Category: Serbia

PS Legal has opened for business in Belgrade with Partners Aleksandra Stojanovic and Milos Pandzic as its founders.

Before founding PS Legal, Stojanovic was a Senior Associate with BOPA Bojanovic & Partners, between 2023 and 2024. Earlier, she was an Associate between 2018 and 2019, a Managing Associate between 2020 and 2021, and a Senior Associate between 2021 and 2023 with Doklestic Repic & Gajin.

Before setting up PS Legal, Pandzic was a Partner with Bozovic Pandzic between 2023 and 2024. Earlier, he was a Senior Associate with Doklestic Repic & Gajin between 2013 and 2018 and a Partner between 2018 and 2023 (as reported by CEE Legal Matters on November 14, 2018). Earlier still, he was an Associate with Karanovic & Partners between 2011 and 2013.

Serbia’s recent economic growth is driven by foreign direct investment, infrastructure projects, and advancements in several sectors according to Gecic Law Partner Miodrag Jevtic.

“Serbia has been very busy,” Jevtic begins. “At a macroeconomic level, we’ve seen positive trends supported by legal regulations to foster growth. Serbia attracts high levels of foreign direct investments, especially in sectors like technology, renewables, logistics, IT, and manufacturing. FDIs in Serbia this year are expected to reach EUR 5 billion, benefiting export-oriented sectors,” Jevtic explains. “Serbia’s geographical position and status as an EU candidate continue to drive investment, and the GDP growth forecast has been revised from an initial 2.5% to a more optimistic 3.8%.”

Focusing on infrastructure projects, Jevtic reports that large-scale transport, energy, and telecommunications are a high priority. “Public-private partnership models are an important opportunity here, and the government is also working closely with financial institutions, such as the EIB and the EBRD. A major milestone is the Expo 2027 specialized exhibition, which will be held in Serbia and is seen as a project of national importance. Preparations entail a comprehensive development plan, dubbed ‘A Leap Into the Future,’ focusing on road and railway infrastructure to further boost economic growth,” he says. “Without infrastructure development, we simply cannot expect sustainable economic growth.”

Additionally, Jevtic says that the country’s mining sector has been in focus lately. “Serbia has significant potential in the mining sector, particularly with lithium, which is crucial for electric vehicle batteries. It is seen as a long-term development opportunity,” he says. “The government is working to support the development of the entire supply chain for electric vehicle and battery production. The recently established strategic partnership with the EU in this area further enhances this opportunity. This will be a game-changer for the industry, and we’re already seeing signs of major developments with new electric models produced in Serbia,” Jevtic outlines. 

Jevtic reports that the country is in “the process of transitioning from coal to renewable energy sources, focusing on solar, wind, and hydropower. The country is accelerating efforts to improve energy efficiency and adopt renewable resources. We just recently witnessed the launch of the largest solar project in Serbia.” Moreover, he says that, as an EU candidate, “Serbia trades heavily with the EU, and aligning its policies with EU standards is critical, especially for future exports.”

 On that note, Jevtic goes on to add that Serbia has been hard at work implementing many EU standards, “in the areas of non-financial reporting and in environmental, social and governance compliance. Many companies have already shifted toward these standards, which is crucial for attracting FDIs and maintaining export relationships with the EU.” According to Jevtic, “customers in the EU want to see manufacturers and service providers in Serbia being compliant with environmental and social standards, and Serbia is pushing hard to complete this regulatory alignment.”

Finally, Jevtic provides a brief update on the digital services sector. “While Serbia has yet to introduce 5G, secondary legislation for its implementation is underway and is expected to be completed before the end of this year, paving the way for a rapid rollout,” he reports. “This will significantly enhance the digital infrastructure – the legal framework will need to adapt to keep up with these advancements,” he concludes.

CMS, working with Norton Rose Fulbright, has advised UGT Renewables on a partnership agreement with Serbia’s state-owned power utility Elektroprivreda Srbije and the Ministry of Mining and Energy for the development and construction of new solar power plants and battery storage facilities in Serbia. Akin Gump reportedly advised the Government of the Republic of Serbia.

UGT Renewables is a US-based solar energy and storage developer

According to CMS, “the project will have a total installed capacity exceeding 1 gigawatt and 200 megawatts/400 megawatt-hours of battery storage. Hyundai Engineering Co. Ltd will also be part of the consortium.”

In 2022, CMS advised UGT Renewables on a joint solar energy project with Montenegro’s EPCG (as reported by CEE Legal Matters on November 22, 2022).

The CMS team included Managing Partner Radivoje Petrikic, Partner Ivan Gazdic, Senior Lawyer, Tamara Zejak, Senior Associates Marija Marosan, Teodora Vujosevic, and Milica Popovic, and Associate Jelena Djordjevic.

Editor’s Note: After this article was published, Gecic Law announced that it had advised the Government of the Republic of Serbia, working alongside Akin Gump. The firm’s team included Partners Ognjen Colic and Miodrag Jevtic, Counsel Milos Petakovic, and Senior Associate Zarko Popovic.

AI is increasingly revolutionizing the way businesses handle recruitment, hiring, management and employee monitoring etc. AI solutions are already adept at personalizing employee experiences, such as benefits and training, streamlining HR processes throughout the employment lifecycle, boosting efficiency and significantly reducing administrative burdens. Additionally, AI provides critical workforce insights, facilitating data-driven decision-making and management. However, these advancements also bring potential risks related to discrimination, protection of privacy, and other fundamental rights that employers must carefully manage.

As the EU AI Act entered into force on 2 August 2024 and should generally be applicable 24 months after its entry into force (with several exceptions), it is crucial to define the role of employers in the AI chain to ensure understanding of the obligations that they must fulfil. While the Act includes provisions on extraterritorial application that could affect AI developers and model creators in Serbia, the question arises: Can it also apply to Serbian employers? Specifically, as deployers of AI systems, some of which may be classified as high-risk, can Serbian employers be subject to the obligations that apply to EU-based employers per EU AI Act?

Applicability of the EU AI Act

The EU AI Act does have provisions that allow its extraterritorial application, meaning it can apply to Serbia, as non-EU entity, under certain circumstances. For instance, AI system providers based in Serbia could fall under the EU AI Act if their systems are used within the EU. However, for Serbian employers who act as deployers (users) of AI systems for their needs within Serbia, the Act does not apply.

For employers in the EU, the EU AI Act introduces strict requirements related to high-risk AI systems. These systems are typically those that monitor employee performance, profile individuals, or make automatic decisions regarding working conditions, promotions, or terminations. Many tools used in employment processes fall into this high-risk category, especially those involved in profiling employees. Additionally, some of the AI tools are strictly prohibited like AI systems for emotions detection or biometrics categorization, which are leading to obtaining sensitive data.

The EU AI Act outlines conditions under which high-risk systems, as defined in Annex III, could claim exemption from the high-risk classification. However, these exceptions do not apply to AI systems used for profiling employees, which are always classified as high-risk.

Consequently, employers in the EU are required to conduct Data Protection Impact Assessments (DPIA) for high-risk systems and adhere to strict implementation procedures. Upcoming guidelines from the European Commission, expected by mid-2025, will provide concrete examples of high-risk AI uses, helping employers navigate the new regulatory framework.

It’s important to note that while the EU AI Act mandates DPIAs for high-risk systems, local data protection regulators in EU member states also adopt their own lists of cases where DPIAs are mandatory. These lists may not align perfectly with Annex III of the Act, potentially expanding the scope of AI-related activities requiring a DPIA. This is a notable aspect for Serbia, as the country does not yet have AI-specific legislation, but a working group is currently drafting new AI regulations, making it interesting to observe how these developments will align with EU standards.

Intersection with GDPR and local privacy regulations

The EU AI Act specifies that deployers of high-risk AI systems must be conduct a Data Protection Impact Assessment (DPIA) as regualted under the General Data Protection Regulation (GDPR).

However, the scope of high-risk systems caught under the EU AI Act may be even broader compared to circumstances under GDPR for which the DPIA is necessary (including also circumstances triggering DPIA under privacy regulations in Serbia, such as the Commissioner’s decision on the list of processing activities requiring DPIA).

In addition to DPIA, the EU AI Act requires employers to conduct Fundamental Rights Impact Assessments (FRIA) in certain cases and notify employee representatives prior to deploying high-risk AI systems in the workplace.

Employers are also responsible, by EU AI Act, for ensuring that their workforce has an adequate level of AI literacy to handle these systems. AI literacy which represents skills, knowledge and understanding that allow providers, deployers and affected persons to make an informed deployment of AI systems, as well as to gain awareness about the opportunities and risks of AI and possible harm it can cause, will be required to apply from August 2, 2025, and this grace period leaves enough time for employers to comply with it.

What about Serbian employers?

Currently, Serbian employers who use AI systems for their internal needs are not subject to the obligations of the EU AI Act. A working group has been established and is working on drafting new AI legislation in Serbia, with the law expected to be completed within a year. Until then, the use of AI systems by Serbian employers will remain governed by the Data Protection Act (DPA).

Having said that, beside ensuring that employees are dully notified on processing of their data, and that legal basis for processing is ensured (which can be tricky when employees’ data is processed), using any AI systems that fall under high-risk category of EU AI Act also requires DPIA under Serbian DPA. Namely, under Serbian DPA DPIA is required among other things, when personal data processing is conducted using new technologies (namely AI) and represents a potential risk to the rights and freedoms of the individuals whose data is being processed. For instance, it is explicitly required in cases of automated processing or profiling if based on such automatic processing a decision is made that significantly influences the life of an individual. According to the Commissioner’s decision, a DPIA and the DPO’s opinion are mandatory for specific processing actions (such as the use of employee monitoring tools based on biometric data).

Thus, employers as controllers who are processing personal data using AI systems which could be qualified as high-risk systems under EU AI Act, are obligated under the DPA to inter alia: (i) conduct a DPIA, (ii) seek the opinion of the Data Protection Officer (DPO), and (iii) request prior consultation with the Commissioner for Data Protection (before any processing takes place).

Consequences of non-compliance

Under the EU AI Act, employers using high-risk AI systems face significant penalties for non-compliance, however, it is important to note that these penalties are not applicable to Serbian employers using AI systems solely for their internal operations, as the EU AI Act’s extraterritorial provisions do not extend to such cases. Relevant penalties for Serbian employers will be those prescribed by national Law on AI, or for any privacy implications penalties under DPA.

Conclusion

Although the EU AI Act does not currently apply to employers in Serbia, and the signing of the Stabilization and Association Agreement obliges Serbia, among other things, to align its legislation with that of the EU Serbian employers should definitely closely monitor the development of this new legal area in EU as to be prepared to what might apply to them in same or similar scope. Regardless, employers should definitely continue compliance with DPA, but also conduct control of currently used AI systems to check whether they are fully compliant with DPA, create records of AI systems used by their employees and create internal rules and policies concerning compliant use of AI systems by their employees and compliant application thereof, all in order to prevent any possible liability in that regards.

By Marija Vlajkovic, Partner, and Andrija Saric and Marija Lukic, Associates, Schoenherr

The Law on Management of Companies Owned by the Republic of Serbia (hereinafter: the Law) came into force on 16 September 2024 in full. This Law was adopted in accordance with the recommendations that the Republic of Serbia received from the International Monetary Fund in order to corporatization, improve management and change the legal form of enterprises in the Republic of Serbia.

The law foresees transformation of enterprises owned by the Republic of Serbia into corporations (hereinafter: corporations), i.e. joint-stock companies or companies with limited liability, by the end of 2025.

The novelty prescribed by the Law is management through centralized ownership. This type of management will be carried out through the ministry responsible for economic affairs, except in the field of energy, where it will be carried out through the Ministry of Energy (for the production and supply of electricity), i.e. through the Republic Commission for Energy Networks (for carrying out the activities of electricity transmission and transportation of natural gas). This type of management does not imply that the ministries or the Republic Commission for Energy Networks, directly perform management functions. They do so through monitoring and improvement of corporate management in corporations, as well as adoption of emergency measures in case of business disruptions in these corporations.

Management through centralized ownership is carried out in accordance with the goals stated in the Law, which are the preservation of national and strategic interests; market preservation and consumer protection; reduction of social stratification of the society; sustainable environmental management and sustainable use of natural resources of the Republic of Serbia; and improvement of economic, industrial and social development.

In order to implement the Law, the Government of Serbia adopted the following legislation:

1. The Decree on the criteria for qualification of the legal form of a corporation, which prescribes the criteria on the basis of which an enterprise qualifies for a change of legal form. Enterprises that meet two of the three requirements: that they have more than 250 permanent employees, that their business income exceeds 40 million euros in the previous year, or that they perform technically and organizationally complex activities, are transferred to joint stock companies (JSC). Other enterprises will take the form of a limited liability company (LLC). Enterprises are obliged to submit an initiative for the change of legal form, with a proposal for a new legal form, to the competent ministry within 30 days from the date the Regulation comes into force;

2. The Decree on determining the list of corporations and minor corporations which includes a list of enterprises wholly or partially owned by the state that expect a change in legal form. The enterprises on this list are primarily categorized based on the Law’s classification depending on the size Republic of Serbia’s share in the enterprise into corporations and corporations in minority ownership of the Republic of Serbia.

The Decree itself further classifies corporations from the list into corporations of national and strategic interest and corporations of special interest.

Corporations and corporations in the minority ownership of the Republic of Serbia that are already categorized based on the classification prescribed by the Law, then on fall under one of the categories from the Decree, and thus create the division into three final categories. The Law or the Decree do not clarify the exact significance of these classifications.

The first category includes corporations in majority ownership of the Republic of Serbia that achieve strategic goals in the field of security and defense; manages strategic infrastructure and related real estate in the fields of energy, traffic, water management, electronic communications, media, data processing and/or storage, and others; as well as corporations that perform activities of general interest, including energy, and provide mandatory services in the public interest. Some of the companies in this category are: “Elektorprivreda Srbija”, “Elektromreža Srbija”, “Putevi Srbija”, “Srbijagas”, “Transnafta”, “Corridors Srbija”, “Pošte Srbija”, “Srbijašume”, “Srbija Cargo”, and “Serbia Train”.

The second category includes corporations of special interest in majority ownership of the Republic of Serbia, whose goal is to realize dividends from strategic investments that are mainly carried out in activities where the market has proven to be inefficient. Corporations of special interest are focused on achieving goals useful for society, such as reducing social inequality, industrial development, economic diversification, social development, realizing dividends from strategic investments, intervention in inefficient markets and supporting innovation. Examples of capital companies of special interest in the majority ownership of the Republic of Serbia are “Uvac Reserve”, “Lepenski Vir tourist area manager”, “Ložionica Beograd”, “Autotransport Kostolac”, “PRIM. Kostolac”, and “Rio Kostolac”.

The third category includes corporations in the minority ownership of the Republic of Serbia that are of special interest to the state, such as “Naftna industrija Srbije”, “FCA Srbija Kragujevac”, “BW Kula Beograd”, “BW Galerija Beograd” and “Belgrade na Vodi”;

3. The Decree on additional criteria for appointment and the procedure for appointing managment bodies of corporations, as well as the procedure for conducting a public tender for directors, which aims to increase the professionalization of management; and

Decision on the code of corporate management of corporations, which represents a collection of professional business conduct and good principles, the application of which strengthens corporate and ownership responsibility in corporations.

By Marko Mrdja, Senior Associate, and Jana Stanojevic, Associate, JPM & Partners

The Government of the Republic of Serbia has proposed amendments to the Law on Public Notaries (“Official Gazette of RS”, no. 31/2011, 85/2012, 19/2013, 55/2014 – other law, 93/2014 – other law, 121/ 2014, 6/2015 and 106/2015) with the purpose of introducing the obligation to solemnize monetary loan agreements between natural persons in the amount of EUR 10,000 and higher.

Additionally, a register for such contracts will be established, which will be maintained by the Ministry of Justice and in which data about the creditor and the borrower, the amount of the loan, the repayment period and the currency will be registered. The notary public will be obliged to submit a copy of such agreement to the registry. The data in the registry will be monitored by the Administration for the prevention of money laundering.

The reasons for this legislative proposal are the lack of control and insight into these types of transactions between natural persons. In our legal system, there is no obligation to formalize loan agreements as public notary documents, and that agreement does not have to be written, even in practice it is usually verbal. Hence, these transactions, regardless of the value of the contract, are not subject to supervision by state authorities. The amount of EUR 10,000 is the limit for cash payments in accordance with the Law on prevention of money laundering and financing of terrorism, and in this way an additional mechanism of verification and protection against abuse would be established.

Proposed amendments refer only to obligations between natural persons, while legal entities, as well as transactions between banks and natural persons, do not fall under this novelty.  It shall be seen, when these amendments to the Law are adopted, how the practice related to these contracts will be shaped and what consequences could exist for those natural persons who do not fulfill the obligation of solemnization.

By Jelena Stankovic Lukic, Partner, JPM & Partners

In October 2024, Karanovic & Partners announced that BIG CEE’s acquisition of Promenada Novi Sad from NE Property (as reported by CEE Legal Matters on July 15, 2024) has now closed.

According to Karanovic & Partners, the deal is worth approximately EUR 177 million.

As previously reported, Karanovic & Partners has advised BIG CEE on its acquisition of Promenada Novi Sad from NE Property. LEF Attorneys advised NE Property.

The Karanovic & Partners team included Senior Partner Milos Vuckovic, Partners Bojan Vuckovic, Bojana Miljanovic Hussey, Katarina Guduric, and Ana Lukovic, and Senior Associates Marko Culafic, Milorad Gajic, and Nikola Siljegovic, Associate Marina Zivanovic, and Junior Associate Pavle Vucetic.

The LEF team included Attorneys at Law Ivan Pantovic and Dijana Grujic.

Kinstellar has advised A1 Srbija on the acquisition of a greenfield site in Serbia.

A1 Srbija is a telecommunications provider in Central and Eastern Europe. Operating in multiple countries including Austria, Slovenia, Croatia, and Bulgaria, A1 Group provides mobile, broadband, TV, and cloud services.

The Kinstellar team included Partner Radovan Grbovic, Senior Associate Mario Kijanovic, and Associate Vuk Vuckovic.

Kinstellar could not provide additional information on the matter.

Karanovic & Partners has advised AMD on opening an engineering design center in Serbia.

According to Karanovic & Partners, the center will initially employ 90 highly qualified software engineers, with two teams based in Belgrade and Nis. “The launch of AMD’s design center in Serbia highlights AMD’s continued commitment to expanding its presence in the Balkans and collaborating with regional tech companies, such as HTEC, to further develop both software and hardware projects. AMD plans to double its workforce in Serbia over the coming years, further cementing the region’s importance in the company’s global operations,” the firm added.

The Karanovic & Partners team included Senior Partner Marjan Poljak, Senior Associate, Sava Draca, Milorad Gajic, Nikola Siljegovic, and Milijana Tomic, and Junior Associate Pavle Vucetic.

Former Schoenherr Partner Jelena Arsic has joined MaxBet in Serbia as its new Chief Legal and Risk Officer.

MaxBet is part of Flutter Entertainment. In fact, in 2023, Arsic was part of the team at Schoenherr that advised on the sale of Maxbet to Flutter Entertainment (as reported by CEE Legal Matters on October 4, 2023).

Before the move in-house, Arsic worked for Schoenherr between 2013 and 2024, having joined as an Associate in 2013. In 2016, she became an Attorney at Law and she made Partner in 2023.

Originally reported by CEE In-House Matters.