Category: Serbia

On 1 March 2019, the Agreement on Social Security between Republic of Serbia and Russian Federation entered into force.

This Agreement regulates the right to pension, rights in the case of injury at work and occupational disease as well as the right for reimbursement of funeral expenses.

The Agreement is based on the standards contained in the Decree of the European Union no. 883/04, which regulates the matter social security of migrant workers.

In accordance with the provisions of this Agreement, citizens of Serbia working in the Russian Federation, will be able to realize their rights under this agreement, including the right to pension. The same applies to citizens of the Russian Federation who work in the Republic of Serbia.

By JPM Jankovic Popovic Mitic

In the last five years significant changes have occurred in the Serbian business and political environment. This has been a time of dramatic change – with the general goal of transforming the position and the image of Serbia both regionally and globally, strongly affirming a pro-EU stance and making Serbia much more attractive for foreign investment. Obviously, both of these goals are interconnected because improving the image of a country brings more investments, and foreign investors generating profits in Serbia improves Serbia’s global image.

The key words of government policy in the last five years were: EU integration, digitalization, and stabilization of public finances. Three administrations have ruled the country over the last five years, numerous elections have been held, and the stir of international politics (including both Brexit and sanctions to Russia) did not pass Serbia by. Throughout all of this, the priorities and goals have stayed the same.

Serbia has made several leaps in the EU integration process. The Brussels Agreement was signed in 2013 by the governments of Serbia and Kosovo. This was an important event, designed to put an end to the decades-long conflict between the two. Although there are difficulties in the process of normalizing relations between Serbia and Kosovo, it is evident that it is going in the right direction. There are high expectations both in the international community and in the region that the process will come to a meaningful conclusion in 2019.

In January 2014 Serbia started membership negotiations with the European Union. The start of membership negotiations at the time seemed as the crown of almost 15 years of work. However, there is much more to do for Serbia. There is still a long way to go in the painful process of harmonizing Serbian law with EU regulations, and changing old ways and habits and maintaining internal stability in a rather conservative society is a challenge in its own right. Since the beginning of negotiations, 14 negotiation chapters have been opened, and two of them have already been closed.

The digitalization of Serbian administrations and the e-government project were also a priority. Both the government and the country’s business procedures bear a heavy bureaucratic burden inherited from Serbia’s socialist past. Cutting through the red tape of certificates in paper form and through the maze of permitting procedures and government approvals was therefore set as a high priority. In the last few years, significant advances have been made in this direction.

The building permit issuing process has been completely digitalized as well, with much shorter deadlines for authorities and with the possibility to both file the request and track its progress online.

Online filing of tax returns and of all kinds of annual reports has also been established, as has the ability to issue invoices in electronic form. Different governmental authorities are now connected via the Internet, enabling them to exchange information faster and more efficiently. The new Serbian Act on Administrative Proceedings has effectively prohibited the authorities from requesting that citizens submit documents if the documents – or the information contained therein – can be obtained in direct communication between the authorities.

The real estate cadaster and public notary systems have been interconnected and public notaries are required to register information on real estate transactions directly in the real estate cadaster’s information system, which increases security and effectively eliminates the possibility of double sales – a historic concern regarding such transactions in Serbia.

Great emphasis was placed on increasing the number of public private partnerships and concessions. Big projects included the transformation of the Serbian national air company JAT into AIR Serbia in cooperation with Etihad Airways; the Belgrade Waterfront project, which transformed one of Belgrade’s downtown neighborhoods, in cooperation with a partner from UAE; the concession for a waste incineration facility in Vinca, and the public private partnership project regarding management of Belgrade’s Nikola Tesla Airport.

The story of deregulation cannot be complete without mentioning company stamps. Legislation was enacted explicitly removing the need for certifying company documents with stamps. Inertia regarding the use of the stamp is so strong that a hotline was even introduced for companies to report authorities who refuse to accept documents without a stamp. The stamp can really be used as a metaphor for the whole Serbian story about deregulation.

The budget deficit was one of the chronic problems of Serbian public finances. Painful but effective measures for the decrease of budget spending have been initiated in the last five years. Higher pensions were decreased, together with a freeze of public sector salaries. A ban on new hires and a cap on the number of employees were also introduced in the public sector.

These measures led to the stabilization of Serbian public finances, which enabled the government to increase infrastructure spending. The highway from Belgrade to the Macedonian border is expected to be finished by the end of 2018, and the network of roads and bridges in Serbia is ever-expanding, enhancing the possibilities for trade and investment.

The last five years have also been a period of reforms and transformation in the Serbian business landscape. As a result, the last five years have been exciting for the legal profession in Serbia, too. Digital advancements made the technical side of work much easier and new investment brought new opportunities to work with international companies and investors, bringing higher work standards and forcing legal professionals in Serbia to improve themselves in order to be able to meet them.

For us at SOG, this also was a time of growth. We have helped foreign investors – big, medium, and small – to set up businesses in Serbia. The development of business in Serbia has provided us with the opportunity to enter and explore previously unknown areas of practice, such as public private partnerships, data protection, and alternative investment funds. We are particularly proud of our active participation in one of the most important transactions in the last five years: the transformation of JAT into Air Serbia.

The last five years have been a time of change and for Serbia and its economy. We, together with the entire business community, anxiously await the next five years and hope that they will bring rewards resulting from the reforms and advancements of the Serbian business environment which occurred in these last five years.

By Milan Samardzic, Partner, SOG / Samardzic, Oreski & Grbovic

This Article was originally published in Issue 6.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Serbian legal market has changed rapidly over the past five years. After less than 30 years of existence in this form, our legal market is still relatively young and its pioneers emerged in the early 1990s. Nevertheless, it is also a dynamic market and brings change every year, especially due to the European Union accession negotiations and additional harmonization of the country’s legislation with EU legislation. On the other hand, frequent changes in law have become a general rule, providing more work for law firms, but also bringing a high level of uncertainty for their clients.

One of the recent trends on the market is the emergence of boutique law firms – a number of spin-offs, opposite to the full-service law firms already on the market that provide a full range of legal services in all areas of client business. Because the Serbian market is relatively small and not fully developed, it does not allow law firms to be active only in one particular niche or practice, so we still cannot talk about the rise of the kind of boutique law firms now common across Europe and the USA. Several full-service commercial law firms are the traditional market leaders, but the rise of boutique law firms is a reminder to them that a strong focus on client service and relationships is the way forward for everyone in this ever-changing legal landscape.

Significantly, law firms are focusing on building brand awareness using a diverse range of proven public relations tools and activities. Social networks, including Facebook, Twitter, and LinkedIn, are used widely by local law firms. However, the Serbian Bar Association continues to struggle with accommodating its regulations to the commercial needs of modern law firms, particularly in terms of advertising and forms of conducting the legal profession, and existing Bar-imposed limitations should be reconsidered. In the meantime, Serbian commercial law firms are still trying to employ the typical marketing methods and tools used by international law firms under the existing, old-fashioned framework imposed by the Bar.

The Big Four play an increasing role on the Serbian legal market, as they expand aggressively from their core audit business. Thus, while the Big Four traditionally focus on practices that complement their audit and tax advisory businesses, such as tax, employment, and immigration, recently they are increasingly branching out into other areas, including M&A. This strategy, combined with the Big Four’s relationships with large clients, have allowed the Big Four to penetrate many areas of the legal industry and compete with the largest law firms on the market.

More than ever before Serbian lawyers are using technology, including legal database applications and video conference tools as well as other electronic devices, to complete daily tasks. Electronic legal research is the most common method of legal research and lawyers are using a wide range of legal databases. New software products are constantly entering the market. By embracing new technologies, many benefits have been achieved. Some of them have been passed on to clients in the form of lower fees and more transparent relationships.

Importantly, Serbian commercial law firms continue to promote female leadership, as the proportion of women in law firms is increasing both at the entry level and in senior positions. In this way, law firms support gender diversity and provide growth opportunities for all, regardless of gender.

The majority of commercial law firms on the market have built up networks and other ties with well-established law firms throughout Europe. These networks and ties have become an important way for Serbian law firms to develop their practices and to attract larger clients operating on a multi-jurisdictional basis. Furthermore, representatives of these international firms are very active in foreign investor associations in the country, which are among the main promoters of the investment-conducive business environment and solid business ethics.

Litigation practices have become important for commercial law firms. In the past, most of these firms had very small litigation teams. But, with the economic crisis and with an increasing number of disputes, many firms have built or significantly expanded litigation practices, and they have become more efficient and better positioned to represent clients in complex disputes. 

Also, the wave of Chinese investments that hit Serbia over the past few years contributed significantly to the Serbian economy and consequently led to the increase of law firm activity in sectors with a heavy Chinese presence: heavy industry, infrastructure, renewable energy, electronic industry, solar projects, textiles, and automobile manufacturing. The Balkan Peninsula is a kind of terminal for China’s One Road, One Belt Initiative and the country is a center of Chinese activity in the region. It is in Belgrade where the Bank of China – the fourth biggest bank per founding capital value criteria – opened its branch office in 2017, from which it serves the Balkan region.

Last but not least, although there was lots of speculation about how Brexit would impact the traditional resort to English law as governing law in the majority of cross-border M&A transactions, we do not see any change happening. Indeed, from our perspective, English law is used as the governing law for cross-border M&A transactions more than ever before. 

By Igor Zivkovski, Partner, Zivkovic | Samardzic 

This Article was originally published in Issue 6.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

A transformation of the legal profession is happening globally, and its effects are also felt, slowly but surely, in the law firms of Southeast Europe. Due to the changing expectations concerning the quality, speed, and commerciality of services, we are seeing a move towards even more client-oriented solutions. Traditional sectors are being replaced with emerging industries, and where we previously had slow processes, with low profit margins, we see value being generated at lightning speeds. Also, a new generation that entered the workforce recently is slowly imposing their own values and approaches, necessitating changes in structure and the values of traditional legal practices.

Evolving Expectations

Although there are signs of accelerated change, law and the legal profession are still lagging behind other sectors of the economy. Perhaps the reason for this lies in the lawyers themselves – we know the system and, more importantly, we know how to work it.  We are used to slow-paced regulatory changes  dictated from governmental and local administrative entities. However, the system has changed and is rapidly evolving. Instead of the government, the relevant industries are now dictating the tempo and requiring lawyers to acquire new skill sets, tailored for the next generation.  

Perhaps the biggest change has been the evolution in client expectations. Now, clients expect swift service, delivered simply and clearly. They want advice customized to their unique circumstances and they recognize the value of high-quality service. Simply put, they want us to cut the chase and get straight to the point. We are expected to deliver commercial advice and to make business simpler when our clients need simplicity, and to put our expertise front and center when our clients need sophistication. We are expected to be reliable, adaptive, and fast, while maintaining the highest quality of service – and clients are willing to pay for that quality.

In adapting to these expectations, law firms are leveraging practice skills and delivering legal services more efficiently through new organizational structures, delivery options, tech-driven solutions, knowledge management systems, process management, and financing for customer-centric solutions.

In a nutshell, client and business standards now preponderantly influence the efficient provision of legal services.  Legal expertise is no longer the sole element of legal delivery; adapting to new client expectations means that legal, as well as technological and project management expertise, is mandatory. 

Emerging Industries

By adapting to this transformation, law firms are improving the way they serve our clients and communities. Speaking of Serbia in particular, the market is more mature than ever. Belgrade has been in the center of the regional spotlight in the last years, as many companies enter into multiple Balkan markets by using the Serbian Capital as a base or a point of entry. 

Following global trends, we are seeing a special interest in the IT sector, especially with major players acquiring local start-ups. Last year was marked by Nutanix’s USD 165 million acquisition of Frame – a Serbian-American start-up. This was the biggest and most valuable start-up transaction involving Serbia, sparking further interest in the IT scene.

Considering this, law firms with an integrated approach to multi-jurisdictional coverage still hold a significant competitive advantage.  However, not even these firms are exempt from the requests set by the emerging market – only those who religiously embrace the changes are going to come out on top.

The Millennial Workforce

But, for law firms to take up the role of business advisors with legal understanding, they must take a more holistic and less purely transactional approach to their clients. 

To this end, law firms need to learn both from and together with their clients, and that means terminating their adherence to outdated norms, still tailored to older generations. According to a study from 2014, conducted by a top US university, millennials will make up more than 75% of the workforce by 2025. And contrary to the fears of millennial invaders hacking the law firm concept and the overall professional services culture, there is a young talent pool, in tune with the industry and technological trends, accepting the legal practice culture.

We now have a group of eager young lawyers who desperately want to contribute to their firms in meaningful ways, right away. But in order to take advantage of this opportunity, law firms must understand this next generation’s mindset and values. This means supporting knowledge-sharing, lectures, and new knowledge management systems.

Conclusion

We are currently enjoying the benefits of positive economic trends, but the memories of the past crisis remain fresh in our minds. To this end, we need long-term, forward-thinking solutions. We need to be thinking about what our clients will expect next and what we should do as lawyers.

A logical first step for law firms is to embrace the digital transformation in the legal industry, as well as embracing the business culture of the younger generation. So far, this transformation has mostly meant that lawyers have become more digital by using the latest tools, but the nature of the legal services has not changed.

Also, a possible step forward for law firms is diversifying their revenue streams. Firms around the world have already made their own forays into other markets, including those typically reserved for accountants or management consultancies, in order to complement their existing sector strengths.

In light of these transformations, it is my belief that only the most capable of adapting and embracing change will survive and thrive.

By Marjan Poljak, Senior Partner, Karanovic & Partners

This Article was originally published in Issue 6.1 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.