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Entrepreneurs rarely lack enthusiasm or passion. What they often do lack, however, is information about best practices, sources of capital, and applicable laws and regulations. To address this need, the Estonian office of the Glimstedt law firm has launched the new “LegalBooster” website, which claims to provide “all the legal stuff you need to know to get your start-up going.”

   

“A lot of my clients are start-ups, I love them, I love them for being so innovative. I think they’re changing us as much as they’re changing the world, and in this sense we’re really grateful to them for making us see our services and wanting to be better every single day, wanting to be more transparent, wanting to be more user-friendly.” (Anne Veerpalu, Senior Associate, Glimstedt)

Anne Veerpalu, one of the the Glimstedt lawyers behind the LegalBooster site, describes the venture as “basically a knowledge database for start-up companies, including not only template agreements, but basically using everything we’ve done before, meaning all the training materials that are relevant, and explanations regarding how to use them, as well as all the videos for trainings we’ve provided, presentations, blogs, and so on.”

The user-friendly site is divided into four sections: Blog, Materials, Videos, and Fund. The home-page contains regular updates of cautionary and/or success stories, as well as useful tips and recommendations. Templates for useful and common procedures like a Power of Attorney form and a Transfer and Licensing Agreement are provided, as is information about upcoming presentations, conferences, and other events of potential interest to new entrepreneurs.

The website’s content reflects what’s happening at the moment, Veerpalu explains. “We are using all of the experience that we gain every day in our practice and trying to put it into words and share it with the start-up community. For example at the moment we have lots of option agreements coming in … and we are seeing a lot of different kinds of option agreements or option terms, and then we blog about what we see and what we experience, and how it’s better to do it, and at what point it’s best to introduce the template, and so on.”

The team of lawyers behind the project (including Veerpalu, Glimstedt Partner Priit Latt, and Associates Merit Lind, Triin Tuulik, Mari-Liis Orav, and Maarja-Liis Lall, as well as Auditor Liis Laanesaar) isn’t worried about providing the information free of charge. Veerpalu explains that, “I think the trend of the legal services market is going towards transparency … and I think this is the way it must be done – it has to be done.” She points out that, “what start-ups actually do a lot when they start is they go around talking to other start-ups. This is the same sort of information they would collect anyway from the market. So basically what we’re doing is collecting it into one place and putting it in a structured form.”

Although the site is created by and managed by Estonian lawyers, Veerpalu believes the great majority of the information it contains is of general value, and useful to start-ups in other jurisdictions as well. And though “powered by” Glimstedt, Veerpalu insists that, “it wasn’t meant to be a marketing tool, and I’ve kept it as much as possible not being a marketing channel.” 

But that’s not to say its completely disconnected from the firm. Partner Priit Latt sees LegalBooster as another demonstration of Glimstedt’s commitment to its clients – and the community at large. He says, “LegalBooster delivers our message really clearly – keep your IP safe and take care of your investment proactively. Glimstedt is an innovative law firm mostly due to the booming technology sector pushing us lawyers to innovate our services. LegalBooster serves as merely one example of it.

On June 2, 2014, Romania’s Nestor Nestor Diculescu Kingston Petersen (NNDKP) announced that the firm is fine tuning its brand message and identity by introducing a new “Legal & Tax” tagline. The move, the firm explained, does not reflect a new capability, but is instead designed “to emphasize its professional leadership in these areas.” NNDKP Partner Ana-Maria Miron, who co-heads the firm’s Tax Advisory Services division, agreed to sit with CEELM and discuss the significance of the new tagline.

   

Ana-Maria Miron, Partner and Co-Head of the Tax Advisory Services Division, Nestor Nestor Diculescu Kingston Petersen

 CEELM: Is this primarily a branding/marketing exercise – emphasizing an integrated approach – or does the new emphasis refer to a genuine organizational or structural change in the firm?

NNDKP: This initiative did not involve structural or organizational changes. However, given that it aims at emphasizing a perfectly mature synergy between our legal and tax consultancy, our strategy focuses extensively, in the long run, on a better integration of these services across all the levels of the organization, so that every attorney, whether a legal consultant/litigator or a tax consultant, can better tailor the optimum solutions from both perspectives. 

In other words, we do things similarly, but we micro-manage all processes in the firm in the context of a stronger internal emphasis on the elements that differentiate us in the market – which we also have chosen to communicate formally (among these, authentic know-how and resources which translate into strong teams of 23 tax consultants and tax lawyers, 115 attorneys, consistent support from our mixed teams not only when the client makes the decision, but also when he implements it, etc.). 

 CEELM: Is this a response to client feed-back that the previous approach was unsatisfactory, or was this simply an internal decision that a more closely integrated approach would be more effective? 

NNDKP: As a result of a six-year close collaboration between our legal and tax teams, this was a natural step in our development strategy and a response to client demands – in a context where the value added came from the consultant’s ability to harmonize the pressure on fees with the same quality of legal and tax services and a team structure that would continue to provide the optimum and most viable recommendations for their businesses. 

 CEELM: Will clients need to request an additional review of tax implications, or will those implications be automatically factored into any advice you give them? 

NNDKP: Technically, our team is fully equipped and dimensioned to factor any legal advice from the tax perspective as well. However, this will not be done automatically, but depending on the project specifics, as we’ll effectively manage, in an adapted manner, the tax implications of the requests we receive. 

 CEELM: CEELM: What is the history of the firm’s tax practice? Was it part of the firm’s original offering, or was it added subsequently?

NNDKP: Although legal advice on general tax matters has been provided to clients since 1997, the specialization occurred gradually, so that a distinct tax practice was established in the firm in 2006, under my coordination. Two years later, the business challenges and opportunities on the legal and tax consultancy markets created the perfect framework to capitalize on the firm’s existing capabilities, with the addition of a highly-experienced team of tax consultants, former managers of companies in the Big4, led by Alina Timofti and Marius Ionescu. Thus, 2008 was the year which marked the beginning of the NNDKP legal and tax synergy, through the creation of the Tax Advisory Services division affiliated with the law firm. 

 CEELM: The firm has managed to build the largest tax consultancy in terms of revenue in Romania outside the Big 4. What were the keys to its success?  

NNDKP: It was not without challenges that we created this and developed the tax division from three professionals to 23 tax specialists and an impressive client portfolio for a “young” entrepreneurial venture. Our long-term business strategy encompassed a series of key strategic aspects that we first designed and then implemented, such as: measurable performance indicators, good talent management translated into the selection of the best tax professionals on the market and optimum retention strategies, adaptive account management, focus on brand growth and reputation management of the newly created entity. 

And the initiative launched six years ago did not only pass the test of time, but proved that we made the best possible choice, confirmed in terms of team strength, evolution of turnover, and the client portfolio. 

 CEELM: Of the three NNDKP Tax co-heads, two are originally accountants, not legal professionals. How common is this in the Romanian market? What are the unique advantages/perspectives that accountants bring to a law firm’s tax practice? 

NNDKP: In some European jurisdictions, only lawyers can act as tax consultants. In others, including Romania, economists can also provide tax advice.

While lawyers benefit from a holistic legal approach, which is essential in addressing a tax issue, the value added by professionals with accounting background resides in their good understanding of basic accounting and financial management aspects, rounded-up by the macro-economic know-how and 360 degree perspective (especially considering the higher number of projects where tax issues derive from accounting rules). 

 CEELM: What are the most complex tax projects that your firm has advised on recently?  

NNDKP: Among our most recent projects there can be mentioned significant deals in several industries:

• Assistance provided to an important international bank in a cross-border merger between its Romanian subsidiary and the UK headquarters, where we advised on all tax implications including the implementation advice.
• During the last post-privatization stages of a major automotive player, the tax assistance included the final tax restructuring of the privatized company, as well as complex negotiations with the State authorities for finalizing the process. 
• Design of tax procedures in relation to the inventory management and stocktaking for a major player in retail; our delivery consisted of a procedures mapping dealing with relevant profits tax and VAT aspects.
• Advice to a major real estate developer in selling two office buildings totaling a value of above EUR 120 million; we were involved in structuring the transactions, the advice during the negotiations, drafting the tax-related clauses in the sale-purchase agreements, etc.
• Advice related to the restructuring of an important agribusiness investment, restructuring caused by the Cypriot banking crisis. We provided not only legal and tax advice, but also tax assistance in relation to the compliance component of such a restructuring.

Taylor Wessing e|n|w|c’s Slovakia office celebrated its 10th anniversary in May, 2014, with a large public gathering and a private firm event for the firm’s lawyers, both in Bratislava.

   

Andrej Leontiev, Bratislava Managing Partner, Taylor Wessing e|n|w|c Attorneys at Law 

The first event, on Thursday, May 15, was designed for clients, and featured 150 guests and a speech by Slovakian Minister of Finance Ivan Miklos. The next morning some 80 Taylor Wessing e|n|w|c lawyers from across CEE gathered in the Bratislava office for a day of meetings and trainings – which concluded with a large party into the evening.

Taylor Wessing e|n|w|c Bratislava Managing Partner Andrej Leontiev, who opened the office in 2004 with colleague Radovan Pala, notes with pride that it has grown from two lawyers and a secretary into  the 3rd largest international law firm in the country, with a team of 25 employees, including 19 lawyers. In that time he has witnessed Slovakia’s accession to the European Union, the country’s adoption of the Euro, the enactment of “modern” laws and creation of special anti-corruption courts, and the establishment of public registers, all of which the firm claims “have led to a high level of legal security,” in the country, “comparable to that of ‘western’ standards.”

Leontiev is pleased not only by his office’s increased size, but also by its growing reputation – he points to the decision last year by former two-time Slovakian Minister of Justice Lucia Zitnanska to join the team – and brand strength, after the 2013 tie-up with international player Taylor Wessing. Leontiev says, “we were a very strong CEE firm, but to acquire clients from the top segment of American and French and English companies we needed something more. Taylor Wessing has helped us a lot.”

But that goes both ways, and the office now is reported to generate 11% of  total Taylor Wessing CEE revenue. And Leontiev is hardly resting on his laurels. He emphasizes that the office is building an IP/IT department, and he is intent, he says, “on becoming the leading firm for startups in Slovakia.”

In the meantime, he and his colleagues are looking forward to the upcoming celebration of the firm’s 10-year anniversary in Warsaw this fall.

It appears that, after many delays in Parliament and a rejection by the President, Romania should soon have a new PPP law.   

If it is passed in the form of the current draft, the proposed law would replace the existing 2010 PPP Law in its entirety. As such, the proposed law should be a step forward in general, in providing a single coherent (and, hopefully, stable) legal framework for PPP projects, notwithstanding that there is political debate over some points of detail.

It should however be noted that the proposed new law appears to be limited in scope and that it will not regulate all PPP projects. The new law is apparently intended to regulate specifically only those PPP projects in which the revenue of the private partner will primarily depend upon payments from the public partner, such as the provision of prisons, public hospitals, and defense facilities. PPP projects in which the private partner’s revenue will be derived mostly or entirely from payments from users appear to fall outside the scope of the new law and will presumably continue to be covered by the existing legislation on the concession and operation of public assets. Classic models of such projects would be toll roads and bridges. It will be interesting to see whether the Romanian government regards projects which depend partly on shadow tolls and partly on actual tolls as falling within the scope of the existing concession regime or under the proposed new law.

As is the case with many pieces of Romanian legislation, it is expected that the implementation of the proposed new PPP law will depend upon detailed subordinate legislation (norms). At the time of writing no draft of the norms was available and it is understood that they are still being worked on, which may explain the apparent lack of progress of the proposed law itself since March 2014.  The new law envisages that the norms will be approved by a Government decision within 90 days of the new law itself entering into force. As Romania is in competition with other countries for funding for PPP projects, it is to be hoped that the passing of the new law and the issue of the norms will be coordinated, so that potential private PPP partners and investors can consider them as a coherent whole. I would certainly not expect any potential PPP investors to make any decision about investing in Romania until both the new law and the norms are available.  Legislative instability is also the curse of investors and it is to be hoped that the Government will take time to ensure that the new law and the norms do form a single coherent and stable package which will not require changes to be made by Emergency Ordinance, as was the case with the existing 2010 PPP Law.

In conclusion, the new law is unlikely to be successful unless it recognizes that the risk in a PPP project where the revenue flow is derived from the state is primarily borne by the private partners, particularly the finance providers. Many models of PPP projects work in other EU countries in which it has been recognized that in order to be bankable, the project must commit the public partner to pay for the asset or service over an extended period. Private partners and their bankers need to be convinced their revenue stream is assured over the full payback period, regardless of which political parties are in power from time to time over that period.      

By Neil McGregor, Managing Partner, McGregor & Partners

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

1. State-Owned Enterprises in Austria 

In order to renew its largely destroyed industries after World War II, the Republic of Austria has experienced an extended period of strong governmental intervention, in particular due to nationalization measures of important industry sectors including manufacturing and energy.     

2. OIAG

In 1967 Austria established a state-owned holding company to hold and govern a significant part of Austria’s nationalized post-war industry. This holding company underwent several reforms and restructurings, and is now called Oesterreichische Industrieholding AG (“OIAG“). 

The OIAG focuses on two core functions on the basis of a special act – the OIAG-Act.

Pursuant to this act, the OIAG is primarily an investment management body and administers its Austrian shareholdings. The OIAG has to ensure the maintenance of influence over its SOEs by either holding at least 25% plus one share of the voting share capital in each company (giving OIAG certain statutory approval rights) or by exerting influence on the basis of shareholder agreements. 

• Secondly, the Austrian Federal Government can issue a privatization mandate to OIAG authorizing the OIAG to further privatize the companies it owns. 
• Currently the OIAG holds a minority share in the international oil, gas and energy company OMV (31%) and the telecommunications provider Telekom Austria Group (28%). 
• OIAG also owns 53% of the shares of the postal service provider Oesterreichische Post AG. 
• In terms of recent developments, OIAG just concluded a shareholders agreement with America Movil in order to ensure Austrian interests in Telekom Austria Group for the next 10 years.
• OIAG’s total shareholding portfolio is currently valued at around EUR 5.6 billion.  

At present there are political discussions about either transferring other major SOEs to the OIAG or winding down OIAG and selling off its shareholdings. An amendment of the OIAG-Act could also lead to the OIAG taking on new responsibilities such as the promotion of small and medium-sized businesses. This is ongoing and has not been decided yet by the Austrian Government. 

3. Legal Framework of Privatizations 

Pursuant to the Austrian privatization act (Privatisierungsgesetz), all privatizations of SOEs have to be based on a privatization concept and must be authorized by the Austrian Federal Government. For any privatization of companies currently held by OIAG, the OIAG-Act has also to be taken into consideration. 

Although the OIAG is dependent on a privatization mandate of the Austrian Federal Government, it is free to determine the specific structure of an individual privatization, within the scope the OIAG–Act. Additionally, the OIAG has to consider the interests of the respective company and the Republic of Austria in all privatizations it undertakes.

4. Privatization Waves in Austria 

Austria has a long history of transferring governmental responsibilities to publicly-held companies. For example, Austria’s road pricing and road maintenance is handled by a publicly-held company called ASFINAG. Although not privatization per se, the transfer of governmental responsibilities to publicly-held companies is often an important first step for a subsequent privatization. 

In particular due to Austria joining the EU and in order to increase income for the Austrian budget, there have been several waves of privatization in nearly all kinds of state-owned areas, including telecommunication, the cultural sector, public transport, and the research and development sector. During the last 15 years, OIAG alone handled 24 privatizations, including some major SOEs such as the Austria Tabak cigarette manufacturer, the Dorotheum auction house, the Vienna Airport, and the Oesterreichische Postsparkasse postal bank. This provided total placement and privatization gains of around EUR 6.3 billion, mostly via the Vienna Stock Exchange. 

5. Future Perspectives oF Privatization in Austria

The OIAG currently holds no privatization mandate for a specific SOE. From our point of view, there still is a considerable potential for privatization of SOEs in Austria, including both full privatizations as well as the complete sale of partly privatized/partly state-owned companies. Since the OIAG only holds three major participations, there are two possibilities for its development in the immediate future, both mainly dependent on the outcome of political discussions: Either its role as primary state-owned holding for SOEs will be reinforced and other SOEs such as ASFINAG will be transferred to OIAG, or the concept will be abandoned altogether and the remaining participations will be transferred back to the Republic of Austria. Either path will lead to an interesting future for privatizations in Austria.       

By Rainer Wachter, Partner, and Oliver Werner, Attorney-at-Law, CMS Reich-Rohrwig Hainz

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The privatization era in Albania began in 1991, following the adoption of the country’s new Constitution and the “On Sanctioning and Protection of Private Property, Free Initiatives, and Privatization” Law.   

Law no. 7501, “On Land”, dated July 19, 1991, and law no. 8053, “On Transfer Without Compensation of Agricultural Land Ownership”, dated December 21, 1995, stipulated that agricultural fields, which had been previously controlled by collective and state farms, were to be divided into plots and distributed to the collective members and farm employees in a system of family ownership.

Law no. 7652, “On State Housing Privatization”, dated December 23, 1992, required residential properties, including apartments and houses with small land plots, to be transferred into the ownership of their occupants.

Law no. 7698, “On Restitution and Compensation of Properties to Former Owners”, dated April 15, 1993 (which was revised by law no. 9235, “On Restitution and Compensation of Property”, as amended, dated July 29, 1994), enabled families that had owned land and property prior to 1945 to claim restitution of their non-agricultural properties, or alternatively to receive other property or financial compensation.

The following five years saw successive governments engage in a program of accelerated privatization; the process was carried out under the guidance of the World Bank and the International Monetary Fund. During this period, the majority of small-and-medium-sized enterprises in the country were sold, leased, or liquidated. By 1996, much of Albania’s economy had shifted into private hands.

A mass privatization program, enabling citizens to buy equity in public enterprises, also began in 1995. However, this process proved difficult to implement, and it was halted in 1997.

The process suffered from lack of strategy and organization in the liberalization of the market. The lack of capital available, due to an underperforming financial and banking system, also impaired the process.

In April 1998, the government approved the Strategic Sectors Privatization Strategy and began  privatization of strategic sectors, including large, state-owned industries. Law no. 8306, dated  March 14, 1998, provided a privatization strategy for sectors considered to hold significant importance for the country’s economy.

Examples include: telecommunications; posts; mining; oil and gas; forests and waters; airport; insurance companies; and state-owned second tier banks. State enterprises and companies with state-owned capital operating in strategic sectors were, as a result of the law, also open to privatization. In order for a state-owned enterprise to be privatized, a specific law had to be approved by the Albanian parliament. This practice remains in force today.

In the years following law no. 8306, numerous companies operating in strategic sectors were entirely or partially privatized.

The privatization of the energy sector was a special focus in the last decade, and it remains so today. Between 2005 and 2010, the Albanian government unbundled the industry’s transmission and distribution systems, introduced a new power market model, and granted concessions for the development of new hydropower plants to private investors.

The privatization of the Transmission Operator System was followed by the privatization in 2013 of four existing medium-sized hydropower plants on the Mat and Bistrica rivers, which have a combined capacity of 76.7 megawatts. The four plants were privatized through competitive international tenders.

However, the wave of privatization seen in previous years has declined recently as Albania, like many countries, was hit by the global economic crisis. The failed sale of the shares held by the Albanian state in INSIG SHA, the only state-owned insurance company, is a particular example of the effects of the financial crisis. The Albanian parliament authorized sale of the state’s shares in 2006; there were also attempts to offer the shares to strategic investors in the international markets – and later in the domestic market, too. The offering did not attract investors, however, and the company, which has subsidiaries in the Republic of Kosovo and FYROM, continues to be owned entirely by the Albanian state.      

By Genc Boga, Senior Partner, and Sabina Lalaj, Senior Associate, Boga & Associates

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Belarus is one of those countries where a good part of key industrial assets still belongs to the state. Changes in regulations on privatization introduced within past two years were aimed at making the procedures more flexible and investor-friendly. What are the outcomes?   

Nowadays an interested investor may choose one of the following ways to acquire a stake in a state-owned enterprise.

First, the investor can become a shareholder in an enterprise in the process of being transformed into a joint-stock company. Transformation is required as the legal form of state-owned companies is a unitary enterprise (a rudimentary form from Soviet times) which has no shares to be traded. A prospective investor should wait for contests to be organized by the State Property Committee. From time to time the Committee publishes announcements about certain major enterprises on its official website (www.gki.gov.by). 

Mass transformation of state enterprises has been under way for several years now in accordance with three-year plans approved by the Belarusian President. The current plan for 2014-2016 will most likely include around 40 unitary enterprises.

Second, an investor can participate in a privatization contest or auction at which state-owned shares are offered. The procedures for acquiring shares through contest and auction are very similar. The difference is that in an auction the only criteria for determining the winner is the acquisition price, while in a contest the conditions include certain additional investment commitments to be undertaken by the acquirer.

Third, investors can acquire additionally-issued shares of transformed enterprises, injecting capital in the company and diluting the state as a shareholder. Quite a few potential acquirers are interested in this option as it implies investment straight into the enterprise rather than transferring the purchase price to the Belarus state budget. One should bear in mind, however, that in this case local municipal authorities may have a pre-emptive right to buy additionally-issued shares. 

In early 2012 President Lukashenko cancelled ineffective privatization plans and declared a new privatization strategy which may be summarized as follows: if we have an enterprise and an investor is interested, the deal must be negotiated and closed if the state finds it beneficial.  The new concept caused some confusion among the authorities involved, as well as investors and advisors, so that for about a year and a half no deals took place.

Finally, the legal framework was adjusted, the State Property Committee started to publish lists of potential targets, and the new algorithm to be used by potential investors may now be briefly described as follows:

A prospective acquirer may either find a privatization target on the list published by the State Property Committee or pick a target of its own accord and send an expression of interest to the government, the template for which is available on the State Property Committee website. Additionally, the Committee itself sometimes announces a “study of interest” in a particular enterprise. In these cases, the Committee posts information on the privatization target and sets a deadline for sending expressions of interest.

Upon receiving an expression of interest a special commission within the Committee considers it and sends a draft decision on privatization to the President of Belarus. Upon approval by the President, a privatization contest or auction should be announced. Therefore, by expressing interest, the investor initiates the procedure for selecting the best buyer of the shares, and later finds itself bidding along with other prospective investors. Announcements on contests and auctions are also published in the printed media and on the State Property Committee website.

One should note that there is no specific timeframe for this procedure. Naturally, this causes considerable uncertainty since an investor cannot know for sure when exactly the target will be available for privatization. This in turn may lead to fading of previously expressed interest.

Unlike other economies in the region in their time, Belarus is not likely to commence mass privatization, at least in the near future. However, we may see some transactions completed even in 2014. The year has already marked its first transaction: the sale of 99.5% shares in BELGIPS to Russia’s Volma Corporation. The largest transactions expected to be signed soon are the sale of Mozyr Oil Refinery shares to Russia’s Rosneft and sale of a stake in Grodno-Azot, a large fertilizer producer, the contest for which was announced recently. In addition, in summer 2014 we expect several contests to take place within the framework of the “pilot privatization” program administered by the National Agency of Investment and Privatization under the auspices of the World Bank, covering eight companies from various sectors (e.g., food & drink, road construction, production of medical devices).      

By Maksim Salahub, Partner, and Nadezhda Fomenok, Legal Assistant, Sorainen

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Unlike in most European jurisdictions, land plots and buildings aren’t considered uniform real estate objects in Russia, and as a result there are situations where a building and the land plot under it have different owners. In many cases, the State owns the land, while individuals own the buildings or other constructions thereon. As a result, privatization of land plots in Russia remains on the agenda mainly in this context.   

The question of how to determine the price of a privatized land plot has become especially pertinent now because, after July 1, 2012, the ability to apply for preferential price at privatization is only rarely available, though before that date it was a matter of right. 

Current legislation determines that the cadastral value of a land plot can be established either as a result of carrying out the state cadastral appraisal or upon the resolution of a dispute regarding the  determination of cadastral value. Cadastral value is relevant as the basis for calculation of land tax, rent payment rates, land privatization rate, and other payments collected by the State acting as the owner of land.

The basis for carrying out a state cadastral appraisal is a decision made by a relevant regional executive authority of the Russian Federation – or, where so authorized by legislation of the Russian Federation, by local government. The appraisal is carried out en masse, rather than on particular land plots – so particularities of specific plots of land are not taken into account – and the results are approved by the State authority which initiated the appraisal.

Cases often arise in which the re-established cadastral value of the land plot is several times higher than its real market price. Market price is determined by the results of an independent appraisal and – unlike the cadastral appraisal – is established not en masse, but individually for the specific land plot.

The owner applying for privatization of a land plot has the ability to challenge the declared repurchasing price of the land plot when he believes that the basis for establishing  the repurchasing price (100% of cadastral value) was incorrect. To do so he must obtain the market cost of a corresponding site by means of carrying out an independent appraisal, and then he may appeal to the court or to the commission tasked with considering disputes regarding determinations of cadastral value at the territorial administration of the Russian State Register. Within any of these procedures the establishment of cadastral value of a land plot equal to its market cost is imposed.

As establishment of market value of a land plot is almost the only instrument for defining a fair repurchasing price of a land plot now, currently a large number of claims are raised before the court challenging the cadastral value of land plots – and that number continues to increase, as a majority of cases succeed, causing the cadastral value of land plots to decrease. Thus it should be noted that within consideration of similar affairs questions may arise on which there haven’t yet been decisive precedents. For example, whether the tenant planning to redeem the land plot can challenge cadastral value. Generally tenants are refused in their claims, but several recent judgments have sustained the claims of tenants of land plots regarding the determination of cadastral value proceeding from their market costs.

Thus, contestation of the cadastral value of land plots (as bases for calculation of the repurchasing price of a site during privatization) in most cases is quite successful, but the process itself takes a lot of time. Quite often after a successful contestation of the cadastral value a competent authority initiates a new revaluation within an administrative procedure that eventually ends with return to the original cadastral value after all. Modification of the legislation regulating the state cadastral assessment is planned now to limit the use of such revaluations in administrative proceedings, and also to increase the term of contestation of determination results of cadastral value in the commission and to establish obligatory pre-judicial consideration of the corresponding disputes in the commission.      

By Sergey Patrakeev, Partner, and Irina Dyubina, Associate, Lidings

This Article was originally published in Issue 3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.