Category: North Macedonia

Ever since “legal tech” became a thing, lawyers have been dreadfully anticipating the time when technology will disrupt the legal profession. The media has been fuelling lawyer worries, and attention-grabbing headlines like “The robot lawyers are here – and they are winning” or “Lawyers could be replaced by artificial intelligence” have kept lawyers awake at night. Artificial intelligence (AI) and machine learning in law has become the talk of the town, and for good reason, as the use of legal technology helps lawyers to get things done more efficiently and cost-effectively. Thus, it does not come as a surprise that legal tech start-ups are becoming the Starbucks of the legal profession – they are popping up on every corner. It is estimated that there are over 1000 legal tech start-ups worldwide and that the legal tech industry is worth USD 15.9 billion globally.

There is no doubt that legal tech is here to stay. Is there a reason for lawyers to be concerned that legal tech will entirely automate the legal profession in the future? I don’t think so. The future is now. Lawyers face increasing pressure from clients to deliver more value at a reduced cost, and legal tech is the key ingredient of the solution to this problem. Many law firms are already using legal tech to drive efficiencies and productivity by automating routine tasks on due diligence, legal research, transaction management, and document management. Legal tech is indeed transforming the legal profession. However, it does not pose a threat to law firms that are embracing technology to provide technology-assisted services to become more efficient and effective. They will be the preferred choice of Increasingly sophisticated clients who will appreciate the efficiency gains of technology-enhanced services. In contrast, law firms that are slow to adopt legal tech in their organizations will most likely face a competitive disadvantage in the long run as they will be unable to provide services as cost-effectively as those law firms which have embraced legal tech.

The above is also true for law firms operating in CEE. The CEE legal market is becoming increasingly competitive due to the influx of new competitors and increased price competition. However, at the same time, conventional CEE law firms are generally inefficient in providing services. Although international law firms develop and use legal tech tools in more developed markets, it appears that the implementation of such tools is lagging in their CEE offices. Language barriers (because AI and machine learnings are primarily developed for use in English-speaking jurisdictions), the size of the markets, and local lawyers’ reluctance to use legal tech tools when providing legal advice seem to be the main reasons for this situation. The reluctance of lawyers to embrace legal tech tools when providing legal services (to be fair, lawyers seem to be curious about the prospects) and the general resistance of conventional CEE law firms to innovate proactively has already opened room for alternative service providers to enter the legal market. 

Clients want conventional law firms to be more tech-savvy and to be able to provide cross-border advice on the basis of alternative fee arrangements. It seems that the Big Four have recognized this and are muscling in on CEE’s legal markets by embracing technology to provide cost-effective legal services by offering packages that bundle accounting, audit, and legal services for a cut cost. They are using technology to gain a competitive advantage over conventional CEE law firms, and it seems that they are winning. Now, this is a genuine reason for CEE lawyers to be concerned about the future of the legal profession. The Big Four have the financial power, motivation, and presence to make an impact on the CEE legal market. To compete with the Big Four, conventional CEE law firms will have to build a culture that embraces the use of legal tech to be able to deliver faster, better, and cheaper legal services to clients. 

Conventional CEE law firms and legal departments who adopt legal technology will be well-positioned to deliver services to clients more efficiently and effectively. The improvement of AI will likely decrease the need for human intervention on routine legal work in the future. However, lawyers’ perspective, creative-thinking, and judgment on complex legal work cannot be replicated by technology. Therefore, lawyers will continue to do their job quicker, more accurately, and better by using technology. 

By Gjorgji Georgievski, Managing Partner, ODI Law Macedonia

This Article was originally published in Issue 5.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The GDPR, which entered into force in the EU on May 25, 2018, will also have implications for Macedonia-based companies.

The GDPR substantially expands the territorial reach of the EU data protection regime and will also apply to non-EU companies if they are selling products or services within the EU or if they are obtaining personal data in the EU and transferring it outside the EU. Hence, Macedonia-based companies which do business in the EU will be required to ensure compliance with the GDPR to avoid hefty fines for non-compliance amounting up to 4% of annual global turnover. 

It is important to note that many of the GDPR’s concepts and principles are much the same as those in Macedonia’s current Personal Data Protection Act (PDPA). Consequently, the general approach to compliance under the PDPA will remain valid under the GDPR. However, companies will be required to make some substantial adjustments to the way they collect and process personal data. While the exact structure of the compliance program of Macedonia-based companies will, in part, be unique to their business, companies can take many actions to ensure compliance with the GDPR. 

Initially, companies are well-advised to carry out a personal data audit to establish whether they will be caught by the GDPR. For example, online businesses which directly offer goods or services to individuals within the EU through websites and apps or employ cookies or other tracking tools on such websites and apps to monitor the behavior of individuals within the EU will be caught by the GDPR. The personal data audit should identify what personal data is collected, how the company uses the personal data, who they share it with, and what security measures are being applied to it. Using the information from the data audit, companies should be able to perform a gap analysis to identify areas where changes are required to ensure compliance with the GDPR. 

The GDPR requires companies to be able to show how they comply with the data protection principles, for example by having adequate policies and procedures in place and by maintaining accurate records of processing activities. Existing personal data protection policies and procedures of companies should be revised to reflect the new requirement for providing individuals with the right to data portability. The right to data portability applies only to personal data that an individual has provided to a controller, when the processing is based on the individual’s consent or for the performance of a contract and when processing is carried out by automated means. Additionally, companies are also required to revise the way they communicate their privacy policies and make sure that they contain concise, easy to understand, and precise information on the lawful basis for processing of the personal data and the data retention periods and state that individuals have a right to complain to the regulator if they feel that their data has been mishandled. Any commercial contracts entered into by companies must be reviewed to ensure that the provisions reflect that data processors have direct obligations under the GDPR and include the revised mandatory provisions for contracts with processors as well as the new breach notification requirements.

Companies should also review how they seek, record, and manage the consent of individuals to having their data collected and processed. The consent of individuals must be specific, informed, unambiguous, verifiable, and given freely. Companies cannot infer consent from silence or inactivity and must separate the consent from other terms and conditions, as well as provide individuals with simple ways to withdraw their consent. Companies relying on individuals’ consent to process their data are required to make sure that the consent will meet the GDPR standard of being specific, granular, clear, prominent, opt-in, properly documented, and easily withdrawn. Otherwise, companies will be required to revise their consent mechanisms and obtain a new GDPR-compliant consent from individuals or find an alternative to consent. Companies offering information society services to children are required to verify individuals’ ages and to obtain parental or guardian consent for any data processing activity. The GDPR sets the age when a child can give his or her consent to this processing at 16, and companies are required to obtain consent for children younger than that age from a person holding “parental responsibility.”

Macedonia companies which are doing business in the EU are well-advised to prepare for the GPDR to avoid sanctions and other repercussions under the new data protection regime.  

By Gjorgji Georgievski, Partner, ODI Law Skopje   

This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Macedonia has started the process of liberalizing and privatizing the energy market as an obligation deriving from the Treaty establishing the Energy Community signed on October 25, 2005 in Athens (the “Treaty”).

In 2010, the Government adopted the Energy Development Strategy to 2030 which identified the integration of the Macedonian energy market into the regional and European energy and natural gas markets by constructing new interconnections and implementing the EU energy market regulations in national legislation as a key priority. The Government also anticipated the implementation of the latest set of EU energy market regulations – known as the “Third Energy Package” – in national legislation. However, Macedonia has not yet ensured the proper transposition of the requirements of the Third Energy Package in the areas of market opening and price regulation, unbundling, third-party access, balancing, eligibility, customer protection, efficient regulatory powers, or independence.

In 2011, the Macedonian lawmaker adopted the Energy Act in the form of an umbrella law covering electricity, renewable energy, oil and gas, and regulation of the energy transmission and distribution markets. The Energy Act envisaged the full liberalization of the energy market by January 1, 2015 in two phases. Initially, the Energy Act envisaged the entrance to the market by eligible customers (i.e. companies with more than 50 employees and annual turnover exceeding EUR 10 million) for July 1, 2013. However, due to continued non–compliance with the Market Rules by operators, in June 2013 the Energy Regulatory Commission (ERC) decided to postpone the market opening to avoid the destabilization of Macedonia’s electricity supply. Subsequently, the entrance to the market of all customers (except for households) was rescheduled for April 1, 2014. This deadline was also not met, however, since, according to the ERC, only large consumers who had already participated in the competitive market signed supply agreements with licensed electricity providers; all the other companies claiming eligibility to enter the market had not yet entered into electricity supply agreements. In relation to the entrance of households on the market, the Energy Act allowed the distribution system operator, EVN, to maintain its monopoly for the supply of electricity to households until December 31, 2014 on the basis of electricity prices strictly regulated by the ERC, and, as of January 1, 2015, to allow households to pay market value prices for their electricity.

In October 2014, the Macedonian lawmaker amended the Energy Act by abolishing the eligibility status of small companies and households initially granted as of April 1, 2014 and January 1, 2015 respectively. Under these amendments, small customers and households would be progressively granted the right to switch suppliers according to the following schedule (i) small customers with an annual consumption above 1 GWh in 2015 would be eligible as of July 1, 2016; (ii) small customers with an annual consumption above 500 MWh in 2016 would be eligible as of July 1, 2017; (iii) small customers with an annual consumption above 100 MWh in 2017 would be eligible as of July 1, 2018; (iv) small customers with an annual consumption above 25 MWh in 2018 would be eligible as of July, 1 2019; and (v) households would be eligible as of July 1, 2020. As these restrictions for small customers and households to freely choose their supplier is a breach of the Treaty, in January 2015, the Energy Community Secretariat opened an infringement procedure against the Government for its failure to comply with the Energy Community’s eligibility rules.

The Government has also failed to transpose the unbundling requirements of the Third Energy Package, as currently the Energy Act transposes only the unbundling requirements from the Second Energy Package. The transmission network operator MEPSO is only legally unbundled while the legal and functional unbundling of the distribution network operator EVN was completed in 2016 by the establishment of its EVN Distribucija subsidiary. The new company has not yet taken measures to ensure the functional unbundling such as rebranding and new visual identity, as the Energy Act does not transpose those requirements from the Third Package. The generation operator ELEM is currently exempt from legal unbundling. However, it has not yet implemented accounting unbundling, in breach of Directive 2009/72/EC.

In August 2017, the Government proposed a new draft Energy Act, but it remains to be seen whether it will be in compliance with the Third Energy Package.  

By Gjorgji Georgievski, Partner, and Marija Serafimovska, Junior Associate, ODI Law 

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.

Macedonia has started the process of liberalizing and privatizing the energy market as an obligation deriving from the Treaty establishing the Energy Community signed on October 25, 2005 in Athens (the “Treaty”).

In 2010, the Government adopted the Energy Development Strategy to 2030 which identified the integration of the Macedonian energy market into the regional and European energy and natural gas markets by constructing new interconnections and implementing the EU energy market regulations in national legislation as a key priority. The Government also anticipated the implementation of the latest set of EU energy market regulations — known as the “Third Energy Package” — in national legislation. However, Macedonia has not yet ensured the proper transposition of the requirements of the Third Energy Package in the areas of market opening and price regulation, unbundling, third-party access, balancing, eligibility, customer protection, efficient regulatory powers, or independence.

In 2011, the Macedonian lawmaker adopted the Energy Act in the form of an umbrella law covering electricity, renewable energy, oil and gas, and regulation of the energy transmission and distribution markets. The Energy Act envisaged the full liberalization of the energy market by January 1, 2015 in two phases. Initially, the Energy Act envisaged the entrance to the market by eligible customers (i.e. companies with more than 50 employees and annual turnover exceeding EUR 10 million) for July 1, 2013. However, due to continued non–compliance with the Market Rules by operators, in June 2013 the Energy Regulatory Commission (ERC) decided to postpone the market opening to avoid a destabilization of Macedonia’s electricity supply. Subsequently, the entrance to the market of all customers (except for households) was rescheduled for April 1, 2014. This deadline was also not met, however, since, according to the ERC, only large consumers who had already participated in the competitive market signed supply agreements with licensed electricity providers; all the other companies claiming eligibility to enter the market had not yet entered into electricity supply agreements. In relation to the entrance of households on the market, the Energy Act allowed the distribution system operator, EVN, to maintain its monopoly for the supply of electricity to households until December 31, 2014 on the basis of electricity prices strictly regulated by the ERC, and, as of January 1, 2015, to allow households to pay market value prices for their electricity.

In October 2014, the Macedonian lawmaker amended the Energy Act by abolishing the eligibility status of small companies and households initially granted as of April 1, 2014 and January 1, 2015 respectively. Under these amendments, small customers and households would be progressively granted the right to switch suppliers according to the following schedule (i) small customers with an annual consumption above 1 GWh in 2015 were eligible as of July 1, 2016; (ii) small customers with an annual consumption above 500 MWh in 2016 are eligible as of July 1, 2017; (iii) small customers with an annual consumption above 100 MWh in 2017 would be eligible as of July 1, 2018; (iv) small customers with an annual consumption above 25 MWh in 2018 will be eligible as of July, 1 2019; and (v) households will be eligible as of July 1, 2020. As these restrictions for small customers and households to freely choose their supplier is a breach of the Treaty, in January 2015, the Energy Community Secretariat opened an infringement procedure against the Government for its failure to comply with the Energy Community’s eligibility rules.

The Government has also failed to transpose the unbundling requirements of the Third Energy Package, as currently the Energy Act transposes only the unbundling requirements from the Second Energy Package. The transmission network operator MEPSO is only legally unbundled while the legal and functional unbundling of the distribution network operator EVN was completed in 2016 by the establishment of its EVN Distribucija subsidiary. The new company has not yet taken measures to ensure the functional unbundling such as rebranding and new visual identity, as the Energy Act does not transpose those requirements from the Third Package. The generation operator ELEM is currently exempt from legal unbundling. However, it has not yet implemented accounting unbundling, in breach of Directive 2009/72/EC.

In August 2017, the Government proposed a new draft Energy Act, but it remains to be seen whether it will be in compliance with the Third Energy Package.

By Gjorgji Georgievski, Partner, and Marija Serafimovska, Associate, ODI Law 

Macedonia’s 2013 Law on Takeover of Joint Stock Companies provides a squeeze-out right enabling a majority shareholder who has acquired at least 95% of the shares of an eligible joint stock company on the basis of a takeover bid to require the minority shareholders to sell their securities at a fair consideration.

The squeeze-out right is combined with a sell-out right enabling the minority shareholders to require the majority shareholder to buy their shares at a fair consideration following a takeover bid. Joint stock companies which are eligible for the exercise of the squeeze-out right by a majority shareholder or the sell-out right by the minority shareholder include: (a) listed companies; (b) companies that have made an initial public offering; and (c) companies with a share capital of at least EUR 1 million and at least 50 shareholders.

Under the Law on Takeover of Joint Stock Companies (the “Takeover Law”), an entity which – acting independently or in consortium with other entities – intends to acquire at least 25% of the shares of an eligible Macedonia joint-stock company is required to make a takeover bid to the shareholders of the target for the purchase of all of their shares at a fair consideration. The takeover bid must contain all of the information necessary to enable the shareholders of the target to reach an informed decision on the bid, including the identity of the buyer, the terms of the bid, the shares or the class or classes of shares for which the bid is made, the consideration offered for each shares or class of shares and others. The buyer may offer as consideration liquid securities, cash, or a combination of both. If, as a result of the takeover bid, the buyer acquires at least 95% of the shares of the target, it obtains the right to squeeze them out – i.e., to purchase the shares of those shareholders who have not accepted the takeover bid at a fair consideration. The fair consideration offered by the buyer must have the same form as the consideration provided in the takeover bid. However, the buyer must provide cash as an alternative.

If the buyer wishes to exercise its squeeze-out right, it is required to make an application to the Central Securities Depositary (CSD) requesting the forced sale of the shares of the minority shareholders of the target within ninety days from the day of completion of the takeover bid. The buyer is also required to publish the application made to the CSD in the Official Journal of the Republic of Macedonia and one daily newspaper distributed throughout all of Macedonia. It is important to note that the buyer is required to deposit the consideration for the shares of the minority shareholders at the CSD or to provide the CSD with a bank guarantee from a reputable bank covering the period of ninety days from the day of completion of the takeover bid at the time of making the takeover bid. Hence, the consideration for the purchase of the target’s minority shareholder’s shares will be readily available for transfer by the CSD, should the buyer decide to exercise its squeeze-out right.

Upon receipt of the application from the buyer, the CSD is required to give notice to the minority shareholders about the exercise of the squeeze-out rights and to request that they provide their banking details for the transfer of the consideration for their shares. The CSD is required to transfer the consideration for the shares to the minority shareholders and to transfer the shares to the buyer within eight days from the day of receipt of the application. If any of the shareholders do not respond to the CSD’s notice or cannot be identified, the CSD is required to deposit and retain the consideration for their shares in a separate account until the time when those shareholders provide their banking details or are identified.

The same procedure set out above applies to the exercise of the sell-out right by the minority shareholders of the target. If the minority shareholders of the target wish to exercise their sell-out right, they are required to make an application to the CSD, also within ninety days from the day of completion of the original takeover bid of the buyer. Upon receipt of the application, the CSD is required to give notice to the buyer and to transfer the consideration to the minority shareholders.

By Gjorgji Georgievski, Partner, and Marija Serafimovska, Junior Associate, ODI Law Macedonia 

This Article was originally published in Issue 4.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.