Category: Latvia

Ellex has advised the Latvia-based companies of the Adven Group on joining the consolidated financing available to the Adven Group globally, secured by commercial pledges.

The Adven Group is an energy infrastructure and services provider active in Finland, Sweden, Estonia, Latvia, Norway, and the Netherlands.

According to Ellex, the “Latvian companies joining the Adven Group’s globally consolidated financing for its companies will provide a safe and predictable funding for the planned investments in the further development and modernization of the district heating systems.”

The Ellex team included Associate Partner Valters Diure and Senior Associate Inga Priedite.

Cobalt has advised the Amber Beverage Group on its EUR 30 million issuance of four-year senior secured bonds with Signet Bank as the arranger. Ellex was the collateral agent on the issuance.

The Amber Beverage Group is a spirits company.

According to Cobalt, “the bond issue saw an exceptionally high level of demand from both private and institutional investors from all three Baltic countries, with total demand exceeding EUR 45 million and more than 100 investors participating in the offering. Proceeds from the bond issue will be used to finance the construction of a modern, fully automated A-class logistics center. The new facility will increase the warehouse capacity of the Group in Latvia by approximately 30% and will improve the efficiency of the Group. It is anticipated that the bonds will be listed on the Frankfurt Stock Exchange Open Market and the Nasdaq Riga Regulated Market.”

Cobalt’s team included Partner Edgars Lodzins, Specialist Counsel Andrejs Lielkalns, and Senior Associate Krisjanis Buss.

Ellex’s team included Partner Ilga Gudrenika-Krebs and Associate Partner Marta Cera.

Sorainen has represented Latvian transport company AS Cata before the Administrative Court in a dispute over the right to conclude a public contract for passenger transport in the region of Vidzeme. 

According to Sorainen, “the court has found that the Road Transport Administration has to withdraw from state contracts worth EUR 200 million with the Nordeka company, which has not started passenger transportation on routes in Cesis, Limbazi, and Sigulda within the time stipulated.”

“In the judgment of March 2, the Administrative Court ruled that the Road Transport Administration had no grounds to give AS Nordeka, which was involved in the cartel, additional time in order to start providing transport. As of today, Nordeka has still not started providing services in Vidzeme, where the previous carrier, AS Cata, continues to provide transport,” the firm informed.

Sorainen’s team included Senior Associate Katrine Plavina-Mika and Associate Elvis Grinbergs.

Former Senior Associates Marta Cera, Anete Dimitrovska, and Edvijs Zandars have been promoted to Associate Partners at Ellex in Latvia as of April 11, 2023.

Cera is a Co-Head of the firm’s Banking & Finance practice and joined the firm in 2018 as an Associate. In 2020, she was promoted to Senior Associate, while in 2022, she became a Co-Head of Ellex Finance and Tax Practice in Latvia (as reported by CEE Legal Matters on January 13, 2022). Before that, she spent one year as an Associate with Deloitte Legal from 2016 to 2017, and another three with PwC Legal, between 2013 and 2016.

Dimitrovska leads the firm’s ESG and Sustainability practice and has been with the firm since 2012, when she joined as an Associate. She was promoted to Senior Associate in 2017. From 2010 to 2012, Dimitrovska served as an Assistant Lawyer at Roedl & Partner.

Specializing in TMT/IP and competition, Zandars spent over 12 years with Ellex, having first joined in 2012 as a Senior Associate. Earlier, he was an Intern at Latvia’s Competition Council.

Sorainen has provided pro bono legal representation to Re:Baltica Center for Investigative Journalism journalist Inga Springe in harassment proceedings against Janis Sondars.

According to Sorainen, Springe “suffered from prolonged and repeated harassment by Janis Sondars, including intimidation, threats, and unwanted communication. On March 30, this year, the Senate refused to initiate cassation proceedings following the entry into force of the Regional Court’s decision. As a result, Janis Sondars was sentenced to two months’ imprisonment for the harassment of Inga Springe.”

According to the firm, “criminal proceedings related to the activities of Sondars were initiated in 2019, but they were terminated shortly afterward and were not renewed even after an appeal because the police did not establish intent on his part to intimidate and make direct threats. Unfortunately, the unwanted activities continued, due to which the police had to be contacted again. When the proceedings were renewed, the prosecutor moved the case smoothly to trial, upheld the prosecution, and within a period of just over a year the case had been heard in all three courts.” 

Furthermore, Sorainen reports that “Sondars was aware that Springe does not want to contact him. Despite the above, unwanted communication with the journalist was maintained for a period of almost two years. As the court pointed out, this communication was carried out grossly ignoring and violating the generally accepted moral norms in society about what constitutes respectful communication among persons who do not know each other, including on issues on which there are sharp differences of opinion. In addition, it is important to evaluate all the actions taken as a whole and in relation to each other, because all the actions only achieved the desired effect – fear on the part of the victim – as a whole. As a result, the court concluded that the victim had objective grounds to perceive the threats and actions as endangering her safety.”

Back in 2021, Sorainen also provided pro bono legal assistance to Inga Springe and two other journalists in connection with their persecution and intimidation carried out by a private individual (as reported by CEE Legal Matters on October 19, 2021).

Sorainen’s team included Partner Andris Taurins, Counsel Violeta Zeppa-Priedite, Senior Associates Katrina Salmgrieze and Agita Sprude, and Associate Krista Niklase.

On February 24, 2023, the Latvian Constitutional Court issued a long-awaited Judgement in case 2022-03-01 confirming that the current control mechanism over arbitration in Latvia is incomplete and unconstitutional. This means that the government will now be required to introduce a procedure for setting aside arbitral awards made by tribunals seated in Latvia.

Background

The alleged award debtor (applicant in the Constitutional Court proceedings) learned about the arbitral award only when its recognition and enforcement was sought in Russia. They had not concluded any agreements, including the alleged arbitration agreement, with the alleged award creditor. They were not aware of the arbitration proceedings nor did they participate in the arbitration proceedings. Upon further investigation, it was discovered that the arbitration process had other substantial procedural errors: the appointed sole arbitrator was practicing in the same law firm as the counsel to one of the parties, the representative of the alleged award debtor acted on the basis of a forged power of attorney and, even more striking, the counsels of both parties, as well as the appointed arbitrator, were all practicing at the same address, which was also the registered address of the arbitral institution administering the case.

If these strange circumstances were not enough to question the legitimacy of the arbitration proceedings, the final award also addressed issues not set out in the submission to arbitration, and included decisions by the arbitrator on merits outside the scope of the submission to arbitration.

In other jurisdictions, each of the above procedural irregularities would be enough to succeed in setting aside proceedings. However, in Latvia, the mechanism for setting aside arbitral awards does not exist.

Under Latvian law, an arbitral award is only subject to control by Latvian national courts if recognition and enforcement of the award is sought in Latvia. It is highly likely that an award would be recognized and enforced in Latvia. However, since the alleged award debtor was established and operating in Russia, no enforcement proceedings were sought in Latvia.

In such circumstances, with no setting aside mechanism under Latvian law, the alleged award debtor was left without an effective remedy at the seat of arbitration to oppose the improper composition of the arbitral tribunal, the flawed arbitral proceedings, and the ensuing final arbitral award. Whether these circumstances and the underlying legislative framework ensured parties arbitrating in Latvia the most basic procedural human rights was for the Latvian Constitutional Court to decide.

The applicant contested the constitutionality of the provisions of the Latvian Civil Procedure Law (Articles 534, 5341, 535, 536 and 537) on enforcement and recognition of arbitral awards, insofar as they do not provide for a possibility to set aside arbitral awards.

Ruling of the Latvian Constitutional Court

The Constitutional Court concluded that a person has a right to exclude jurisdiction of state courts and instead resolve a dispute by arbitration, provided that such opt out is free, in accordance with the law, and unambiguous. Moreover, in line with the principle of the rule of law, a person may not, even voluntarily, waive any of the guarantees contained in the Constitution of Latvia, such as party equality, independence and impartiality of the tribunal, and the right to be heard. Therefore, the State is obliged to ensure control over arbitration proceedings by granting affected individuals and entities the possibility to protect their violated rights. This implies that a person must have a right to state supervision of arbitral proceedings.

The Constitutional Court emphasized that this was not the first time it has drawn Latvian legislator’s attention to the deficiencies of the legal framework governing control of arbitration proceedings. The Court went further, noting that the legislator’s failure to implement an effective mechanism for the control of arbitration proceedings for an extended period of time erodes public trust not only in arbitration, but also in the state and the law itself.

The Constitutional Court analyzed the current control mechanisms, finding that the Latvian Arbitration Law already provides for a control mechanism when the validity of an arbitration agreement is questioned or when the enforcement of an arbitral award before Latvian courts of general jurisdiction is sought. However, in all other cases, no control mechanism exists.

As a result, the Constitutional Court declared Sections of the Latvian Civil Procedure Law to be incompatible with Article 92 of the Constitution of the Republic of Latvia, insofar as they do not provide for control of arbitration proceedings in cases where the interested party does not apply to a court of general jurisdiction for enforcement of the arbitral award for a prolonged period, where the arbitral award is recognized and is enforced abroad or where it is not necessary to apply to a court of general jurisdiction for the enforcement of the arbitral award to obtain an enforcement order.

The Constitutional Court declared relevant Sections to be incompatible as of 1 March 2024, thus giving legislators a one-year term to introduce proper control mechanisms over arbitration proceedings.

Conclusions

This is a long-awaited judgment that will hopefully provide the necessary impetus not only to introduce a mechanism for setting aside arbitral awards, but also to improve the Latvian arbitration framework. The Latvian arbitration legislation contains several incomprehensible provisions that discourage serious players from choosing arbitration as a means of resolving disputes, and it will be a success, if at least some of them are dealt with as a result of this judgment.

Although it is not precisely known what the legislator’s preferred solution will be, it will certainly open the previously closed door to set aside proceedings where an arbitral award is tainted by serious procedural irregularities and various schemes of arbitration abuse.

The contributors was representing the award debtor in the proceedings before Latvian courts.

By Maija Tipaine, and Toms Krumins, Senior Associates, Cobalt

Walless has advised the Eco Baltia Group on its acquisition of Pilsetas Eko Serviss via its subsidiary Latvijas Zalais Punkts.

Pilsetas Eko Serviss is a road and street maintenance company.

According to Walless, Eco Baltia is the “largest and fastest growing environmental resource management group in the Baltics. The transaction was approved by the Competition Council in December 2022 and completed in early 2023. The acquisition helps Eco Baltia Group to strengthen its leading position in the Baltic environmental management sector.”

“Our goal as shareholders is to develop Eco Baltia as a strong regional leader, characterized by sustainable entrepreneurship and a move towards a circular economy in business,” INVL Baltic Sea Growth Fund Partner and Eco Baltia Chairman of the Supervisory Board Vitauts Plunksnis commented. “With this transaction, Eco Baltia’s service portfolio will continue to grow, creating additional value for customers, employees, and investors, and increasing the company’s future growth potential.”

The Walless team included Partner Zane Eglite-Fogele and Tax Consultant Inguna Abele.

Walless did not respond to our inquiry on the matter.

Cobalt has advised Latvenergo on its EUR 50 million issuance of six-year green bonds with a fixed annual interest rate and a yield to maturity of 4.952%.

Latvenergo is a state-owned electric utility company in Latvia. The company generates about 70% of the country’s electricity.

According to Cobalt, “the total amount of the submitted purchase orders reached EUR 132.6 million. The purchase orders were received from more than 20 investors, including asset management funds, insurance companies and banks in Latvia, Lithuania, Estonia, Germany, and Austria, and international financial institutions – the European Bank for Reconstruction and Development and the Nordic Investment Bank.”

The issuance is being implemented under Latvenergo’s third EUR 200 million program for the issuance of notes. Cobalt also advised Latvenergo on its previous issuance – EUR 100 million in five-year green bonds (as reported by CEE Legal Matters on May 18, 2022).

The Cobalt team included Partner Edgars Lodzins and Senior Associate Krisjanis Buss.

Ellex has successfully represented TD Trans before the Senate of the Supreme Court of Latvia in a cassation claim regarding a Riga Regional Court ruling on the breach of the unfair competition prohibition, where almost EUR 30,000 in loss compensation was awarded.

According to Ellex, “the claimant, engaged in the logistics sector, initially brought an action in court against two defendants, namely, a forwarding company and a natural person who was the former employee of the claimant. In the opinion of the claimant, the breach of unfair competition prohibition in the actions of both defendants stemmed from the fact that the forwarding company with which the claimant collaborated in the cargo carriage sector, was partially owned by a sister of the other defendant, who was an employee of the claimant.”

“In the opinion of the claimant,” the firm explained, “all transactions relating to the carriage by road made with the particular forwarding company had caused damages to the claimant; therefore, the claimant sought recovery of damages in the amount of approximately EUR 68,000, jointly and severally, from the defendants which amounted to a two-year profit of the forwarding company. In substantiating both the establishment of the breach of the fair competition prohibition and the establishment of the specific amount of damages, among others, the claimant argued that an alleviated standard of establishing a breach and losses is to be applied in cases of breach of the competition law pursuant to Directive 2014/104/EU.”

The court of first instance had partially satisfied the claim against the company, adjudicating some EUR 6,800 in losses, Ellex reported, “while dismissing the claim against the natural person altogether, since the claimant’s employee did not amount to a market participant and a competitor of the claimant during the alleged period of the breach. Conversely, the Riga Regional Court upheld the establishment of the breach of the unfair competition infringement by the company, while increasing the amount of the indemnity of damages to be recovered from the company up to almost EUR 30,000.”

Finally, according to the firm, “by its judgment of December 28, 2022, the Senate of the Supreme Court revoked the judgment of the Riga Regional Court – in the part whereby the claimant’s claim was satisfied – and returned the case for a new review at the Riga Regional Court,” together with an elaborate criticism on its initial ruling. “The Riga Regional Court must adjudicate the claimant’s claim taking into account the conclusions contained in the judgment of the Senate,” the firm reported.

Ellex’s team included Partner Martins Gailis and Associated Partner Irina Kostina.

Cytowski & Partners has advised Trace.Space on its USD 1.5 million pre-seed financing round led by Fiedler Capital and including Foreward, Charlie Sanghurst, and Andris Berzins from Change Ventures.

Trace.Space is a Latvian technology company that provides artificial intelligence-enabled software for industrial and automotive product engineers and manufacturers.

The Cytowski & Partners team included Partner Tytus Cytowski, Lawyer Eresi Tracy Uche, and Law Clerks Kunal Kolhe and Fabiana Morales Centurion.