CEE Legal Matters

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  • Breaking Barriers: Gender Balance in Corporate Leadership

    Hungary is gearing up for a groundbreaking shift in corporate governance, with the proposed law aimed at improving gender representation in leadership positions at publicly traded companies. By implementing the relevant EU directive, the proposed law does not only seek to address long-standing gender imbalances but still promotes greater access of women to the labor market participation.

    The legislation targets supervisory boards in public limited companies where women occupy less than 49% of the positions. To ensure compliance, companies must achieve a minimum 40% representation of the under-represented gender in supervisory boards by mid-2026. While smaller businesses, including micro and medium-sized enterprises, are exempt, larger corporations face significant accountability measures. Key provisions of the law require companies to overhaul their recruitment and selection processes. Candidates must be evaluated based on objective and transparent criteria such as qualifications, skills, and experience. In cases where candidates are equally qualified, preference must be given to the underrepresented gender.

    To maintain accountability, affected companies must file annual reports each year by 30 June, detailing the gender breakdown of their boards and the actions taken to achieve the mandated targets. These reports will be submitted to the Registry Court of the company, and to the Budapest Stock Exchange, which information shall also be publicly available on the websites of the companies. The Budapest Stock Exchange will also publish by 31 July each year an annual list of companies that meet the requirements, encouraging transparency and public oversight. The above should also be duly indicated in the corporate governance statement of the company. Those failing to comply must explain their shortcomings and provide corrective actions.

    As the implementation deadline approaches, all eyes will be on the companies tasked with turning this vision into reality and on the ripple effects this progressive change may unleash across the economy. This legislation is a huge milestone for women in the labor market, as it underscores the importance of gender diversity in decision-making by improving the gender balance on boards of public limited companies. The proposed law, if accepted, is expected to come into effect on 28 December 2024.

    By Levente Csengery, Partner, KCG Partners Law Firm

  • First Successful Application of New Leniency Procedure

    A leniency procedure has been in place in Ukraine for over two decades. However, until recently, there was no public record of its successful application by the Antimonopoly Committee of Ukraine (AMC).

    One key reason for such unpopularity was that, until the end of 2023, only the first-comer could receive full immunity, while subsequent applicants received no benefits. Some other provisions under the old regime further complicated the process, discouraging its use.

    In 2024, a new leniency procedure came into effect, introducing significant improvements. It not only continued to offer full immunity to the first-comer but also allowed reductions in fines for subsequent applicants who provided valuable evidence. Specifically, the second applicant could receive a reduction of up to 50%, the third up to 30%, and any subsequent applicants up to 20%. Other enhancements were also introduced to make the procedure more accessible and predictable for applicants.

    On 12 December 2024, the AMC reported the first grant of leniency under the new procedure. The case involved bid-rigging, and full immunity was granted to the tender participant who first reported the violation and satisfied certain other conditions (such as, provision of critical evidence and cooperation with the AMC throughout the process).

    This example shows that the procedure is workable and can encourage companies to report violations to the AMC.

    By Igor Svechkar and Oleksandr Voznyuk, Partners, and Pavlo Verbolyuk and Sergiy Glushchenko, Counsels, Asters

  • Czech Parliament Discusses Measures to Cut Renewable Energy Subsidies, Focusing on Solar Power Plants

    A set of two measures aimed at reducing state subsidies for renewable energy sources has been approved by the lower house of Parliament in the Czech Republic on 11 December 2024. These changes, proposed through amendments to the Act on Promoted Sources (the “RES Act”) and the Energy Act, specifically target solar power plants with a capacity of more than 30 kW that were connected in 2009 and 2010.

    The new measures will focus on controlling subsidies by introducing individual checks on profitability (internal rate of return or IRR). Support will be reduced or withdrawn if the allowed profitability thresholds are exceeded.

    The amendments also redefine the calculation of IRR to include the entire project lifetime, rather than being limited to the subsidised period. Finally, transactions with related entities that are not conducted on an arm’s-length basis will be re-evaluated as if they were.

    The planned effective date for these measures is 1 January 2025.

    Operators of renewable energy installations will still be required to conduct self-assessments and report their figures to the market operator. The Ministry of Trade is expected to issue a decree outlining the reporting process, but as the RES Act amendments are not yet fully approved, this decree has not been published. It remains unclear whether the existing decree (No. 72/2022, Coll.) will be amended or replaced for this purpose.

    Tax authorities will also play a role by providing the State Energy Inspection with information on related-party transactions, financial flows and other conditions relevant to IRR compliance checks.

    EU context

    The European Commission’s State Aid decisions, particularly State Aid SA.40171 (2015/NN) and State Aid SA.35177 (2014/NN), have established the framework for legitimate expectations regarding renewable energy subsidies. These decisions emphasise that national regulations must align with EU-level state aid rules, providing critical context for the proposed amendments. These decisions are essential for shaping the legitimate expectations of receivers of state aid. The European Commission serves as the competent authority for establishing the framework for state aid in the renewable energy sector. National regulations merely implement the rules set forth by the European Commission.

    Rise to claims by solar investors expected

    The Czech Solar Association, the largest professional organisation in this field, has strongly criticised these measures, warning of potential legal disputes under international agreements such as the Energy Charter Treaty (ECT) and the Switzerland–Czech Bilateral Investment Treaty (BIT). Similar issues arose during the financial crisis when the Czech Republic introduced a solar levy, leading to over 50 lawsuits, a constitutional complaint and seven international arbitration cases.

    The Czech Republic successfully defended most of these claims. Marie Talašová, a counsel in our energy practice team, oversaw the State’s defence in her capacity at the time as Head of the International Legal Services Department of the Ministry of Finance. After leaving the Ministry, she acted as an attorney for the Czech Modern Energy Union, advising on related issues, particularly with regard to legislation implementing conditions set forth by the EU.

    What comes next?

    The legislative process for these amendments continues. After passing the lower chamber, the draft law is sent to the Senate. If the Senate approves it or takes no action within 30 days, the draft will move to the President for signature. If the Senate rejects or amends the draft, it will be returned to the lower chamber for further discussion. The President has the authority to return the draft within 15 days with reasons for veto, but if no objections are raised, the law will be published in the Collection of Laws and become effective.

    An expert team of dedicated energy lawyers from Wolf Theiss is closely monitoring these alterations as solar companies with investments in the Czech Republic are on alert over the subsidy cuts.

    By Robert David, Partner, Marie Talasova, Counsel, and Barbora Malimankova, Senior Associate, Wolf Theiss

  • Ellex and Sirel & Partners Advise on Privatization of Operail’s Business Operations in Estonia

    Ellex has advised on the privatization of Operail’s business operations via a sale of its business operations along with its subsidiary Operail Repairs for EUR 19 million to Tiigi Keskus, an Estonian company that won the sale auction. Sirel & Partners advised Tiigi Keskus.

    Operail is a state-owned company administered by the Estonian Ministry of Climate. According to Ellex, it specializes in freight transport on Estonian railways and in the maintenance and repair of rolling stock. Until early 2023, the company was also involved in wagon rental and freight transport in Finland, but its owner opted to divest these non-strategic business lines. In February 2024, the government decided to further privatize Operail’s remaining business lines, culminating in this transaction.

    In 2019, Ellex advised Operail on entering the Finnish market (as reported by CEE Legal Matters on October 24, 2019).

    The Ellex team included Partners Sven Papp and Martin Maesalu, Counsels Gerda Liik, Jaanus Ikla, and Mari Must, Senior Associates Hanna Pahk, Merlin Liis-Toomela, Kevin Gerretz, and Denis Tsasovskih, Associate Alan Paas, and Lawyers Miikael Tuus, Karl Rudolf Org, and Karoline Poska.

    The Sirel & Partners team included Partners Juri Sirel and Sandra Toots and Associate Reelika Rohi.

  • A&O Shearman and DTB Advise Partners Group on Sale of VSB Group to TotalEnergies

    A&O Shearman and Divjak, Topic, Bahtijarevic & Krka have advised Partners Group on the sale of VSB Group to French energy company TotalEnergies. Jones Day reportedly advised TotalEnergies.

    Partners Group operates in global private markets.

    VSB Group is a renewable energy platform in Europe. According to A&O Shearman, the transaction gives VSB an equity value of EUR 1.57 billion. “Partners Group acquired a majority stake in VSB in 2020 and has since transformed the company from a mid-sized renewables developer into a leading pan-European renewables platform. Under Partners Group’s ownership, VSB has more than doubled its project pipeline from 8 gigawatts to over 18 gigawatts, significantly expanded its operating and under construction capacity from 53 megawatts to over 475 megawatts today, and diversified across wind and solar PV, battery storage, and e-mobility technologies.”

    The DTB team included Senior Partner Damir Topic, Partner Marina Kovac Krka, Senior Attorneys at Law Dina Salapic, Andrej Zmikic, and Jasna Belcic, Attorneys at Law Sanja Novoselic, Barbara Simic, and Jure Marovic, Associate Andrija Duvnjak, and Trainee Josipa Banozic.

    The A&O Shearman team included lawyers in Hamburg, Frankfurt, Duesseldorf, Paris, Luxembourg, Warsaw, and Milan.

    Editor’s Note: After this article was published, Schoenherr announced that it advised TotalEnergies. The firm’s team included Partners Maximilian Lang, Krzysztof Pawlak, Grzegorz Filipowicz, and Ivan Einwalter, Counsel Marcin Antczak, Senior Attorneys at Law Krzysztof Lesniak and Adam Nowosielski, and Attorney at Law Lea Muzic.

  • SSK&W Advises ASP Capital on Investment into Cyber360

    SSK&W has advised ASP Capital on its investment into Cyber360.

    ASP Capital is a family investment office in Poland.

    Cyber360 is an IT company operating in the field of cybersecurity. According to SSK&W, the company develops the “Cyberdefender service, which provides customers with, among others: compliance with the NIS2 directive.”

    The SSK&W team included Partner Szymon Syp.

  • Wolf Theiss and Dolezal & Partners Advise on Strabag Group’s Acquisition of B2 Assets in Czech Republic

    Wolf Theiss has advised Strabag Property and Facility Services on its acquisition of B2 Assets from Dusan Bocek. Dolezal & Partners advised the seller.

    Strabag is an Austrian property services company and a provider of building solutions, managing real estate and property assets including offices, industrial sites, plants, technology buildings, data centers, and residential properties. 

    B2 Assets is a Czech Republic-based building management company. It manages a portfolio of approximately 1.4 million square meters.

    The Wolf Theiss team included Counsels Tomas Kren, Kamila Seberova, and Ondrej Benes, Senior Associates Barbora Malimankova and Katerina Mikulova, and Associate Nikola Hnojilova.

    The Dolezal & Partners team included Partners Eva Mayerova and Martin Winter.

  • Parliament to Discuss Amendments to Several Major Laws at the End of the Year

    The Hungarian Parliament is debating several major laws at the end of 2024, including amendments to the Act on the election of the Members of the Parliament (‘Election Act’), another amendment to the Fundamental Law of Hungary and new rules on hate speech.

    As Hungary approaches the parliamentary elections of 2026, the need has arisen to amend certain provisions of the Election Act, in particular the constituencies. The reason for this is that, under the relevant legislation, the number of eligible voters in each constituency cannot differ by more than 15% from the arithmetic average of all constituencies in the country. Given the significant changes in the population of each constituency since the last election, this amendment is necessary. On this basis, the most significant change is that there will be 2 fewer single-member constituencies in Budapest and 2 more in Pest County in the 2026 elections.

    Following the lessons learned from the 2024 mayoral election, it will be included in the law that if the result is closer than 0.5%, the votes will be recounted automatically. Another important change is that voters no longer need to carry their address cards with them to vote.

    Under a recently published bill, a person who writes a comment expressing an intention to commit a specific act of violence (especially violent death of other(s)) would be punishable by up to one year’s imprisonment. According to the proposal’s explanatory memorandum, it would be outside the scope of freedom of speech to make comments that incite hatred against others and/or advocate the violent death of others. In this context, press products available on the internet would be obliged to draw up a policy (as long as they also provide a commenting facility) and filter these comments on that basis.

    Finally, another amendment to the Fundamental Law of Hungary is under discussion, which would allow a person who is not a prosecutor to be elected as Attorney General.

    By Bálint Éberhardt, Attorney at Law, KCG Partners Law Firm

  • Navigating Uncertainty in Bulgaria: A Buzz Interview with Mitko Karushkov of Karushkov Legal Solutions

    Navigating the challenges of Bulgaria’s legal and regulatory environment requires a careful balance, particularly in light of ongoing political instability, according to Karushkov Legal Solutions Founder Mitko Karushkov who takes aim at systemic issues affecting legislative processes, judicial stability, and regulatory reliability, while highlighting the importance of proactive risk management and the potential for growth amidst uncertainty.

    “Bulgaria must be understood within the context of its ongoing political instability,” Karushkov begins. “This directly affects the legislative process, delaying the adoption of crucial laws while rushing others through parliament, often at the expense of quality and clarity. We’re seeing critical pieces of legislation left in limbo, which undermines confidence and predictability in the legal framework,” he goes on to say. Furthermore, Karushkov says that “sometimes some regulators state that the EU legislation is ‘vague’ and ‘too broad,’ which triggers the necessity of passing national laws in addition to the EU regulations. This, along with the political instability and the resulting cumbersome legislative process, sometimes leads to a lack of comprehensive guidance businesses need to operate securely.” In particular, he indicates that “technology regulation has suffered from this instability, with delays in implementing necessary legislation causing challenges for businesses operating in these sectors.”

    Focusing on the specific challenges this poses for businesses and investors, Karushkov stresses that “the instability creates a significant challenge for businesses, both domestic and international. For one, the judicial system is far from stable, and the regulators are not immune to these broader systemic issues. While not all decisions or regulatory bodies are questionable, the system as a whole is shaken, leaving room for uncertainty.” This is why a thorough risk analysis is absolutely essential for businesses operating in Bulgaria. “It’s not enough to evaluate the financial or operational aspects of a deal – companies must also consider potential legal disputes and prepare for worst-case scenarios.” Additionally, he stresses that “many regulators face challenges due to expired terms and delayed appointments, which raise questions about their capacity and competence. This gap in regulatory oversight has led some regulators to avoid addressing factually complex cases, compounding uncertainty for businesses.”

    Crucially, when it comes to mitigating risks, Karushkov indicates that “businesses should factor in the potential for disputes and the likelihood of challenges within Bulgaria’s judicial system.” To that end, he indicates that arbitration clauses are becoming increasingly important, as they provide an alternative to the local courts. “Companies should also focus on robust due diligence, ensuring that every aspect of their operations – from regulatory compliance to contractual obligations – is carefully scrutinized. Proactive legal and operational strategies are crucial for navigating this environment.” Specifically, he adds that “some non-EU clients are increasingly introducing self-insurance clauses, offering more flexibility and security for investments. This approach has gained traction among local businesses as well, reflecting a shift in risk management practices.”

    Still, with all this being said, there is a silver lining. “While the challenges are significant, there are still opportunities for growth,” Karushkov says. “Bulgaria remains a key market in the region, with a strategic location and an economy that continues to attract attention despite the hurdles. Businesses that approach the market with caution, leveraging strong legal advice and risk management practices, can still find success,” he opines. Moreover, political and judicial reforms are topics of active discussion in the country, and if implemented effectively, Karushkov believes they could restore confidence and stability in the years to come. “In a landscape defined by uncertainty, careful planning, and strategic risk management are not just advisable – they’re essential. However, I remain optimistic that things will start looking up soon,” Karushkov concludes.

  • Czech Parliament Passes Fundamental Reform of Incentives Scheme for Movies and Video Games and Introduces a New Fee System for VOD Service Providers

    The Czech Republic has been a key global entertainment industry player for decades – whether through the quality of its local film production services, or the country’s use as a filming location, or with respect to developing world-famous video games. Now, in order to respond to the constantly evolving entertainment industry, to strengthen the competitiveness of the Czech audiovisual market, and to ensure the country remains a priority destination for major players developing film, series and video game projects, the Czech incentive scheme has been overhauled by lawmakers.

    Specifically, Czech lawmakers have just passed the most extensive amendment to the Czech Audiovisual Act in recent years (the “Amendment”). The Amendment passed the Senate today, will soon be signed by the President and is expected to come into effect on 1 January 2025. The changes related to the production incentive system are set to take effect a year later.

    Specific changes introduced by the Amendment are highlighted below.

    Changes to film incentive scheme

    The Amendment introduces significant changes to the Czech film incentive scheme, with the goal of increasing state support for audiovisual production in the country.

    Support is set to increase from 20% to 25% refund of eligible costs incurred at least partly in the Czech Republic for feature films, feature series and documentary films. The introduction of the 25% rate for eligible costs will also newly apply to documentary series.

    For animated films and series and for digital production / post-production work, the amount of state support is set to increase from 20% to 35% refund of eligible costs.

    Moreover, in order to satisfy the demands of certain large-scale production projects by foreign producers, and at the same time prevent the outflow of such projects to other countries, the maximum possible incentive amount per project will increase from current CZK 150 million (approx. EUR 6 million) to CZK 450 million (approx. EUR 18 million).

    Furthermore, the Amendment reduces the minimum required runtime for feature films, feature series, animated films, animated series and documentary films to qualify for an incentive. Here we can see how Amendment is responding to new trends and tries to make series production more eligible for the Czech incentives. This reflects changes in content consumption, with younger viewers used to watching shorter formats, with VOD services and TV adapting to such habits.

    The Amendment also establishes new categories of animated works (both film and series) with a lower limit of minimum Czech expenditures, allowing more animated projects to qualify for incentives.

    A fundamental change from the current incentive system is the transition from a three-phase decision making incentive process (registration, allocation of funds, payment of the incentive) to a more simplified two-step process (project registration, payment of the incentive) where the first and second phases merge and are now called “project registration”. The initial project registration phase is initiated by the application for registration of the incentive project, which must be submitted before the start of production of an audiovisual work in the Czech Republic.

    The amendment also introduces a new category of eligible costs, namely pre-production preparation costs, which can include costs incurred up to six months prior to the submission of the project registration.

    New support for video games and small-screen projects

    A ground-breaking change in the incentive system is its extension to support video games and small screen works.

    The Czech video game industry is strongly geared towards exports. According to the Explanatory Memorandum to the Amendment, more than 95% of Czech game production is for the global market. In 2021, the turnover of Czech video game companies reached a record CZK 7.11 billion (approx. EUR 283 mil.), and in the same year video game companies paid CZK 395 million on the income tax alone.

    Video game developers will now be able to apply for financial support for their projects similarly to film and television production companies. According to the Amendment, state support will be provided via grants, with the state receiving a share of profits. In other words, video game companies receiving grants will be required to pay a percentage of their revenues back to the Czech Audiovisual Fund.

    In addition, the Amendment also sets forth support for small-screen productions, made available through television broadcasting or streaming platforms.

    The Fund will specify the detailed criteria for granting support for video games and small-screen productions via its Statute, which is currently being drafted by experts and should be issued in spring 2025.

    New fees for VOD providers

    The Amendment makes use of an option authorised via the European Audiovisual Media Services Directive (“AVMS Directive”) and also imposes an obligation to pay a fee from on-demand audiovisual media services to those VOD providers that are not established in the Czech Republic but nonetheless still target end-users in the Czech Republic. Many EU Member States have already implemented these fees in accordance with AVMS Directive and the Czech Republic is following this trend.

    The above-described fee concerns revenue from (i) on-demand audiovisual media services in the Czech Republic and from (ii) audiovisual commercial communications displayed to end-users in the Czech Republic, which are associated with the provision of on-demand audiovisual media services there. The fee calculated from these revenues (i.e. from both the provision of service in the Czech Republic and commercial communications) is 2%.

    The Amendment enables providers to reduce such fees by up to 50% through direct investments. These investments can be, for instance, in the form of funding Czech production. If no direct investments are made, VOD providers must pay an additional fee of 1.5% of their total revenues in the Czech Republic (this additional fee is proportionally reduced based on the extent of direct investments undertaken).

    Conclusion

    The Amendment represents significant news for the entertainment industry, offering a much more attractive incentive scheme for those that want to realize their production projects in the Czech Republic. Foreign producers and video game companies in particular should take note.

    Our dedicated entertainment law team will continue to keep you updated on the latest developments and is standing by to offer guidance and counsel.

    By Petr Bratsky, Managing Associate, and Anna Marciano, Junior Associate, Kinstellar