Category: Croatia

Harmonized rules ensuring smooth functioning of the EU Digital Internal Market finally have finally come into existence. Instead of 27 different legal requirements there will be only one set of rules regulating digital market and services in the EU –namely, the Digital Markets Act and the Digital Services Act.

In this article we will briefly deal with the Digital Markets Act (DMA) which stands for Regulation on contestable and fair markets in the digital sector officially published on 12 October 2022.

The DMA introduces ex ante measures aimed at preventing market failures caused by gatekeepers’ anti-competitive behaviour in the digital sector across the Union. This means that businesses offering their services online will now have easier access to the whole EU market and consumers will have a bigger variety of products and services offered.

According to DMA, gatekeepers, in a nutshell, are platforms big enough to possibly control key channels of distribution, e.g., Google, Amazon, Facebook, Twitter or Instagram. An important point to keep in mind is that DMA is applicable even to gatekeepers not headquartered in the EU, provided they offer services to EU citizens. The mitigating circumstance for gatekeepers in DMA application throughout Member States, on the other hand, is that Member States are generally prohibited from imposing additional obligations to gatekeepers.

Some of the key obligations prescribed under articles 5, 6 and 7 that the gatekeepers have to comply with are:

• allowing business users to offer the same products or services to end users through third-party online intermediation services at prices or conditions that are different from those offered through the online intermediation services of the gatekeeper;
• having fair, reasonable, and non-discriminatory general conditions of access for business users to gatekeepers’ software application stores, online search engines and online social networking service;
• applying transparent, fair, and non-discriminatory conditions in ranking and related indexing and crawling, of services and products offered by the gatekeeper itself and similar services or products of a third party;
• allowing and technically enabling end users to easily un-install any software applications on the operating system of the gatekeeper (except applications essential for the functioning of the operating system or of the device). For example, Android users would now be able to un-install Google Photos app from their phone, however, iOS users could affect system functionality if apps such as App Store, Camera, Messages are deleted; and
• ensuring interoperability of number-independent interpersonal communications services (e.g. WhatsApp and Viber).

In order to ensure compliance with the DMA, the gatekeepers should appoint at least one compliance officer for these purposes and report them to the EU Commission.

Non-compliance with the DMA can result in fines which range from 1% to as much as 20% of gatekeeper’s total global income in the preceding financial year.

Finally, the gatekeepers should be careful to take the DMA into consideration very soon since some provisions are already applicable (those regulating the powers of the European Commission) whereas others will come into force on 2 May 2023.

By Janica Rakoci, Associate, Ostermann & Partners

The position of consumers has been strengthened by a recent Supreme Court resolution by which the courts are obligated, within enforcement proceedings initiated against consumers, to examine, of their own motion (ex officio) whether an enforceable title contains unfair provisions. The resolution only relates to enforceable titles that have not been previously reviewed by a court, primarily agreements concluded in the form of directly enforceable notarial deeds.The resolution of the Supreme Court represents a further step in the protection of consumers with regard to unfair clauses as regulated by Council Directive 93/13/EEC on unfair terms in consumer contracts (UCTD). It is in line with the Guidance on the interpretation and application of the UCTD and the respective decisions of the Court of Justice of the European Union (CJEU).

In general, within enforcement proceedings, courts are not allowed to examine underlying contracts. Enforcement is considered to represent the final stage in exercising one’s rights, which occurs after all relevant factual issues and legal questions have already been sufficiently discussed within a litigation proceeding.

However, many loan and mortgage agreements with banks were concluded in the form of a directly enforceable notarial deed. This form allowed the creditor to obtain an enforceable title when conditions defined in the agreement were fulfilled, without having to initiate and conduct lengthy court proceedings. Notaries were required to check the form and the content of such agreements and to explain it to the parties. In the case of default, usually on the consumer´s side, the creditor would submit to the notary the agreed evidence that their claim had not been settled, upon which the notary would issue a certificate of enforceability and the private agreement entered into between the debtor and the creditor would become an enforceable title, having the same legal effect as a court decision. Thus, neither the amount of the outstanding debt nor any other terms and conditions of such agreements were subject to court examination before becoming enforceable.

The issue of numerous existing enforceable agreements containing possibly unfair clauses was partially reflected in the last changes to the Enforcement Act in 2020, which provided for the possibility that the debtor requests a delay of the enforcement, if the enforceable title derives from an agreement concluded by a consumer and, depending on the available evidence, there is a likelihood that one or more contractual provisions are null and void. The enforcement court is not supposed to decide on nullity – the consumer is required to file a respective lawsuit before the competent court.

We expect that the provisions in question will be further amended to reflect the recent position of the Supreme Court. In this new resolution, even though the Supreme Court does not define the kind of decision the enforcement court should bring if the enforceable title does contain unfair provisions and respective legal remedies, we assume that the courts will instruct consumers to initiate respective lawsuits and decide to delay the enforcement.

Furthermore, there is another related recent decision of the Supreme Court, from January 2022, by which the Supreme Court allowed an extraordinary remedy – a review of the possibility of invoking unfair clauses within an appeal against an enforcement decision. Although the decision on this possibility is still pending, in the explanation of their permission of said remedy, the Supreme Court quoted the Guidance on the interpretation and application of the UCTD and the respective decisions of the CJEU, which indicate the direction of their future decision.

It is expected that the Supreme Court will confirm the possibility of discussing unfair clauses even at this stage of proceedings, in accordance with the position of the CJEU that procedures that give creditors the possibility of more expedient enforcement of their claims based on titles other than judgments and which entail no or only limited substantive checks by national courts, must not deprive consumers of their right to proper protection against unfair contract terms.

Encouraged by EU case law, Croatian courts are transferring the burden of consumer protection from consumers to the courts. As this topic is gaining more traction, it is likely that the legislator will follow suit and amend the Enforcement Act to reflect the foundation laid by the courts.

By Sandra Lisac, Partner, and Vedrana Vuckovic, Associate, CMS

This Article was originally published in Issue 9.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Divjak Topic Bahtijarevic & Krka has advised Allianz on the sale of its 11.72% stake in Zagrebacka Banka to the UniCredit Group and on Allianz Holding Eins’ purchase of Zagrebacka Banka’s 16.84% stake in insurance company Allianz Croatia. Schoenherr reportedly advised UniCredit on the transactions.

Allianz is an insurer and asset manager.  Zagrebacka Banka, a Croatian bank, is part of the UniCredit Group.

According to DTB, “with these two deals, Unicredit and Allianz strengthened their positions in the Croatian banking market and reinforced their long-standing and highly successful bancassurance partnership.”

DTB’s team included Senior Partner Damir Topic and Attorneys Dina Salapic and Dominik Glavina.

Kinstellar Croatian affiliate Zuric i Partneri has advised Robin Powered on its acquisition of Flow and Form. Sole practitioner Marko Kapetanovic reportedly advised the seller. 

“The acquisition comes at a time of rapid expansion in Robin’s support for hybrid work worldwide, as the company also announced language support for French, Canadian French, German, and Spanish and is growing its workforce in the United Kingdom,” Kinstellar informed. “The purchase of Flow and Form gives Robin Powered a new international footprint, a team focused on innovation with proven experience building digital platforms to bridge the gap between in-person and virtual work, and a platform to further grow Robin’s international customer base.”

Robin Powered is a US-based hybrid workplace company. Flow and Form is a Central European technology company delivering solutions to the real estate technology industry.

The Kinstellar team was led by Managing Associate Marija Vuchetich and included Partner Edin Karakas and Associates Zrinka Ivankovic and Kristina Marinov.

Vukmir & Associates has advised the majority creditors and bankruptcy administrator on the restructuring and exit from the bankruptcy of Dubrovnik-based Belvedere.

According to Vukmir & Associates, the majority creditors included Zvonko Stojevic, Brijuni Limited, and Studio 100 GmbH. The bankruptcy administrator was Jure Matkovic.

“The process involved corporate reorganization and financial restructuring of the company through a HRK 17,5 million debt-to-equity swap for the majority creditors and a HRK 44,9 million investment into the company by one of the creditors,” Vukmir & Associates informed. “After exiting the bankruptcy, the company will concentrate its business activities on the development of the location of Nikola Tesla’s birthplace in Smiljan, Croatia. Amongst others, a Science Museum and a Concert Hall with over 30,000 square meters are planned to be built on the location.”

“This marks the end of the ten-year-long bankruptcy proceedings for Belvedere, and it is one of only a few cases in Croatia where the company has successfully exited bankruptcy and continued business operations through the application of a mechanism of the bankruptcy plan,” according to the firm.

The Vukmir & Associates team was led by Partner Tomislav Pedisic and Attorney-at-Law Tea Cerinski and included Associate Karlo Brekalo.

Kinstellar’s Croatian affiliate Zuric i Partneri has advised Angelina Yachtcharter Holding on its acquisition of an 85% stake in Ultra Sailing. Bradvica Maric Wahl Cesarec advised the seller.

“With the purchase of Ultra Sailing, an authorized dealer of Beneteau and Fountaine Pajot vessels in Croatia, and with a charter fleet of more than 50 boats, Angelina Yachtcharter becomes the largest nautical charter provider in Croatia and strengthens its position as the leading nautical charter operator in the Croatian market,” Kinstellar informed.

Founded in 1995, Angelina Yachtcharter is a nautical charter management company in Croatia. The company operates a fleet of more than 230 boats berthed in six marinas across the Adriatic coast.

Ultra Sailing specializes in nautic and commercial sailing activities.

The Kinstellar team was led by Partner Mihovil Granic and Managing Associate Andrijana Kastelan and included Associates Tena Pajalic, Matea Sekur, Zrinka Ivankovic, and Hrvoje Klisanic.

The BMWC team included Partner Neven Maric and Junior Partner Ivan Luetic.

In the wake of the war in Ukraine and Russia shutting down the gas supply to Europe, Croatia has been forced to take the upcoming potential energy crisis seriously, with several government measures and packages being implemented, according to Savoric & Partners Partner Mia Lazic.

“The main topic in Croatia, much like in most EU countries right now, is energy,” Lazic begins. “The government has approved a package, which will take effect in October, that caps the prices of electricity for households, businesses, and institutions,” Lazic reports. “The cap-off for businesses will vary depending on their consumption, but the average cap price will be EUR 230 for megawatt per hour, which is significantly lower than the current EUR 450 European median,” she adds. The temporary energy price-fix package will remain in place until the spring of 2023.

Furthermore, Lazic reports that the “VAT levels for natural gas have been lowered and certain subsidies for households and small businesses have been put in place.” These measures, too, are to remain in place until the spring of 2023. “Additionally, it is worth noting that the Croatian national gas company, INA, has been mandated to increase gas production by 10%, which will, in turn, be distributed by the Croatian national electrical company to households and other selected categories.” Lazic reports that this measure, also in place until next spring, is part of the Croatian government’s overall efforts to exert more control over energy distribution.

Moreover, Lazic reports that the Croatian Prime Minister has announced a “proposal for a special tax targeting those companies that profited the most during the crisis.” Whatsmore, Lazic reports that the overall interest-raising trend that is present in the Eurozone has not been as steep in Croatia. “Our interest rate levels have been quite high as they were, so there hasn’t really been a major hike in that regard. Of course, some leveling-off is expected when Croatia joins the Eurozone in 2023,” she reports, but adds that it is still not expected that interest rates would pose a massive issue. “Most consumer loans in Croatia, some 60% of them, are already fixed-interest ones, so volatility is not expected in that regard.”

Finally, Lazic provides an insight into the ongoing sale of Sberbank’s 42.51% stake in Fortenova, a major Croatian food producer and retailer. “Fortenova is a very important piece of our domestic economy – having this in mind, it has been a problem how near it came to being covered by EU sanctions, given its ownership structure,” she explains. “There were talks that Indotek would buy out Sberbank’s shares, but this did not come to pass. The latest rumors are that Fortenova will attempt to buy out the shares itself, and that even some Croatian pension funds could be interested; however, there are still problems.” 

Lazic explains that, in order for the sale to take place, a decision should be made at the shareholders’ meeting with 66% of all shareholders, meaning that Sberbank would have to vote in favor of it – which the sanctions have so far prevented. “Due to sanctions, Sberbank was prevented from sending its representatives and voting at the two shareholders’ meetings in the Netherlands that tackled this matter. There is a third assembly, likely to take place in the following few months, with the same agenda – the key difference this time will be that the voting requirements, according to Fortenova’s corporate documents, will shift so that 75% of all present votes will be required in order for sale to take place, making the Energia Naturalis group the key decision maker in such a scenario.” Lazic concludes by explaining this means it is likely that Sberbank’s stake will get sold off, thus removing Fortenova from any immediate danger of being sanctioned.

We can probably all agree that no one likes bad surprises, and the same especially holds truth with respect to unexpected outcomes of legal proceedings. When it comes to civil proceedings before Croatian courts, so-called “surprise” decisions were recently introduced into Croatian legislation by Articles 5 and 367a of the new Croatian Civil Proceedings Act which entered into force on 19 July 2022.

The new Civil Proceedings Act prohibits such “surprise” decisions which refer to court decisions that are based on the legal classification of the case which is completely different from the one discussed in the proceedings and which a diligent party could not have reasonably foreseen.

According to the case law of the European Court of Human Rights (e.g., Galich vs. Russia), such decisions are in conflict with the postulates of fair trial (Article 6 § 1 of the European Convention of Human Rights) and especially adversarial principle (“Audiatur et altera pars”). Hence, the prohibition of “surprise” decisions is aimed at preventing the violation of the right to a fair trial, including the right to be heard.

Although the prohibition of “surprise” decisions refers to all courts, it is particularly evident in the context of reversing “surprise” decisions of appellate courts considering they become legally binding upon adoption. Therefore, in such cases, the new Croatian Civil Proceedings Act prescribes the obligation of the appellate court to encourage the parties to comment changed legal classification of the case prior to rendering such a decision. The parties are also entitled to refer to new facts and new evidence, but only to the extent that such changed legal classification of the case requires this.

This change in the Croatian legislation is welcome by most. However, we are yet to see whether de lege lata solution will in deed prevent courts from rendering “surprise” decisions as well as how the participation of the parties in a debate concerning the legal issues will affect outcome of the proceedings.

By Marija Elena Prskalo, Associate, Ostermann & Partners

Kinstellar’s Croatian affiliate Zuric i Partneri has advised on the incorporation of two employer associations in Croatia: the Association of Trade and Logistics and the Association of the Processing Industry and Technology.

According to Zuric i Partneri, “both associations were founded with the aim of creating stronger conditions to respond to the challenges of the upcoming period and to contribute to the growth of the competitiveness of both industries through joint action and constructive dialogue with the stakeholders of the relevant institutions, business associations, and interest groups.”

According to the firm, the Association of Trade and Logistics has 30 founding member companies, with over 17,000 employees and a turnover of more than EUR 4.5 billion. The Association of the Processing Industry and Technology also has 30 member companies and more than 5,500 employees, with a turnover of more than EUR 800 million.

Zuric i Partneri’s team included Co-Managing Partner Miroslav Plascar and Senior Associate Vedran Kopilovic.

The strategic importance of the energy sector in securing a stable and sustainable energy supply is currently a hot topic across Europe. The global rise of energy prices, supply chain issues, and tackling climate change are some of the major challenges all European countries are currently facing. Croatia is no different. While tackling these global challenges, the Croatian energy sector has been undergoing major legislative and regulatory changes, especially in the field of renewable energy.

One of the particular challenges is achieving the national goal of using renewable energy for a minimum of 36.6% of the total gross energy consumption by 2030. Due to a significant stagnation in the development of renewable projects in the past five years, and taking into account the complexity and length of the development process, Croatia is on a tight timeline to increase its current share of approximately 28% in order to meet that target.

To facilitate the increase of renewable energy projects the Croatian government has introduced a number of legislative changes in 2021 and 2022, including enacting the new Electricity Market Act and the new Renewable Energy Act. These legislative changes have two major goals. First, to simplify the permitting process and ensure more active support for developers of renewable projects. Second, to facilitate transparency and stability in the process of development and in granting incentives.

As reaching renewable energy targets is possible only with significant private investments and financing, the government aims to ensure a more active approach of the Ministry of Economy and Sustainable Development, designated to act as the contact point for investors and actively provide guidelines during the licensing process. By the end of 2022, the Ministry of Economy and Sustainable Development and the Croatian Energy Market Operator (HROTE) are also expected to publish a comprehensive guide on licensing for the development of renewable projects, aiming to clarify the complex regulatory regime for future investors.

In terms of licensing, major changes were introduced in the process of issuing energy approval as one of the key licenses in the development process. Energy approval is now issued in a competitive public tender process facilitated by the Ministry of Economy and Sustainable Development. As the energy approval is now a first step in the licensing process, it assumes a higher initial investment cost for the new projects. However, it provides a more predictable timeline for project development and comfort to investors that the location subject to such approval will be secured for a period of up to five years.

Finally, in order to boost the development of new projects, it is particularly important to ensure a transparent and predictable incentive system. Although a new market premium incentive system was first introduced in Croatia in 2016, it took until March of this year for the first tender for larger capacity projects to be released. The huge time gap between the previous feed-in-tariff system (abolished in 2015) and the applicability of the new market premium system has caused a significant delay and regulatory issues for the projects that have commenced the development but were not able to apply for any kind of incentive. That resulted in a higher regulatory risk and the reluctance of investors and lenders in providing significant financing for the development of larger capacity projects.

The new regime for market premium incentives is expected to change that. Although a market premium is payable for the net quantities of supplied electricity based on sales generated on the market – and does not involve a guaranteed offtake of electricity by HROTE – the market has still seen an increased interest from investors in renewable projects.

The mentioned legislative changes and continuing effort of the Croatian authorities to provide proactive support to investors are certainly a step forward in accomplishing the renewable energy targets. However, there is still a long way to go in the transition to clean energy, from setting up the regulatory framework, to the completion of investments, and reaching commercial operations for the renewable projects. Providing efficient and timely support to investors, reducing the length of administrative procedures, and establishing a predictable and transparent public tender process will be crucial for Croatia to successfully move forward on the clean energy path.

By Mia Lazic, Partner, and Andrea Ruba, Senior Associate, Savoric & Partners

This Article was originally published in Issue 9.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.