CEE Legal Matters

Category: Serbia

  • Competition Authority Imposes Landmark Fine Under Leniency Programme

    Competition Authority Imposes Landmark Fine Under Leniency Programme

    The Commission for the Protection of Competition has published its first leniency decision in a cartel case, following a report by one of the cartel participants.

    Konica Minolta distributors and dealers had engaged in collusive tendering in procurement procedures for acquiring office equipment and providing office machine repair and maintenance services in Serbia.

    This is a landmark decision because the commission imposed a record cartel fine of €500,000 (7.55%, 6.18% and 3.21% of the annual turnovers of the undertakings concerned, respectively). Such uncharacteristically high fines are in line with the commission’s previous practice of imposing severe penalties on bid-rigging cartel participants.

    A leniency programme had been introduced in 2009 but had yielded no results. This recent decision is therefore a watershed moment in the programme’s development and signals an improvement in the commission’s anti-cartel enforcement record.

    The commission granted the cartel participant full immunity from the fine because it had self-reported and handed over evidence before the commission knew about the competition law infringement. The leniency applicant’s information was sufficient to initiate proceedings and conduct dawn raids, which involved making forensic images of computer hard drives and collecting other evidence of collusion in the tender preparation process.

    The leniency decision is also important because the commission held that the practice of penalising bid-rigging cartels should be applied not only to public procurement procedures subject to the Public Procurement Act (ie, launched by public bodies or companies), but also to those launched by market participants not subject to the act (eg, private companies).

    By Srdjana Petronijevic, Partner, and Zoran Soljaga, Attorney at Law, Schoenherr

  • BDK Advokati and JPM Help Decathlon Open Store in Serbia

    BDK Advokati and JPM Help Decathlon Open Store in Serbia

    BDK Advokati and JPM have helped Decathlon, a sporting goods retailer, open its first outlet store in Serbia.

    According to BDK Advokati, “with stores in more than 50 countries and tradition of more than 40 years, this French sports chain offers sports equipment for all age groups and for more than 80 sports.”

    The BDK Advokati team, which reported that it handled real estate, corporate, employment, regulatory, and commercial law matters, included Senior Partner Dragoljub Cibulic, Senior Associates Tomislav Popovic and Nikola Cincovic, and Associate Djordje Zejak. 

    The JPM team, which reported that it provided advice on customs, sporting goods declarations, contractual relations, FOREX, data protection matters, inspection supervision, liability and warranties, employment matters, IP rights, and marketing law, included Partners Jelena Stankovic, Bojan Sunderic, and Jelena Nikolic.

  • The Buzz in Serbia: Interview with Petar Mitrovic of Karanovic & Partners

    The Buzz in Serbia: Interview with Petar Mitrovic of Karanovic & Partners

    “There are no major movements between firms, or any new firms popping up,” says Petar Mitrovic, Partner at Karanovic & Partners in Belgrade, about the Serbian legal market. “There have been some movements, some partners leaving their law offices and moving to the private sector, but nothing worth writing home about.”

    Mitrovic carries the tune when it comes to the political scenery of Serbia as well, describing the current the country as “pretty much a stable show – and the political stability seems to be paying off in terms of increased FDI numbers and the fact that the country’s GDP is on the rise as well.“

    “There is a lot of construction going on in Serbia right now,” Mitrovic says, turning the discussion to active business sectors in the country. “In addition to other factors it would seem that a long and warm Autumn attributed to this,” he explains, pointing to a new patch of highway in Surcin-Obrenovac, near Belgrade, as well as a significant number of construction sites in the capital itself. 

    Still, it’s not just construction that’s active; Mitrovic reports that “the mining sector is booming right now, in the east and west of the country.” He notes that Zijin Mining and Rio Tinto, two of the largest mining companies operating in Serbia, “have the potential to set up the first greenfield mines in Serbia in the next few years.” 

    Finally, Mitrovic refers to two legislative updates on the horizon. “First,” he says, “there is the proposed Act on Construction Planning that is currently being discussed in the Parliament. It is more investment-friendly, as it brings clarity to some issues that the previous legislation lacked, and it is expected to expedite the construction process.” Second, he says that next year is likely to see a new incentive scheme for renewable resources. “The current incentive scheme is outdated and does not allow wind parks to apply for it – which isn’t great, seeing as how there are a number of wind parks in various stages of development at the moment.” Still, he says, “this scheme shouldn’t be expected to come into play until Q3 of 2020, with the parliamentary elections set for March likely to slow things down a little bit.”

  • Whistleblowers – Between Law and Reality

    Serbian National Parliament adopted Act on the Protection of Whistleblowers (“Official Gazette of RS”, no. 128/2014, hereinafter “APW”) on December 4th, 2014, rightfully recognizing that whistleblowers are essential elements of an ethical social and economic environment and hence deserve additional institutional protection (especially because of their exposure to employers’ retaliation).

    Who are whistleblowers

    A whistleblower is any person who discloses to the public, their employer or to the competent authority any information on illegal activities, human rights violations, performance of public duties contrary to their purpose, risk to life, public health, security, or any other kind of information that may prevent large scale damages from occurring. This person may gain knowledge or become aware of the aforementioned information by being an employee of the wrongdoer, by using public services, or being engaged in business activities with the wrongdoer.

    As per the above definition and provisions of the APW, there are three kinds of whistleblowing:

    1. Internal – when the employee discloses information to their employer;
    2. External – when the competent authorities are notified of the wrongdoing; and
    3. Whistleblowing to the public – usually through media or other public outlets.

    The rights and procedures that protect whistleblowers from the potential blowback are determined in accordance with the specifics of each type of whistleblowing. For example:

    • the employer that employs more than 10 people is obliged to enact a bylaw which regulates the procedure of whistleblowing;
    • the employer is obliged to notify in writing every employee about their right to protection under APW;
    • employer or competent authority to which the whistleblower discloses said information must act within 15 days from the day of receipt of the disclosure;
    • the whistleblower may disclose said information to the public without prior notification of the employer or competent authorities only if there is an immediate threat to life, public health, security, environment, large scale damages or destruction of evidence.

    Additionally, a whistleblower may choose to remain anonymous.

    What kind of protection are they entitled to

    The APW protects whistleblowers by providing them with certain rights under the following conditions:

    • that they disclose relevant damning information within one year from the date he/she came into possession of that information, but not later than ten years from the date on which wrongdoing has been performed;
    • based on the available information, any other person of average knowledge and experience similar to the whistleblower would put faith in the veracity of information subject to the whistleblowing;
    • that the whistleblowing was conducted in good faith (that the right to whistleblowing is not being abused).

    Whistleblowers are protected from being placed in an unfavorable position and may be afforded a reimbursement of damages in accordance with Contracts and Torts Act.

    APW lists examples of placing a whistleblower in the unfavorable position:

    • employment/recruitment procedure;
    • acquiring the status of an intern or a volunteer;
    • work outside employment;
    • education, training, or professional development;
    • promotion at work, assessment evaluation, promotion or demotion;
    • disciplinary measures and penalties;
    • working conditions;
    • termination of employment; etc.

    In addition to this, the employer or the competent authority may be fined for misdemeanors stipulated by this act.

    Real-life application

    Unfortunately, even five years after the APW was adopted, whistleblowers are not receiving adequate protection. Because of this very few people dare to speak up and “blow a whistle”, which is defeating the purpose that the Government has set out to achieve.

    Although well-intentioned, certain aspects of this regulation are flawed as there are still cases where the provided protection is insufficient. One of the main problems lies within the fact that under current provisions of the APW, it is easy for wrongdoers to claim that the whistleblower is disclosing classified information. Such information cannot become public and the whistleblower can only turn to their employer or the competent authorities and the procedure ends there. We can easily see how this may become a problem if the entity accused of wrongdoing is the very authority that should provide protection to the whistleblowers.

    In order to comply with the provisions of APW and ensure that your whistleblowing rights are protected, it is advisable to consult with your attorney of choice.

     

    This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

    By Milos Velimirovic, Partner, and Dragan Martin, Associate, Samardzic, Oreski & Grbovic

  • BDK Advokati and PwC Legal Advise on Eldorado Gold’s Sale of Mining Companies to Ibaera Capital

    BDK Advokati and PwC Legal Advise on Eldorado Gold’s Sale of Mining Companies to Ibaera Capital

    BDK Advokati has advised Eldorado Gold on the sale of its two Serbian mining companies, Tara Gold and South Danube Metals, to Ibaera Capital, an Australian PE focused on exploration and project development. Ibaera Capital was advised by PWC Legal.

    Eldorado Gold is a Canadian gold and base metals producer.

    The BDK Advokati team included Senior Partner Vladimir Dasic and Associate Sanja Dedovic.

    The PWC Legal team included Attorneys at Law Stefan Dobric and Predrag Milovanovic.

  • Novelties in Serbian Legislation – Alternative Investment Funds and Open-Ended Investment Funds With Public Offering

    On October 10, 2019 the National Assembly of the Republic of Serbia adopted the Law on Alternative Investment Funds and Law on Open-Ended Investment Funds with a Public Offering, where both of the laws came into force on October 19, 2019 and will become applicable on April 20, 2020.

    The main purpose for adopting the laws was harmonization of the Serbian legal system with the legal system of the European Union, namely with:

    (i) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 – ( “AIFMD”) and 

    (ii) Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities – (“UCITS Directive”), 

    as well as improvement and development of the capital market, which will consequently contribute to the development of the economy of the Republic of Serbia. 

    Taking into account the current situation on the domestic market, the laws stipulate that it will be possible to delegate the safekeeping of assets to domestic and foreign banks in the period prior to accession to the European Union, provided that the prescribed conditions are met, and with the prior consent of the Securities Commission. By regulating delegation in this manner, a greater level of security, control and liability will be ensured, since supervision will be exercised by both the National Bank of Serbia and the Securities Commission. 

    The bylaws for the implementation of the laws will be adopted within six months from the day on which the laws enters into force (i.e. six months as of October 19, 2019).

    It should be noted that these laws have introduced new terms “depositary” and “depository services”  instead of the previously used “custodian banks” and “custody services”, since they are generally accepted in the European Union.

    Also, the application of the provisions relating to cross-border operations of alternative investment fund management companies and delegation of depositary operations are delayed until the accession of the Republic of Serbia to the European Union, as well as of certain provisions concerning the number of persons constituting the management of a management company and the manner in which they operate, while the application of the provisions relating to small investors and public offers are postponed until January 1, 2021. 

    Law on Alternative Investment Funds

    The main reason for adoption was the need to provide a higher level of protection in case of risky investments of alternative investment funds and to define more closely and in more detail the rules that exist in relation to management companies of alternative investment funds. 

    The Law on Alternative Investment Funds regulates the establishment and management of alternative investment funds and of the management companies of alternative investment funds; the way of placing on the market, issuing and buying out of shares in alternative investment funds; the affairs and duties of the depositary and the competence of the Securities Commission.

    It also sets forth different types of funds and prescribes the types of assets into which alternative investment funds can invest raised funds. Furthermore, it distinguishes between open-ended and closed-ended alternative investment funds, with the most important novelty being the introduction of a new type of closed-ended investment fund: a legal entity with internal management, which manages assets by itself and not through a management company.

    Law on Open-Ended Investment Funds with a Public Offering

    A special type of investment fund – Undertaking for Collective Investment in Transferable Securities ( “UCITS fund”) is regulated by the new Law on Open-Ended Investment Funds with a Public Offering. A UCITS fund is an open-ended investment fund with the sole object of collective investment of assets, raised by public offering, in transferable securities or in other liquid financial assets and which operates on the principle of spreading of investment risk, and with units which are, at the request of holders, repurchased, directly or indirectly, out of the fund’s assets.  

    The law specifies the conditions for establishment of UCITS funds, as well as for operating and reporting of management companies, the assets into which they are allowed or not allowed to invest, the risk management policy, depositary liability and supervisory powers of the Securities Commission. Furthermore, the restriction that an open-ended fund member cannot acquire more than 20% of the net worth of the investment fund was deleted, in accordance with EU regulations.

    The Law on Open-Ended Investment Funds with a Public Offering offers the option of organizing an umbrella fund which is not a legal entity and which consists of two or more sub-funds, with the structure of the main and the sub-fund regulated by the law, together with rules of investment. 

    By Bojana Javoric, Senior Associate, JPM Jankovic Popovic Mitic

  • Karanovic & Partners Promotes Milica Savic to Partner

    Karanovic & Partners Promotes Milica Savic to Partner

    Milica Savic, a former Senior Associate at Karanovic & Partners, has been promoted to Partner in the firm’s Belgrade office.

    Savic graduated from the Faculty of Law of the University of Belgrade in 2010 and holds an LL.M. from the same faculty. Prior to joining Karanovic & Partners in 2013, she spent three years at Vukovic & Partners.

    According to Karanovic & Partners, “Milica Savic is experienced in representing clients in major investment arbitration cases under ICSID, ICC, and UNCITRAL arbitration rules. She particularly focuses on privatization related disputes, complex and high-value M&A and construction disputes, bankruptcy and reorganization proceedings, as well as commercial and investment arbitration.”

    The same round of promotions saw Sanja Spasenovic promoted to Special Advisor and Sava Draca promoted to Senior Associate. 

    “These individuals represent the next generation of Karanovic & Partners. Our clients already recognized them for their immense knowledge in their respective fields,” said Managing Partner Rastko Petakovic. “They are the embodiment of our core values, dedication, hard work, and commercial approach. They have made a great contribution to the growth of our practice and displayed a full commitment to our clients and teamwork“.

  • Karanović & Partners and Zdolsek Advise on NIBE Acquisition of TIKI Group

    Karanović & Partners and Zdolsek Advise on NIBE Acquisition of TIKI Group

    Karanovic & Partners has advised NIBE Industries AB on its acquisition of the TIKI Group, Gorenje’s Serbian subsidiary. The TIKI Group was advised by the Zdolsek law firm.

    The transaction remains contingent on the approval of Serbia’s competition authority. 

    Karanovic & Partners describes the TIKI Group as “one of Europe’s largest manufacturers of water heaters.” 

    The Karanovic & Partners team was led by Senior Partner Dragan Karanovic and included Associate Igor Radovanovic.

    The Zdolsek team was led by Associate Katja Zdolsek.

    Editor’s Note: After this article was published CEE Legal Matters learned that Gecic Law had assisted Gorenje doo gospodinjski aparati, Slovenia, in the acquisition of the TIKI Group by Sweden’s NIBE Industries.

  • Cooperation Between Eurojust and Serbia: Taking Stand Against Organized Crime in Western Balkan

    On 12 November 2019 in Belgrade, Ministry of Justice signed a cooperation agreement with EUROJUST, an EU agency dealing with judicial co-operation in criminal matters among agencies of the member states. The signing of the agreement took place in Belgrade after Serbia fulfilled the prerequisite by adopting the new Act on personal data protection, which was the final step in complete harmonization with EU regulations and directives. Eurojust has cooperation agreements with 12 countries, 3 of which are Western Balkan countries: Montenegro, North Macedonia, and Albania.

    One-way street

    Up until the signing of the agreement, Serbia’s cooperation with EUROJUST relied on letter rogatories which were sent from EU member states on a regular basis. The letter rogatories involved Serbia in 143 cases of serious organized crime, including criminal offenses of money laundering, drug trafficking, fraud, as well as crimes against life, limb, and personal freedom. Furthermore, Serbia attended 23 coordination meetings at Eurojust and served as a part of 6 mutual investigation teams in drug trafficking-related cases.

    During the period of 2015 until November 2019 Serbia played a major part in sustaining organized crime in the Western Balkan, but without the agreement which would enable mutual support, the results lacked a proportional impact. Taking in consideration multiple facts, such as Serbian citizens’ role in property-related international crimes who, according to European Commission’s report, are the most frequent offenders in this type of crimes specifically in Belgium, France, Germany and Italy, and on the other hand

    Serbian citizens being among the most frequent victims of trafficking in the Western Balkans, an agreement was a much-needed instrument in successful combat in the matter.

    Liaison prosecutor

    A novelty introduced by this agreement is an appointment of a liaison prosecutor in Eurojust. A liaison prosecutor serves as an intermediary between two parties, distributing relevant information about actions and progress from one party to another. Until the agreement, Serbia had an option of appointing a connection point which would send information about relevant cases only to other countries, but the present opportunity widens the scope of notification by allowing Serbia to receive updates as well as other countries involved in an active investigation. Additionally, Serbia will now be able to share personal data and evidence with prosecutors and investigators from all over Europe.

    A step closer to the EU

    Aside from elevating the protection from transnational organized crime, the signing of the operational agreement inferred a complex and durable activity in regard to Chapter 24 of the EU Acquis and resulted in the fulfillment of one of the interim assessments of the chapter in the negotiation process between Serbia and the EU.

    This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

    By Milos Velimirovic, Partner, and Anastasija Milosevic, Associate, Samardzic, Oreski & Grbovic

  • Mergers and Merging on the Serbian B&F Market

    Mergers and Merging on the Serbian B&F Market

    Some might say that Serbia’s banking sector is blooming and steadily consolidating. Others may argue that actual consolidation is still far away. Either way, players on the local market are changing. This is clear now following the exit of Societe Genarale, BNP’s Findomestic, and two Greek banks, followed by the bold revamp of Hungary’s OTP and the strengthening of domestic investors such as AIK and Direktna Bank.

    BNP’s subsidiary Findomestic was only recently sold to local Direktna Banka – which also acquired Serbia’s NKBM subsidiary and the Greek Piraeus Bank. OTP acquired NBG Group’s Vojvodjanska Banka and the local champion Societe Generale. The domestic AIK Banka swiped up the Greek Alpha Bank, while Telenor Banka ended up in the Czech PPF Fund’s lap. This trend has been followed by NPL transfers outside of the banking sector, leaving the NPL ratio at a slim 5.7%. Now, all eyes are on the privatization of the largest state-owned bank, Komercijalna Banka. The EBRD and IFC, like other significant shareholders of Komercijalna Banka, are willing to sell their respective participations. Potential buyers to look out for seem to be the Slovenian NLB, Raiffeisen Bank International AG, AIK, and the consortium of Direktna Banka and EuroBank. With EU banking groups – such as Banca Intesa, UniCredit, ProCredit, Addiko (post IPO), and Erste – and newcomers such as MiraBank (UAE) and Bank of China, the local banking market, whether consolidated to fully meet the needs of Serbian citizens or not, truly represents an exciting blend of different banking cultures. 

    Serbia’s central banking authority – the National Bank of Serbia (NBS) – still orchestrates the local banking market, retaining an instrumental role in all licensing procedures, supervising foreign exchange, balancing foreign currency oscillations, and steering the reference (base) rates (indeed, the key base rate has recently been decreased to a record low of 2.5%).The NBS also has a significant role in scrutinizing and regulating various fintech products in the banking and financial services industry, such as crowd-lending platforms and microfinancing.

    Project finance is still critical, especially in real estate and energy/renewable financing. The local banks have been successful in securing their position in the residential, retail, and office space sectors, including several significant projects, such as the Belgrade Waterfront (EagleHills), Central Garden (ShikunBinui), and SkyLine (AFI) on the residential side; BW Galerija (EagleHills) and the AdaMall Shopping Centre (GTC) on the retail side; and the Business Garden (AFI) and Green Heart (GTC) in the office sector. Energy/renewable financing, especially windfarm financing, remains primarily reserved for IFIs (the IFC and EBRD), but we can also see an increased role for commercial banks, at least in certain participation schemes.

    Financing in Serbia always had local law challenges, primarily originating from foreign exchange requirements, young and undeveloped registries for immovable ownership titles, mortgages and pledges, and inconsistent court practice. However, banks and investors, as well as their advisors, have managed to shape the Serbian legal landscape, so that it now provides a relatively high level of certainty. Professional associations are trying to relax foreign exchange restrictions fortified by the NBS. Title checks and collateral registries have become, to a large extent, reliable and efficient; the security agent concept is widely recognized in law; and private bailiffs have been introduced to relax the courts’ lack of capacities and should enable judiciaries to turn towards more sophisticated legal questions.  

    Recently, Serbia has been investing intensively in all areas of its infrastructure, including air traffic, railways, roads and highways, and ports and river transportation projects. This opened the floodgates to different forms of financings: traditional public procurements in which the government either finances a project from its own budget or through external financing (from, i.e., the EIB and World Bank Group); bilateral treaties-based funding in which the government directly awards the project to a contractor originating from the treaty country and where financing is secured by loans being disbursed directly to the contractor (primarily in connection with treaties concluded with China, Russia, UAE and Turkey); and public private partnerships, in which the private partner secures the funding. Two recent public private partnerships of note, in terms of their complexity, importance, and magnitude, are the Nikola Tesla Airport concession (which went to France’s Vinci), and the Vinca waste management project in Belgrade (which went to Suez-Itochu).

    Serbia is well-placed to benefit from even more opportunities in the banking and finance area in its journey toward EU accession. This is indeed a fairly bold statement, as we live in a strange world, with the deadline of October 31 still looming and the question of Greenland’s future an unexpected issue; but it appears that the prospects of the banking and finance market’s further development in Serbia are fairly strong.

    Darko Jovanovic, Senior Partner, Karanovic & Partners

    This Article was originally published in Issue 6.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.