Skrastins & Dzenis has successfully represented the SIA U-R-A Architectural Studio in a dispute with a contractor.
The dispute was based on the unauthorized use of ideas and copyrights drawn from four U-R-A Studio designs that were initially prepared for a property in the Latvian city of Jurmala.
S&D’s team included Partner Vigo Krastins and Senior Associate Andra Berzkalne.
There is ongoing litigation between the Moller Mobility group companies in Latvia (importers and dealers of VW cars in the country) and Latvia’s Competition Council involving a EUR 7.4 million fine imposed on the companies for an alleged cartel agreement. This is the highest fine ever imposed in Latvia for breach of competition law on one group of companies.
Following a whistleblower’s report by a former dealer who had been excluded from the dealers’ network for breaching the dealer’s agreement, the Competition Council built its case on e-mail correspondence between the group and independent VW dealers aimed at reserving participation rights in an upcoming public tender for one of the dealers. The Competition Council took the view that this e-mail correspondence constituted a cartel agreement, i.e., an agreement the very object of which is to restrict competition in the relevant market.
In December 2018 the Administrative Regional Court repealed the Competition Council’s decision, finding among other things that the e-mail communication between the group and independent VW dealers could not be regarded as a cartel agreement because it was limited to one brand and VW still faced fierce competition from other brands. The court ruled that the Competition Council had to prove the negative effects of such an agreement instead of presuming them. The Competition Council has appealed the case to the Supreme Court.
Antitrust Damages
Neither the Trucks cartel case nor the VW diesel emissions case have generated any antitrust damages actions in Latvia. With regard to the Trucks cartel, this is despite the fact that, when implementing the EU Competition Damages Directive, the legislator established a presumption that cartels cause a 10 percent price mark-up unless proven otherwise. Most likely the ice would start moving if the legislator also allowed for class actions in antitrust damages claims.
So far there has been only one successful antitrust damages case in Latvia: In November 2018 a final court judgment entered into force awarding damages worth EUR 1.35 million from the Riga Freeport Authority for having abused its dominant position for more than seven years. The litigation took nine years, which is another reason why lawyers do not get many antitrust damages engagements.
Used Car E-Commerce
Latvia’s State Revenue Service and Road Traffic Safety Directorate have been working together for several years to suppress the shadow economy in sales of used cars. The Automotive Association, which represents importers and dealers of new cars, is assisting the state institutions with a campaign aimed at educating consumers about the risks of fraud, the lack of any guarantees, and the seller’s liability when buying used cars from natural persons. A by-product of this co-operation is a regulatory requirement permitting the commercial sale of cars only through a “brick and mortar” car park. This requirement effectively constitutes a barrier to the online sale of used cars, since e-commerce platforms are still obliged to hand over the cars at a physical “store” – a requirement contrary to the very business rationale of e-commerce. This rule is probably incompatible with the EU’s Digital Single Market Strategy, since the objectives of preventing tax evasion and ensuring consumer protection can be attained by less restrictive means, as it is in other EU Member States.
GDPR
Most consumers opt for consumer financing of their cars. Latvian laws require any such deal to be based on an assessment of a consumer’s creditworthiness. That puts car dealers in an unusual role from the perspective of protecting personal data, now governed by the GDPR. Dealers are subcontractors of consumer finance companies as opposed to the traditional role of customer’s representative. Dealers must now follow financiers’ rules for protecting personal data in lease applications, agreements, and maybe even during negotiations with several financiers. They also must invest in IT security and reign-in aggressive sales techniques.
Whistleblowers’ Law
On May 1st, 2019, the Whistleblowers’ Law will come into force to protect persons who report information on a wrongdoing such as corruption, sexual harassment, tax evasion, breach of competition law, and so on, obtained in a work-related context. Car dealers and other companies employing more than 50 persons will be obliged to have internal procedures in place to handle whistleblower reports. However, there is a good chance that the law will only work on paper, as there are no sanctions prescribed for failure to comply with its requirements.
By Debora Pavila, Partner, and Katrine Plavina, Senior Associate, Vilgerts
This Article was originally published in Issue 6.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
TGS Baltic has advised SIA M257 on the April 4, 2019 opening of Akropole, a shopping and leisure mall in Riga.
TGS Baltic describes Akropole as “one of the largest construction projects in Latvia in recent years, with the total investments in the implementation of the project reaching slightly below 180 million euros. The total area of the shopping mall and the office building is 98,000 square meters, 90,000 square meters [of which] are allocated for retail, while the rest [are allocated] for office premises.”
In addition, the firm reports, “the spacious shopping mall includes an ice rink, the first Apollo Kino Cinema in Latvia with 9 auditoriums, 1,140 seats, and the first IMAX cinema in Latvia that combines the latest sound and image quality technologies (7 million euros investment), and an elegant and spacious Maxima XXX grocery store (3.6 million euros investment).”
The TGS Baltic team working on the project included Partners Linda Strause and Andra Rubene, Senior Associate Mara Stabulniece, and Associates Aija Kreicberga, Rudolfs Vilsons, Kalvis Krumins, and Janis Karsenieks.
Editor’s Note: After this article was published, Sorainen informed CEE Legal Matters that it had advised designer Sarma Norde, Apollo Kino and Megafort Latvia in relation to the opening of the Akropole shopping mall.
TGS Baltic has helped Apranga APB establish subsidiary Apranga HLV SIA, which will operate Zara Home stores in Latvia.
The first Zara Home store opening in Latvia is expected in the second half of 2019 in the Alfa shopping center in Riga.
Apranga is a fashion retailer in the Baltic States, which partners with European and global brands.Its Apranga HLV SIA was registered in the Latvian Commercial Register on March 20, 2019.
TGS Baltic’s team consisted of Partner Inese Hazenfusa and Associate Reinis Grunte.
The Riga office of Cobalt has helped SIA M257 obtain a commission for Akropole projects from the City of Riga’s construction authority.
SIA M257 is developing the Akropole building — a multifunctional shopping and entertainment center which will open its doors on April 4, 2019.
The gross building area is 98,000 square meters, which includes 9,000 square meters of office space. According to Cobalt, the center will house 170 tenants, including fashion and lifestyle stores, cafes, restaurants, an ice hall, a gym, and a cinema with nine screening rooms and the only IMAX screening room in Latvia.
Cobalt’s team included Managing Partner Dace Silava-Tomsone, Partners Toms Sulmanis and Gatis Flinters, and Senior Associate Inga Tenisa.
Latvian lawyer Nauris Grigals has become a Partner at TGS Baltic in Riga.
Grigals, who joined TGS Baltic — then operating as Tark Grunte Sutkiene — in 2009, specializes in corporate law, commercial law and M&A. According to the firm, “he also has broad experience in litigation, especially in the area of corporate and tax litigation, as well as arbitration.”
He received his degree from the University of Latvia in 2007.
Ellex Klavins provided Latvian advice and Titov & Partners provided Swedish advice to Latvian Forest Company AB on the sale of Its operating subsidiaries to the Svenska Cellulosa Aktiebolaget SCA group, which was advised by Glimstedt.
The Latvian Forest Company is a Swedish company that purchases and manages forest property in Latvia. The c ompany sold subsidiaries SIA Latvijas Mezu Kompanija and Baltic Forest IV SIA to SCA Mezs Latvija SIA, itself a wholly-owned subsidiary of Svenska Cellulosa Aktiebolaget SCA — a Swedish timber, pulp, and paper manufacturer with headquarters in Sundsvall, Sweden.
Partner Peteris Dalderis worked on the deal from the Ellex Klavins side and Partner Dimitrij Titov from the Titov & Partners side.
Glimstedt’s team consisted of Partners Lauris Zubulis and Aldis Kalinks and Associates Roberts Ginters, Inga Damskalne, and Renate Riekstina.
Kronbergs Cukste Levin and Uria Menendez have successfully represented the European Central Bank in front of the European Court of Justice in a case against the Republic of Latvia involving security measures it took against the Governor of Latvijas Banka Ilmars Rimsevics.
According to Kronbergs Cukste Levin, the case involved the Latvian Corruption Prevention Bureau’s decision to prohibit Rimsevics from performing his duties as President of the Bank of Latvia. According to the firm, “the court decision followed the line of ECB argumentation that such security measures may only be imposed under exceptional circumstances based on overwhelming or undisputed evidence. As the Republic of Latvia did not present such evidence, the decision on security measures was annulled.”
Kronbergs Cukste Levin Partner Vineta Cukste-Jurjeva and Uria Menendez Counsel Daniel Sarmiento represented the ECB in the matter.
Ellex Latvia has advised Silverlake Axis Ltd on the acquisition of 80% of the equity interest in SIA X Infotech Group. Deloitte Legal advised Novaltisco Investments Limited, a shareholder of SIA X Infotech Group, on the sale.
According to Ellex, “this acquisition brings together complementary product portfolios, business strategies, and expands geographical presence to allow both entities to better support existing customer bases and pursue new customers.”
Silverlake Axis Ltd is a provider of digital economy solutions and services to organizations in banking, insurance, payments, retail, and logistics industries.
SIA X Infotech provides software solutions for issuance and verification of electronic identity documents. The company is headquartered in Latvia with subsidiaries in Latvia and Kenya.
The Ellex team consisted of Senior Partner Raimonds Slaidins, Associate Partner Irina Kostina, Senior Associates Reinis Sokolovs, Andris Lazdins, and Edvijs Zandars, and Associate Kaspars Olsevskis.
The Deloitte Legal team consisted of Partner Maris Liguts, Managing Associate Ivita Samlaja, and lawyer Santa Dzenite.
In the October 6, 2018 parliamentary elections in Latvia, Klauberg Baltics Partner Theis Klauberg says, the ruling party lost its positions, giving the stage to new faces in the government. Still, he reports, “the biggest challenge was to form a lasting government.”
“The process of forming coalition was unusually lengthy,” Klauberg reports. “But it could be explained by the fact that this time several parties received a similar amount of votes, with no pronounced winner of the elections.” According to him, the outcome of the elections was a surprise, as unlike the previous government, the parties that won the majority of votes this time are independent of particular business interests. According to Klauberg, this is an encouraging development. “The political society is developing in a positive way, away from particular interests of business groups, and simply is more democratic,” he says, smiling that, “it is an improvement!”
Not all is rosy, however, and Klauberg reports concern among foreign investors about the ongoing crisis in Latvia’s banking sector. “There was an increase in oversight over financial institutions, and banking regulations are becoming stricter,” he notes, explaining that the increasing scrutiny is connected primarily to money laundering prevention. However, despite the government’s intentions, he says, the new rules are impacting investors in the country. “It has become much more difficult for foreign investors to do business with local banks when establishing a company in Latvia,” he says. “It is a huge problem, and a new phenomenon for Latvia.” As a result, he says, the increasingly demanding regulatory environment could potentially result in a slowdown of foreign investment, although he concedes that, “I would not expect this to happen.”
According to Klauberg, after some 20 years of minimal change in Latvia’s tax regime, a number of new rules came into force a year ago, primarily relating to an increase of social taxes for health insurance and pensions for self-employed individuals. Although he reports that there has been minimal public opposition to the changes — “Latvia typically does not have loud reactions,” he says — he describes the reaction to the increase as generally negative.
Finally, Klauberg says that the country’s legal market is fairly stable, though he describes with pride as “the biggest news” his firm’s recent departure from pan-Baltic bnt attorneys to target German clients (which CEE Legal Matters reported on December 21, 2018).