Revera has advised US-based The Games Fund on its USD 1 million investment in the Vandrouka Games studio.
Vandrouka Games is a game studio focusing on casual games and quizzes. The company is based in Minsk and Mogiliov.
The Games Fund is a venture fund that invests in game developers, primarily in Eastern Europe.
Revera’s team consisted of Partner Helen Mourashko, Leading Associates Alena Potorskaya and Daria Lobach, Senior Associate Artiom Handryko, and Associate Uliana Bulgakova.
According to Konstantin Mikhel, Managing Partner at Vlasova Mikhel & Partners, sanctions-burdened Belarus is slowly preparing for the change of its constitution. In addition, Mikhel reports that two sets of “pertinent amendments” have been passed recently – one to Company Law and the other to Advocacy Law.
“The tension in society was recognized by both the government and the people,“ Mikhel says and reports that Belarus is on its way to a new constitution. He explains that there are several versions of the supreme law, yet, none of them are official. “One draft, published by the opposition, plans to make Belarus a parliamentary republic with a mostly ceremonial president like in Germany, Poland, or Lithuania, and would see some other presidential prerogatives abolished,” says Mikhel and explains that such a solution would be quite different to the status quo.
Another draft was announced by the Presidential Constitutional Commission, according to Mikhel. “This unofficial and, most likely, not final version keeps the presidential republic with broad presidential power, but, at the same time, unlike in the current constitution, it would make an act issued by parliament stronger than a presidential decree,“ Mikhel details. “The draft also entails the creation of a new state body, the Belarusian People’s Council, which would have authority over both the parliament and the president,” he says and adds that such a body is reminiscent of the Soviet or Chinese system, which speaks volumes of its credibility. According to Mikhel, the president also announced that he will be presenting his draft in the autumn of 2021, with the referendum planned for no later than February 2022. “It’s unlikely that the opposition’s draft will be presented at the referendum together with the government’s draft,” Mikhel reports.
The political instability brought international sanctions upon Belarus, and Mikhel acknowledges that, as a result, foreign investors have grown reluctant to invest in the country. The M&A sector suffered as a result. However, despite the lack of FDIs, some parts of the economy are doing quite well, according to Mikhel. “We increased exports of food, wood, and oil products,” he says. There are a number of real estate projects planned for implementation, Mikhel reports, and points to a USD 4 billion hotel, office, and residential project that a UAE investor plans to develop in Minsk.
Moving on to the matter of legislation, Mikhel reports that two sets of amendments have been passed recently. The first one introduced an “option program” in the Company Law, under which a company may issue shares to its management and employees as a part of their remuneration, Mikhel details. The second set of amendments pertains to the Advocacy Law. According to Mikhel, the amendments liquidated the once independent Advocacy Bureau and determined that advocacy activities may only be performed as a legal consultancy within the Bar Association. In addition, the law still retains the distinction between advocates and licensed lawyers, with only the former being able to represent clients in courts, while lawyers can only practice on business matters.
Last week, Illia Salei of Borovtsov & Salei announced that he “was forced to leave Belarus where [he stands] to be prosecuted under Article 361 of Belarusian Criminal Code for the alleged appeals to actions aimed at harming the national security.” He added: “I consider the case to be politically motivated.” CEE Legal Matters spoke to Salei to learn more about the matter.
CEELM: To give our readers a bit of background, can you tell us what Article 361 is and what the specific charges against you are?
Salei: Article 361 of the Belarusian Criminal Code provides for criminal liability for making public calls for actions aimed at harming the national security of Belarus. In violation of Belarusian law, the charges put forward against me neither specifically describe what public calls I made, nor specify the place, time, or other details of the alleged crime. Instead, the charges contain only very vague wording and simply repeat the content of Article 361 of the Criminal Code. I have officially denied all the charges, including at the time of official interrogations, and find the case to be politically motivated for my professional activity as a lawyer.
CEELM: You argue this is a “politically motivated” case. Why do you believe that to be true?
Salei: Between May and September 2020, together with my colleague Maksim Znak, I represented democratic opposition presidential candidates Viktar Babaryka and Sviatlana Tsikhanouskaya during the 2020 presidential election in Belarus, including by appealing the official results to the Central Electoral Commission and the Supreme Court of Belarus. I also advised and represented one of the opposition leaders, Maria Kalesnikava. In this regard, I consider the arrest to be connected exclusively with our professional activity – specifically, advising opposition leaders – and aimed at depriving them of their constitutional right to legal protection.
After the arrest, Maksim Znak and I were recognized as political prisoners by a coalition of Belarusian human rights organizations, as well as by most Western states. Amnesty International deemed us as political prisoners. The Law Society of England and Wales and the American Bar Association, among others, sent official letters to Belarusian authorities demanding our immediate release. We highly appreciate the support of the international legal community.
CEELM: As you mentioned, following your arrest, Amnesty International deemed you a “prisoner of conscience.” What does that mean and what was the rationale behind this classification?
Salei: Generally, prisoners of conscience are persons imprisoned for the peaceful expression of their political, religious, or other conscientiously held beliefs, or for their identity, even though they have neither used nor advocated violence. In our case, this means that the arrest is connected exclusively with the legal representation of opposition leaders who were publicly expressing their political beliefs.
CEELM: You mentioned you are not the only lawyer in this position?
Salei: As mentioned, the politically motivated charges for making public calls for actions aimed at harming the national security of Belarus were put forward against Maksim Znak and me.
Today, Maksim faces trial. Despite the general rule of Belarusian law and the International Covenant on Civil and Political Rights, the hearings are taking place behind closed doors. Maksim’s lawyers are not allowed to disclose any details of the hearing, under the risk of disbarment. Belarusian authorities justify the closed hearing on the grounds of national security.
Repressions against lawyers in Belarus generally continue. Most of the lawyers who were involved in defending and representing opposition leaders were disbarred. Some of them were also forced to leave the country.
CEELM: When we last checked in, you were in Poland. What are the next steps for you?
Salei: Today I indeed find myself in Warsaw, Poland. As my practice in Belarus does not seem likely to resume in the nearest future, I am looking and am open to new opportunities and challenges to continue both my personal and professional growth. I would be interested in both the private and public sectors.
CEELM: If you could convey any message to the legal community across the region, what would it be and why do you find that to be particularly important?
Salei: I would call on the international legal community to send a strong message to Belarusian authorities demanding the cessation of politically motivated pressure and repressions against lawyers and that basic civil and political rights, in general, be respected in Belarus.
I would also kindly ask national bar associations in the region to consider the option of a simplified procedure for admission of Belarusian lawyers deprived of their licenses for political reasons.
I would separately call on the community to demand a fair and public trial for Maksim Znak, who denies all the charges and is actively defending himself.
Sorainen has advised the Cajun Operating Company on franchising matters in Belarus.
According to Sorainen, the advisory service pertained to “franchise registrations, transfers, workouts, and dispute resolution.”
The Cajun Operating Company is a US-based owner, operator, and franchiser of Church’s Chicken fast food restaurant in the US, also operating under the brand Texas Chicken internationally.
Sorainen’s team consisted of Partner Maksim Salahub, Senior Associate Marina Golovnitskaya, and Associate Yauheni Budchanka.
According to Sergey Mashonsky, Senior Partner at Arzinger Law Offices in Belarus, his country is struggling to find economic balance amid the pandemic and the international sanctions. He reports that certain sectors, such as forestry, are doing well, while some others, such as the food packaging industry, have been negatively impacted in recent times.
“As Belarus was one of the two countries in Europe that did not introduce air travel restrictions during the COVID-19 pandemic, tourism did not suffer too much,” Mashonsky says. “In fact, the sector seized the opportunity, as some tourists didn’t have where else to go but to Belarus,” he adds. In addition, Mashonsky notes that there has been a high demand for Belarusian lumber and that, as a result, forestry is booming. “The market prices of lumber and other forest materials, like pulp, are quite high and Belarus is rich in forests,” he explains. Furthermore, Belarusian wood-processing plants have been manufacturing and exporting wood panels for eco-houses to the Baltics, Scandinavia, China, Germany, and elsewhere at a faster pace than before.
On the other hand, Mashonsky says, certain sectors have recently had a rough patch. “In February 2021, many chemical plants in Texas were shut down due to a power loss, which has disrupted the global supply of plastics and has ramped up the prices of food packaging,” he explains and adds that the food and beverage industry in Belarus suffered as a result. In addition, Mashonsky reports the IT sector, mostly based in Minsk’s high-tech park, has been impacted by recent tax changes. “The general income tax for the residents of the high-tech park was raised from 9 to 13% and tech companies could either renegotiate their employees’ salary to factor in the increase or pay the tax difference at the company’s cost,” he explains.
Furthermore, Mashonsky reports that the Belarusian parliament was working very hard on new laws. “Amendments were made to the Civil and Administrative codes,” he says. Mashonsky also notes that the reform on personal data is underway and that the first-ever law regulating it will enter into force in four months. “Prior to this law, personal data was regulated by just one article,” he says and adds that, although this law is not as strict as the GDPR, it will put in place mechanisms to properly handle personal information. In Corporate Law, according to Mashonsky, the option for non-repayable contributions was introduced. “This option allows shareholders to finance their company’s operations, without that loan affecting the share capital,” he explains.
Former Senior Associate Nikolay Artemyev has been promoted to Associate Partner at Borovtsov & Salei in Belarus.
Artemyev focuses on banking and finance practice and M&A, as well as advising on real estate and general corporate matters. He began his career in 2009 with Belgazprombank, and in 2011 he moved to Egorov Puginsky Afanasiev & Partners, where he spent most of the next two years. In 2012 he joined Cobalt, where he stayed until joining Borovtsov & Salei in 2017. He obtained his Bachelor’s Degree in Business Law and a subsequent LL.M. from the Belarusian State University in 2010 and 2011, respectively.
“I am happy to be promoted to Associate Partner position at Borovtsov & Salei Law Firm,” commented Artemyev. “First, I express my deep gratitude to all of my colleagues … for opportunities and great support. Second, many thanks to all clients with whom I’ve worked and who have helped me to grow in my career. Together to new horizons!”
On November 13, 2019, the Resolution of the Ministry of Economy of the Republic of Belarus dated April 01, 2019 No. 9 “On electronic auction for the sale of property in economic insolvency (bankruptcy) proceedings” entered into force (the “Resolution”).
The Resolution does not contain transitional provisions so that it shall be applied to any auction in insolvency held from November 13 (including the property transferred for sale earlier, or rebidding).
This Resolution enshrined the so-called “Dutch” auction – for decrease. Auctions in such a format help to attract more bidders, quickly sell poorly sold property, involve unused objects in the economic turnover, which will improve business in the country as a whole. It will also increase and improve the turnover of bankruptcy assets (i.e. the debtor’s property) since even the most expensive low-liquid asset will find its buyer with a price reduction of 80%. Electronic auction also ensures transparency of the bidding process itself.
The essence of such an auction in Belarussian insolvency proceedings is that the initial and minimum prices (below which the object cannot be sold) are set and starting from the second hour, in the absence of bids, the price is reduced by one step, which cannot be less than 5% of the initial price. The minimum price shall not be less than 60% of the initial one, and not less than 20% of the initial price – for rebidding. Though the Resolution has been recently adopted, the practice has already revealed a number of gaps and application issues.
One of the gaps was the absence of a body authorised to set a minimum price. But the Ministry of Economy has published an official explanation, which refers it to the competence of the meeting of creditors. The meeting can also decide to transfer the competence to the creditors’ committee or the anti-crisis manager.
Some of the provisions of the Resolution are in contradiction with the provisions of the law on insolvency (bankruptcy) proceedings (e.g., electronic auction is held without creating a commission). The judicial authorities are of the opinion that bankruptcy proceedings should be conducted only in accordance with the legislative acts on insolvency (bankruptcy), but not with the ministries’ acts, as it is prescribed by the Economic Procedural Code. Moreover, some anti-crisis managers also stand on this position on penalty of administrative and criminal liability for violation of the legislation on insolvency.
The Department for Sanitation and Bankruptcy of the Ministry of Economy (the “Department”) clarified the status of these documents (the Resolution, letters and information on the official sites of the Ministry of Economy and the Department): this is the official position of the Ministry of Economy and the Department, and it is a guide to action for anticrisis managers.
According to the Department data, only about 30-35% of bankrupt companies’ property sales are carried out through an electronic auction. The Director of the Department has set a task for the anti-crisis managers to bring the number of electronic auctions to 70% by summer 2020. Following the results of the World Bank’s research “Doing Business” in 190 countries, Belarus ranks 74th in the section “resolving insolvency”. Despite the rapid duration (on average 1.5 years) and low financial costs of the procedure, the debt repayment ratio is low. However, compared to 2019, the Ministry of Economy notes an increase in the debt repayment ratio. The introduction of the Dutch auction method will help improve this indicator.
By Darya Gaiduchyk, Associate, Cobalt
Belarus has never been in the news as often as in 2020, which might serve as evidence that the country is currently facing challenging times. The COVID-19 pandemic has been a catalyst and revealed problems in the still widely unreformed Belarusian economy, while the political crisis hit the country hard. With the economy slowing down, demand for commercial real estate has dropped, and investors have put most of their plans on hold and have been monitoring the situation carefully, awaiting further developments.
This applies not only to foreign but also to local investors, so that the number of transactions involving real estate has been at a multi-year-low during recent months. Purchase prices and rental rates have declined for every type of real estate across the country, preserving the huge differences between the city of Minsk, some regions close to Minsk, and the rest of the country. However, the impact on prices has not been as significant as one would expect.
Looking at projected or ongoing construction, financing for construction projects – always a challenge, very often leading to different owners for each floor of a building – has become even more difficult, as banks have restricted their lending activities. Nevertheless, construction is continuing in those projects which have already started, for several reasons.
First of all, under Belarusian law, acquiring ownership of a land plot for construction is allowed only in certain cases. As a rule, land plots are allocated by the state on the basis of long-term rental agreements. These agreements are concluded after an auction at which the right to conclude an agreement and the right to use the land plot is awarded to the highest bidder. Since this process can involve multiple uncertainties, in practice most land plots for commercial real estate construction are granted on the basis of investment agreements. In an investment agreement the competent authority grants a land plot and the investor undertakes to invest and to build on that land plot.
Second, investment agreements contain very strict rules regarding the timeframe for completion of the construction project. In principle it is possible to extend the term of an investment agreement, but this is very burdensome, since the amendment requires that the entire procedure for conclusion of the agreement be repeated. In any event, there is no guarantee that the term will be prolonged, and investment agreements contain substantial penalties in the case of delays. In extreme cases the right to use the land plot can be withdrawn. Indeed, the authorities have made use of this option several times, leaving investors with huge losses.
With all this in mind, investors and developers try everything in order to comply with the terms for continuing construction, even in these uncertain times, using any funding available. Of course, this will simply shift problems to a later stage, and it leads to an increasing amount of unfinished construction in the future since available funding – while allowing developers to continue for several months now – might well be insufficient to finish the building and put it into operation.
Tenants are presented with ever-greater choices, since many projects have been finished recently and many commercial premises are currently empty. As a rule, however, there is little movement since relocation to new premises involves expenses, which must be calculated against possible savings.
For many tenants of state-owned properties, rental rates were lowered by decree, initially for several months, and now for a period of two years, as a reaction to the COVID-19 pandemic. Many private lessors achieved a similar result by way of negotiation, and there is also a tendency in the market to switch to private tenants since they are more flexible, it is easier to negotiate agreements with them, and the standard of facilities is usually higher. The impact of the possible relocation of IT companies is not clearly visible in the market. The retail sector – and in particular smaller retail spaces in shopping malls – and the catering sector have been hit harder than the office market.
In the near future no significant change is expected since the Belarusian market works only under limited “market conditions.” The volume of transactions with or in connection with distressed assets is expected to increase and development of property in prime locations by upgrading them to a higher standard will be another challenge.
By Alexander Liessem, Partner, bnt
This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
Sorainen has helped Hesburger develop its operations in Belarus.
Sorainen describes Hesburger as “one of the largest fast-food chains in Northern Europe.” According to the firm, the project concerned “restructuring the client’s franchising operations, including support in harmonizing the master franchise agreement with Belarusian law, handling all contractual matters that arose, and registering the franchise with the local patent authority.”
Sorainen’s team included Senior Associate Marina Golovnitskaya and Associate Yauheni Budchanka.
Sorainen has acted as Belarusian counsel to DLA Piper Norway on its provision of legal services to the Norwegian Seafood Council related to a licensing agreement for the council’s “Seafood from Norway” trademark.
The Norwegian Seafood Council is a Norwegian exporter of seafood and is owned by Norway’s Ministry of Trade, Industry, and Fisheries.
Sorainen’s team consisted of Senior Associate Marina Golovnitskaya and Associate Yauheni Budchanka.