Category: Croatia

Divjak, Topic & Bahtijarevic has promoted Ana-Marija Grubisic Cabraja, Ema Mendusic Skugor, Marina Kovac Krka, and Martina Kalamiza to partner, in the firm’s words, “closing a year of great changes in the best possible way.”

The four DTB lawyers will formally assume partner status on January 1, 2020.

In addition, after six years as partner, DTB’s Mario Krka has been appointed Senior Partner, and DTB lawyers Hana Renic Henig and Jasna Belcic will become senior lawyers.

“In choosing our new partners and making all the other new appointments, we were guided by the values that we had been building DTB on over the past years,” said Managing Partner Emir Bahtijarevic. “That is why expertise, continued personal development, leadership, responsibility, timely completion of tasks, and entrepreneurial spirit are all characteristics our new partners have in common. We expect them to strengthen us, not only with their expertise and professional abilities, but also their energy and human qualities, and, as partners, to contribute significantly to us remaining committed to providing our clients with the best possible service.” 

Ana-Marija Grubisic Cabraja joined DTB in 2011 after graduating from the Faculty of Law at the University of Zagreb. She specializes in dispute settlement proceedings and arbitration, and DTB describes her as “an expert in restructuring procedures and insolvency law.”

Ema Mendusic Skugor joined DTB in 2012, also after graduating from the University of Zagreb. She specializes in corporate law, with special emphasis on regulated industries law and EU law.

Marina Kovac Krka joined DTB in 2009 after spending one year at the Boric Law Office and two years at the BS&P Law Firm. She is qualified in both Croatia and Germany and focuses on domestic and international corporate transactions. 

Martina Kalamiza advises clients in the field of banking and finance law and capital markets. After graduating from the University of Zagreb in 2005 she spent five years with the Laktic & Partners law firm before joining DTB.

According to Divjak, Topic, & Bahtijarevic, “by expanding its partner team, DTB continues to maintain the legacy of the recently departed partner Sasa Divjak, who has over the past 25 years built one of Croatia’s top law firms on expertise, quality and reliability.”

“There haven’t been any large shifts in the legal landscape recently if we’re talking about legal offices, teams moving, exits, and so forth,” says Schoenherr Partner Miriam Simsa. “The general situation seems to be that established players have things pretty much in control and that there is not a lot of room for new entries. Yet it is fair to say that the spin-offs have been increasing their market share over the last few years.”

However, she says, that predictability is not mirrored in the political landscape. “First, presidential elections are coming soon,” Simsa says. “Then next year we have the EU presidency seat moving to Croatia, starting in January, and of course the upcoming general elections that are due late in 2020.” She believes this is unlikely to impact business in an adverse fashion. “We really don’t expect any controversies to happen, in terms of business and investments. Even though there’s going to be a lot of voting next year, we expect things to continue running smoothly.”

And indeed, the Croatian economy seems to be in good condition, especially when compared to the rest of the region, Simsa says with a smile. “The most active business sector in Croatia is always tourism, and there are a lot of investments that are expected to happen in the coming years, but that’s not the most exciting thing,” she says. “Croatia has propped up a VC fund with the purpose of investing specifically in domestic startups and scale-ups. It has a Slovenian manager – Fil Rouge Capital – and rumor has it that it will manage a EUR 42 million portfolio with an aim to invest it all by 2023.”

Still, Simsa says of the economy that “not all is fine and dandy,” and she says there is a lot of pressure on the country’s labor market. “Historically speaking there is a clear brain-drain from Croatia and the rest of the Balkans, but now, with the Austrian labor market set to open up to Croats in mid-2020, it looks like even more workers might migrate.” 

Finally, Simsa says, Croatia’s new Enforcement Act, expected to enter into force in 2020, is a frequent subject of controversy. “Even though it is questionable how it will work in practice – seeing as how it is generally set to be a much easier procedure – from an economic standpoint it makes a lot of sense,” she says. Thus, although not all lawyers are excited about the prospect of the changes, outside investors are likely to welcome the new law with open arms. “If enforcement is difficult then businessmen are going to be reluctant to enforce collateral, which could lead to them being reluctant to invest, seeing as how it directly impacts their general confidence in the business atmosphere,” she concludes. “Now, with the new act, it is reasonable to assume that enforcements will become easier and faster, which will strengthen trust and spur investments.”

When investors think of attractive and developed capital markets, Croatia’s is probably not the first to come to mind. Can that be changed? 

Croatia has put a great deal of effort into developing its capital market legislation over the past ten years, mainly to align it with the EU Acquis. Nonetheless, the country’s capital market continues to share many characteristics with still-emerging capital markets.

What we have been looking into lately are specific instruments commonly seen on larger capital markets, such as bonds issuances, covered bonds, securitization, and so on. Securitization – which inevitably means thinking of its not-too-good reputation following the 2008 financial crisis – could stir things up in Croatia’s capital market. To remove securitization’s post-crisis stigma and to create a quality securitization market, the EU Parliament and the Council of the EU have adopted Securitization Regulation (EU) 2017/2402, which introduces an important legislative framework, specifically addressing requirements for simple, transparent, and standardized securitization. 

With EU legislation for “post-crisis stigma-free” securitization and with companies regularly getting their funding the old-school way (i.e., bank financing, shareholder loans, and the unfortunately-rare public offerings of shares and bonds), accessing funds through financing alternatives and enabling diversification of funding sources while distributing risk at the same time through securitization could be the next interesting trend on the market. 

Breaking Down Securitization

What is securitization? In a nutshell, it is a type of structured financing that enables the “originator” of claims, or in simple legal terms, the assignor, to refinance a set of claims. The examples of originators are banks, leasing companies, companies with certain volume of claims, such as electricity or highway companies, etc. The originator selects, pools, and repackages a portfolio of its claims, organizes them into different risk categories for different investors, and assigns them to a “securitization special purpose entity.” Upon the transfer the special purpose entity issues debt securities (for example, bonds) to investors on the capital markets. Generally such securities reflect the proceeds from the underlying claims. The special purpose entity collects payments from the underlying claims and uses the proceeds to make payments on the issued debt securities to the investors. The securitization may include other process participants such as a sponsor financial institution which purchases claims and exposures from another for purposes of a securitization transaction. In practice, securitization is highly complex and requires a lot of preparatory and structuring work. It also includes number of other participants, the most important being an underwriter, credit rating agencies, third-party credit enhancers, a swap counterparty, a servicer, and a trustee. 

Securitization in Croatia

Well-structured securitization can be appealing for banks and other financial institutions, as it represents a method of refinancing claims and gaining capital relief, allowing banks to obtain more breathing space. It is also appealing to other market players, attracted by the opportunity to obtain capital from a source other than borrowing. In a bank-based financial system such as Croatia’s, securitization is another source of financing that, at the same time, increases the level of financial market participation.

More than a decade has passed since Croatia’s first attempt to regulate securitization in a specific act. Despite the working group’s efforts to identify and understand all elements important for securitization and then draft an act, none was ever enacted by the Croatian Parliament. One of the reasons often cited is the financial crisis of 2008, which highlighted how misuse of securitization can amplify the effects of a crisis. For whatever reason, no legislative securitization framework has been created since. 

As it directly applies in all member states, the EU’s Securitization Regulation became applicable in Croatia without needing to be transposed into national law. Still, in response to the Securitization Regulation, Croatia’s legislator recognized the need to enact secondary legislation to enable the legal framework set out in the Securitization Regulation to function in Croatia’s legal system. Thus, as a part of this alignment of Croatian law with the Securitization Regulation, amendments to Croatia’s UCITS and AIF Acts are currently working their way through parliament.

Croatia’s legal system recognizes the main legal concepts necessary for securitization, although additional legislative steps are necessary to ensure that the legislative framework set out in the EU’s Securitization Regulation can function easily in the country. As the recent efforts by the Croatian legislator show movement in a positive direction, there is reason to hope that Croatia’s legal system will be ready for securitization soon.

Jelena Nushol, Partner, and Ivan Ivandic, Associate, CMS Zagreb

This Article was originally published in Issue 6.9 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 has helped Globe Trade Center obtain stage two financing from Erste & Steiermarkische Bank for the construction of the Matrix Office Park, a project consisting of “two highly-efficient buildings, designed and constructed in line with LEED Platinum certification for green construction,” according to DTB.

“The first phase of the financing project,” DTB reports “was completed in 2017 and resulted in the construction of the first building.” The second building is expected to open its doors in the spring of 2020.

The DTB team included Senior Partner Damir Topic and Senior Associate Lea Muzic.  

“Croatia has had a wave of NPL transactions which have left behind a need for more lawyers to manage the sold loan portfolios as case managers,” says Ivna Medic of Kallay & Partners in Zagreb. She reports that the Croatian businesses have recognized the need for lawyers as compliance officers and that more and more lawyers are accepting such positions.

Continuing her analysis of the legal industry in Croatia, Medic says that the market is experiencing a generational shift, with “the focus switching from the older, full-service law firms to their junior partners or senior associates launching spin-offs with their own firms.” There are new offices opening, though the “older and bigger firms are still dominating the high-value private sector.”

Medic reports that expectations are high for Croatia’s new Enforcement Act, which is “currently scheduled for the second reading in front of the Parliament and [which] contains quite major changes, all in order to make the enforcement procedure more flexible and economically rational.” The changes, she says, are expected to “resolve some practical issues” and to “finally resolve the issue of the powers of public notaries within the enforcement procedure.” In addition, going forward the enforcement procedure in Croatia will have to be “initiated and managed using electronic means of communication and the use of prescribed forms,” which she says should simplify the process as a whole.

Medic describes the real-estate sector in Croatia as “very active, even with prices being at their highest level from the last few years, in both the commercial and residential sectors.” The NPL market is growing as well, she says, and is quite active with “huge interest from different funds and companies that are being established for just this purpose.” She rounds up her assessment of the economy by citing ”major investments made in tourism, especially on the coastline” and reporting that “the metal and wood processing sectors are growing as well.”

“As for infrastructure projects in Croatia taking place currently,” Medic says, “I’d have to mention the upcoming construction of solar power plants in Cres, Vis, and Vrlika, and the purchase of the solar power plant in Kastelir, which is just the first stage of a HRK 750 million investment that is scheduled to occur by 2023.” In addition, she says, this year “the agreement to construct a bridge over the Sava River near Gradiska was finally signed,” following initial agreements between Croatia and Bosnia and Herzegovina back in 2011. The estimated value of the project is EUR 30 million and it is expected to be finished within two and a half years.

Finally, Medic assesses the current political situation in Croatia. “We have a presidential election in two and a half months,” she says, “so everybody is more or less focused on this, but I personally do not see that it will have any – or at least any serious – impact on business. Public perception is that the President of Croatia does not have great influence on the economy, therefore, it is not expected that the election results will influence business in any significant way.”

Established by senior Croatian lawyers from three separate firms, Lovric│Novokmet│Smrcek — LNS — has opened its doors in Zagreb.

Founding Partners Toni Smrcek and Pavo Novokmet first started working together in 2017 and, as Tus Novokmet Smrcek in 2018, were nominated for the CEE 2018 Deal of the Year for their work on BC Partners’ acquisition of a majority stake in the United Group. With former Divjak Topic Bahtijarevic Partner Mate Lovric replacing Tomislav Tus, LNS began its operations in April 2019.

According to LNS, “Mate Lovric’s background is in high-end M&A work, Toni Smrcek is a well-established figure in the banking and finance area, [and] Pavo Novokmet is a household name on the Croatian capital markets and dispute resolution market.” According to the firm, “the three will lead a full-service law firm assisting clients looking for focused and experienced corporate service.”

“I am looking forward to experiencing (and enjoying) this ride together with my two friends, Pavo and Toni, who happen to be great people and great lawyers,” said Mate Lovric. “We’ve known each other for many years (as far as from primary school) and we share not only professional values, but what is more important, life values.“”

“We have stepped down from our positions in top-tier Croatian law firms for a reason – to focus more efficiently on creating value for our clients,“ said former Savoric & Partners Partner Toni Smrcek. “The three of us together with our teams will continue to provide solution-orientated and seamless support to our clients, but now within a new format that is designed to be resilient and more flexible in a changing legal environment.“

“The founding or our law firm may be seen as a small step towards the consolidation of the new generation of top ranked Croatian lawyers, as opposed to traditional spin offs that have been blooming recently,“ said Novokmet, who spent over ten years at Zuric i Partneri before starting his new firm.

Divjak, Topic Bahtijarevic has advised Energia Naturalis on its mandatory public offer for all outstanding shares in Luka Ploce.

DTB describes Luka Ploce as “one of the largest Croatian ports and is a crucial gateway for transport of goods in and out of Bosnia and Herzegovina and for the southern part of Croatia.” According to the firm, “after the completion of the mandatory public offer, Energia Naturalis controls 36.11% of all votes in the shareholders’ meeting and is the largest shareholder of Luka Ploce.”

The DTB team representing Energia Naturalis was led by Partners Damir Topic and Mario Krka and included Associates Marija Gojevic Sparavec and Franjo Nakic.

Croatia’s Divjak, Topic & Bahtijarevic is mourning the unexpected passing of Founding Partner Sasa Divjak.

DTB describes Divjak, who co-founded DTB in 1994 and was head of the firm’s Corporate, Employment, and IT practice groups, as “a recognized and accomplished attorney, with 25 years of continuous counseling market leaders in the Croatian and regional business community. He received his law degree in 1990 at Zagreb University’s Faculty of Law. He was admitted to the Croatian Bar Association in 1994. He was a founding partner with the Divjak Topic & Bahtijarevic law firm, which he co-founded with Damir Topic and Emir Bahtijarevic. He advised corporations on all aspects of running their business in Croatia, from specialized advice on corporate and labor matters, telecommunications, media, and IT industries, to commercial insurance and other regulated industries.” The firm describes him as “an exceptional attorney and a tireless businessman, active in many social and professional events in Zagreb, Croatia and abroad.”

In addition, according to DTB, “Sasa cherished his family above all else. He is survived by his wife, Senia, children Vita and Sven, mother Iva, father Bosko, and sister Tanja. Our hearts and thoughts go out to them in this time of deep sorrow.”

Finally, the firm reports, “Sasa Divjak was larger than life. He was a leader and a mentor in our law firm and the legal community. Sasa’s inexhaustible capacity to give, his kind heart and generous spirit made him unique and special to all who knew him. He will be missed, but his legacy will live on through DTB’s work and through all the lives he touched.”

A testimonial on Divjak’s LinkedIn page describes him as an “excellent lawyer [and] a good co-worker, friend, and person who you can trust in any way.”

And his colleagues at the SEE Legal alliance, of which DTB is a founding member, expressed their colleagues as well. According to a statement on SEE Legal’s website, “we all have great memories of at least 16 years of friendship and partnership and will remember him for his calm, friendly but always professional approach to solving problems DTB and SEE Legal faced from time to time. Sasa was a model as a husband and parent and now, when he will no longer be with us, we understand how much we are going to miss him.”

Divjak, Topic Bahtijarevic Partner Mario Krka says that “there are currently three major legislative changes that everybody in Croatia is talking about: changes to the Corporate Law Act, certain tax bylaws amendments, and upcoming changes to the Civil Procedure Act.”

“Corporate law changes are what lawyers are talking about most,” Krka says. The most significant of those changes, he says, involve e-incorporation of companies, within a broader strategy designed to “modernize access to courts”, and generally clearing things up from legal perspective.

Tax changes are also an “especially hot topic,” Krka says, referring to changes that will allow Croatia’s Tax Authority to block Internet pages if it “believes that these pages enable people to buy goods and services in a way that circumnavigates the current regulatory framework.” The Tax Authority is to do that by “requesting the blockage from the network regulator, which will, in turn, apply pressure on Internet providers to shut these pages down.”

Recently proposed changes to the Civil Procedure Act, Krka concludes, “will mostly serve to streamline practice and ease the current caseload the Supreme Court has on its plate.” Croatia’s Civil Procedure Act hasn’t been amended in six years, he says, and he notes that the current “set of suggestions will lighten court’s workload, but will also deny citizens certain types of legal remedies.”

Krka says that “the real estate sector is the most active right now” and that there is a significant “increase in the prices of properties both in the commercial and residential sectors, especially on the seaside and in Zagreb.” He adds that there are some talks of a “major infrastructural project that will aim to revamp a portion of Zagreb next to the Sava river,” but reports some that the contractors rumored to be working on the project are “the people that are linked to a similar project in Belgrade – The Belgrade Waterfront – which has a cloud of controversy around it.” 

Turning away from real estate, Krka notes that “the purchase of Croatia’s third major telecommunications operator, TELE2, has been announced.” (As reported by CEE Legal Matters on June 7, 2019).

Finally, Krka says that the recent European Parliamentary elections led to a slight “shift towards the right,” which could lead to a “strengthening of right-wing politics.” He concludes by saying that “the important question is the stability of the ruling coalition In Croatia,” and he notes that any internal party turmoil may “have external impact, especially in terms of parties positioning for the Croatian parliamentary elections.”