Category: Montenegro

On August 9, 2022, CEE Legal Matters reported that Vukovic & Partners had advised ODM Collections on obtaining a purchase of receivables work license from the Central Bank of Montenegro. CEE In-House Matters spoke with Drazen Stevanovic, CEO at ODM Collections, to learn more about the matter.

CEEIHM: Let’s start with an introduction to ODM Collections and its operations.

Stevanovic: ODMC is a company whose main interest is professional receivable management and the purchase of overdue receivables. We’re highly-experienced NPL servicers but also distressed asset investors.  With a personalized and professional approach, we ensure efficient collection without reputational or financial risk.

The company was founded in 2013 and has a team with extensive knowledge and many years of experience in the field of NPL, sales, and finance. It provides very professional and consistent work on client cases with a new concept on the market, which involves managing the collection of receivables without any costs for the client or with a predetermined minimum amount of costs, depending on the portfolio of receivables. Not long after our incorporation, in addition to services relating to NPL, we also started investing in distressed assets and at this point, we have more than 50 distressed asset portfolios acquired on our own.

In our desire to expand our business to other regional jurisdictions as well, ODMC founded its daughter company in Montenegro – ODM Asset ltd Podgorica. Its core activity is also the management and purchase of receivables allowing many benefits for debtors and creditors such as immediate cashflow and the elimination of the need for in-house receivable management and collection sector.

ODMC currently works in Serbia, Bosnia and Herzegovina, North Macedonia, and Montenegro, and planning to expand the business all over Western Balkans.

CEEIHM: As reported by CEELM, the company was recently advised on obtaining a purchase of receivables work license from the Central Bank of Montenegro. What is the license for specifically and why did the company need it now?

Stevanovic: After the passing of the law on financial leasing, factoring, purchase of receivables, all financial institutions must be licensed by the Central Bank of Montenegro. Bearing in mind that our core business is receivable purchase, the licence was a necessity. At this point, the Montenegrin market is in a specific position where there are not many distressed market investors interested in this financial service which is why we see our chance for expansion especially due to our experience and in-depth knowledge of the local ecosystem.

CEEIHM: How smooth was the process of obtaining the license, now that it is behind you?

Stevanovic: It was a delicate process of preparing all needed legal documents, completing the IT set-up as well as the set-up of other infrastructure but especially because of business development plans. ODM Collection, the founder of ODM Asset ltd Podgorica is based in Serbia, so the business case had to be harmonized with the Montenegrin legislation and local market specifics. With respect to relevant regulations and decisions of the Central Bank of Montenegro, I can say we had a smooth way of obtaining the license, especially having in mind we’ve already founded companies like this before, and that we had Vukovic and Partners Law Firm as a partner on this project. Also, I must say we were pleasantly surprised by the cooperation of the Central Bank of Montenegro and the high level of professionalism we encountered. Our advisor had experience with different regulators in the region who were not as assistive, while CB of Montenegro is very pro-business oriented.

CEEIHM: And what was the mandate of your advisors on it – Vukovic & Partners?

Stevanovic: We entrusted the whole process of establishing the company and obtaining the license to Vukovic and Partners Law Firm. All legal analysis was provided by VP, and we had them as an advisor in every step needed in this process, especially with the preparation of the documentation which was very extensive. VP has worked with us for the past 10 years in every jurisdiction in the Balkans, and being familiar with not only the legal but also the business aspect of establishing the company, the cooperation was very efficient and economic with applicable solutions.

CEEIHM: Lastly, why did you opt for Vukovic & Partners to assist you in obtaining this license?

Stevanovic: The main reason we’ve decided to opt for VP, aside from our successful 10-year cooperation, is that we were able to get complete service from them. VP leads a whole team of experts for services that financial institutions usually provide such as IT support, business developers, CROs, etc, so we were able to get complete service and have them not only as legal advisors but also advisors on business set-up as well. Above all, their team consists of experienced lawyers with excellent knowledge of regulations for every branch of law that was necessary for our business. The banking and Finance Department of VP is specialized in providing comprehensive assistance to clients whose core business consists of providing financial services which is why Vukovic & Partners is one of the leading law offices in the Republic of Serbia in the field of collection and strategic resolution of NPLs so it was the best decision to engage them as a partner on this project.

Originally reported by CEE In-House Matters.

According to windeurope.org data, Montenegro was at the top of the list of European countries in terms of the percentage of energy generated by wind farms on April 17, 2022. On that day, the two Montenegrin wind farms, Mozura and Krnovo, produced 45% of Montenegro’s total electricity needs.

Could It Be Every Day?

Montenegro currently hosts the Krnovo wind farm, with an installed capacity of 72 megawatts, and the Mozura wind farm, with a capacity of 46 megawatts. They will soon be joined by the Gvozd wind farm, for an estimated 54 megawatts, while the 100-megawatt Brajici wind farm is also planned.

The undersea interconnection with Italy currently allows a bi-directional exchange of electricity between the two countries, with a capacity of 600 megawatts, to become 1,200 megawatts with the laying of a second cable in the next few years. This project will facilitate the development of power interconnections among European countries by enhancing power transmission efficiency. At the same time, it positioned Montenegro as a regional hub for power interconnectivity.

Montenegro has favorable climatic conditions with an average of 240 sunny days yearly and significant amounts of wind. By investing in solar and wind in the future, Montenegro could very quickly transform its electricity industry and realize the Brussels imperative of decarbonization relatively painlessly. And that is exactly the direction that ongoing and future projects in electricity infrastructure are taking.

Ongoing Projects Overview

1. The Briska Gora Solar Power Plant – the contract for the long-term lease of state-owned land for its construction was signed in December 2018. The investor is a consortium consisting of EPCG (the national energy company), Fortum, and Sterling & Wilson. The contract was concluded for a period of 30 years, with a EUR 200 million investment value. The investor has to project, construct, and manage a solar power plant with an installed capacity of 250 megawatts.

2. The Brajici Wind Power Plant – the 30-year contract for the long-term lease of state-owned land was signed in August 2020. Germany’s WPD should invest EUR 100 million to project, construct, and manage a new 101-megawatt wind farm.

3. The Gvozd Wind Power Plant – the construction of WPP Gvozd represents the continuation of the second phase of construction of the WPP Krnovo plant, already a part of the Montenegrin production system. It is currently under development by EPCG and Austria’s Ivicom. Based on preliminary data, the value is EUR 80 million for an installed capacity of 54.6 megawatts. A pre-qualification tender is currently underway, under EBRD rules.

4. The Komarnica Hydro Power Plant – the contract for the development of a conceptual design with a feasibility study and environmental impact assessment, worth EUR 1.3 million, was signed in 2018. The completion of these activities is scheduled for the middle of 2022. According to preliminary data, the project is valued between EUR 260 and 290 million, with an installed capacity of 155 megawatts and an annual production of about 210 gigawatts.

5. The Ecological Reconstruction of TPP Pljevlja – the ecological reconstruction implies the construction of the nitrogen oxides reduction, desulfurization, and wastewater treatment systems, the reconstruction of the inner ash and slag transport system as well as an auxiliary boiler room, etc. It will provide a heating source for the town of Pljevlja, while also addressing the current ecological issues. The project should last about two and a half years, or until October 2024. It will be financed by EPCG, with an estimated value of EUR 75 million.

Future Projects Overview

1. Small Scale Solar Plants – considering the potential of solar energy in the country, there are plans to develop such projects in the western part of Montenegro. The research phase is ongoing, and results should be available soon.

2. The Slano Floating Solar Power Plant – the floating solar plant on lake Slano would be the first one of this type in Montenegro. The plan is to construct a solar power plant with a 50-megawatt installed capacity. The investor is EPCG, with the project in its research phase.

3. The Velje Brdo Solar Power Plant – another potential project is that of Velje Brdo, near Podgorica. The existing spatial plan predicts building a solar power plant with a 50-megawatt installed capacity, with a possibility for extension. The planned location is owned by the state and the Municipality of Podgorica.

By Jelena Vujisic, Senior Partner, and Olivera Brajovic, Senior Associate, Vujacic Law Office

This Article was originally published in Issue 9.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Fraught with institutional uncertainty and political instability, times are difficult and uncertain in Montenegro, according to Jovovic Mugosa & Vukovic law office Managing Partner Vanja Mugosa.

“The situation in Montenegro has been somewhat unstable, of late,” Mugosa begins. “There is a high number of important state institutions, especially those performing judiciary functions, which are headed by ‘acting’ managers, or lack the required number of people for undisturbed operation.”

Mugosa explains that “the Supreme Court, the Constitutional Court, the High Council of the Judiciary, as well as the Supreme State Prosecutors office are all stuck in this limbo. The Constitutional Court is in danger of ceasing to function: only four of the prescribed seven judges’ seats are filled, and one of them could likely retire in September,” he says, “making the court unable to render any decisions.”

Coupled with the fact that the only commercial court in the country and a number of basic courts are facing similar issues, the wider Montenegrin legal landscape looks in peril, according to Mugosa. “For the Supreme State Prosecutor and members of the Judicial Council to be elected, a two-thirds majority is needed in the parliament’s first round of voting. Barring that, the requirement is to then have three-fifths; this too has failed to materialize,” Mugosa elaborates.

And the state bar is facing similar issues. “The Montenegrin Bar Association’s elective assembly should have been held in December 2020, to appoint the Chairman and other bodies of the chamber. That hasn’t happened to date, with the Chairman’s and Vice President’s terms long ended and an incomplete Managing Board, and it is unknown when the assembly will actually happen,” Mugosa explains. “Such an overall condition of the country has had a major impact on lawyers, businesses, and investors,” he says. “Further, the Bar practice in Montenegro has been in a state of strike for more than two months in mid-2021,” he adds, “because of issues related to fiscalization and different interpretations of the lawyers’ status. Even though a joint working group has been formed with the Ministry of Finance, that issue has not been solved either.”

According to Mugosa, the current status quo has been “going on for a while. It was believed that the last three months – following the election of a new government – would see some much-needed changes and resolutions to the accumulated problems. Alas, political turmoil and instability prevented that.” The government, after just three months, fell to a vote of no-confidence on August 19. “We will either see a new one get elected or go straight for new extraordinary parliamentary elections,” he says. “Neither option will lead to resolving key problems and decreasing tensions. And the extraordinary parliamentary elections would be quite problematic – as only the Constitutional Court is in a position to deliberate on election matters – if the court fails to maintain at least four members, such matters could not be heard. It would be almost impossible to hold regular elections, with results acknowledged by all participants,” Mugosa explains. “It’s all a bit of a paradox.”

Speaking about the recently toppled government, Mugosa feels that it had dropped the ball in its first 100 days in office. “The government had ambitious goals, but they failed to focus on resolving the accumulated problems in the judicial system and its much-needed overhaul. That only exacerbated an already problematic and complex situation, threatening to hamper Montenegrin accession to the EU,” he says.

Finally, Mugosa says the overall status of the Montenegrin economy is “difficult to estimate, as it’s the middle of the tourism season. With the sector accounting for almost a third of the country’s GDP, the current good projections might be deceptive.” He believes that it could be a tough autumn. “Looking at all the global problems – the energy crisis, the war, the rising inflation – it is likely that tough times are ahead.”

Montenegro does not have a foreign investment screening regime comparable to those emerging now in European Union in light of the EU FDI Screening Regulation. It operates a sector-specific authorisation system covering the defence sector.

Legal basis

The Foreign Investments Act (Official Gazette of Montenegro, nos. 18/11, 45/14 and 73/19) and the Guidance on the content and the manner of submitting information on foreign investments (Official Gazette of Montenegro, no. 19/14).

Filing requirement

A foreign investment is defined by the Foreign Investments Act as an investment in-cash, in-kind, services, property rights and securities (with in cash and in-kind investments qualified as such in accordance with Montenegrin accounting rules). The Foreign Investments Act explicitly provides that a foreign investor can:

• establish a company (solely or with other investors);
• establish a branch of a foreign company;
• acquire shares and stock in a Montenegrin company; and
• acquire a Montenegrin company.

In addition, the Foreign Investments Act foresees that a foreign investment can be made based on concession agreements, franchising agreements, financial leasing agreements and real estate purchase agreements, as well as other agreements in accordance with applicable laws.

A foreign investment is subject to screening and approval only if it concerns an investment into or the incorporation of a company active in the production and trade of arms and military equipment.

Relevant sectors

Production and trade of arms and military equipment.

Process and timetable

Competent authority: Ministry of Economic Development, Ministry of Defence and Ministry of the Interior.

Mandatory filing requirement: Yes

Filing deadline: There is no deadline prescribed for the foreign investor to make a filing.

Responsibility for filing: The foreign investor is obliged to notify a foreign investment and procure approval for it.

Sanctions: There are no prescribed sanctions under the current framework applicable to foreign investments in the field of production and trade of arms and military equipment. However, approval is mandatory when the conditions are met and closing must be suspended until approval is obtained. Moreover, a Montenegrin company engaged in the production and trade of arms and military equipment cannot negotiate a foreign investment in any of the forms described above before obtaining approval from the Ministry of Economic Development.

Length of the proceedings: There is no deadline prescribed for the Ministry of Economic Development to carry out its review and issue a decision.

FDI Screening in North Macedonia.

FDI Screening in Moldova.

FDI Screening in Poland.

FDI Screening in the Czech Republic.

FDI Screening in Austria.

FDI Screening in Bosnia & Herzegovina.

FDI Screening in Croatia.

By Danijel Stevanovic, Partner at Moravcevic Vojnovic i Partneri in cooperation with Schoenherr

The long-awaited legal framework defining entrance and residence permits for digital nomads – Law on amendments to the Law on Foreigners (“Law”) has been adopted in the Parliament of Montenegro and it shall enter into force on 11 August 2022.

The adopted Law provides, in comparison to the initially proposed bill, a simplified definition of a digital nomad, defining that a digital nomad is a foreigner who is employed or performs tasks electronically for foreign or their own companies which not registered in Montenegro. Additionally, the adopted Law clarified that in the event that a foreigner who has a status of a digital nomad establishes a company in Montenegro or register as an entrepreneur in Montenegro – he/she shall lose the status as a digital nomad.

The Law also prescribes that close family members of digital nomads can receive a special family reunification permit.

As close family members, the Law recognizes:

1. marital partners;
2. children under the age of 18 years old;
3. children of one of the marital partners, and adopted children, under the age of 18 years old.

The Ministry of Interior Affairs shall enact a bylaw within 90 days which will define in more detail the conditions and manner of issuance of the permits for digital nomads and their close family members.

By Lana Vukmirovic Misic, Partner, Vukmirovic Misic Law Firm in cooperation with JPM Jankovic Popovic Mitic

Vukovic & Partners has advised ODM Collections on obtaining a purchase of receivables work license from the Central Bank of Montenegro.

ODM Collections is an investor in troubled assets.

According to Vukovic & Partners, “with the consent given from the Central Bank of Montenegro, ODM Asset doo Podgorica will start its activities as a company for the purchase of receivables, with the ambition to become the leading company in this area in the local market.”

Vukovic & Partners’ team included Senior Attorneys Jelisaveta Janic and Marijana Bisevac, Attorneys Igor Joksovic and Vasilisa Pejovic, and Trainee Lawyer Andrea Bacanek.

Montenegro has reached a deadlock in appointing members of the judiciary, with cases being significantly delayed, while the government is on the verge of a vote of no confidence, according to Doklestic Repic & Gajin Attorney-at-Law Danilo Radulovic.

“Montenegro is in a very specific predicament at the moment with regards to the judiciary,” Radulovic begins. “Key bodies responsible for appointing new judges are unable to operate since politicians cannot agree on who to nominate for the Judicial Council – the highest institution that selects judges. Despite some members of the old council still being in power, the council is not able to appoint the judges in different instances of the courts, including the Supreme Court.”

“Consequently,” Radulovic says, “a large number of cases are on hold, with only critical ones being processed. The latter include criminal charges as, unlike the Judicial Council, the Prosecution Council is already formed. Major civil litigations, on the other hand, are significantly delayed. EU officials have recently acknowledged this deadlock and have called for a response to unblock the judicial system.”

Shifting gears, Radulovic says that “Montenegro recently completed its first highway project, which was inaugurated around one month ago.” The new highway will connect Montenegro from the center to the north, including to Serbia and Romania. “The project was quite controversial initially, as the major source of funding was a Chinese bank and investors, compromising Montenegro’s relations with the EU. Eventually, the EU re-invested in the project to not be fully dependent on Chinese funds,” he notes, adding that the new 43-kilometer highway passing through the mountains is very promising for the tourism sector.

“The recent noticeable trend in terms of business activities is that, following the war in Ukraine, a large number of companies are relocating to Montenegro,” Radulovic points out. “The majority of these companies operate in the IT sector and employ freelance workers. So far, the trend is particularly noticeable among Russian IT companies, which cannot receive payments due to the sanctions regime.”

Other than that, Radulovic notes there is a rather important legislative update on the horizon. “For the first time, Montenegro will adopt regulations requiring specific individuals to justify the source of their funds,” he says. “Notably, this update has more focus on anti-bribery and less on anti-money laundering regulations.”

“With regards to political life, the opposition recently made the suggestion to initiate a vote of no confidence against the current government,” Radulovic says. “Interestingly, if the vote is successful, a new government would have to be elected without new elections, considering that new elections are not in the interest of any of the political parties. At the moment negotiations are ongoing but, despite that, there’s a lot of uncertainty about the upcoming period,” he concludes.

Aware of the fact that an effective system of infrastructure creates the preconditions for the normal and undisturbed functioning of the wider social system, Montenegro has made significant efforts in recent years, both in terms of the normative definition of the sector and in finding optimal mechanisms for national infrastructure. In many European countries, a public-private partnership represents the optimal mechanism for national infrastructure, which has considerable advantages and is being ever more used.

Having an effective legal framework is a precondition for creating an environment that supports private investment in infrastructure. Based on this premise, the long-awaited law regulating public-private partnerships in Montenegro was adopted at the end of 2019 and has been applicable as of July 2020. Along with this new legislation, the amended Law on Concessions also began to apply in mid-2020 with a large portion of its subject matter being transposed into the Law on Public-Private Partnership (Law). In addition, the ensuing months marked the adoption of a set of by-laws that set the Law in motion.

The Law has created a new framework for investment policy in Montenegro based on the model of public-private partnerships. In this way, a synergy between the authority of public institutions and the expertise and knowledge of the private sector is achieved to build and reconstruct public infrastructure, as well as perform public works and provide public services.

According to this Law, a public-private partnership is based on the principles of protection of the public interest, free management which ensures a high degree of quality, safety, affordability, transparency, protection of competition, and protection of the environment.

The Law covers contractual and institutional public-private partnerships and elaborates in detail on the procedure for concluding a public-private partnership contract, which regulates the public and private partners’ respective rights and obligations with respect to the public-private project. Moreover, key contractual terms such as those related to subcontracting, the liability of a private partner, financing, taking security, and termination have all found their place in the Law.

In addition, it is important to note that the Law brings novelties to the institutional framework in the entire Montenegrin investment policy. This primarily refers to the formation of a new body – the Montenegrin Investment Agency, established to promote and monitor the realization of public-private partnerships and investments. In addition, the Agency and the Ministry of Finance and Social Welfare give an opinion on public-private project proposals. At the same time, all public-private partnership contracts shall be registered before the Contracts Register of the agency and published on its web page.

The Law also precisely defines the issues related to the preparation of tender documentation and justification analysis and regulates the entire procedure through which the proposal of one project passes to the final adoption. It is also important that the legislator especially emphasized the importance of the public interest, since the analysis of justification that accompanies each public-private partnership project is its important segment.

The public-private partnership concept represents an established systematic approach of many governments and local self-governments around the world when it comes to financing public infrastructure. Over the past few years, the Government of Montenegro as well as municipalities in Montenegro have made the first tentative steps towards the introduction of public-private partnerships.

Therefore, it will be important to monitor the appetite of the business community for seeking alternative means of private sector involvement in public infrastructure/service projects. It remains to be seen whether the potential of the cooperation between governmental bodies and the public sector through the public-private partnership concept will be fully used in Montenegro.

However, it could be concluded that further reforms are needed in infrastructure, especially for roads and certain municipal and environmental sectors. These sectors could benefit from greater commercialization, especially through public-private partnership projects.

By Igor Zivkovski, Partner, Zivkovic Samardzic

This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Montenegro is a popular destination these days for IT businesses seeking to relocate primarily from the countries currently at war, with its tourism and real estate sectors growing again, according to Radonjic/Associates Managing Partner Vladimir Radonjic.

“In Montenegro, similarly to other Western Balkans countries, unfortunately, politics is the priority topic and a part of every discussion and, in turn, is affecting society and various industries,” Radonjic begins. “Following the 2020 parliamentary elections, we witnessed a major historical change resulting in the shifting of power to the opposition, after 30 years,” he says. “A new government was formed recently, a very unusual coalition, since the party that was ruling for 30 years is now supporting the government, but is not formally a part of it. Interestingly, the new government tends to be more invested in PR, which can be a double-edged sword, since if they fail to deliver on their promises it might lead to some disappointments,” he explains.

“Unfortunately,” Radonjic notes, “all investments are influenced by the government’s attitude. We have seen bad precedents over the last few years, with major investors leaving the country or being engaged in disputes with the state. We need stability, especially since Montenegro’s economy is heavily dependent on tourism, accounting for around 30% of our GDP.”

Radonjic adds that, following the war, Montenegro has been targeted by many IT businesses seeking to relocate. “Since the beginning of the war in Ukraine, many IT companies from the US, the UK, and Switzerland have been moving their research and development staff to Montenegro, especially from Russia, Belarus, and Ukraine,” he explains. According to him, Montenegro seems to be one of their top choices on account of its legal and tax regulations, as well as the climate factor. “This has already had a major impact on the local economy, with rental prices increasing in Podgorica and on the coast,” he says. “We should aim to put some policies in place encouraging foreign businesses to stay in Montenegro on a long-term basis, and not only temporarily.”

On the business side, Radonjic says that “general corporate and commercial work is still a big driver. We are also setting up new financial institutions.” He reports that “the tourism sector, which is closely linked to real estate, is again growing, and the price of real estate, for both rentals and purchases, is increasing.” Interestingly, he adds, “while earlier we saw more interest from buyers in post-soviet countries, these days the trend is changing and there is an increased interest from Western European buyers for assets in Podgorica and on the coast.”

There have been no major new developments in terms of energy, Radonjic says. “In the past, the metal industry was quite active in Montenegro. However, earlier this year, there have been some negative developments, due to increasing energy prices,” he points out. “The aluminum plant near Podgorica, which was one of the major exporters, was shut down and its Turkish investor is aiming to sell the factory. This has been quite a hot topic in the media, as the factory was traditionally a major employer, especially for the second-largest city in the country.”

“With regards to legal updates, Montenegro finally adopted a systemic piece of legislation on company law in 2020,” Radonjic says. “Unfortunately, the law has many downsides as it was not properly drafted, resulting in problems for many clients.” He believes that amending the law and implementing the proposed changes would be instrumental in the smooth sailing of Montenegro’s economy.

Dentons’ Rob Irving Talks About The Deal of the Year in Montenegro – 4iG PLC’sAcquisition of Telenor Montenegro from PPF Group.

CEELM: First, congratulations on winning the Deal of the Year award in Montenegro!

Rob Irving: Thank you! I don’t imagine there were too many deals under consideration in Montenegro, but, for us, our SEE practice is a very important part of Dentons’ CEE endeavors. We are routinely present in SEE and very much enjoy working on those transactions and feel that they are an important part of what we can contribute to the region.

CEELM: Can you describe the deal for us and Dentons’ role in making it happen?

Irving: There were two phenomena converging here. 

Firstly, several years ago, PPF, a large Czech financial holding, purchased the Telenor mobile business in CEE – it was a huge transaction involving several different countries. However, ultimately, looking at things from their perspective – Montenegro didn’t quite fit in the long-term strategy they had for the rest of the portfolio. 

At the same time, 4iG, a Hungarian company that was traditionally an IT company, began a process of rapid transformation into a large integrated telecommunications company – both in Hungary and in the region generally. They saw this as an attractive opportunity to take a strong market position.

Those two converged before we were even involved, and there was a principal level agreement on the basics of the transaction between the parties, so our work was trying to implement things, essentially.

Both of these parties are big, strong companies with strong opinions on how to do deals yet, at the same time, they had a good collaborative relationship and were able to work through any issues as they arose. It wasn’t one of the most difficult transactions in that sense, on account of parties being dedicated to working things out between each other, I must say.

CEELM: How did you land the mandate and what do you believe it was about the team that got it for you?

Irving: We have a large office in Prague that expanded quite a bit in the past few years, especially on the corporate and M&A side. We’ve been doing an increasing amount of work with large Czech financial groups investing outbound around the world from the Czech Republic – in the past year, we supported Czech clients on M&A transactions in the US, Mexico, South Africa, the Netherlands, Australia… all out of Prague. So, our operation there is very much an international one.

PPF, with its international holdings, has been someone that we wanted to work with for a while. We built on our relationship with the regulatory, TMT, and IT advice we provided to PPF in various markets – in particular surrounding their investment in the traditional Telenor business. When it came to this particular mandate, they approached us for the transaction.

I think that this is core to what we do – we’ve handled a number of sales throughout SEE, including, around the same time, the sale of the third-largest mobile operator in Albania to 4iG (a deal we hope will be the Albania DOTY for next year). That deal was signed just before the New Year and closed in March 2022.

People approach us for these types of transactions because we are, on the one hand, an international law firm with the ability to work on English and US-law governed transactions. Also, on the other hand, we have a regional team that understands the region and is a bit more flexible in terms of thinking around regional issues.

CEELM: What were the most complex aspects of the deal from a legal perspective? And what were some of the biggest difficulties faced in the process?

Irving: Any time there is a carve-out – be it of a product line, or geographically – there are issues in terms of, for example, IT systems, branding, management services, etc. There are always going to be times during the negotiations when the terms of the carve-out are heavily debated – what gets cut off at closing, what continues for a period after, on what terms… these issues always make carve-out transactions more interesting.

It was much easier, for example, when we helped sell One Communications in Albania – which ended up being a stand-alone business, following its carve-out from Deutsche Telekom a few years prior.

Finally, we were happy we hadn’t run into any issues on account of telecommunications being a particularly regulated sector.

CEELM: In contrast, what, in your opinion, went particularly smoothly and what do you believe contributed to it?

Irving: I don’t want to overplay the lawyers’ role in making the transaction go so smoothly. Some of the times you can wrap yourself in the flag and say, yes, we lawyers saved the day – but this wasn’t the case with this particular transaction. The clients were pretty determined to make this work – so it was, overall, a pretty cooperative atmosphere in getting this done – both on the principals’ side and the lawyers’ side.

We had Anthony O’Connor from Kinstellar leading the other side of the negotiations – he is a former colleague, he and I worked together for ten years in the same firm, and he is a good friend. So, there was no posturing going on, it was a very collaborative atmosphere and we all tried to make the legal work run like clockwork.

CEELM: Why do you believe the judges voted for this deal over the others?

Irving: I don’t know how many transactions as large were under consideration from Montenegro in the last year. It is a market that tends to have probably a couple of large, cross-border transactions per year. So, I suspect that might have been at work somewhat.

I can say, however, that there were some really interesting issues of Montenegrin law that came up at certain points that made us delve into it all quite intimately, with, in certain cases, the law working a bit differently compared to some SEE countries. Working on such a large transaction in Montenegro requires a lot of care and attention – which makes me have a lot of respect for Montenegrin lawyers who are required to implement such transactions just because of the demands those complexities place on them.

CEELM: In your view, what is the significance of this deal for the Montenegro/CEE market? 

Irving: Getting a dedicated long-term investor like 4iG into the market, who has long-term ambitions with respect to what they seek to achieve – is a big positive. 

A lot of large EU and global telecommunications firms have been slowly withdrawing from CEE – you can see this across the board, with telecommunications operators being up for sale in different countries across CEE and SEE. For example, Deutsche Telekom has sold some of its assets in recent years; Telenor, of course; other companies exploring selling assets… so, in this dynamic, to get a long-term dedicated industry investor like 4iG, which has deep pockets, is a strong positive for the country.

CEELM: And do you believe we can expect other similar deals in the near future? Why/Why not?

Irving: I can’t give you any hints – you never want to talk about things which you hear as market rumors, or that you may have been approached on, but I would say that lots of people are exploring opportunities. 

People who are interested in expanding – regional players in particular, like Telecom Serbia or Telecom Slovenia that are always on the lookout for regional assets. Furthermore, I don’t know if 4iG is done – there seems to be some room for further expansion – so if further assets come up for sale maybe they’ll continue to explore their options. Also, financial investors certainly continue to look for angles.

For example, there is a firm operating across SEE, the United Group, that has consolidated all the way from Slovenia to Greece – they’re private equity-owned, by BC Partners – which continues to make acquisitions.

I would say that the play is looking at where there might be large EU or global groups that own, what is for them, rather small assets, and whether continuing to own those assets and dedicating management time and financial resources to them makes sense, given their global situation. It is prudent, of course, to look at regional players as logical consolidators of these assets.

This Article was originally published in Issue 9.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.