Category: Lithuania

The new Lithuanian Concessions Law came into force on January 1, 2018. With the new legislation, Lithuania has adopted European Parliament and Council Directive 2014/23/EU on the award of Concession Contracts, which establishes a balanced and flexible legal framework for the award of concessions and ensures effective and non-discriminatory access to the market for all economic operators. The new Lithuanian legislation aims to ensure transparency and fair competition in the development of infrastructure and the provision of services of general economic interest, as well as the attraction of national and EU-wide private investors to the public sector.

Lithuania’s new Concessions Law changes the central concept of concessions, leading to a more flexible and competitive concession process. Under previous legislation, the subject-matter of the concession was limited to certain sectors. The new law distinguishes between works and services concessions, and allows mixed contracts that cover the provision of both works and services. In addition, the scope of subjects over which concessions can be awarded is now wider. Under the new Concessions Law, a concessionaire may be an “economic operator” — defined as any natural or legal person, public entity, or group of persons or entities. This includes temporary associations or undertakings that offer the execution of projects, supply of products, or provision of services in the market. 

Due to complex technical and financial arrangements, concession contracts are often subject to changing terms and conditions. Although such changes are necessary for the proper and efficient execution of a contract, they may also risk violating the principles of equal treatment, non-discrimination, mutual recognition, proportionality, and transparency. To avoid such violations, and to ensure greater legal clarity, the new legislation requires the initiation of a new concession procedure where material changes to the initial concession arise. Minor changes to a concession contract do not require the creation of a new concession, but changes can not be regarded as minor if: 1) they introduce new conditions which, had they been part of the initial concession award procedure, would have attracted other economic operators; 2) the modification changes the economic balance of the concession in favor of the concessionaire; 3) the modification considerably extends the scope of the concession; or 4) a new concessionaire replaces the one to which the contracting authority had initially awarded the concession.

The new provisions in the Concessions Law also change the requirements governing time limits on the validity of concessions. The previous law provided a maximum term of 25 years. The new legislation sets no maximum term, but allows the contracting authority to define the term of the concession in accordance with the public need for works or services. To speed up the process of dispute resolution, the legislation introduces a new dispute settlement procedure, which sets a shorter time limit for settling disputes. These changes will prevent unnecessary delays in litigation, and also secure the public and private interests, both of the contracting authorities and of the economic operators.

One of the major changes included in the new Concessions Law, designed to protect the award process from favoritism or corruption, is a new and detailed negotiation procedure. While previous legislation provided only that the successful candidate must be invited to negotiate, the new regulation requires that the candidate whose bid ranks second be invited if its proposal was similar to that of the successful candidate and its rating differs by no more than 15%. The contracting authority also has the right to invite other candidates even where the difference exceeds 15%. The concession contract will therefore be concluded with the candidate that proposes a better bid during the negotiations, and qualifies under the criteria of the concession requirements.  

Changes introduced under the new Lithuanian legislation on concessions aim to promote new investments, increase the number of concessions being offered, encourage more operators to participate in tenders, and ensure the most efficient use of public funds. The new Concessions Law also benefits PPP (public-private partnership) regulation in Lithuania, helping to improve public access to the services of highest quality at the best prices.

By Inga Kostogriz-Vaitkiene, Partner, and Ieva Zablasckaite, Paralegal, CEE Attorneys Lithuania 

This Article was originally published in Issue 5.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Sorainen has successfully represented dairy products producer Luksiu Pienine in a dispute against Pieno Zvaigzdes, a Lithuanian manufacturer of milk and dairy products, over the use of the Liliputas brand.

The Vilnius district court ruled that Pieno Zvaigzdes has no right to use Liliputas or any similar brand name in Lithuania or abroad without permission from Luksiu Pienine, which is the rightful owner of the brand. The court ordered Pieno Zvaigzdes to pay Luksiu Pienine EUR 14,700 as compensation for damages.

Pieno Zvaigzdes can appeal against the judgement to a higher court within 30 days.

According to Sorainen, ”Pieno Zvaigzdes was illegally using the Liliputas name written in Cyrillic script to brand cheese exported outside EU territory, while Luksiu Pienine sells Liliputas-branded cheese in Lithuania and abroad.” In 2015 the European Commission included Liliputas cheese in its Protected Geographical Indication list. 

Sorainen represented Luksiu Pienine in the court proceedings and provided assistance with preparing the claim as well as other procedural court documents. The firm’s team was led by Partner Zygimantas Pacevicius and included Counsel Stasys Drazdauskas and Associate Ignas Motiejunas. 

Tvins has successfully represented the interests of the BTA Baltic Insurance Company in a dispute regarding what the firm describes as “a double insurance matter.”

According to Tvins, BTA had “paid out a part of an insurance indemnity, arguing that there was a double insurance (the property was insured under two insurance contracts) and, therefore, the indemnity should be reduced proportionally with the reduction of the amount of the insured sum.” According to the firm, the other company, which received “only a reduced insurance indemnity,” challenged BTA’s position, “and applied to the court for the payment of the entire amount of money.”

On April 11, 2018, the Supreme Court of Lithuania annulled the judgments of the first and appellate instances and found for the BTA Baltic Insurance Company, holding that the double insurance statement was justified and lawful.

The case was handled by Tvins Managing Partner Tomas Talutis and Senior Associate Tadas Lukosius.

Working via a Chinese Wall, Ellex Valiunas has assisted both Urban Inventors and the Lithuanian branch of the US-information technologies company Intermedix negotiate and conclude a lease agreement between the two in Kaunas, Lithuania.

Urban Inventors will rent an area of 7,300 square meters of the Business Leaders Center to Intermedix —representing more than 60 percent of the Center’s total rental space.

Ellex Valiunas Associate Partner Dovile Skesteniene represented Urban Investors and Senior Associate Akvile Bieliauskaite advised Intermedix.

Cobalt has advised Wallter in obtaining an electronic money institution license for non-limited activity. This is the 34th time that this type of license has been issued by the Bank of Lithuania.

According to Cobalt, with the license, Wallter intends to provide e-money issuance and payment services for individuals and for small and medium-sized businesses. The company will be primarily engaged in the provision of money remittance, prepaid cards, and multi-currency electronic purse services.

The Cobalt team advised Wallter on all issues related to obtaining the licence, drafted licence application documents, and also represented the company before the Bank of Lithuania. The firm’s team was led by Partner and Head of the Banking and Finance Practice Group Akvile Bosaite and Senior Associate Justina Milasauskiene.

The Lithuanian energy sector, like the European Union’s, faces the challenging task of finding an effective and competitive way to transition to clean energy while at the same time ensuring a secure energy supply. Energy efficiency, renewable energy, and prosumers are first priorities.

This clearly means a shift towards new models of energy production and new business models influenced by innovation, such as new information technology, big data processing possibilities, and blockchain technology.

In 2017, the Lithuanian Ministry of Energy drafted a National Energy Independence Strategy (the “Strategy”) which was approved by the Government on November 29th, 2017 and then submitted to Parliament for further consideration. Therefore, the most relevant issue for the first part of 2018 in the energy sector is adopting the Strategy, which provides the country’s energy targets and guidelines for implementation by 2030 and outlines the trends of energy development by 2050.

The draft Strategy sets out four key elements of Lithuania’s energy policy: (i) energy security, (ii) the development of renewable energy, (iii) competitiveness, and (iv) innovation.

Besides the infrastructure projects ensuring energy security (i.e., the synchronization of power systems with Continental Europe (by 2025) and the construction of a gas pipeline between Lithuania and Poland (by 2021)), the draft Strategy identifies the development of reliable and competitive local energy production in order to reduce the country’s dependence on imported electricity as a goal. Taking into account the lack of local primary energy sources and dependency on fossil fuel imports, development of alternative energy production is an underlying target for the energy sector of Lithuania.

In this regard, increasing energy production from renewable resources is one of the key targets of the draft Strategy. It is expected that consumption of energy produced from renewable sources will account for up to (i) 30% by 2020, (ii) 45% by 2030, and (iii) as much as 80% after 2050. The draft Strategy provides that wind energy should make up the largest share of electricity generated from renewable resources – no less than 55% in 2030 and 65% in 2050.

In 2016, approximately 17% of consumed electricity was produced from renewable energy sources. Wind power generation jumped in recent years due to the 500 MW support quota (with feed-in tariff allocated via tender procedure) provided for wind power plants. At the moment there is no free support quota left., however, and thus the energy companies and renewable project developers are looking forward to new guidelines.

If the final Strategy retains the same amounts, the total installed capacity will increase by an additional 250 MW (and in total up to 770 MW) by 2020, with increases scheduled to continue until 2050.

Only onshore wind power generation capacities have been developed in Lithuania so far, and the first part of the projected capacity increase will be dedicated to them. However, offshore possibilities have recently become quite active due to several legislative amendments adopted by Parliament on July 11th, 2017, which provide a rough plan for offshore wind project development. First, the Government will have to approve the rules for research to identify appropriate offshore wind power plant locations in order to organize tenders. Second, during the next three years, the institution selected by the Government shall perform that research. Finally, by February 1, 2021, the Government will have to decide on: (i) the parts of the sea where development and operation of the power plants will be allowed; and (ii) the possible capacities to be installed, and it will have to approve rules for the procedure for tenders and issuance of permits.

In addition to these plans, the Government is also seeking to boost the development of renewable energy by encouraging energy consumers to become energy prosumers – i.e., to generate their own power (mainly solar). It is forecast that the number of energy prosumers will increase to 34,000 by 2020 and more than 500,000 by 2030.

The adoption of the Strategy is still pending. However, if the approved Strategy keeps the projected numbers, renewable power generation perspectives in Lithuania will become very promising.

By Dovile Greblikiene, Partner, Ellex Valiunas  

This Article was originally published in Issue 5.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.