Category: Lithuania

From the implementation of a bank windfall tax to a surge in crowdfunding and factoring and banks’ newfound appetite for real estate loans, the legal, financial, and regulatory landscape of Lithuania is constantly evolving, according to Adon Legal Partner Marius Matiukas.

“Bank windfall legislation, adopted in May, introduced a tax on the banks’ increased net revenue from interest, based on the difference between interest (loan) incomes and interest (deposit) expenses,” Matiukas begins. “This has been a hotly debated topic, with banks expressing a reluctance to pay. However, it has led to a positive outcome as well, in terms of increased deposit interest rates and volumes.” Lithuania now ranks fourth in the EU for retail deposit interest rates, he explains, “which has resulted in a surge in deposits. This tax is expected to generate approximately EUR 400 million for the government by 2024.”

And banks have also reconsidered their strategies toward real estate investments, Matiukas notes. “Initially, there was a period of reluctance among banks to provide loans for real estate. However, there has been a shift, with banks not only restructuring existing loans but also showing an appetite for new loans.” Costs of financing did change considerably. Thus, to make financing possible they occasionally agree with longer amortization schedules, he adds. “By extending the principal amortization period, i.e., having smaller monthly repayments with higher repayment at the end of the term, it’s possible to issue higher credit with the same debt service coverage ratio. Although financing for real estate saw a slowdown for three or four months, banks are now again providing loans to established market players.”

Lithuania has also seen significant growth in crowdfunding and the issuance of new licenses under the EU Crowdfunding Regulation, Matiukas says. “Even established crowdfunding platforms from outside Lithuania are choosing the country as their business hub due to the established regulatory framework and practice. Over the first six months of this year, funding for projects has reached EUR 118 million, compared to EUR 72 million during the same period of the previous year.” The switch to the EU regime will further expand the market, enabling EU-wide operations, he points out, but the regulator is also increasingly strict: “the Bank of Lithuania is adopting a more conservative approach in issuing new licenses, as well as in supervision of the existing financial sector participants. And it’s also sophisticated enough to make its own decisions and interpretations regardless of what’s happening in other jurisdictions.”

The factoring industry in Lithuania is booming as well, with several new companies operating in the sector. “Some historically only factoring companies have obtained banking licenses as well,” Matiukas points out, “while liberal regulations in Lithuania allow for the provision of factoring services without needing a specific license.” This openness has attracted foreign companies to enter the market, he notes, “seeking opportunities in this thriving sector. We’ve also witnessed investments and Series A rounds in factoring companies, indicating strong interest in this form of alternative financing.”

According to Matiukas, Lithuania’s appeal to foreign players in the financial market can be attributed to several factors. “First, the country has a well-established regulatory framework. The experience and clear positions of the regulatory bodies provide stability and predictability,” he says. “Additionally, Lithuania has a history of attracting and nurturing financial companies, evident in the growth of e-money firms in the past. The country’s technology, finance, and legal talent pool and expertise further enhance its attractiveness for new entrants.” Finally, the regulator is also proactive and forward-thinking: “The Bank of Lithuania’s strategic focus has recently expanded to improving the capital markets, which hopefully will further solidify the country’s position in the global financial landscape,” Matiukas highlights.

Lithuania’s Ilaw Lextal has announced the promotion of four of its Attorneys to Associate Partner positions – Inga Neniske, Egle Visinskiene, Ramune Saikuviene, and Neringa Gylyte – effective September 2023.

Neniske, who specializes in corporate law, has been with Ilaw Lextal for five and a half years. She joined the firm in 2018 as an Associate and made Senior Associate in 2019. Earlier, she spent four years with Advokato Misiaus Kontora, the last two of which as an Associate.

Visinskiene has over 13 years of experience in real estate and disputes. She joined the firm in 2014 as an Attorney at Law and made Senior Associate in 2021.

Saikuviene, a labor law professional, has more than 17 years of legal experience. She has been with Ilaw Lextal for the past 12 and a half years, joining the firm back in 2011 as an Attorney at Law. Earlier, she was an Assistant Attorney with the MAQS Law Firm for four and half years, starting in 2008. She also spent a year with the Soloveicikas, Markauskas, Aviza, Bagdanskis law firm and two more in-house with SILBETA, between 2006 and 2008.

Gylyte, who specializes in commercial disputes, spent the last nine years with Ilaw Lextal. She joined the firm back in 2014 as an Associate, made Senior Associate in 2017, and became an Attorney-at-Law in 2019. Before that, she spent almost three years in-house as a Lawyer with Apsaugos Komanda.

“Our most valuable asset is our people. We are committed to maintaining a culture of continuous learning and improvement. It is essential to provide opportunities for growth and development to ensure that our team members realize their full potential,” Managing Partner Tomas Bagdanskis commented. “The promotion of Egle, Inga, Neringa, and Ramune to Associate Partners is proof of this commitment to developing talent and encouraging people internally. We are confident that their leadership will make a significant contribution to the continued success of  Ilaw Lextal.”

Former Lithuanian Competition Council Chairman Sarunas Keserauskas has returned to Ellex Valiunas as a Partner, after spending 12 years as the head of the competition watchdog.

According to Ellex, Keserauskas will “develop the practice of Competition law and other areas of business supervision.”

Before rejoining Ellex, Keserauskas spent 12 years with the Lithuanian Competition Council, starting in 2011, and almost two years more as a Senior Legal Adviser with the Office of Fair Trading, between 2009 and 2011. He began his career with Ellex legacy law firm Lideika, Petrauskas, Valiunas, and Partners – Lawin, in 1995. He started as an Assistant Lawyer, was promoted to Associate Lawyer in 1998, and an Adviser in 2006, and spent 14 years with the firm before departing in 2009.

“Joining the law firm where I started my legal career, I will bring with me the experience I have gained working for competition authorities in Lithuania and the United Kingdom, as well as participating in the activities of international organizations and implementing international projects,” Keserauskas commented. “I will share this experience with Ellex’s Competition practice as it strives to establish itself as an internationally recognized center of excellence.”

Ellex has advised Integre Trans on its EUR 4 million bond issuance on the Nasdaq Baltic First North Market.

Integre Trans is a transport and logistics services company with branches in Lithuania and companies in Germany, France, and Poland.

According to Ellex, the bonds’ maturity date is May 5, 2026, with a nominal value of EUR 1000 each and an annual coupon rate of 12% plus six-month EURIBOR. Interest is paid semi-annually. “Integre Trans’s successful first bond issue will provide the company with the capital it needs to finance its operations and growth plans.”

The Ellex team included Associate Partner Egle Neverbickiene and Associate Egle Radvilaite.

TGS Baltic has advised private equity fund manager BaltCap on its acquisition of logistics company Xpediator.

Xpediator is an international logistics company that controls the forwarding and cargo transportation company Delamode Baltics in Lithuania.

According to TGS Baltic, under the Delamode brand, Xpediator provides freight-forwarding, logistics, and transport support solutions in CEE and the UK. “The consortium intends to expand the company’s core freight-forwarding offerings across Europe and beyond, as well as to build UK-based businesses. Taking Xpediator private will allow it to pursue new growth prospects and position itself as a leader in global supply chain solutions for our region.”

“BaltCap will assist Delamode expand its core freight-forwarding activities in the CEE region, as well as develop logistics operations in the UK and Romania,” BaltCap Partner Sarunas Alekna said. “We are confident that our local presence and 25 years of experience in developing regional business champions will help management realize the company’s vision.”

The TGS Baltic team included Partners Agnius Pilipavicius and Marius Matonis, Associate Partner Triinu Jarviste, Senior Associates Indre Vickaite-Liatuke, Jonas Salna, Mari Anne Rohtla, Paulius Dabulskis, Ruta Tikuisyte, Sebastian Okinczyc, Vladlena Rudusane-Simica, and Vytautas Bradauskas, Associates Auguste Linauskaite and Eliza Silina, and Junior Associate Paulius Zalnieraitis.

TGS Baltic did not respond to our inquiry on the matter.

TGS Baltic has advised Vilnius-based policy research and consultancy company PPMI on its sale to Kantar Public.

Kantar Public is an international public policy evidence and advisory business.

According to TGS Baltic, “the agreement will allow both organizations to expand their combined offerings in public policy advisory and evaluation, data and analytics, and behavioral and communications work to better support the government, multilaterals, business, and civil society clients dealing with the world’s most important and complex public policy issues.”

“Today is the start of the next exciting chapter for PPMI as we embark on our new relationship with Kantar Public,” PPMI Managing Director Haroldas Brozaitis commented. “PPMI has been a leading evidence-based insights and public policy consultancy since our inception in 2001. We have more than 100 in-house researchers and work with partner organizations in all EU countries to serve public sector leaders in the EU and international institutions as well as national authorities. We are proud of our purpose-based culture, which combined with exceptional strength in analytical capabilities and technology-enabled data, enables us to be a strong collaborative partner to existing and future clients operating in the public realm.”

The TGS Baltic team included Partner Marius Matonis and Senior Associate Ruta Tikuisyte.

TGS Baltic did not respond to our inquiry on the matter.

Cobalt has successfully represented Lithuanian poultry farm Gireles Paukstynas before the Supreme Court of Lithuania in a dispute with insurer Lietuvos Draudimas regarding the insurer’s refusal to recognize the state-mandated slaughter of sick birds as an insured event.

Gireles Paukstynas is a poultry company. It was established in 1973.

Lietuvos Draudimas is an insurance company active in the Baltic countries. It celebrated a century in the market in 2021. 

The dispute between Gireles Paukstynas and the insurance company “arose after some of the chickens in the company’s poultry farms contracted salmonellosis, and the Veterinary Service issued a recommendation to slaughter the sick birds,” Cobalt reported, as Lietuvos Draudimas refused to recognize the slaughter of sick chickens as an insured event.

According to the firm, the case would set a precedent for assessing which decisions of state institutions should be regarded as meeting the requirements of the Law on Animal Welfare and Protection. The Supreme Court of Lithuania upheld the company’s cassation appeal and overturned the decision of the Vilnius District Court and the ruling of the Lithuanian Court of Appeal against Gireles Paukstynas.

“The SCL decided that the lower courts interpreted the provisions of the insurance regulations incorrectly. The court noted that the recommendation of the Veterinary Service to slaughter flocks of infected chickens can be considered as an order for slaughter, because only in this case would the violation of the requirements of the Law on Animal Welfare and Protection be avoided.” According to Cobalt “the recommendation of the Veterinary Service to slaughter the infected birds should be considered an order in the sense of the insurance contract concluded by the parties and the rules applicable to it. Accordingly, the SCL submitted an assessment that in the case in question, Lietuvos Draudimas refused to pay the insurance benefit unjustifiably.”

Since the lower courts did not assess the reasonableness of the amount of the requested insurance benefit, the SCL decided to refer the civil case to the court of first instance for re-examination in order to determine the amount of the insurance payment.

The Cobalt team was led by Partner Marius Inta and Senior Associate Vaidas Kontrimas.

The EU Directives on Work-life balance and on Transparent and predictable working conditions were introduced into the Lithuanian national legislation in August 2022 with the remainder following on 01 January 2023 and brought about significant changes and obligations for the 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?

Some changes to the Labour Code of the Republic of Lithuania came into force on 01 August 2022, with the remainder following on 01 January 2023.

Amendments to the Law on Sickness and Maternity Social Insurance came into force on 01 January 2023.

What are the key changes for employers and employees?

1. Paternity leave

• Now, the 30-calendar day period of paternity leave can be split into 2 parts of 15 calendar days or used non-interruptedly until the child reaches 12 months of age.
• Paternity leave benefit is set at 77.58% of
  compensatory earnings.

2. Childcare leave

• Each parent is eligible for 2 months of childcare leave until the child is 18 or 24 months old; this leave cannot be transferred to another person.
• The balance of the childcare leave period may be used by either parent, grandparents, or other relatives
  (as chosen).
• The 2 non-transferable months can be used all at once or split into parts.
• Both parents may not be simultaneously on
  childcare leave.
• In a case where a parent decides not to use his/her share of non-transferable leave, the total period of childcare leave is decreased accordingly.

3. Unpaid leave

• An employee is entitled to unpaid leave for a period recommended by a healthcare institution when taking care of a sick member of the family or household.
• The employer must grant time off if the employee’s request is related to a family emergency in the event of sickness or accident in which the employee is required to be directly present.

4. Flexible working arrangements

• An employee who is caring for a family member or person living with him/her, is raising a child of up to 8 years old or is a single parent to a child of up to 14 years old, will receive more flexibility to work under part-time arrangements. (They are exempt from any requirement related to length of employment.)
• An employer must agree to allow an employee to work remotely who is raising a child of under 8 years of age or who is caring for a family member or a person living with him/her. There is an exception when the employer can prove that remote working would not be cost effective due to the specific nature of the work involved.
• Employees are entitled to choose a preferred working schedule if they:
  • Are pregnant;
  • Have recently given birth or are breastfeeding;
  • Are raising a child of under 8 years;
  • Are a single parent to a child of under 14 years;
  • Are caring for a family member or
    household member.

The above rules apply unless the employer can prove that such a regime would not be cost effective due to the specific nature of the work involved.

5. Discrimination

Any discrimination based on nationality, religious beliefs, state of health, marital and family status is prohibited in all cases (hiring, termination of employment, etc.).

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

• Review internal documents (policies, regulations) relating to the abovementioned areas, and update them accordingly in any cases of non-compliance.

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?

Part of the amendments relating to the Labour Code of the Republic of Lithuania came in force on 01 August 2022. The remainder came into force on 01 January 2023.

What are the key changes for employers and employees?

1. Providing information

Before the employee starts work, the employer must provide the employee with information on the:

• Probationary period (if applicable);
• Procedure on termination of the employment contract;
• Payment system for overtime;
• Right to training (if the employer provides it);
• Rights relating to social security benefits from social security institutions in connection with the employment.

2. Secondments

Before sending the employee on a secondment for a period of more than 28 days, the employer must provide the employee with the following information:

• The country and duration of the secondment;
• The currency in which remuneration will be paid;
• Any allowances to be granted during the posting,
  if applicable;
• Any conditions relating to the return to the
  permanent employer.

In a case where the employee is posted to another EU member state, the following information must also be provided:

• The remuneration to which the employee is entitled according to the local laws of the host country;
• Any daily allowances granted during the posting,
  if applicable;
• A link to the official website of the host country, which provides information on posted workers.

3. Probationary period

A probationary period cannot exceed 3 months. If a fixed-term employment contract for 6 months or less is signed, then the probationary period must be reduced proportionately (i.e. to be less than 3 months).

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

Review internal documents (policies, regulations, templates of onboarding documentation etc.) relating to the areas mentioned above and update any cases of incompliance accordingly.

By Laura Rackauskine, Managing Associate, and Beatrice Zubyte, Assistant Lawyer, Deloitte Legal Lithuania

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.

Lithuania hopes for the best and prepares for the worst by further tightening its banking and fintech regulations, following the latest decisions and position papers issued by the supervisory authority. Despite talks of a recession, the banking and finance market remains active, according to Cobalt Partner Akvile Bosaite.

“The Baltic FinReg Summit that Cobalt and the European Investment Bank hosted recently was big news for banking and finance lawyers in the region,” Bosaite begins. “This was the seventh edition of the Baltic conference, and it focused on the most relevant and timely topics for us. In contrast to last year’s discussions on AML topics,” she expands, “this year we explored new financial products emerging in the market, particularly those tailored for GenZ. Venture-Debt, a product rather new to the Baltics, also took center stage and, additionally, the conference delved into the regulation of artificial intelligence in the financial sector and the implications for market participants.”

A significant part of the event also revolved around DORA, Bosaite notes, “a framework that applies to all financial institutions, aiming to enhance cybersecurity and combat fraud.” Finally, the event also covered cross-border financial services within the EU. “We were fortunate to have prominent speakers from fintech and banks, as well as regulators from all three Baltic states,” she explains. “Companies like Revolut and Monesa shared their perspectives on working cross-border in various European jurisdictions, for example. It was a great venue for legal practitioners and businesspeople from the financial and regulatory area to gather, exchange ideas, and gain insights.”

Another significant recent development, according to Bosaite, “was the local supervisory authority (Bank of Lithuania) revoking the licenses of Transactive Systems and PayrNet, the two biggest electronic money institutions in Lithuania.” This action was taken due to several breaches, she explains, “including failures in AML/KYC procedures, monitoring of clients, and safeguarding of client funds. The repercussions extended across Europe, given their agencies’ presence in various countries.”

PayrNet will also go into insolvency, Bosaite adds, “as they can’t cover all their liabilities, with the proceedings expected to take a long time. This has naturally caught the attention of finance and banking lawyers. And it has brought the importance of robust risk monitoring and AML/KYC policies to the forefront, with the Bank of Lithuania also issuing a position paper targeted at institutions working through agents or intermediaries: they need to do the work to know their clients, like everyone else.”

Beyond that, Bosaite says Lithuania is constantly strengthening its legal base and regulations “to have better risk monitoring procedures and better sanctions and AML/KYC policies. Several other new requirements came in from the Bank of Lithuania – to make sure we have a risk-averse financial system and avoid further AML scandals.”

Apart from the financial sector, Bosaite reports the NATO summit in Vilnius was a major focus for both the authorities and the news cycle. Out of the limelight, facing some setbacks in the manufacturing sector and talks of a technical recession, Lithuania’s economy remained robust. “The economy seems to be in a holding pattern,” she says. “While there were some adverse effects, especially on M&A deals during the winter, the spring and summer have seen a surge in transactions and deals. The financial sector, unicorns, and start-ups are experiencing a positive phase, with tech companies showing resilience even in times of layoffs.” Looking at the big picture, Bosaite concludes “there’s cautious optimism among most professionals, despite the lingering recession talks.”

Cobalt has advised Highland Europe on its investment in PVcase, together with Elephant and Energize. 

According to Cobalt, “PVcase, a solar energy software startup, has attracted USD 100 million funding in a Series B round. Founded in 2018, PVcase helps companies design, evaluate, and optimize commercial and utility solar assets.”

The Cobalt team included Partners Juozas Rimas and Akvile Bosaite and Managing Associate Deimante Pagiriene.

Cobalt did not respond to our inquiry on the matter.