Category: Croatia

Allen & Overy has advised a syndicate of ten banks on Bina-Istra’s EUR 1.1 billion refinancing of the Istrian Epsilon project and the debt financing of the construction, management, and maintenance of the new phases of the Adriatic highway in Croatia.

BINA Istra is a Croatian joint stock company founded in 1995 to facilitate the construction and subsequent management of an Istrian Y motorway, consisting of the A8 motorway and the A9 motorway.

The Allen & Overy team included Partner Jocelyn Land, Senior Associate Josh Htet, Associate Enzo Beule, and Trainees Roman Aleksandravicius, Lucy King, and Emma Jing.

Allen & Overy did not respond to our inquiry on the matter.

Croatia’s economic outlook has improved with the eurozone entry, energy market reforms, and new and exciting equity programs and legislative changes, while judiciary labor strikes have challenged the country’s courts, according to Marohnic, Tomek & Gjoic Partner Tena Tomek.

“Recently, we’ve seen a significant boost in Croatia’s economic outlook,” Tomek begins. “The rating agencies have upgraded our overall outlook from stable to positive, marking the highest investment rating so far. Much of this positive shift can be attributed to Croatia’s entry into the eurozone and Schengen Area at the beginning of 2023, which has had a positive effect on our economy,” she explains. 

Apart from entering the eurozone, Croatia’s quick recovery from the pandemic and addressing the energy crisis have been crucial for the overall improvement of the Adriatic country’s economic status. “Our energy market is now very active, and we’ve witnessed a surge in regulatory activities,” Tomek continues. “Croatia is aligning with global trends, transitioning from traditional oil and gas to electricity, with a particular emphasis on renewable energy sources. Solar energy has become a major focus, whereas wind energy and biomass held the spotlight earlier,” she reports. In terms of regulations, the Croatian energy market underwent “significant structural changes in 2021 with the introduction of the new Electricity Market Act. Subsequently, in July 2023, Croatia finally adopted long-awaited necessary subordinated acts, providing a regulatory framework necessary for further development of energy projects,” Tomek adds.

Another notable legislative trend currently taking shape in Croatia relates to the legislative framework for agro-solar projects. “These new regulations aim to facilitate the development of agricultural solar plants, benefiting both the energy and agriculture sectors. Additionally, due to the energy market’s dynamics and high prices, we’ve observed a shift towards corporate Power Purchase Agreements,” Tomek says. “This trend signifies a move towards more market-based energy transactions.” 

On the other hand, Croatia has also seen labor strikes in the judicial sector recently. “Indeed, we faced a substantial labor strike involving all civil servants and employees in the judiciary,” Tomek outlines. “This strike paralyzed our courts for two months. Ultimately, after extensive negotiations with the government, union members accepted the government’s offer, which included a significant 12% pay raise. The strike was a testament to the pressing need for improvements in the judicial system’s efficiency and the welfare of its workers,” she says. 

Moreover, to improve efficiency and expedite dispute resolution, “two new pieces of legislation have been introduced,” Tomek continues. “The first is the Act on Non-Litigious Civil Procedure, a long-awaited development that aims to streamline non-litigious legal procedures. Additionally, measures have been implemented to encourage amicable dispute resolution, reducing the burden on the courts.” According to her, these include “mandatory mediation before proceeding to court procedure for damages compensation. Both initiatives are designed to enhance efficiency and accessibility to justice.”

Finally, Tomek points to interesting developments in the sphere of private equity and venture capital in Croatia. “This autumn, we’ve witnessed the launch of two significant programs in collaboration with the European Investment Fund. The first program, in partnership with the Croatian Bank for Reconstruction and Development, involves a EUR 52 million investment program focused on SMEs in Croatia. It also aims to bolster local private equity markets while prioritizing sustainability and the green transition,” she explains. “The second program, a collaboration of the EIF and the Croatian Ministry of Regional Development and EU Funds, is an EUR 80 million initiative to support Croatian start-ups and develop the local venture capital scene. With interest rates on the rise, these programs provide alternative sources of financing for SMEs and start-ups in Croatia,” Tomek concludes.

Divjak Topic Bahtijarevic & Krka has advised Hungary-based fruit and tree nut farming company Apple Heaven on the purchase of shares in Rabo.

Rabo is a Croatian producer and exporter of apples and nectarines.

The DTB team included Managing Partner Emir Bahtijarevic, Attorneys at Law Jasna Belcic, Zrinka Mustafa Prelic, Sanja Novoselic, Dominik Glavina, Iva Vukoja, and Barbara Simic, and Trainee Anella Bukovic.

DTB was unable to provide further information on the matter.

Miskovic & Miskovic has advised Infinum on a EUR 10.8 million loan from the EBRD. Mamic, Peric, Reberski, Rimac reportedly advised the EBRD.

Infinum is a Croatian IT company. According to Miskovic & Miskovic, “this loan has been granted as a credit acquisition line, and the first tranche (together with Infinum equity funds) has already been used for Infinum’s acquisition of the ETR IT company, based in the USA.”

The Miskovic & Miskovic team included Partner Pavo Miskovic and Attorneys at Law Maja Seat and Hana Fiala.

BDV has advised private equity fund Provectus Capital Partners – the majority stakeholder of the Adria Dental Group – on the acquisition of Dragas Dental Design.

According to BDV, Dragas Dental Design is the largest dental and medical business entity in the Slavonian region. “With this investment, the Adria Dental Group has taken one step closer to fully covering the entire Croatian market and providing high-quality dental services throughout the country.”

Earlier, BDV had also advised on Adria Dental Group’s financing and acquisition of the Fiziodent Polyclinic (as reported by CEE Legal Matters on January 9, 2023) and on Provectus Capital Partners’ Dentum Dental Clinic investment (as reported by CEE Legal Matters on November 17, 2022).

The BDV team included Partners Ivan Dvojkovic and Marko Karlo Bohacek.

Editor’s Note: After this article was published, CEE Legal Matters learned that sole practitioner Tomislav Svetina advised sellers Zoran Dragas and Matea Penavic Dragas on the transaction.

The EU Directives on Work-life balance and on Transparent and predictable working conditions were introduced into the Croatian national legislation in January 2023 and brought about significant changes and obligations for employers. What do they mean for businesses?

This report is designed to help companies to understand the requirements and how they have been implemented.

Implementation of EU Directive on Work-Life Balance (EU Directive 2019/1158)

Has the directive been implemented in the jurisdiction?

Yes.

What is the status of the implementation or draft implementation?

Directive 2019/1158 was implemented by the Amendments to the previous Maternal and Parental Benefits Act (Official Gazette no. 85/2022) which entered into force on 01 August 2022, as well as by the new Maternal and Parental Benefits Act (Official Gazette no. 152/2022) which entered into force on 01 January 2023. The rest of the key changes have been implemented by the Amendments to the Labour Act, which also entered into force on 01 January 2023.

What are the key changes for employers and employees?

1.      Paternity leave (“ocinski dopust”) (under the Maternal and Parental Benefits Act)

• This lasts for 10 days in the case of 1 child being born, and for 15 days in the event of twins, triplets or other multiple births.
• The leave can be taken before a child reaches 6 months of age.
• The leave is paid by the state budget at 100% of the employee’s compensation rate for the period.
• The father is obligated to inform the employer at least 15 days in advance of the intended use of paternal leave.

2.      Parental leave (paid) (“roditeljski dopust”)

• Most of the requirements on parental leave in Directive 2019/1158 were already reflected in previous legislation.
• Parents are entitled to a maximum of 8 months of parental leave (provided that both parents take a period of parental leave) for the first and second child, and for a maximum of 30 months (provided that both parents take a period of parental leave) for twins, a third child and for every additional child thereafter.
• Each parent is entitled to 4 months (or to 15 months in case of twins, third child and every additional child thereafter) of parental leave, with the provision that each parent retains 2 months of parental leave that cannot be transferred to the other parent. If only one parent uses parental leave, its maximum duration can be 6 months (or 28 months in case of twins, third child and every additional child thereafter). The recent amendments to the maternal and parental benefits legislation have introduced more flexibility to the use of parental leave, which parents can now use individually, simultaneously or alternately, according to personal agreement.
• Leave can be granted at once or in parts, provided that if used in parts it is used at most twice a year for a minimum duration of 30 days.
• The leave is paid up to a maximum amount of EUR 995.44 per month.
• It can be used when the child is aged between 6 months and 8 years.

3.      Carers’ leave (“dopust za pružatelje skrbi”) (Amendments to the Labour Act)

• This leave to take care of a family member or other person living in the same household is a new right.
• It is unpaid.
• It allows up to 5 days’ leave in a calendar year.

4.      Protection (Amendments to the Labour Act)

• During periods of leave or while using rights related to parenthood, employees are protected from their employment being terminated.
• In a case of a court dispute, if the employee makes it probable that the use of rights related to parenthood was the reason for a termination of employment, the burden of proof falls on the employer.

5.      Time off from work due to force majeure (Amendments to the Labour Act)

• This allows leave of 1 working day, once in a calendar year, in cases of unforeseen circumstances.
• It can be used when, due to a particularly important and urgent family reason caused by illness or accident, the employee’s immediate presence is absolutely necessary. Flexible working arrangements, additional rights (Amendments to the Labour Act)
• A pregnant woman, a parent with a child aged up to 8 years and an employee who works part-time due to the use of rights related to parenthood, may upon their written voluntary consent, work irregular hours that are subject to change.
• An employee with a child of up to 8 years of age and an employee who provides personal care to an immediate family member or a person living in the same household, provided that this employee has spent 6 months with the employer in an employment relationship, can request from the employer a temporary amendment to the employment contract that changes the contracted full-time working hours to part-time, i.e. request a change or adjustment of the working time schedule, due to his/her personal needs. The employer is obligated to consider such request and answer in writing within 15 days.
• Due to harmonising work and family-related personal needs, an employee may request remote work due to (i) health protection due to a diagnosed illness or established disability, (ii) pregnancy or parental obligations to children up to the age of 8 and (iii) providing personal care that, due to serious health reasons, is needed by a member of the immediate family or is needed by a person who lives in the same household. The employer is obligated to consider such request and answer in writing within 15 days.

What are the main actions for HR departments in preparing for the changes?

• Review and revise internal labour documentation such as:
  • Work regulations and remuneration regulations;
  • Offboarding procedure (if such exists);
  • Other employment policies and practices applicable to employees with relation to their parental entitlements;
  • Templates of other documentation concerning e.g. consents to work in overtime or to be sent on business trips;
  • Application forms required to apply for new leaves/releases.
• Training to acquaint HR colleagues with the new rules.

Implementation of EU Directive on Transparent and Predictable Working Conditions (EU Directive 2019/1152)

Has the directive been implemented in the jurisdiction?     

Yes.

What is the status of the implementation or draft implementation?

Some of the requirements of the Directive 2019/1152 were already reflected in the previously existing legislation, whereas the remaining were implemented by the Amendments to the Labour Act which entered into force on 1 January 2023.

What are the key changes for employers and employees?

1.      Probationary period

• The probationary period may last no longer than 6 months.
• In exceptional circumstances, the probationary period may last longer if during its duration the employee was temporarily absent (especially due to temporary incapacity for work, use of maternity and parental rights and use of the right to paid leave). In this case, the probationary period can be extended correspondingly, in relation to the duration of the absence, so that the total duration of the probationary period cannot be longer than 6 months.
• If the employment contract is concluded for a fixed term, the duration of the probationary period must be proportionate to the expected duration of the contract and the nature of the work.
• After the termination of the concluded employment contract in which the probationary period was agreed, the parties cannot recontract the probationary period when entering into a new employment contract for the performance of the same work.

2.      Obligation to provide information

• Before work starts, the employer is obliged to provide the employee with a copy of the employment contract and with a copy of the application for mandatory pension and health insurance within 8 days of the deadline for applying for mandatory insurance according to a special regulation.

3.      Additional employment

• An employee who is employed and works full-time with 1 main employer or works part-time with several employers so that his or her total working time is 40 hours per week, can work additionally for another employer with some exceptions (e.g. jobs with special working conditions).
• The main employer can ask the employee to stop additional work, provided there are objective reasons for such a request, especially if it is contrary to competition law or if it is performed within the employee’s working hours at the main employer.

4.      Cross-border work

• The employer may send the employee to undertake work abroad for a limited time.
• If this work lasts longer than 4 consecutive weeks, the written employment contract or written confirmation of the concluded employment contract before going abroad must also contain additional information specified in the Labour Act.

5.      Transition to another form of employment

• An employee who has spent more than 6 months with the same employer based on a fixed-term employment contract, provided that the probationary period (if contracted) had ended, may request the conclusion of an indefinite-term employment contract. If the conclusion of a permanent employment contract is not possible, the employer is obligated to provide written justification within 30 days. The same is applicable to a request for full-time working hours made by an employee who works part time.

6.      Mandatory training

• The employer is obliged to provide the employee with training in accordance with the needs of performing the contracted work and at its own expense. The time spent on training will be included in the working hours and, if possible, take place during the employee’s established working schedule.

7.      Protection from dismissal and burden of proof

• The employee must not be placed in a disadvantageous position due to exercising his or her employment rights.

What are the main actions for HR departments in preparing for the changes?

• Review employment policies and practices (especially those concerning the probationary period, additional employment, mandatory training and the provision of information).

By Valerija Cerovski Attorney at law in cooperation with Deloitte Legal

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms or their related entities (collectively, the “Deloitte organization”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No representations, warranties or undertakings (express or implied) are given as to the accuracy or completeness of the information in this communication, and none of DTTL, its member firms, related entities, employees or agents shall be liable or responsible for any loss or damage whatsoever arising directly or indirectly in connection with any person relying on this communication. DTTL and each of its member firms, and their related entities, are legally separate and independent entities.

Miskovic & Miskovic has advised joint agents Erste & Steiermaerkische Bank, Privredna Banka Zagreb, and Zagrebacka Banka on the Zagrebacki Holding’s EUR 305 million sustainability-linked bond issuance. Mamic, Peric, Reberski, Rimac advised Zagrebacki Holding.

According to Miskovic & Miskovic, this bond issue guaranteed by the City of Zagreb is the first sustainability-linked bonds issue of a utility company in Croatia and “represents the largest tranche of a corporate bond issue ever done on the capital market in the Republic of Croatia.” The EBRD and IFC were also involved as institutional investors. The bonds were issued in the nominal amount of EUR 305 million with a maturity of five years, with a fixed annual interest rate of 4.90%, and are listed on the Official Market at the Zagreb Stock Exchange.

The Miskovic & Miskovic team included Partner Pavo Miskovic and Lawyers Maja Seat and Hana Fiala.

The MPRR team included Partner Luka Rimac, Junior Partner Frano Belohradsky, and Attorney at Law Lucija Roncevic.

Editor’s Note: After this article was published, Lovric Novokmet & Partners announced it had advised anchor investor IFC on its EUR 72.5 million subscription. The LNP team included Partners Pavo Novokmet and Martina Kalamiza, Senior Associate Petar Alilovic, and Associate Lucija Zelenkovic.

Ilej & Partners in cooperation with Karanovic & Partners has advised the Media Development Investment Fund and Pluralis on their acquisition of a minority stake in Croatia’s Telegram Media Grupa. Batarelo Dvojkovic Vuchetich advised Telegram Media Grupa.

The Media Development Investment Fund is a New York-registered fund specializing in investment in independent European media. Pluralis is the fund’s Amsterdam-based affiliate.

Telegram Media Grupa is a Croatian digital media publisher.

The Ilej & Partners team included Partner Franka Baica and Senior Associate Nika Jurkovic.

The Batarelo Dvojkovic Vuchetich team included Partner Laurenz Vuchetich and Senior Associate Anamarija Javor.

Croatia’s energy and real estate sectors are well-positioned for growth, while frequently changing legislation and an ongoing strike by judicial clerks complicate the lives of lawyers, according to Divjak, Topic, Bahtijarevic & Krka Senior Partner Mario Krka.

“The past few months have been relatively less dynamic in Croatia, but still, there is quite some buzz surrounding various industries, particularly energy and real estate,” Krka begins. “The energy sector, especially the solar market, is booming, and Croatia has significant energy production capacities to offer.” However, he says “the market is heavily regulated and – due to a large number of requirements and limitations, some of which are yet to be determined by the government – the processes are relatively slow. Although there are certain developments, uncertainty persists regarding when things will start moving forward and gain momentum.”

As for real estate, Krka notes that another prosperous tourism season is anticipated, resulting in continued success in the development of hotels, and points out “there is also an increase in interest regarding the expansion of mixed-use and residential buildings. However, we have yet to witness major international players taking on larger construction projects of that kind, especially residential.” According to him, in Zagreb, several ideas and projects are in the works, aiming to develop mixed-use and residential structures. As for hotels, “it seems that Mariott is expected to enter the market, with plans for their 5-star facility to open its doors by the end of next year.”

On the political side, Krka says that a recent strike by judges in Croatia has now come to an end. “However, the strike by judicial clerks is currently causing some issues, leading to the postponement of hearings in some cases,” he continues. “The strike primarily centered around the issue of stagnant salaries that haven’t increased for years. Many professionals within the judicial system are underpaid, pushing for the strike to occur just before next year’s parliamentary elections. Fortunately, the judges’ strike didn’t last long enough to cause significant damage, but we still expect to feel its impact. Negotiations are underway to reach agreements on these matters,” he explains.

Moving to specific legislative updates, “we anticipate new amendments to the Companies Act, specifically aimed at transposing a new directive on cross-border mergers,” Krka says. “This practice of quite often amending our statutes, including general ones like the Companies Act, is quite demanding on lawyers, let alone companies.”

“In the context of M&A, this year has been relatively slower,” Krka notes. “However, the market has a keen interest in the playout of Fortenova and the potential sale of its shares. The company is in an unfavorable position of having a significant part of its shares linked to sanctioned entities, so the companies involved are actively seeking a resolution to this situation.”

Finally, Krka highlights that an interesting trend in Croatia is related to businesses showing cautiously increasing interest in ESG initiatives: “while this is still in a development stage, we have observed our clients raising some questions regarding ESG, albeit to a limited extent.”

Queritius is opening a new office in Zagreb, with Dalibor Valincic having joined the firm as a Partner on June 1, 2023.

Dispute resolution boutique Queritius opened its doors in Warsaw in 2020 (as reported by CEE Legal Matters on September 8, 2020) and expanded to Budapest the same year (as reported on November 24, 2020). It opened a new office in Kyiv in 2022 (as reported by CEE Legal Matters on May 26, 2022) and is now expanding to Zagreb.

According to the firm, Valincic has over “15 years of diverse dispute experience with a strong focus on investment and commercial arbitration and sectors including oil and gas, construction, the food industry, and distribution.” Prior to joining Queritius, Valincic spent over 15 years with Wolf Theiss, having started in 2008 and leaving as a Partner. During that time, he was also a Visiting International Advisor with Dechert in Washington DC, in 2018.

“With Dalibor’s arrival, we are taking another important step towards developing Queritius into a Central Eastern European disputes powerhouse,” Queritius Budapest Partner Daniel Dozsa commented. “We have known Dalibor for over a decade and are absolutely delighted to welcome him as our new Partner in Zagreb.”