Category: Serbia

One of the most current news this year, which turned out to be equally interesting to both legal experts and IT industry professionals, was the adoption of the European Union’s Artificial Intelligence Act (“AI Act“) as the first regulatory framework regarding artificial intelligence (“AI“) adopted at the EU level. The aim of the AI Act is to bring the European Union (“EU“) to the forefront of the artificial intelligence race, while simultaneously ensuring the protection of human rights, the environment, the rule of law, and democracy.

Although its implementation has not yet begun, the AI Act is expected to clarify some of the uncertainties related to the application of AI for EU member states (and those on the path to becoming members) and provide a solid foundation for the creation of national regulations on this topic.

Summary of the content of AI Act

The AI Act is based on a risk analysis arising from the application of AI – AI is divided into four categories depending on the severity of the risk it can lead to:

1. unacceptable risk – this includes tools that use AI for the purpose of classifying individuals based on their behaviour or characteristics, which would consequently lead to their social “grading” and potentially unfavourable treatment. In other words, AI must not be used for so-called social scoring. Uses of AI that fall into this category are prohibited;
2. high risk – this group includes, for example, AI systems that process personal data with the aim of profiling individuals, such as systems used in the candidate selection process for employment;
3. limited risk – this category includes chatbots and content generated using AI;
4. minimal risk – this category includes, for example, AI used in the creation of email spam filters or video games based on AI technologies.

Among other things, adoption of the AI Act is recognized as significant because it achieves the “reconciliation” of two opposing aims:

• encouraging investment in AI and maximizing the positive aspects of AI, on the one hand, and
• ensuring and protecting the rights of individuals that may be affected by the use of AI, on the other hand.

The AI Act applies not only to entities physically located in the EU but also to those located in non-EU countries that use AI within the EU territory. In this regard, a parallel can be drawn between the AI Act and the GDPR, which defines the geographic scope of application based on the same principle.

Penalties for Non-Compliance with the AI Act          

Entities that fail to comply with the obligations prescribed by the AI Act will face high penalties. The strictest penalties will be imposed on those using systems categorized as unacceptable: for them, fines can reach up to 35 million euros or up to 7% of the total global annual revenue of the company, whichever amount is greater.

For violations of other provisions of the AI Act, the maximum penalty amounts to 15 million euros, or 3% of the total global annual revenue of the company, whichever amount is greater. The “mildest” consequence is for providing incorrect or incomplete information regarding AI to the competent authorities, in which case the penalty can be as high as the greater of the following two amounts: 7 million euros or up to 1% of the total global annual revenue of the company.

Situation in Serbia

When it comes to the domestic regulations, Serbia has been working on creating a legal framework for the use of artificial intelligence for several years now. The first step towards this goal was the adoption of the Artificial Intelligence Development Strategy in the Republic of Serbia for the period 2020 to 2025, which was adopted in 2019. Bearing in mind the rapid development and increase in the use of AI in Serbia since the adoption of the first Strategy, the need to improve the Strategy arose as early as the beginning of 2024. Consequently, development of a new Artificial Intelligence Development Strategy in the Republic of Serbia for the period 2025 to 2030 (available only in Serbian) has begun, and it is expected to be adopted during 2024.

In addition to the Strategies, it is also worth mentioning that the draft Law on Artificial Intelligence of the Republic of Serbia is currently being prepared by a special working group within the Ministry of Science, Technological Development and Innovation. The adoption of this law is announced for the first half of 2025, and it is expected that such legislation will address numerous questions related to the application of this technology and create an adequate ground for its further development and safe use.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

By Anja Beric, Senior Associate, PR Legal

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

The transaction remains contingent on regulatory approval.

In late 2023, Karanovic & Partners advised on BIG CEE’s acquisition of two retail parks in Serbia (as reported by CEE Legal Matters on December 6, 2023).

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.

In the practice of the Court of Appeal in Belgrade, in the judgment No. Gž1 1900/20 dated 19.03.2021 (“Judgment“), the following position was taken:

An employer who has, by a decision on the termination of employment, released the employee from the obligation to comply with the prohibition of competition clause, which was established by the Employment Contract, is not obliged to pay the employee the compensation that was agreed upon in relation to the obligation to comply with the said clause.

This position is particularly interesting because it represents a significant shift in judicial practice.

Namely, until the issuance of the Judgment, the courts’ practice was that this clause is regulated by the employment contract and that all amendments, especially regarding the termination of the validity of the clause, must be an expression of the consensual wills of the contracting parties, the employer and the employee.

However, with the Judgment, this stance has been completely changed.

Below we analyze the reasoning of the Judgment.

Case Analysis

The facts of the specific case are as follows:

• The employment contract obligated the employee to comply with the prohibition of competition clause after the termination of the employment relationship (“the Clause“), and the employer to pay the agreed compensation for complying with the Clause.
• By the employer’s decision, the employee’s employment was terminated and the employee was released from the obligation to comply with the Clause.
• After the termination of employment with the employer, the employee comply with the Clause during the agreed period.
• The employer did not pay the employee compensation for comply with the Clause after the termination of employment.
• The employee filed a claim against the employer for the payment of compensation for complying with the Clause.

Court Positions

1. First-Instance Judgment

Regarding the stated facts, and in accordance with the then-current practice, the first-instance court finds the plaintiff’s claim justified, explaining as follows:

• According to the provisions of the Labor Law, the provisions of the employment contract can only be amended by an annex with a reasoned offer (in accordance with the provisions of Articles 171-174 of the Labor Law), that is, in the same form in which the employment contract was concluded. Only with the employee’s consent to the delivered offer can the original conditions stipulated in the employment contract be changed.
• Moreover, the employment contract is a formal legal act concluded in writing between the employer and the employee and binds the contracting parties by its content until the parties agree to change that content. Therefore, the employer cannot be released from the obligation to pay compensation for the Clause by a unilateral act.
• Accordingly, the court considers that, in the specific case, on the one hand, we have a bilateral legal act, the Employment Contract, and on the other hand, a unilateral individual legal act, the employer’s decision on the termination of employment which released the employee from observing the Clause. Given the aforementioned, the provisions of the employment contract, i.e., the provisions of the Clause from the said employment contract, are binding on the contracting parties, so the employer as a contracting party was obliged to adhere to the conditions stipulated in the contract, that is, to pay the agreed compensation for the Clause upon termination of employment.

1. Judgment

However, the second-instance court in the Judgment finds that the first-instance court incorrectly applied the substantive law, thereby reversing the first-instance judgment.

Namely, referring to the provision of Article 162 of the Labor Law, the court states that when contracting the Clause, the agreement on the payment of monetary compensation in the agreed amount aims to compensate for the damage suffered by the employee because, during a certain period, they cannot enter into an employment relationship or apply acquired knowledge. This obligation matures on the day of termination of employment, that is, that is when the Clause takes effect.

Since the employer released the employee from the obligation to comply with the Clause by the decision on termination of employment relationship, and considering that the employee did not suffer any damage as a result, the employer was not obliged to pay compensation, whose purpose is to compensate for presumed damage.

Namely, the court states that the employment contract may stipulate the jobs that the employee cannot perform in their own name and for their own account, as well as in the name and for the account of another legal or natural person, even after the termination of the employment relationship, without the consent of the employer with whom they are in an employment relationship.

From this, it follows that this prohibition is not absolute and that the jobs covered by the prohibition of competition clause can be performed with the employer’s consent, in which case the clause becomes ineffective.

Finally, the court considers that this consent must be in written form, as is the specific case, as evidenced by the decision on the termination of employment, which the employee did not challenge.

Conclusion

Therefore, according to the Judgment, for the termination of the validity of the agreed Clause, the mutual consent of the contracting parties is not necessary; it can terminate based on a written, unilateral act of the employer.

This stance is supported by the very wording of Article 161, paragraph 1 of the Labor Law, which states that the employment contract may stipulate the jobs that the employee cannot perform in their own name and for their own account, as well as in the name and for the account of another legal or natural person, without the consent of the employer with whom they are in an employment relationship. This applies both to the clause agreed upon during the employment relationship and the one agreed upon after its termination, as Article 162, which regulates the latter, refers to Article 161.

Since, according to the aforementioned, this prohibition of performing certain jobs is linked to the employer’s consent, unilateral release from the Clause by the employer’s act (decision, order, or other written act) actually represents consent to the performance of the said jobs.

Consequently, the result is the termination of the validity of the Clause and the automatic termination of the employer’s obligation to pay compensation to the employee for observing the Clause, as the purpose of the compensation is lost.

As we noted above, this position significantly changes judicial practice. However, we must continue to monitor the further practice of the Supreme Court, as the highest instance in the Republic of Serbia, on this issue.

This article is for informational purposes only and does not constitute legal advice. If you need further information, please feel free to contact us.

By Borinka Dobrnjac, Senior Associate, PR Legal

Cytowski & Partners has advised Lupa Technology on its USD 1.8 million series seed with South Central Ventures. The same firm also advised South Central Ventures.

Lupa Technology is a Serbian startup developing an Al-driven platform that turns complex data into actionable insights. According to Cytowski & Partners, “their solution simplifies data handling from multiple sources, ensuring critical information is readily available for key decision-makers. The SCV investment will be used for global expansion, in particular the USA.”

“We are thrilled to support Lupa Technology as they redefine data management standards in the construction industry,” stated South Central Ventures fund Partner Goran Stevanovic. “Their innovative approach and deep understanding of construction challenges position them as a pivotal player in enhancing operational efficiencies. We are excited to see the fast adoption of Lupa’s technology by industry leaders and the value they are getting by using it, and at the same time, truly impressed with the quality and dedication of the Lupa team.”

The Cytowski & Partners team included Partner Tytus Cytowski, Associates Fabiana Morales Centurion, Heidi Fan, and Bond Eke-Opara, and Lawyer Eresi Tracy Uche.

The Republic Geodetic Authority of Serbia (“RGZ“) announced in June 2024 that it has conducted a mass assessment of apartment values across Serbia, aiming to set a new standard in transparency and accessibility of real estate data.

Currently, professional users such as lawyers and surveying organizations can access assessed property values through the eCadastre system on RGZ’s digital portal. It was also announced that this capability will soon be available to citizens for free.

Why are apartment values assessed?

The authority to conduct assessments by RGZ stems from the Law on State Survey and Cadastre (“Law“) and the Rulebook on Real Estate Valuation (“Rulebook“) enacted in 2014.

According to the Law, the assessment of market value of real estate represents the determination of the closest market value of real estate within a specific period.

The Rulebook stipulates that real estate valuation must be conducted in accordance with applicable international standards and best practice guidelines (International Association of Assessing Officers – IAAO; Royal Institution of Chartered Surveyors – RICS), which further serves as the basis for establishing the RGZ property price index.

The RGZ real estate price index is an index used to monitor changes in price levels and overall market trends.

The residential property price index for the Republic of Serbia has been developed in accordance with international methodological guidelines and based on a model for mass appraisal of apartments. This model considers not only prices from sales contracts but also various property characteristics sourced from relevant databases such as the Real Estate Price Register, Cadastre, Register of Residential Communities, Geosrbija, and tax administration.

RGZ publishes quarterly reports on the RGZ residential property price index on its website. The latest report, for the first quarter of 2024, was released in June 2024 and stands at 160.49.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

By Marija Muzevic, Counsel, and Anja Stanojevic, Junior Associate, PR Legal

New Customs Law brought about additional certainty in social relations – the subject law clearly envisages in its Article 35 that the customs authority may, in the procedure of post-release control/examination, verify the existence, authenticity, accuracy, and validity of any accompanying document.

When the post-clearance examination of the customs clearance indicates that the provisions governing certain customs procedures have been applied on the basis of incorrect or incomplete information, the customs authority undertakes in accordance with customs and other regulations in force the necessary measures and renders corresponding decisions in order to correct irregularities and align the legal situation with the newly determined circumstances. This provision is to be construed in such manner that the customs authority is obliged, if it receives in accordance with the Regional Convention on pan-Euro-Mediterranean preferential rules of origin (PEM Convention) from the customs authority of the importing state a request for subsequent verification of the proof of origin of goods1, in the procedure of post-release control in line with the Article 35 of the Customs Law, to verify authenticity, accuracy and validity of the proof of origin of goods. The procedure of post-release control should result in the rendering of an administrative act since the subject matter of this procedure is the legitimate interest of the exporter to use the proof of origin in a particular export clearance procedure.

In our practice, we have recently dealt with a case, where our customs authority acted upon the request of the customs administration of the importing state within the meaning of Article 32 of the PEM Convention and where our customs authority was obliged to conduct “subsequent verification of proof of origin of goods”. When we were dealing with the PEM Convention for the first time, we realized that the respective provision of the PEM Convention regulates (only) the manner of cooperation between customs administrations of contracting states/parties in cases, when one of them expresses doubt in authenticity, accuracy and validity of the proof of origin of goods. On the other side, the very procedure, in which authenticity, accuracy, and validity of the proof of origin of goods is being determined, is prescribed by the national legislation. Article 35 of the Customs Law sets forth that in the procedure of post-release examination/control, “the customs authority may verify accuracy and completeness of the information provided in a declaration, temporary storage declaration, entry summary declaration, exit summary declaration, re-export declaration or re-export notification, as well as existence, authenticity, accuracy, and validity of any and all accompanying documents…” The correctness of our view is additionally supported by Article 33 of the Customs Law, which defines the concept of customs control, which in particular consists of examining goods, taking samples, verifying of accuracy and completeness of the information provided in a declaration or notification and existence, authenticity, accuracy and validity of documents, examining of accounts and other records of business entities, inspecting of means of transport, inspecting of luggage and other goods carried by or on persons as well as conducting official inquiries and other similar acts. A customs authority may undertake any of these actions either in the procedure of so-called regular control of customs clearance/information provided in a customs declaration or in the procedure of post-release control2. This is so due to the fact that the Customs Law, Law on Inspection Supervision, and Law on General Administrative Procedure prescribe rules for conducting procedures by the customs authorities. 

In the above-mentioned case that we were dealing with, we identified the practice of the customs authority that the procedure of “subsequent verification of the proof of origin of goods” upon request of the customs administration of the importing state was ended by way of delivering to the exporter a notification that the goods did not meet the criteria related to the preferential status within the meaning of PEM Convention. The procedure was initiated by way of ordering the exporter to submit the so-called evidentiary documentation, i.e. corresponding documents that prove the origin of the product at hand. After the exporter acted in accordance with the customs authorities’ request, it received after a while a notification that the subject goods did not meet the requirements for preferential status. The notification was delivered in the form of an ordinary letter.

For all those who were not involved in such a procedure, we hereby explain that the preferential status of goods is in the procedure of export clearance to be proved in such a way that the exporter submits in the very procedure of export clearance to the customs authority a request for issuance of EUR.1 movement certificate. The request is to be submitted on a form, set forth by PEM Convention as well as by the Ordinance on Customs Procedures and Customs Formalities. Along with the request the exporter is to submit a short-term or long-term manufacturer’s declaration on the origin of goods, whereas the customs authority, based on the proofs submitted, either issues the EUR.1 certificate or rejects the exporter’s request. By submitting the request, the exporter provides a statement of commitment that he shall, upon customs authorities’ request, submit all proves for the purpose of proving the preferential status of the goods (invoices and extracts from the bookkeeping records of the exporter and manufacturer). Such a statement is provided in the context of authorization of the customs authorities of the importing state to claim from the customs authorities of the exporting state to, in cases of doubt, conduct “subsequent verification of the proof of origin of goods”.

In the case at hand, the exporter is, by way of receiving from the customs authority of the Republic of Serbia, an “ordinary” notification that his goods do not meet requirements related to the preferential status of exported goods, deprived of his right to effective legal protection, respectively right to protect his rights and legitimate interest in a lawful procedure. As already mentioned, the customs authorities are authorised to undertake actions for the purpose of establishing the relevant facts and subsequently rendering corresponding administrative acts, by which they decide on the rights and legitimate interests of the parties involved, only and exclusively in procedures of either so-called regular control or post-release control. A procedure, that is conducted in a lawful manner, shall guarantee that the parties involved assert their rights and protect their legitimate interests. Such a view is further supported by the third paragraph of Article 35 of the Customs Law, which envisages that the customs authority is authorised, when the post-clearance examination of the customs declaration or the customs clearance indicates that the provisions governing certain customs procedures have been applied on the basis of incorrect or incomplete information, to undertake in accordance with customs and other regulations in force the necessary measures and render corresponding decisions in order to rectify irregularities and align the legal situation with the newly established circumstances.  

In the case at hand, it is about a segment of the export clearance, respectively post-clearance examination of existence, authenticity, accuracy, and validity of customs document, i.e. certificate on the origin of goods. Our conclusion is that the customs authority is under paragraph 3 of Article 35 of the Customs Law obliged, if it finds that the regulations related to certain customs procedures have been applied on the basis of incorrect or incomplete information, to render a corresponding decision, respectively an administrative act, by which it shall set aside the EUR.1 certificate, or if this is not the case, terminate the post-release examination procedure (instead of ending the procedure of verification of the proof of origin merely by delivering to the exporter an ordinary letter). Our thesis is further supported by the Article 19 of the Customs Law, which sets forth cases, where the customs authority is authorised to set aside its decisions3. In the procedure of post-release control, the rules of the Law on Inspection Supervision are to be applied as well, based on paragraph 4 of Article 35 of the Customs Law. Hence, the customs authority was obliged to initiate the procedure by way of delivering to the exporter an order for conducting of post-clearance examination and, after having established all relevant facts, providing an explained opinion, which the party/exporter would be entitled to object. Should the customs authority then reject the party’s objection, it would be obliged to act in line with paragraph 3 of Article 35 of the Customs Law, i.e. to render an administrative act on annulment of the certificate of origin of goods.

By sending a mere notification the customs authority also deprived the exporter of the right to an effective legal remedy. If the customs authority fails to render a resolution, by which it decides on the party’s legitimate interest to assert the benefits, provided by the Customs Law, respectively to export the goods with preferential status, the exporter shall never get familiar with the reasons for deprivation of preferential status of goods. This is exactly the reason why the laws prescribe procedures for the purpose of establishing the existence, authenticity, accuracy, and validity of the proof of origin of goods. Furthermore, the legitimate interest of the exporter is also in keeping a successful business relationship with the importer and his business reputation as well as safeguarding the value of his assets in case of raising a claim for compensation of damages by the importer of respective goods (in case, when the customs authority finds that the goods do not have preferential status, wherefore the importer is obliged to pay in the importing state the import duties on the subject goods or to pay higher amount thereof).

We are of the opinion that we have good arguments for success in the procedure; it is not possible to defend the position that the party (exporter) is not entitled to assert his rights and protect his legitimate interests in a lawful procedure.

By Ivan Milosevic, Partner and Janez Voncina, Senior Associate, JPM & Partners

Facial recognition has recently become something mundane: for example, every day we can see smartphones that offer the option to unlock the phone using the owner’s face.

Although this advanced functionality can be justified (and sometimes very useful) for such private needs, its use in public spaces is controversial. In these situations, it can lead to a deep intrusion into the privacy of a large number of individuals who not only did not have the possibility to express whether they want to be recorded, but often do not even know they are being recorded.

In this regard, recording large public areas by relevant authorities and recording smaller public spaces by private entities for the protection of their business are equally controversial. However, in this case, we will focus on the latter example.

What is the benefit of facial recognition in public spaces? 

The benefits of facial recognition in public spaces and areas are most often mentioned in the context of crime prevention and prosecution. One of the more popular examples is video surveillance in supermarkets, where thefts are frequent, which requires establishing of reaction mechanism that will primarily discourage potential thieves from attempting theft, but also make it more efficient to locate them if a crime does occur.

When it comes to this topic, where do European countries stand?

One of the most famous examples of the “private” introduction of this type of technology is the case of a supermarket owner in the Netherlands, who attempted in 2020 to implement video surveillance with facial recognition in his store, precisely with the aim of preventing theft.

However, the Dutch Data Protection Authority prohibited such actions, leading to the adoption of a guide on the legal implications of facial recognition, which addressed numerous practical questions on this topic. In this particular case, it was stated that the supermarket owner would need to obtain consent from each individual consumer entering the store, which is practically impossible.

The main regulatory obstacle is the data protection regulations, with the GDPR at the forefront, which significantly restrict such data processing by requiring that recorded individuals consent to the recording. It is important to emphasize that implicit consent, achieved by posting a notice about recording at the store entrance and assuming that the customer agreed to be recorded by entering the store, is not sufficient.

On the other hand, the Dutch authority mentioned in the guide the previously discussed example of using facial recognition to unlock mobile phones as an exception classified under “private” needs, to which the GDPR does not apply, making the application of this functionality permissible.

Which are the main legal implications of video surveillance with face recognition?

The main question that arises is whether there is an adequate legal basis and justified purpose for processing personal data – specifically, individuals’ faces, in public areas. Among the six grounds provided by the GDPR, none seem appropriate, leading to the inevitable question of the lawfulness of such data processing.

An additional problem is the difficulty in limiting the scope of data collected by recording public areas, which can easily lead to excessive data processing and violation of the data minimization principle. In other words, it is evident that recording an area with a large number of people cannot be considered proportionate when the aim is to detect only one or a few individuals. Furthermore, it raises the question of whether such processing is truly necessary and whether the purpose justifies such invasive measures.

Finally, when recording public areas, questions also arise about where and for how long the collected data is stored. Collecting a large amount of personal data about citizens leads to the necessity to ensure adequate storage and security of such data, as well as determining time limits for their retention. When it comes to recording public areas by private entities, the fact is that data controllers might be subject that lack sufficient resources, experience, and knowledge to take appropriate protective measures regarding the collected data.

Domestic regulation in terms of facial recognition

In Serbia, there are still no regulations on this specific topic.

When it comes to recognition technologies, the discussion in our country is more focused on the use of such functionalities by public entities – competent authorities, in particular. This topic initially came to the forefront when in 2019 the Ministry of Internal Affairs (“MIA”) proposed the introduction of biometric surveillance on the streets for the purpose of recognizing license plates, which resulted in the introduction of the “Oko sokolovo” system. This system does not identify the driver and is thus less invasive to individual privacy.

However, there are also discussions on introducing facial recognition functionality, regarding which the Commissioner for Information of Public Importance and Personal Data Protection (the “Commissioner”) warned that care must be taken to ensure that the faces of other individuals visible in the footage are made unrecognizable after identifying the individual whose recognition is necessary. According to the Commissioner, this would achieve a balance between privacy on the one hand and citizen safety on the other.

The issue of facial recognition video surveillance in public areas clearly brings modern technologies into direct conflict with privacy protection. Given the numerous legal implications that have yet to be resolved, it will be interesting to follow further discussions and considerations as an appropriate legal framework is defined at the international level.

This article is to be considered as exclusively informative, with no intention to provide legal advice. If you should need additional information, please contact us directly.

By Anja Beric, Senior Associate, PR Legal

Former SOG Law Firm Senior Associate Jelena Zivkovic has joined NCR Lawyers as a Partner.

Specializing in dispute resolution and arbitration, contract law, and labor law, Zivkovic worked for SOG Law Firm (affiliated with Kinstellar since 2023 as reported by CEE Legal Matters on July 3, 2023) between 2022 and 2024. Before that, she worked for Stankovic & Partners as a Legal Trainee between 2018 and 2020 and Attorney at Law between 2020 and 2022.

“It is with immense pleasure [that we] announce the new addition to NCR Lawyers and our partnership,” NCR Lawyers Partner Nemanja Curcic commented. “Her dedication to clients aligns perfectly with the core values of NCR Lawyers and together we will provide innovative solutions for our clients.”

While energy is still going strong in the Serbian market, others such as biotechnology and blockchain are certainly worth keeping an eye on, according to SOG in cooperation with Kinstellar Managing Partner Milos Velimirovic.

“The energy sector continues to dominate in Serbia,” Velimirovic begins. “Currently, wind energy is booming, and solar energy is also gaining traction – there are even discussions about nuclear energy.” According to him, “the sector is at the top of the list in terms of transactions, deals, and the number of players involved. The new government has shown a keen interest in this sector, aligning with previous agendas but with renewed vigor.”

Further, Velimirovic mentions that biotechnology is an emerging area of particular interest in Serbia at the moment. “Biotech is catching our attention, albeit with less media coverage. For instance, ZoryaBio, a multidisciplinary team, has developed an interactive map of cancer prevalence in Serbia based on various criteria,” he says. Although the team is not composed of doctors, Velimirovic outlines that “their work is immensely valuable for medical professionals. Serbia ranks among the top four countries globally for biotech, driven partly by a high incidence of cancer and other diseases.” Moreover, Velimirovic indicates that the new government’s strategic documents reveal substantial planned investments in this area, including a dedicated scientific sector with funding between EUR 400 million and EUR 500 million. “I believe biotech will become one of the top three or four sectors to watch in the coming years,” he says.

As for other cutting-edge areas – blockchain and crypto – Velimirovic reports that developments are plenty. “The crypto and blockchain sectors are also booming, though they are not yet mainstream. The startup community is thriving, with several new VC funds being established and local players entering the market.” As he explains it, this influx is “making Serbia competitive on the startup scene, supported by both international schemes and local initiatives.”

Velimirovic explains that it could all be connected with an election cycle that just ended in Serbia. “Post-elections, we’ve noticed an uptick in activities and deals, including some larger transactions. While not directly correlated, the new government’s appointment has positively influenced the M&A market and our workload.” Velimirovic elaborates that the government’s “renewed focus on strategic investments and legislative activities post-election has contributed to this momentum.”

Velimirovic reports that there are not many worthy to report on. “Legislative activities were somewhat on hold due to the elections. Meanwhile, the Rio Tinto lithium mine project, previously a topic of much public discussion, remains under consideration and is likely to be resumed.”

Lastly, he reports that the upcoming “Expo 2027 project is quite significant, with extensive planned investments that will have a broader impact on the economy.”

The National Bank of Serbia (“NBS”) has prepared a Draft Amendments to the Law on Payment Services (“Draft”) and invited experts and other interested parties to submit their suggestions and comments as part of a public consultation by 27 June 2024.

Over the past decade, the NBS has advocated for continuous improvement and digitalization of the payment services market in Serbia, implementing various norms and optimizing payment infrastructure. The adoption of the Law on Payment Services (“Law”) in 2014, followed by amendments in 2018, largely aligned the payment services sector with European Union (“EU”) regulations. By adopting the latest proposed amendments in the Draft and issuing accompanying subordinate regulations for their implementation, the operations in the payment services sector would be fully harmonized with EU regulations.

The objective of the Draft amendments is to encourage the use of advanced technologies in the payment services market, while ensuring greater competition and transparency among service providers. Additionally, these changes aim to enhance user protection and security in conducting innovative payment transactions.

The Draft places special emphasis on enhancing the security of e-payments and implementing measures to protect the confidentiality and integrity of personalized security elements of payment service users, thereby ensuring safe validation and reducing the risk of fraud.

The benefits for the payment services sector from adopting the Draft include:

• Enhanced user security;
• Increased service offerings and provider competitiveness;
• Lower service costs;
• Significant room for innovation in the payment services sector.

Open Banking

Adopting the Draft would also establish Open Banking in the Republic of Serbia. Open Banking allows access and control over users’ financial accounts and enables instant and cashless payments through applications that connect the accounts of business banks and other payment institutions of payers and payees. Open Banking is set to become the primary source of innovation that has the potential to completely transform the banking sector.

Under the proposed concept of Open Banking in the Draft, two new types of services are introduced:

• Payment from users’ e-accounts:

This option enables payments directly from users’ payment accounts without the use of payment cards, facilitating cashless payments on user internet sales points.

• Unified overview of users’ account information:

These applications provide users with a comprehensive overview of balances and payments from all their bank accounts. Such access to information allows users to share it with other financial service providers to obtain additional financial products and/or services, without the outdated process of obtaining account statements from banks as in the current practice.

Membership in SEPA 

The Single Euro Payment Area (“SEPA”) is an EU project introduced after the adoption of the euro as the single currency, aiming to facilitate more efficient and cost-effective international payment transfers among users. This payment method is ensured through unified rules and practices applied by all banks and other payment service providers in the EU, including EU members not using the euro, as well as certain non-EU countries (Switzerland, Norway, United Kingdom, and Iceland).

In preparation for Serbia’s accession to SEPA, the NBS has drafted a Draft Decision on specific rules for executing credit transfers and direct debits in euros (“Draft Decision”). The Draft Decision establishes business, technical, and other requirements for conducting credit transfers and direct debits in euros. Alongside adopting the Draft Decision for SEPA membership, regulatory alignment will be necessary in areas (beyond payment services), including anti-money laundering, banking operations, competition protection, and personal data protection.

SEPA membership aims to reduce costs for individuals making electronic and instant payments internationally. Normative and infrastructural alignment is required for payments to be executed within seconds, thereby reducing costs for all participants in e-payment processes.

Conclusion

Open Banking and SEPA membership have the potential to significantly enhance competitiveness, lower service costs, and the speed of e-payments in the Republic of Serbia, as well as improve user experience in the advanced banking sector. They offer the potential for instant payments in foreign currencies on an international level without additional conversion costs.

However, there are potential risks for users, as data sharing will occur on a broader scale compared to traditional banking. Time and practice will determine whether the regulatory framework, if adopted, will successfully mitigate all potential harms to payment service users when moving away from standard business operations solely within the traditional banking sector.

This article is for informational purposes only and does not constitute legal advice. For further information, please feel free to contact us.

By Predrag Pavlicic, Senior Associate, PR Legal