Category: Serbia

Former Zivkovic Samardzic Partner Igor Zivkovski has joined Schoenherr’s Serbian affiliate Moravcevic, Vojnovic i Partneri as a Local Partner.

Before joining Schoenherr, Zivkovski spent the last ten years with Zivkovic Samardzic, more than five of which as a Partner. Earlier, he spent almost two years as an Associate with Karanovic & Partners.

Zivkovski’s arrival will “strengthen [Schoenherr’s] venture capital and start-up practice, where he has advised both investors and founders on the most significant financing rounds in Serbia to date and continues to be their trusted advisor. Igor will also join our M&A practice group, where he has extensive experience in the technology, media, and telecommunications, financial services, and consumer sectors,” the firm announced.

Everyone is free to choose their work, time, or place of engagement and the profession they will commit to. The Serbian Constitution grants these basic human rights while also envisaging that all jobs are available to everyone under equal conditions. A similar principle is founded under the Law on Protection of Competition – that the protection of competition on the market of RS is regulated with the aim of economic progress and the well-being of society as a whole, especially to the consumer’s benefit. However, these are only the general principles that are subject to numerous constraints with the purpose of either protecting basic human rights, preventing unfair competition, or harboring the whole economic system with the consumers and companies as its vital participants.

The limitation of these freedoms is articulated either within employer-employee relation (employment non-compete), by means of statutory rules under the Companies Law of RS (statutory non-compete), or via an agreement between the parties other than employment (contractual non-compete). Due to the specific nature of each of these relationships, the rules and borders of such constraints are sometimes vastly different.

Employment non-compete

Labour Law enables an employment agreement to stipulate activities that an employee cannot engage in, either on own behalf or on behalf of another legal entity or natural person, without the employer’s consent. This is subjected to various limitations having in mind the disproportionate and unequal employer-employee relationship where the basic assumption is that the employee is a ‘weaker’ party in terms of leverage. Hence, the law introduced the following rules as essential for non-compete enforceability: 

• the non-compete clause can be applicable only if specific conditions are met, and in particular: that the employee can learn, by working with the employer, new, particularly important technology, know-how, a wide circle of business partners, or learn significant business information and secrets. Therefore, the prohibition of competition is limited in terms of the type or quality of assets or information that employees can acquire during their engagement.
• non-compete clause can only be determined under the employment agreement and not under the company’s bylaws. However, some conditions can be set under the bylaws (territorial validity of the prohibition of competition, depending on the type of activity, can be determined by a company’s bylaw – such as General Employment Rulebook).
• non-compete clause can be agreed upon for two (2) years after the employment termination provided that the employer is paying such former employee the proper monetary consideration during the respective period. The general rule is that the non-compete clause affects only the period of the employment relationship (where the salary is deemed enough consideration for the employee’s loyalty), but, if agreed and under the condition that the ‘proper’ monetary fee is to be paid by an employer, prohibition period can be prolonged for 2 years after employment termination.
• non-compete clause must provide the exact or at least more specific jobs and types of engagement from which the employee would be prevented from engaging.

If the clause meets the criteria under the Labor Law, an employee who violates the prohibition of competition can suffer material consequences. For example, the employer can demand: 

• reimbursement of damages (that needs to be proven and require actual damage suffered by the employer) from the breaching employee or
• the contractual penalty – only if envisaged under the employment agreement irrespective of the actual damage suffered. The contractual penalty must be in accordance with the Law on Contracts and Torts (the amount is determined at the parties’ discretion in total amount, in percentage, or for each day of delay, or in some other manner, but in a practical sense, cannot be disproportionate concerning the amount of actual damage suffered). This is an easier solution for employers given that it does not require for the actual damage to be suffered and the employer doesn’t need to prove the occurrence of damage itself. Regardless, if the amount of actual damage is greater, the employer can request the difference between the penalty and the suffered damage (but such difference must be proven by the employer within the respective court proceeding). 

In case the employee breaches the post-termination non-compete (2 years after employment termination), the employer can invoke such breach (request damages or contractual penalty) only if the monetary compensation was paid to the employee beforehand.

Mistakes that can lead to unenforceability of non-compete clause

• the employers (mostly companies) are imposing the non-compete clauses on employees without justified reason (when there is no new, particularly important technology, know-how, a wide circle of business partners, or learning significant business information and secrets) or without elaborating what those reasons are;
• the employers (mostly companies) that fulfill the preconditions addressed above are failing to provide ‘proper’ monetary consideration to employees for the two (2) years period after the employment termination. This is the most common malpractice by employers and occurs either when not stipulating any monetary compensation or only the ‘symbolic’ amounts that cannot be considered as the proper fee.

These mistakes come naturally given that employers value the prohibition of competition mostly during the employment period but also having in mind that the Labour Law is not clear on the exact amount (or criteria to determine such amount) that should be paid to employees in the post-termination period. Such omissions can result in an unenforceable non-compete clause and thus great risk for the employer.

Statutory non-compete

According to the provisions of Article 75 of the Companies Law in RS, persons with special duties (under the meaning of Article 61 of Companies Law[1] ) cannot, without approval:

• have the status of a person who has special duties in another company with the same or similar business activity (competitor);
• be an entrepreneur with the same or similar business activity;
• be employed at a competitor or be otherwise engaged in a competitor;
• be a shareholder or founder of another legal entity with the same or similar business activity.

By the incorporation act, the company can:

• extend the prohibition to other persons, but cannot affect their already acquired rights;
• determine that the prohibition applies even after the termination of the status of a person who has special duties, but not longer than two (2) years;
• indicate jobs, the way or the place of their performance that does not constitute a violation of the non-compete clause.

Both employment non-compete and prohibition of competition under the Companies Law are legally valid ways of restraining the freedom of participating in the market or working with competitors. Due to the nature of employment relations on the one hand and between the company and persons with special duties on the other, there are some crucial differences between these two. 

• the prohibition of competition under the Companies Law usually is in force while the persons with special duties have their respective functions within the company;
• extensions and changes under the Incorporation Act cannot affect already acquired rights of the persons with special duties (g. the amendments to the Incorporation Act cannot reduce the acquired rights of the current director in the company, meaning that the prohibition of competition cannot be extended, prolonged, nor essentially broaden during the capacity of that person)
• it can be extended by the Incorporation Act for two (2) years after the special duties of a person cease, but the Companies Law does not provide the compensation to be paid in such cases as a mandatory rule (unlike the Labor Law where the monetary compensation for the 2-year post-termination period is mandatory even if the employment agreement does not directly stipulate employee’s right to compensation).

Contractual non-compete 

Aside from the employment non-compete and the prohibition set out by the Companies Law, the parties can agree upon the prohibition of competition under the general principles of Law on Contract and Torts as a part of one of the contract mechanisms to prevent their engagement with competitors or to establish exclusive provision of goods or services between the businesses. Hence, this mechanism is usually used in commercial agreements and B2B relationships.

Under the Law on Contracts and Torts, the parties are free, within the limits of mandatory regulations, public order, and fair customs, to arrange their relationships under the contract as they wish. Hence, a non-compete clause can be a part of various agreements if agreed under the Law on Contract and Torts and other applicable mandatory regulations. The commercial entities (companies, entrepreneurs, traders, etc.) are usually well-informed, more cautious, and equal between themselves, unlike the employer-employee relationship. Therefore, no explicit rules are set for this prohibition of competition to be applicable unlike for employment non-compete.

Regardless, there are mandatory regulations (other than the Law on Contracts and Torts) that should be addressed. So, to establish the applicable and legally binding non-compete clause under the commercial agreement, it is necessary to articulate the provisions in line with the mandatory regulations.

Unfair market competition

Law on Trade defines unfair market competition as an action by a trader or service provider directed against its competitor, which violates codes of business ethics and good business practices and causes or may cause damage to another competitor, and especially:

• by making untrue and offensive claims about another merchant or service provider;
• by presenting information about another trader or its goods, service provider, or service, which is aimed at damaging the reputation and business of that trader or service provider;
• by selling goods with markings, data, or form, which justifiably creates confusion among consumers regarding the source, quality, and other properties of the goods or services;
• acquiring, using, and disclosing a trade secret without the consent of its owner, to make his position on the market difficult;
• promise, i.e. giving gifts of greater value, property, or other benefits to other merchants or service providers, to provide the giver with an advantage over competitors;
• unauthorized display of the quality mark, trust mark, or similar mark by the trader.

Hence, when contracting the non-compete for commercial agreements, it is required to respect the mandatory rules and not enter the area of conducting unfair competition as provided under the Law on Trade.

Restrictive agreements

On the other hand, parties should pay attention to avoid the possibility that the commercial agreement is not deemed restrictive under the Law on Protection of Competition. This law defines restrictive agreements as those made by undertakings with the objective or the consequence to considerably limit, violate, or prevent competition on the territory of the RS. They are prohibited and void, and could be in the form of contracts, particular provisions in contracts, or specified or implicit arrangements, where:

• the purchase or sale prices or other conditions of trading are determined directly or indirectly;
• the production, market, technical development, or investments are limited and controlled;
• unequal conditions of operations are applied in the same activities for different undertakings, through which the undertakings are put into an unfavorable position about their competition;
• the contract or agreement is conditioned to the acceptance of additional obligations. that by their nature and trading habits and practice are not connected with the subject of the agreement;
• the markets or procurement sources are divided.

Therefore, when integrating the non-compete clause within the commercial agreements, the parties must pay attention to specifics, to avoid restrictive clauses and provisions that will be rendered as null and void.

Conclusion 

All these rules need to be properly addressed irrespective of their differences, given this legal mechanism seems to be irreplaceable in the dynamic world of constant innovation – especially within the IT sector (including blockchain, AI-powered platforms, tools, open-source, and interconnected applications, etc.) where people represent the main capital and growth factor. Moreover, the companies rely on these legal constraints to protect their most valuable products (information, know-how, and special knowledge related to working processes) so it should not be overlooked by any of the market participants, even more so, having in mind that the consequences could be irreparable.

General partners; shareholders of a limited liability company who own a significant share in the company’s share capital or limited liability company shareholder who independently or with other person/entity acting together with him, owns more than 25% of voting rights in the company); Shareholders who own a significant share in the company’s share capital or a shareholder who is the controlling shareholder of the company in terms of Article 62 of Companies Law (if one member, independently or with other person/entity acting together with him, owns more than 25% of voting rights in the company); Directors, supervisory board members, representatives and procurators; Liquidator.

By Aleksandar Popovic, Partner, and Milos Maksimovic, Senior Associate,  JPM & Partners

NKO has advised the Dr. Max Group on its acquisition of the Uniprom pharmacy chain in Zajecar.

NKO had already advised the Dr. Max Group on other pharmacy chain acquisitions in 2023: AU Medis Lek (as reported by CEE Legal Matters on January 6, 2023), Cvejic (as reported on January 31, 2023), and Beolek (as reported on March 9, 2023).

The firm had also advised the Dr. Max Group on its acquisition of a number of other pharmacy chains in Serbia, in 2022, including Pancevo-based AU Kod Suncanog Sata and Veliko Gradiste-based AU Selic (as reported by CEE Legal Matters on October 11, 2022), Belgrade-based K-Pharma (as reported on June 8, 2022), the Janja pharmacy chain (as reported on March 28, 2022), and the Zlatni Lav pharmacies (as reported on January 5, 2022).

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

Zivkovic Samardzic has advised the shareholders of HDL Design House on their sale of the company to Capgemini Consulting Oesterreich. Amoiridis reportedly advised HDL Design House as well. Karanovic & Partners and Moussas & Partners reportedly advised Capgemini.

According to the buyer’s press release, founded in 2001 and headquartered in Belgrade, HDL Design House comprises approximately 300 highly-skilled engineers with substantial experience in delivering advanced custom chip designs for multiple industries.

Capgemini Consulting Oesterreich is a multinational information technology services and consulting company.

The Zivkovic Samardzic team included Partners Branislav Zivkovic, Uros Djordjevic, Igor Zivkovski, and Sava Pavlovic.

Moravcevic Vojnovic and Partners in cooperation with Schoenherr has advised the shareholders of Maxbet on the sale of a 51% stake in the company to Flutter Entertainment for a cash consideration of EUR 141 million. Karanovic & Partners, working with Arthur Cox, advised Flutter Entertainment.

The transaction remains contingent on regulatory approval.

Maxbet is Serbia’s second-largest omni-channel sports betting and gaming operator.

Flutter Entertainment is a sports betting, gaming, and entertainment company. According to Schoenherr, Flutter also has the opportunity to acquire the remaining 49 % in 2029. “This transaction marks a strategic milestone for both companies. For Maxbet, this partnership represents a significant leap forward, aligning perfectly with their strategy to strengthen their local presence and enforce innovative growth opportunities. It also underscores Flutter’s commitment to securing strong positions in regulated markets and replicating past successes in similar ventures with local heroes in Georgia and India.”

Earlier this year, Schoenherr had also advised Maxbet on its acquisition of El Dorado Slot Clubs from Bargame (as reported by CEE Legal Matters on January 9, 2023).

The Schoenherr team included Partners Luka Lopicic, Marija Vlajkovic, and Jelena Arsic, Attorneys at Law Pavle Eric, Zoran Soljaga, and Magdalena Petreska, and Associates Milos Jokic and Andrej Zoric.

The Karanovic & Partners team included Senior Partner Milos Vuckovic, Partners Ivan Nonkovic and Bojana Miljanovic Hussey, Senior Associate Sava Draca, and Junior Associate Ljubica Stojanovic.

Trade secrets are an invaluable asset for many businesses, often encompassing years of research, innovation, and strategic development. Protecting them is paramount, and the legal landscape surrounding this protection is ever-evolving. The European Union Intellectual Property Office (EUIPO) recently published the report “Trade Secrets Litigation Trends in the EU” (June 2023), which provides fresh insights into the state of trade secrets litigation within the European Union.

It is important to understand what trade secrets are and why they need to be protected. Trade secrets are confidential information that gives a business a competitive advantage. Examples of trade secrets include manufacturing processes and marketing strategies. If this information falls into the wrong hands, it can harm a business and give competitors an unfair advantage.

Trade secrets are protected as a form of intellectual property, and this document is significant for the SEE region as well, as all the countries (Albania, Bosnia & Herzegovina, Montenegro, North Macedonia and Serbia) adhered to the stabilisation and association agreements with the EU, providing that all of them need to reach the same standards of intellectual property protection as the one in the EU.

The Evolving Landscape

At its core, trade secrets litigation revolves around the unauthorised use or disclosure of business-critical information that gives a company a competitive edge. This can include anything from customer lists and supplier contracts to formulas, strategies, and processes. Anyhow, different thresholds apply in different sectors. As businesses continue to globalise and digitise, the risk associated with the leakage of such information has grown exponentially.

The EU, with its diverse member states, each having its own legal traditions and practices, presents a unique environment for trade secrets litigation. However, cross-border cases are rare.

Diving Deeper: Statistics

The document provides interesting statistics and trends in various EU countries. It seems that businesses in Italy, Central and Eastern Europe are more prone to initiate proceedings in the field than in other regions. Regarding the targets, the most significant portion of defendants is found in ex-employees. Finally, the report reveals that the infringement claim success rate is 27%. 

Case Studies: Learning from the Past

Another intriguing aspect of the document is the inclusion of numerous case studies. These real-world examples of trade secrets litigation can serve as cautionary tales, guiding businesses on potential pitfalls and providing insights into the legal strategies employed by both plaintiffs and defendants. For instance, the report offers the stance of the Spanish court that direct evidence of the infringement is not necessary: “as the unlawful acquisition could be reasonably presumed from the almost identical nature of complex software products, as such striking similarity could not be attributed to coincidence.”. 

Concluding Thoughts

Trade secrets are a cornerstone for many businesses, and their protection is not just a legal necessity but a strategic imperative. This report provides a wealth of information on the topic. For businesses, legal practitioners, and policymakers alike, understanding these trends is vital to navigating the complex waters of trade secrets litigation across Europe.

In Serbia, and neighboring countries, the regulation of trade secrets is subject to multiple laws, some of which exhibit inconsistencies. Therefore, it’s essential for companies to approach this issue strategically. They must acquaint themselves with which types of information can genuinely be classified as a business secret under Serbian law. Moreover, businesses should be aware of the necessary legal and factual measures required to ensure their trade secrets receive legal protection. Furthermore, they need to familiarize themselves with the mechanisms available for immediate response and evidence preservation in cases of violations or threats to their proprietary interests.

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

By Goran Radosevic and Milica Savic, Partners, and Nikola Kliska, Senior Associate, Karanovic & Partners

September 2023 – According to Article 5 of the Serbian Banking Act (Zakon o bankama), no person other than a bank licensed in Serbia may engage in the granting of loans unless authorised by law. One Serbian law that does allow foreign banks (i.e., banks not established and licensed in Serbia) to provide cross-border loans to Serbian entities is the Serbian Foreign Exchange Act (Zakon o deviznom poslovanju). In particular, Article 18(7) of the Foreign Exchange Act expressly allows Serbian entities to borrow cross-border from foreign banks, which are not required to obtain a banking licence in Serbia for this purpose.

Corporate finance

Bearing in mind that raising capital on the capital markets through the issuance of bonds and notes has yet to take off in Serbia to any significant degree, most corporate finance in Serbia is currently provided by bank lenders—either domestic or foreign banks or their syndicates.

Secondary debt market

Nevertheless, some of these corporate loans may eventually end up in a secondary debt market outside the banking sector. The National Bank of Serbia’s (“NBS”) Decision on Risk Management of Banks (Odluka o upravljanju rizicima banke) allows local banks to transfer certain types of their loans to either another Serbian bank or to another legal entity (e.g., an unlicensed company) incorporated in Serbia, in order to reduce non-performing assets. The transferability of these loans depends on their performance, i.e., loans that may be transferred outside the banking sector are:

• non-performing loans – loans to corporate clients (including entrepreneurs and farmers) that have been declared past due; and
• problematic performing loans – still performing loans that are classified as problematic in accordance with the NBS’s Decision on the Classification of Bank Balance Sheet Assets and Off-Balance Sheet Items (Odluka o klasifikaciji bilansne aktive i vanbilansnih stavki banke) and are classified as problematic by the selling bank on the classification cut-off date immediately preceding the submission of the notification of the intended transfer to the NBS.

Consumer finance

On the consumer finance side, the situation is somewhat different: retail loans almost entirely originate within the banking sector and must remain within the banking sector, as the secondary debt market for retail loans is only allowed between banks.

According to Article 39 of the Financial Services Consumer Protection Act (Zakon o zaštiti korisnika finansijskih usluga) and Article 42a of the above-mentioned NBS Decision on Risk Management of Banks, a bank may assign claims arising from any loan (i.e., whether performing or non-performing) granted to an individual as a retail client / financial consumer (fizičko lice – korisnik finansijskih usluga) only to another bank licensed in Serbia.

Non-bank consumer lending opportunity

The above suggests that non-bank lending opportunities in Serbia are virtually non-existent, especially in the retail/consumer finance sector. However, this conclusion would not be entirely correct. There is another piece of legislation that does allow for a certain form of non-bank lending, namely the Payment Services Act (Zakon o platnim uslugama).

Pursuant to Articles 78, 79 and 95 of the Payment Services Act, a payment institution (platna institucija) that has obtained a licence from the NBS to provide payment and ancillary services as a payment institution may, in addition to the provision of payment services, engage in certain other activities, including the granting of loans, subject to the following conditions:

• the granting of loans is an operational and ancillary activity directly related to the provision of payment services and does not jeopardise the safety and soundness of that part of the payment institution’s operations relating to the provision of payment services, nor hinder supervision by the NBS;
• such loans must meet the following criteria:
  • the loan is granted for the sole purpose of executing a payment transaction;
  • the repayment period of the loan does not exceed 12 months;
  • the loan is not granted from the funds of payment service users received by a payment institution for the execution of payment transactions of those users; and
  • the own funds of a payment institution are always adequate to cover the total amount of the loans granted, in accordance with the capital requirements prescribed by the NBS.

As a result, investors who might see untapped potential in the Serbian consumer finance market need not be deterred by the immediate showstopper of having to invest heavily upfront to establish or acquire a bank in Serbia, as banks are typically the most regulated and expensive vehicles to operate. The alternative vehicle that could be considered is a payment institution, which also needs to be incorporated in Serbia and licensed by the local regulator (i.e., the NBS), but the level of regulation applicable to payment institutions is still lighter compared to the all-encompassing regulatory inventory applicable to banks.

By Petar Kojdic, Partner, Kinstellar

The Law on Amendments to the Law on Excise (“the Law”) was published in the Official Gazette of the Republic of Serbia no. 75/2023 of September 6, 2023, and it entered into force on the eighth day after its publishing, i.e., on September 14, 2023, while it shall be applied from October 1, 2023.

The reason for enacting the Law is the need to achieve further harmonisation of excise policy with the EU standards in domain of excise policy pertaining to the excise taxation of energy products, tobacco products and alcoholic beverages – both in regard to the scope of excise taxation and reaching a minimum level of excise taxation as stipulated by EU regulations, while the aim of the Law is also to increase budget revenues.

We shall herein provide an overview of key novelties brought out by the Law.

1. E-excise system

The Law introduces the e-excise system, which is defined as a centralised information system managed by the ministry in charge of finance, which retrieves data from other registers kept by relevant authorities, as well as data related to excise products, excise taxpayers and trade actors; it enables submission of electronic applications for issuance of control excise stamps and for issuance and renewal of permits for excise warehouses, as well as management of business processes and communication between users of e-excise system with regard to excise products, recording, storing and processing data relating to movement of excise products.

The users of e-excise system are state authorities and organisations, legal entities, payers of corporate profit tax, payers of tax on income from independent activity, which, within their rights, duties, obligations or authorisations relating to excise products:

• take part in the procedure for approval, printing and issuing control excise stamps, keeping records of approved and issued stamps, labelling excise products and scanning QR codes on control excise stamps;
• take part in the procedure for provision, renewal and withdrawing of excise permits;
• keep registers of manufacturers and importers of alcoholic beverages and coffee, as well as other registers relating to excise products.

Access to the system is enabled by the ministry in charge of finance, while its use will be obligatory from October 1, 2024.

The conditions, manner and procedure for registration of users of e-excise system, as well as other relevant matters related to it, will be regulated by a by-law to be enacted by the Government within nine months from the day of entry into force of the Law

2. Control excise stamps with QR code

Control excise stamps with QR code are introduced within the e-excise system.

Namely, the Law stipulates that the payer of excise for cigarettes and non-combustible tobacco shall be obliged, during manufacturing i.e., before import or during import at the place of customs clearance at latest, after product labelling, to perform initial scanning of QR code on the control excise stamp, for each of these products separately, and to enter additional information in the e-excise system, notably:

• product description;
• place of manufacturing;
• date and time of manufacturing;
• information on product line;
• information on market where the product will be sold;
• code and name of the product brand.

Following the initial QR code scanning, trade participants shall be obliged to scan the QR code on control excise stamp in each individual place of product receipt, and for each product separately, as well as to immediately submit data on read QR codes on excise stamps through e-excise system. The obligation to scan QR code on excise stamp and submit data through e-excise system is also applied during transfer from one place to another and during movement of product within one trade participant.

By-laws necessary for implementation of the stated legal solutions will also be enacted within nine months from the day of entry into force of the Law.

The obligation to label products with control excise stamps containing QR code will apply from January 1, 2025, as well as the obligation to scan QR code on control excise stamp by excise taxpayers, i.e., other participants in trade, in accordance with the provisions of the Law.

3. New excise products

The Law introduces two new excise products – nicotine pouches and natural gas for final consumption.

Nicotine pouches are single-use products containing nicotine or nicotine compounds and other ingredients, packed in bags or porous bags and exclusively intended for oral use, which are traded according to norms prescribed for the market of the Republic of Serbia.

Excise for nicotine pouches is paid for one kilo of net weight contained in nicotine pouches, in the amount of 4,500.00 RSD/kg, while the obligation on basis of this excise starts from January 1, 2024.

As regards the natural gas for final consumption, it shall be subject to excise in the amount of 1,097.20 RSD/MWh for motor vehicles and excise in the amount of 63.30 RSD/MWh for heating, while the Law defines the meaning of final consumption and end user.

Taxpayer of natural gas excise shall mean an entity which is, under the law regulating the area of energy, considered supplier, i.e., public supplier of natural gas, the entity producing and compressing natural gas in exploitation field, and the entity importing compressed natural gas. The basis for calculation of excise on natural gas shall be the quantity of supplied natural gas, also in accordance with the law regulating the field of energy. The Law also stipulates the exceptions, i.e., when the excise on natural gas for final consumption is not paid.

The obligation on basis of excise on natural gas shall start from January 1, 2025.

4. Register of importers of alcoholic beverages and coffee

The Law stipulates the obligation for importers of coffee and alcoholic beverages, before releasing goods into free circulation, to enter into the register of importers of alcoholic beverages and coffee, kept by the Customs Administration.

By-law regulating the stated register will be enacted within nine months from the day of entry into force of the Law.

This register is an addition to the previously established Register of producers of coffee and alcoholic beverages, which is also established on basis of the Law on Excise.

5. Increased excise

The Law increased the amounts of excise for oil derivatives, biofuels and bio liquids, alcoholic beverages (low-alcohol beverages, beer, low-alcohol beverages containing beer regardless of the percentage of beer contained and low-alcohol beverages with 5% or more of alcohol) and coffee (unroasted coffee, roasted coffee, coffee flakes and parchments and coffee extracts, essences and concentrates).

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 Lara Maksimovic, Senior Associate, PR Legal

In the probate proceedings, the court determines who the heirs of the decedent are, which property makes up his estate, and which rights from the estate belong to heirs, legatees, and other persons.

If a foreign element exists on the side of a deceased, it is necessary to determine which substantial law will be applied and which court will have jurisdiction. The foreign element on the side of a deceased exists if the deceased was a foreign citizen or if he was a Serbian citizen who had an immovable or movable estate outside of Serbia at the time of death.

The probate proceedings in Serbia are regulated by the provisions of the Inheritance Act and by the provisions of the Law on Non-Contentious Proceedings. When it comes to the jurisdiction of Serbian courts for the probate proceedings with a foreign element, the rules are stipulated also in the Law on Resolving Conflict of Laws with Regulations of other Countries. Here we will say something more about the jurisdiction of the Serbian courts in probate proceedings with a foreign element.

Institution of the proceedings

The probate proceedings shall be instituted ex officio as soon as the court becomes aware that a person has died or has been declared dead. Having in mind said, if the deceased was a citizen of Serbia, probate proceedings should be instituted ex officio as soon as the competent court is informed by the Registrar that a person is deceased.

The Registrar often omits to inform the court about one’s death. In that case, the heirs of a deceased should submit the motion on probate proceedings to the competent court. After that, it is up to the probate court to decide whether the proceedings will be continued and finished before the court or before the notary public. Usually, the court appoints the case to the notary public, unless there is an explicit and justified request from the heirs that the proceedings be conducted before the court.

However, the motion to the court is always necessary if the deceased was a foreign citizen or a person without citizenship. The probate proceedings before Serbian courts are being conducted in Serbian language, so the motion must be in Serbian language also. Also, if the deceased was a foreign citizen the court itself would be obliged by the law to conduct proceedings and could not appoint the case to the notary public.

Jurisdiction of the Serbian courts

The Basic courts are first-instance courts competent for the subject matter of probate proceedings in Serbia. There are 67 Basic courts in Serbia in total. Most Basic courts have only one probate judge who is competent for the probate proceedings and very few court personnel for this matter. This is due to the fact that the courts usually appoint notaries public to conduct regular probate proceedings (probate proceedings without a foreign element) and there are only a few cases with a foreign element.

A general rule for the probate proceedings is that the court on whose territory the testator had a permanent or temporary residence at the time of death shall have territorial jurisdiction. If the testator at the time of death did not have either a permanent or temporary residence in the territory of the Republic of Serbia, the court in whose territory the prevailing part of his estate is located shall be the court of competent jurisdiction.

Having in mind all said, territorial jurisdiction is established firstly based on the fact of permanent/temporary residence of the testator in Serbia and secondly on the location of the prevailing part of his estate. If the location of the prevailing part of the testator’s estate is not possible to determine, any court in whose territory some part of the estate is located could be the court of competent jurisdiction.

If there is no other way to determine which court would be the territorially competent court, then the Supreme Court of Serbia is authorized to determine which Basic court will be the competent one.

A court of the Republic of Serbia shall have exclusive jurisdiction to hear cases relating to immovable estate situated in the Republic of Serbia. If the court of some other country would hear the case and determine the heirs relating to the immovable estate of a deceased in Serbia, the decision of the foreign court would not be suitable for recognition in Serbia and Serbian authorities would not recognize it.

If the immovable estate of Serbian citizens is situated abroad (in a foreign state), a court of the Republic of Serbia shall have jurisdiction only if the authorities of the country in which the immovable property is situated do not have jurisdiction under the law of that country.

A court of the Republic of Serbia shall have jurisdiction to hear cases relating to the movable estate of Serbian citizens if the movable property is situated within the territory of Serbia or if a foreign authority does not have jurisdiction under the law of the country in which the property is situated or has declined jurisdiction. Also, a court of the Republic of Serbia shall have jurisdiction to hear cases concerning the movable estate of a foreign national that is situated in the Republic of Serbia, unless the court in the country of the deceased has no jurisdiction to hear cases relating to the movable property of Serbian nationals.

A court of the Republic of Serbia shall have exclusive jurisdiction to hear cases on the movable estate of a person without nationality, a person whose nationality cannot be established, or a person who has been granted refugee status if the movable property is situated in Serbia or if the deceased was permanently resident in Serbia at the time of death. However, if the deceased was not permanently resident in Serbia, the provisions governing deciding on the estate of a foreign national shall apply as appropriate, while a foreign state shall be understood to mean the state in which the deceased was permanently resident at the time of death.

When a court of the Republic of Serbia has no jurisdiction to hear cases on the estate of a foreign national, it may nevertheless order measures to secure the estate and protect the rights of the estate which is situated in Serbia.

Conclusion

When it comes to immovable estates situated in Serbia, the jurisdiction of the Serbian court in probate proceedings always exists and it is always an exclusive jurisdiction, even if the deceased was a foreign citizen. However, when it comes to movable estate, the jurisdiction of the Serbian courts exists only for specific cases.

Probate proceedings with a foreign element are usually a challenge for the courts and usually last longer than regular probate proceedings. So, if the heirs address the motion to the wrong court, it could lead to even longer proceedings which could be measured in years. By engaging a competent law office in Serbia, one can save a lot of time and avoid often costly and unnecessary trips to Serbia.

By Aleksandar Grujic, Senior Associate, and Dimitrije Stepanovic, Associate, JPM & Partners

The German Supply Chain Due Diligence Act is a major advancement in the supply chain network, improving international human rights and environmental standards across the board. It focuses on issues of child labour, health and safety standards, and the role of trade unions, and will have substantial effects on all relevant parties concerned due to its scope and importance. For instance, the Act bans all sorts of conduct from discrimination to forced labour. Serbia in particular will be considerably impacted, since Germany is the country’s largest trade partner.

This article will therefore examine the nature of the Act and its implications for Serbia’s companies and supply chain.

Due diligence and the importance of the Act

To understand the impact of the Act, it is first necessary to highlight its purpose. Due diligence is a risk-based process, it being understood that the risks are those related to the people producing the goods and services they are delivering. Consequently, all Serbian companies that are part of the supply chains of German companies are required to establish risk management processes meeting certain obligations in the areas of human rights and the environment. Companies are currently obliged to assess 11 human rights and three environmental risks listed in the law. The latter are based on the UN Guiding Principles on Business and Human Rights, as well as the Basel Convention on Hazardous Waste and other relevant environmental conventions. Therefore, the Act is crucial in achieving the overall objectives of promoting fair practices in accordance with recognised guidelines and removing unfair economic practices and business from the market.

Affected companies and their obligations

The law applies to Serbian companies exporting to German enterprises of sufficient size (i.e. having a central administration, principal place of business, headquarters, statutory seat or branch in Germany) and employing at least 3,000 employees in Germany. From 1 January 2024, it will also apply to all companies with over 1,000 employees in Germany. The law pertains both to companies registered in Germany and their affiliated companies abroad, as well as to direct and indirect suppliers in their supply chains. For instance, if the indirect supplier relationship is structured to circumvent the due diligence obligations in relation to the preparation of risk analyses and remedial measures, these obligations will apply to indirect suppliers as if they were direct suppliers. Moreover, the complaints procedure (outlined under the heading below) must enable complaints in respect of economic actions of indirect suppliers. If violations of human rights or environmental obligations by an indirect supplier are suspected, the company must run a risk analysis, set up preventive measures and devise a plan to prevent, cease or mitigate the violation. Lastly, the law will only affect product and service supply chains, not the export of final products by Serbian companies to Germany.

The content of the law and complications

On a technical level, the law covers nine steps, primarily requiring companies to put a stable risk analysis system in place. Complications may arise for companies that have thousands of suppliers and will therefore need to scan production based on multiple factors, from markets to processes. They are therefore expected to take two types of action: preventative (if there is a likelihood of a risk to arise) and remedial (if the risk has already materialised). In addition, the company needs to ensure that a complaints system is in place for everyone in the supply chain. Therefore, anyone whose right is infringed can make a complaint at the company level about a certain lapse. Lastly, companies need to document everything they are doing and report it. The system contains an official reporting document.

The Act describes obligations to “make reasonable efforts” to identify and remove risks, implement the necessary grievance mechanisms and take remedial action when required. Thus, there is no “obligation” as such to ensure and guarantee with absolute certainty that no human rights or environmental obligations have been breached. This is mainly due to the understandable fact that the risks to be avoided only exist when there is a “sufficient probability” that a prohibition from an exhaustive list will be violated. Hence, if a company is not aware of a grievance in its supply chain, it cannot be held accountable, as long as all required steps have been taken to discover it. Nevertheless, as soon as the grievance becomes known, the company will be required to take remedial action. This will include contractual assurances of compliance and control mechanisms, including assurances by direct suppliers that they will address the human rights and environmental objectives further down the supply chain. Failure to do so will result in heavy fines and the company potentially being excluded from public tenders for up to three years.

An evaluative approach must be taken to determine when a contract with a direct supplier must be terminated (where the supplier is in violation of a human rights or environmental obligation). For example, termination is required if the breach is very serious, other measures fail to remedy the situation and no less severe alternative is available. If a company subject to the Supply Chain Act notices that a breach has already occurred or is imminent at a direct supplier level and cannot be ended in the foreseeable future, it must arrange a plan for ending or minimising the violation. The plan may include a temporary suspension of the business relationship.

Guidance provided in Serbia

Despite possible difficulties with adhering to and implementing the Act, the Chamber of Commerce of Serbia (CCIS) in cooperation with the German International Cooperation (GIZ) will launch a “helpdesk” (Responsible Business Hub) for advising companies in the first quarter of this year. The helpdesk is intended to smooth the transition for companies in meeting the demands of foreign suppliers in Serbia. The quality of support offered is reinforced by Tanja Lindell, Deputy Manager at the Industry Department. “We will work on creating a network of strategic partners and consultants, and in the coming period, the CCIS will also organise a range of seminars, events and consultations directed at raising awareness and inciting dialogue between the interested parties about the German law on supply chains and the upcoming EU regulation,” Lindell said.

Jurisdiction at the EU level?

Lastly, to gain a broader perspective, there are also efforts at the EU level to establish a regulation regarding human rights due diligence. Currently, the EU Parliament is pushing the Commission to draft an EU-wide regulation, whose completion could be accelerated by Germany as the largest economy in the Union. The actual implementation of such a comprehensive regulation remains to be seen.

By Marija Vlajkovic, Partner, and Andrija Saric, Associate, Schoenherr