Category: Serbia

Cvjeticanin & Partners has advised Inclusio on securing EUR 50,000 in seed-phase financial support from the EBRD.

According to the firm, the funds are allocated as part of the EBRD Star Venture grant and “will help [Inclusio] grow significantly.”

The Inclusio social enterprise focuses on helping people with disabilities access public locations such as banks, post offices, stores, etc. It notifies employees at these locations of a person’s arrival and provides information on the nature of assistance required. “The goal is to help every customer have a smooth experience, help companies and their employees provide the best possible service to their clients, as well as raise awareness for the needs of people with disabilities,” Cvjeticanin & Partners reported.

The Cvjeticanin & Partners team included Founding Partner Nenad Cvjeticanin and Partner Marija Cvjeticanin.

CT Legal has promoted Milena Radulovic to Partner.

Specializing in corporate and commercial, banking and finance, and bankruptcy, Radulovic has been with the firm since December 2022. Before that, she was the Manager of Legal Affairs at Nasa AIK Banka between March 2022 and December 2022. Earlier, she worked as a Senior Legal Advisor for Sberbank, between 2012 and 2022, as a Senior Legal Associate with Erste Bank Serbia, between 2011 and 2012, and as a Legal Adviser for Volksbank Serbia between 2008 and 2011.

Radulovic started her legal career as a Law Trainee with the Kosic Law Office.

NKO Partners has advised Dr. Max on its acquisition of the Dr. Ristic pharmacy chain from MediGroup SEE.

According to the firm, Dr. Ristic is based in Belgrade and consists of eight retail units, of which seven pharmacies are in Belgrade and one is in Novi Sad.

NKO has recently advised Dr. Max on its acquisition of the Uniprom pharmacy chain in Zajecar (as reported by CEE Legal Matters on October 4, 2023).

The NKO team included Partners Djordje Nikolic and Branko Jankovic and Associate Goran Mihajlovic.

On November 3, 2023, Zivkovic Samardzic announced that the sale of Eurobank Direktna Beograd to AIK Banka (reported by CEE Legal Matters on March 8, 2023) had closed upon receipt of the necessary regulatory approvals.

According to the firm, Eurobank entered the banking business in Serbia in 2003 as Eurobank EFG Serbia. After the merger with Direktna Banka, the merged bank – Eurobank Direktna – became number eight in the Serbian market with a market share of 5.5% in assets, a loan portfolio of EUR 1.7 billion, and EUR 1.5 billion in deposits (as of September 2022).

According to Zivkovic Samardzic, following the recently closed transaction, Eurobank Direktna’s and AIK Banka’s joint participation in the Serbian banking market will be higher than 13%, with over EUR 4 billion in deposits and a very strong capital base. “The acquisition of Eurobank Direktna is another milestone in the Serbian banking sector as it also reflects the increasing competition and consolidation within Serbia’s banking sector,” the firm announced.

As previously reported, Zivkovic Samardzic and Milbank advised the shareholders of Eurobank Direktna while Schoenherr and Holman Fenwick Willan advised AIK Banka.

The Zivkovic Samardzic updated team included Partners Branislav Zivkovic, Sava Pavlovic, and Uros Djordjevic and Associates Ilija Milosavljevic and Ana Grebo.

The Schoenherr team included Partners Matija Vojnovic, Vojimir Kurtic, and Dusan Obradovic.

Editor’s Note: After this article was published, Kinstellar announced it had advised AIK Banka on the competition law aspects of the EUR 280 million acquisition. The firm’s team was led by Special Counsel Olga Sipka and Senior Associate Aleksandra Stecuk.

Although a seemingly simple question, the obligation to incorporate a branch does not have a simple answer. Branch incorporation of business companies is foreseen by the Company Law (hereinafter: “Company Law”).

The company branch office is a separate organizational unit of a company in the territory of the Republic of Serbia through which the company performs activities in accordance with the law. A branch does not have the capacity of a legal person and acts on behalf and for the account of the company in legal transactions, which is liable, without limits, for the obligations towards third parties resulting from the operations of its branch.

Amendments to the Company Law from 2018 introduced the obligation to register a branch with the Agency for Business Registers: “A branch of a domestic or foreign company is registered in accordance with the registration act.” However, two lawyers – three opinions make a seemingly unequivocal sentence have two meanings: is there an obligation to only register an incorporated branch or is there an obligation to incorporate a branch? Does each separate place where the company carries out its activities must be treated as a branch and is the company obliged to register each such separate place as a branch?

In the proposed amendments to the law, it is explained that the mandatory registration of the branch is introduced in order to facilitate the monitoring of the activities of the branch, which is important from the point of view of tax policy and employment policy, insurance, social issues, etc.

A branch is formed by a decision passed by the general meeting unless otherwise provided for, which is registered. Therefore, companies can still form business units by the decision of the legal representative, which is not registered, for all those needs, i.e. premises, for which the obligation to incorporate a branch is not prescribed by law.

Additionally, the criteria set by the definition in the Company Law should also be taken into account; namely, if the separate place is not organizationally independent, whilst this independence certainly cannot be measured as in the case of a separate company but rather its separate part, it cannot even be viewed as a branch in the sense of the aforementioned law, and the question of its mandatory incorporation and registration would not even arise.

Furthermore, the Law on Tax Procedure and Tax Administration contains the obligation of the taxpayer to submit an application to the Tax Administration for the registration of data that is not reported to the Agency for Business Registers, on all business premises in which they stock or store goods or perform activities. Therefore, the regulation of this law allows the possibility for the company to carry out activities on a premise that is not registered as a branch in the Register of Business Entities but obliges them to report such premises to the Tax Administration.

Tax regulations distinguish between the concepts of branch and permanent business unit. Namely, the Law on Corporate Income Tax defines a permanent business unit as any permanent place of business through which a non-resident taxpayer carries out activities (branch, plant, representative office, place of production, factory or workshop, mine, quarry or other place of exploitation of natural resources). Therefore, a branch is only one of the forms of a permanent business unit. Each branch in the sense of the Company Law is also a permanent business unit in the sense of tax regulations if it was formed by a non-resident, but not every permanent business unit is a branch.

Finally, in certain situations, the legislator provided for the obligation to incorporate a branch through a lex specialis, in relation to which the Company Law represents a lex generalis. Such cases are rare, but they highlight special situations in which the obligation to incorporate a branch exists, as opposed to the general rule of the Company Law on the possibility thereof.

To begin with, the Law on Tourism stipulates the obligation of a tourist agency that performs tourism activities in its registered seat, but not as its main activity, to register a separate branch for it. Additionally, if it performs tourism activities outside its registered seat, it is obliged to register a branch for each place of business. An exception is provided only for the occasional performance of tourist activities at fairs and other public manifestations within the legal term.

The same law regulates the service of renting motor vehicles, i.e., rent-a-car. As in the previous case, the criteria for the obligation to incorporate a branch is the provision of services at the registered seat, but not as a predominant activity, or the provision of services outside the registered company’s seat.

Previously regulated by the same law as the field of tourism, since 2019 the field of hospitality is contained in a special Law on Hospitality, which similarly establishes the same criteria for branch registration when performing hospitality activities, as well as exceptions for the same, with special reference to catering activities in nautical and hunting tourism facilities.

What is interesting about the above-mentioned special laws is that companies which are entering tourism and hospitality professions are often not even aware that they are violating the relevant regulations, until the inspection authorities make them.

Furthermore, the Law on Road Traffic Safety establishes the obligation to incorporate a branch for training candidates for the driving exam outside the territory of the police administration unit where their registered seat is located, as well as obtaining a license to perform the above-mentioned activity for each of the branches.

Exceptions are established for conducting a practical exam outside a populated place that does not meet the requirements for conducting a practical exam, as well as for conducting practical training throughout the territory of the Republic of Serbia.

In addition, the same regulation regulates the performance of vehicle technical inspection as an activity of general interest that can be performed by a company in several facilities, where a separate branch is incorporated for each facility, and authorization must be obtained for each.

Finally, the new Law on Electronic Communications does not contain the obligation to register branches of companies that perform other activities in addition to electronic communications, which was contained in the previous law. The new provision is that the regulator may, under certain conditions and as an exceptional measure, impose on a vertically integrated company the obligation to separate its activities into a separate business unit, in the form of a related business company or branch, or the company may voluntarily carry out such separation. 

Having in mind all of the above, and especially the fact that the provisions of one law cannot be interpreted independently of the legal system in which they appear, the obligation to incorporate a branch as a general rule does not exist, while the obligation to register an already incorporated branch certainly exists. Therefore, the law does not impose on all subjects to form branches but to register them as such.

By Katarina Milic, Senior Associate, JPM & Partners

The past few months in Serbia have seen significant public attention focused on two media laws: the Law on Public Information and Media and the Law on Electronic Media. Various opinions have been expressed, with the government of the Republic of Serbia, specifically the Ministry of Telecommunications and Information, as the formal proposer of these contentious amendments, while independent journalist associations have taken the opposite stance. On October 26, 2023, the National Assembly passed and adopted these amendments. Less than a decade after significant changes, these two crucial media laws have come under scrutiny to align with international standards of freedom of expression.

The work on amending these laws, which regulate the media landscape in Serbia, is a result of Serbia’s obligation to harmonize its domestic legislation with the regulations and legal accomplishments of the European Union. The proposer of the laws, the Ministry of Telecommunications and Information, has considered them essential regulations whose main value lies in their compliance with European directives.

The key changes to these laws that have generated and continue to generate significant debates are discussed in the following part of this article.

Regarding the amendments to the Law on Public Information and Media, the differences in interpretation of provisions related to the authority of the Press Council in the process of allocating budget funds to media outlets and provisions determining who can be a media publisher represent central points of contention between some media organizations and government representatives.

The Law on Public Information and Media defines who can be a media publisher. According to the disputed provision, the publisher of media cannot be the Governmental bodies but it can be a legal entity in public ownership, provided it does not receive state aid or engage in activities of general interest. Journalist associations see this as an indirect return of media ownership to the state.

A similar situation arises for media whose publishers are institutions founded by National councils of minorities. These media outlets face the most significant pressure from their founders because the institution’s founder appoints the governing bodies of the media publisher.

Independent journalist organizations view this move as a step backward compared to a period about a decade ago when the state decided to withdraw from the media sector, especially during the privatization of media.

The Law on Public Information and Media, among other things, contains a section regulating the co-financing of projects in the field of public information to serve the public interest. It envisages that one of the criteria for project evaluation should be the extent through which the project will be implemented adheres to professional and ethical standards.

Journalist associations highlight that this provision is discriminatory since some media outlets will have to adhere to a code of ethics, while others will have a blank check from the state to violate professional ethical standards without facing any sanctions.

Regarding the Law on Electronic Media, on the other hand, the addition of two paragraphs to Article 122 has caused the most dissatisfaction. It mandates operators to number channels as stipulated by law, with an obligation to place “Public service programs” in the first three slots, followed by television stations with national frequency. What is also contentious is that if operators fail to reach an agreement on pricing with these television stations, the Regulatory Body for Electronic Media will determine the price.

Another crucial amendment relates to the selection of members of the Regulatory Body for Electronic Media (REM), which will now be chosen by the National Assembly but based on proposals from Republic Ombudsman, Commissioner for Equality, Commissioner for Public Information and Personal Data Protection supporting in this way, its independent status.

The members of the REM chosen in accordance with the previous Law on Electronic Media will continue to perform their duties until one year after the entry into force of this law. New members of the REM will be selected before the term of the current members expires.

The new law also defines inappropriate content for underaged population. Additionally, the REM will have the authority to carry out inspections of media operations.

It is essential to analyze these new media laws and its provisions in the context of approaching general ellections in Serbia. Only the time will tell whether they will turn out to be a stumbling block or a stepping stone for media freedom.

By Kristina Lekovic, Associate, Cvjeticanin & Partners

NKO Partners has advised Rock Flow Dynamics on its acquisition of a development center in Belgrade and entry into the Serbian market.

Houston-headquartered Rock Flow Dynamics is a software engineering firm focused on the energy sector. It offers dynamic reservoir simulation technology, training, software support, and project consultancy. It was established in 2005 and has offices in 25 countries, with over 300 clients to date.

According to NKO Partners, “RFD’s new hub aims to support the creation of tNavigator – a state-of-the-art reservoir modeling and simulation platform that offers advanced innovative tools for geology, geophysics, and reservoir engineering disciplines.”

The NKO team included Co-Founding partner Djordje Nikolic and Senior Associates Srna Popovic and Luka Aleksic.

The Republic of Serbia and the People’s Republic of China officially signed a Free Trade Agreement (FTA) on 17 October 2023.

The FTA represents grounds for the creation of the free trade zone among others by facilitating the trade of goods in accordance with GATT 1994. Most importantly, the FTA:

• envisages national treatment of goods originating from the country signatories, meaning that imports will not be treated less favourably than the same or similar domestically-produced goods once they have passed custom;
• envisages that country signatories will strive towards simplifying customs procedures;
• introduces a range of preferential customs measures between the signatory nations, categorized as follows:
• A0: Immediate abolition of customs and other duties upon the FTA’s entry into force.
• A5: Gradual abolition of customs and other duties in five one-year phases, commencing from the FTA’s entry into force.
• A10: Gradual abolition of customs and other duties in ten one-year phases, commencing from the FTA’s entry into force.
• A15: Gradual abolition of customs and other duties in fifteen one-year stages, commencing from the FTA’s entry into force.
• E: Continued application of customs and other duties even after the FTA’s entry into force.
• introduces most favoured nation (MFN) treatment in relation to import between the signatories, meaning that the base custom duty applicable in a country signatory as of 1 January 2022 will be applicable to import between the signatories, if lower than the one under the FTA;
• references to and calls for the application of GATT 1994 and the related agreements for a number of matters, such as quantitative restrictions, subsidies, anti-dumping measures, sanitary and phytosanitary measures, technical regulations, etc.

The FTA will take effect on the first day of the third month following the month when both signatories notify each other of completing all necessary legal procedures required for its implementation.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Branimir Rajsic, Senior Consultant, Katarina Tomic Senior Associate, Milica Mijatovic Associate, Karanovic & Partners

In one of our previous texts (available here) we discussed misdemeanors, hence in order to analyze in more detail legislator’s penalty policy pertaining to legal entities we will here elaborate the economic offences which, along with criminal acts and misdemeanors, also fall into the penalty corpus of our legal system.

Specific nature of economic offences is reflected in the fact that they represent more severe law infringements than misdemeanors, but minor than criminal acts.

Economic offences in general

According to the definition included in the Law on Economic Offences (Official Gazette of SFRY, no. 4/77, 36/77 – corr., 14/85, 10/86 (consolidated text), 74/87, 57/89 and 3/90, Official Gazette of FRY, no. 27/92, 16/93, 31/93, 41/93, 50/93, 24/94, 28/96 and 64/2001 and Official Gazette of RS no. 101/2005 – other law) (“the Law”), economic offence is socially harmful infringement of regulations on economic or financial operation which caused or might cause more severe consequences and which is defined by an act of competent authority as economic offence. Legal entity and responsible person in a legal entity may be liable for economic offence.

Therefore, for the purpose of protecting legality in the field of economic and financial operation, the law regulates general terms and principles for imposition of penalties for economic offences, system of penalties and procedure for establishing liability and imposing penalties on perpetrators of economic offences.

However, the law does not stipulate individual acts that represent economic offences, as this is done in several other laws regulating economic and financial operation. For instance, economic offences are set out in the Law on Banks, Law on Food Safety, Law on Energy, Law on Capital Market, Law on Copyright and Related Rights, Law on Road Traffic Safety, Law on Accounting and many others.

The largest number of economic offences are done in the field of accounting and financial operation, while the practice of acting courts indicates that they mostly comprise of omission to submit regular annual financial statements and statement of inactivity for the last financial year.

Penalties for economic offences

As economic offences represent punishable conduct, the penalties prescribed for economic offences resemble those imposed for misdemeanors and criminal acts, but their number is smaller. Namely, penalties that may be prescribed, i.e., imposed for economic offences are:

• fine;
• conditional sentence; and
• safeguard measures.

When it comes to fine, the Law stipulates that economic offences may be exclusively subject to imposition of monetary fine.

Fine

The lowest fine that may be imposed on a legal entity is RSD 10,000, and the highest is RSD 3,000,000, while the lowest fine for responsible person in a legal entity is RSD 2,000 and the highest RSD 200,000.

Within this range, the law stipulates special ranges of fines for specific economic offences. Thus, for example:

• The Law on Food Safety stipulates that legal entity will be fined RSD 300,000 to 3,000,000 for economic offence if it conducts manufacturing and trade of food and feed without being registered in the Central Register of Facilities or if it sells unsafe food etc., while responsible person in a legal entity will be fined for the same economic offence from RSD 50,000 to 200,000;
• The Law on Copyright and Related Rights stipulates that company or other legal entity will be fined RSD 100,000 to 3,000,000 for economic offence if it discloses, records, reproduces or communicates to the public in any manner wholly or partly, a work of authorship, performance, phonogram, videogram, broadcast or database without permission, or distributes, or rents or holds in possession in commercial purposes copies of works of authorship, performances, phonograms, videograms, broadcasts or databases that have been reproduced or distributed without authorization etc., while responsible person in a legal entity will also be subject to fine from RSD 50,000 to 200,000 for the same economic offence.

Fine for a legal entity may also be imposed in the amount corresponding to the amount of damage, non-execution of obligation or value of goods or other items that are the subject of economic offence, in which case such fine may amount up to twenty times the amount of damage, non-executed obligation or value of goods or items that are the subject of economic offence.

Alike in case of misdemeanors, the court may impose a mitigated penalty, i.e., impose a penalty that is below the minimum prescribed for an economic offence, when this is envisaged by the Law, special regulations setting out economic offence and in cases with particularly mitigating circumstances. It was observed in practice that, upon determining penalty, the courts particularly consider the amount of turnover on a legal entity’s account as a fact relevant for determining the amount of fine.

Also, the court may stiffen penalty envisaged for economic offence committed by a legal entity or a responsible person, which fine may be up to double the amount of maximum prescribed penalty, in case of recidivism.

The court decision determines the deadline for fine payment, which may not be shorter than 15 days nor longer than three months, while in justified cases the court may allow the penalized legal entity and responsible person to pay fines in instalments; however the deadline for full payment may not exceed one year.

Although the Law does not stipulate prison sentence, it is possible to impose prison sentence on a responsible person if such responsible person fails to pay the fine in a legally prescribed deadline, in which case the fine is replaced with prison sentence (by appropriate application of provisions of the Law on Enforcement of Criminal Sanctions).

Conditional sentence

Court may also pronounce conditional sentence to a legal entity and responsible person for the committed economic offence. This means that they will be subject to fine, however it will not be enforced if the convicted (legal entity or responsible person) does not commit another economic offence during the supervision period defined by the court (which may not be shorter than one and longer than two years).

Safeguard measures

The following safeguard measures may be pronounced for economic offences:

• public disclosure of judgment;
• item confiscation;
• prohibition for legal entity to perform certain activity; and
• prohibition for responsible person to perform certain duties.

The court may impose one or more safeguard measures on a perpetrator of economic offence when there are legally prescribed conditions for such imposing.

Prosecution and statute of limitations

Economic offences fall into the category of punishable acts that are prosecuted ex officio, i.e., they are within the jurisdiction of public prosecutor’s office, which conducts investigation and subsequently files the information to the competent court.

When it comes to the statute of limitations for prosecution of economic offences, the Law stipulates that it shall be upon expiry of three years from the day of committing economic offence. Exceptionally, in case of economic offences in the field of foreign trade, foreign exchange and customs operations, the statute of limitations is five years from the day of committed economic offence.

Statute of limitations for enforcement of penalty for economic offence shall be upon expiry of three years from the day of validity of the decision imposing such penalty, while statute of limitations for enforcement of safeguard measure of public disclosing of judgment shall be upon expiry of six months, for safeguard measure of confiscation of items upon expiry of three years from the day of validity of the decision imposing such measure. Statute of limitations for safeguard measure of prohibition for legal entity to perform certain activity and prohibition for responsible person to perform certain duties will be upon expiry of the period for which such measures are imposed.

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 Ivana Ruzicic, Managing Partner, and Danica Nikitovic, Junior Associate, PR Legal

Petrovic Legal has advised SPS ME on its acquisition of Gulf International Pipe Industry from the Gulf Investment Corporation, the Arkan Group, Posco Holdings, the Oman Investment Corporation, and Capitoline Holding Limited.

SPS ME is a Middle Eastern trader of carbon steel, stainless steel, and special steel pipes.

Gulf International Pipe Industry is the first manufacturer of high-pressure steel line pipes and casing pipes in Oman.

The Petrovic Legal team was led by Partner Stefan Petrovic.

Petrovic Legal could not disclose additional information on the matter.