-based investment governance in the Western Balkans. This dynamic is not theoretical: following the UAE deal, Montenegro has signed bilateral cooperation agreements with partners including Hungary and France and is discussing similar formats with the United States, illustrating how deal-based governance models can spread across policy areas and partners. Still, Montenegro’s vibrant civil society and a Constitutional Court willing to hear all perspectives demonstrate that public interest can still shape outcome. Political leadership now decides whether it treats this process as obstruction or as a chance to set a regional benchmark.
What Options Does the EU have?
The EU’s credibility in regulating corrosive capital depends on its ability to act when institutional momentum emerges. Montenegro offers precisely such a moment. The public debate around the UAE agreement, the mobilisation of civil society, and the renewed activity of the Constitutional Court have created rare political and social alignment around rule-of-law standards.
The EU should treat this not as a domestic controversy to monitor from a distance, but as an opening to invest politically and institutionally in ways that can scale regionally.
Concretely, the EU can start in Ulqin/Ulcinj, where a visible, high-standard investment pilot could deliver an early and credible win. By mobilising existing EU instruments to support a rule-based model for coastal and tourism development – grounded in transparent spatial planning, EU public procurement rules, and environmental safeguards – the Union could demonstrate how compliance translates into bankable projects and investor certainty.
Where constitutional review constrains specific projects, the EU can help redirect investment toward compliant sectors and locations, ensuring that respect for constitutional order strengthens rather than penalises development outcomes.
Citizens in Montenegro do not oppose development, but they insist that the rule of law prevails.
In parallel, the EU should operationalise a "Corrosive-Capital-Watchdog" within the enlargement architecture to track treaty-based investments, identify institutional stress points early, and provide rapid technical support to courts, parliaments, and regulators. Embedded within DG ENEST’s accession monitoring and coordinated with DG GROW and the EIB, these tools could already apply across the Western Balkans, preventing exceptional deals from becoming regional templates by default.
At the same time, the EU should mainstream ex-ante constitutional and procurement screening of strategic investment agreements into the current accession cycle; align targeted expert support with ongoing chapter closures to reinforce domestic capacity as legal alignment deepens; and scale rule-based investment pipelines that offer European investors predictable entry points.
Citizens in Montenegro have articulated a clear expectation: they do not oppose development, but they insist that the rule of law prevails. Acting now would allow the EU to meet that demand – and demonstrate, in practice, that enlargement still rewards those who choose high standards over fast deals, and institutions over shortcuts.
