Category: Serbia

Meeting of minds of the contracting parties undeniably represents the very foundation of the contract law, hence both theory and practice agree that there is no agreement without it. However, when it comes to the manner of expressing such will, the situation is somewhat different.

The court in Canadian province Saskatchewan has recently ruled that it is possible to conclude a valid contract by using “thumbs-up” emoji (so-called “like”). In the rationale to this ruling, the court stated that the emoji is just as valid as signature and that the courts need to adapt to the “new reality”, i.e., an increasing use of technology in communication and business.

Circumstances of the case

In this particular case, in March 2021, a grain buyer sent a mass text message to farmers, advertising that the company was looking to buy a certain quantity of flax (86 tonnes) at a certain price (17 Canadian dollars per bushel). The buyer then spoke with a farmer on the phone and texted him a picture of the purchase contract referring to purchase and delivery of flax and asked the farmer to confirm the contract by the message. The farmer responded to the text message with a “thumbs-up” emoji.

The meaning of this emoji caused the dispute between the buyer and seller. Namely, the buyer claimed that the emoji meant that the seller was agreeing to the terms of the contract, pointing at previous contracts concluded with the same seller in a similar (informal) way (e.g., by exchanging text messages such as “OK”, “yes” etc.). On the other hand, the seller indicated that the disputed emoji had only been sent to confirm the receipt of the contract photo sent by the buyer, while he had not even looked at the delivered contract (let alone agreed to its conclusion).

Rationale of the ruling

The court took the buyer’s side stating that the disputed emoji, although representing a “non-traditional mean to sign a document”, in this case, i.e., under the specific circumstances, represented a valid way to express consent, i.e., to achieve the purpose of contract signature. The court further underlined that its role was not to attempt to stem the tide of technology in business correspondence, including emojis, but instead to be prepared to meet the challenges that may arise therefrom.

According to the above stated, the court ordered the seller to compensate to the buyer the damage caused for unfulfilled contract (in the amount exceeding EUR 50,000).

Conclusion of contracts in domestic legislation

In relation thereto, the Law on Contracts and Torts of the Republic of Serbia stipulates the following:

• A contract is concluded when the parties have agreed on significant items of the contract.
• The will to conclude a contract can be expressed by words, customary signs, or other acts from which its existence can be established with certainty. The expression of will must be done freely and seriously.
• An offer is accepted when the offeror receives a statement on acceptance from the offered. The offer is also accepted when the offered dispatches an item or pays a price, as well as when it conducts another action which, based on the offer, established practice between the parties or custom, can be deemed as an expression of acceptance.
• Silence of the offered shall not mean acceptance thereof. However, when the offered is in a continuous business relation with the offeror concerning certain goods, it shall be deemed to have accepted the offer pertaining to such goods, unless it had been rejected immediately or in a designated period.
• Conclusion of a contract shall not be subject to any form, unless otherwise prescribed by the law. The parties may agree for a special form to be a condition of validity of their contract.

Therefore, when it comes to informal contracts, domestic legislation allows for the will to conclude contract to be manifested by so-called conclusive actions, i.e., which indicate the existence of intention to conclude contract (animus contrahendi), whereas the degree of certainty with which such conclusion is made shall vary depending on the circumstances of the case and thus it will always be subject to interpretation.

According to the available data, in the previous practice of the competent courts in the Republic of Serbia there was no such extensive interpretation of the stated legal provisions as in the case of the Canadian court, but it remains to be seen how domestic courts will treat the increasing use of electronic means of communication in negotiating and contracting, including digital symbols.

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, Partner, and Lara Maksimovic, Senior Associate, PR Legal

In a critical move to face the rapidly evolving technological novelties and their immanent implications on the protection of personal data and the business environment in general, the Serbian Government adopted the Personal Data Protection Strategy 2023 – 2030 (the “Strategy”) late this August.

It seems that the Strategy arrived at a crucial time, considering the remarkable technological progress and resulting booms in data processing practices since the Strategy’s 2010 predecessor. The Serbian Data Protection Authority recognized this long ago and has been urging other stakeholders ever since to adopt a new and improved strategy to guide the data protection framework in the times to come.

All the aspirations and promises contained in the Strategy can be summarized in one main goal – securing Serbia with an adequacy decision from the European Commission, which would mean formal recognition of Serbia as a country offering a level of protection of personal data essentially equivalent to that in the EU. Ultimately, ensuring the adequacy decision should mean a great deal for facilitating the data flow between Serbia and the EU, thus leaving room for greater business cooperation and wider inclusion of Serbia in the markets fueled by the big economies.

According to the Strategy, the main obstacle in seeing this ambition through lies in the numerous shortcomings of the existing Personal Data Protection Law (the “DP Law”) and other pieces of legislation tackling personal data matters. Despite its near-verbatim adoption of the EU’s GDPR articles, the DP Law failed to include GDPR’s recitals and also to account for numerous local specifics, making it rather difficult for companies to interpret and comply with, as well as for the regulators to manage expectations and ensure smooth supervision.

To combat this, the Strategy kicked off by outlining the key deficiencies in the overall legal and socio-political framework in Serbia and, mirroring the potential solutions for these, proposed a set of quite a few goals to reach before 2030 ticks off.

Most importantly, the Strategy sets upgrading the DP Law to fully match the GDPR standards as a key step in this process, including the adjustment of other laws with the provisions of the DP Law. Interestingly, the Strategy focused the first year of the Strategy’s implementation on adopting legislation in areas where appropriate guidance lacked the most, suggesting that we should have a new set of video and audio surveillance, as well as biometrics and genetic personal data regulations adopted by the end of 2024. A bold statement for an otherwise complex and demanding area, especially to be performed within a rather tight deadline.

The Strategy also promised to bring tangible results when it comes to the actual enforcement of the DP Law, recognizing this has been one of its weakest spots in the preceding 15 years. Unlike the GDPR, which prescribes fines up to EUR 20 million or 4% of a company’s global annual turnover, the DP Law limits the fines’ amount to approx. EUR 17,000, which hardly motivates companies to invest more strongly in compliance. An explicit Strategy’s reference to the mechanism introduced by Serbian Competition Law, which entitles the Competition Commission to impose fines calculated as a certain percentage of the company’s turnover, implies that the Government means business and that this may turn out to be a crucial change to be introduced to the DP Law in the forthcoming period.

The Strategy also vouches to bring a significant increase in the number of appointed data protection officers (for local companies), as well as in the number of foreign companies to appoint their local representatives in Serbia, which is something the Data Protection Authority has been focusing on in recent years. The Strategy further commits to ensure that the entities subject to the DP Law adopt and maintain the required internal documentation, and to bring certain improvements to the legal remedy apparatus, thus suggesting that the Data Protection Authority and other competent bodies plan to noticeably strengthen their enforcement policy to accommodate the expected goals.

Finally, the Strategy outlines the importance of strengthening the capacities of the Data Protection Authority, primarily in terms of the number of employees dealing with information technology and digitalization. Raising public awareness about the importance of data protection is also one of the Strategy’s cornerstones, which should be achieved through updated school curriculums, training for employees in courts, public prosecutor’s office, and administrative bodies, as well as by organizing roundtables and similar events and increasing the number of visits to the Data Protection Authority’s website.

One thing is clear – the data protection milieu is curious to see the Strategy kick off and welcome the rise in the awareness of privacy rights and the redefining of the resulting practices in Serbia. Meanwhile, the bold announcements of the Strategy should serve the companies in – or doing business with – Serbia, as a good wake-up call to revisit their data protection ways and prepare ahead for the coup.

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, Partner, and Anja Mihajlovic and Anja Gataric, Junior Associates, Karanovic & Partners

In the previous article, we became familiar with the class action. This legal institute originated from Anglo-Saxon law, and many countries use it, primarily the USA.  In this article, we will consider the introduction of a similar institute into the legal system of the Republic of Serbia from the perspective of de lege ferenda.

Purpose and Use

Through its centuries-long application, class action has proven to be a significant legal mechanism essential to every modern societal system.  Indeed, in situations where an event threatens the interests of a more significant number of individuals, there is no better way to provide comprehensive legal protection than through a class action.  It achieves at least three objectives:

• Legal protection for individuals who lack sufficient financial or other resources to initiate individual legal proceedings,
• Overall societal efficiency – instead of numerous identical proceedings, there is a single process that determines the protection of all interested parties,
• Prevention of harmful behavior – raising the awareness of potential wrongdoers regarding the possibility of addressing the consequences of their actions about every affected individual should lead to more cautious behavior, compared to a situation where only individual lawsuits are available to the aggrieved parties.

Mass Lawsuits and Attempts to Regulate Class Action in Serbia

Mass lawsuits are a phenomenon that has significantly burdened the functioning of domestic courts.  The so-called “masovke” first appeared in the mid-2000s.  Notable cases emerging from them include shifts and night work, meal and holiday allowances for employees, discrimination of war veterans, amounts of daily childcare compensation, nullity of provisions on the costs of processing loan agreements, as well as the latest cases relating to auxiliary school staff and their right to meal allowance.  Mass lawsuits have profound legal and economic implications, which has prompted efforts to reintroduce class action into Serbian law.

There have been previous attempts, which were not very successful.  The legal community acknowledges that the Civil Procedure Act of 2011 regulated a specific legal procedure to protect collective rights and citizens’ interests.  According to the provisions of the then-act, associations, unions, and other organizations had the right to file a class action if their registered or legally prescribed activities provide for such protection, if the purpose of the association or act relates to the common interests and rights of a more significant number of citizens, and if the actions of the respondent have harmed or seriously endangered them.  However, after just one attempt to file a “class action,” the Constitutional Court of Serbia declared this procedure unconstitutional in its Decision of May 23, 2013.  It excluded the possibility of its further application.  The rationale was that it was unclear which rights could be subject to a class action.

It has been proven in our domestic practice that establishing a legislative framework for the implementation of class action in Serbia represents a challenge, and it seems that a direct transplantation of the American model is not feasible.  Thus, it is to be expected that the Serbian legislator will strive to implement Directive (EU) 2020/1828 on representative actions for the protection of the interests of consumers (“Directive“).  Considering that the Directive establishes minimum standards, the Directive text alone does not sufficiently guide the creation of legislative provisions.  Therefore, if future legislators aim to develop a practical framework, they must delve into the institute’s core and understand its underlying logic.

Free Rider Problem

In pursuit of the proper legislative regulation of class action in Serbia, it is essential to always bear in mind that a class action is inherently a representative action – the class representative is the leading figure who represents the interests of the class and all its members.

For this reason, one of the valuable approaches could involve drawing upon the experience of another pre-existing form of representative lawsuit within the Serbian legal system, namely the derivative suit.  This type of lawsuit was introduced into Serbian law in 1996 but has not gained traction in practice.  One of the critical reasons for this state of affairs is believed to be the rules concerning procedural costs.  Consequently, it is thought that the derivative action suffers from the “Free Rider Problem,” wherein each member of a business entity expects that another member will undertake such risk, resulting in a scenario where the lawsuit might not be filed at all.

The same issue would undeniably manifest in the context of a class action.  Hence, the primary task of the Serbian legislator should involve evaluating the preparedness to depart from traditional rules concerning procedural costs.  If prepared, organizations, i.e., qualified entities, as prescribed by Article 4 of the Directive, and individuals or their groups should have the right of action.  To illustrate, one of the conditions for filing a lawsuit could involve its submission by a group of 10 consumers or by those whose cumulative compensatory claims exceed a certain amount.

Role of the Court

The court’s role when deciding on a class action is paramount.  In light of this, it prompts the question: To what extent should the court assume a more comprehensive role than the standard litigation process?  Serbian courts already possess specific expanded roles akin to those recognized in American law, such as approving court settlements.  However, in Serbian law, the court should refrain from assessing the appropriateness of the class action during the admissibility evaluation phase.  Instead, the court should examine the formal conditions prescribed for class actions.  This is in line with the experience of derivative actions.  Unlike the American legal system, where the court grants permission to proceed with a derivative action only if it deems the lawsuit is in the interest of a company (appropriateness assessment), the Serbian jurisdiction has not adopted this practice.  Therefore, the recommendation is to avoid provisions that would empower the court to evaluate the appropriateness of this lawsuit even in the preliminary phase of a class action, specifically when assessing the existence of procedural prerequisites for the proceedings’ continuation.

Effects of the Judgment

The effects of the judgment intend to achieve two objectives: firstly, to prevent a re-examination of factual and legal matters that were subjects of the class action proceedings, and secondly, to establish direct legal protection based on the judgment.

For this reason, during the regulation of class action, rules about the subjective boundaries of the judgment are of utmost significance, ensuring that individuals who were not parties to the proceedings benefit from the decision.  In this context, the pivotal consideration revolves around whether the Serbian legislator would endorse an inclusionary or exclusionary system within the proceedings (opt-in or opt-out).

• (i) The inclusionary system – an individual must request to be included in the proceedings to acquire party status, to have the effects of the judgment apply to them;
• (ii) The exclusionary system – a party is automatically included in the proceedings, yet they retain the option to request exclusion to avoid being subject to the effects of the judgment

The exclusionary system aligns more harmoniously with the nature of class action due to its improved treatment of parties.  Namely, the judgment should have legal effect even on absent class members, regardless of their involvement in the proceedings.  Such an approach would align with the provisions of the Civil Procedure Act, which, in Article 360, among other things, prescribes that a judgment shall also hold its effect upon the third parties by reasons of the nature of a disputed right or legal relation.

Other Relevant Aspects for Regulating Class Action

In addition to conceptual considerations, procedural facets require attention.  In this context, it is vital to address the procedure and method of informing class members about the filed lawsuit, conditions for amending the case, specific procedural rules, and the burden of proof, as well as the possibility for class members or even third parties to join the proceedings as parties or interveners.  Special conditions for undertaking dispositive actions related to the claim should also be prescribed, encompassing not only settlement agreements but also withdrawal of the lawsuit or waiver of the claim.  Rules governing the public nature of the proceedings, special conditions for the existence of lists pendentia, and the joinder or severance of proceedings should also be articulated.

Class Action in Western Balkans

Class action has recently found its place within the traditionally continental legal systems in the EU member states and Western Balkans countries.  The possibility of exercising collective legal protection in court proceedings is now considered a vital aspect of the right to a fair trial by Article 6 of the European Convention on Human Rights.

In Albania, there is no official way for a group to initiate a proceeding through a class action jointly.  Instead, consumers can form associations to initiate civil proceedings against legal entities.  In Bosnia and Herzegovina, there is no formal process for class action.  Instead, a special procedure allows multiple individuals to join their legal interests in protecting their rights, similar to the Serbian approach of 2011.  Furthermore, in North Macedonia, the law does not regulate class action.  Finally, Montenegro only allows class action in consumer protection.  However, the Montenegrin Civil Procedure Act does not recognize class action, which raises several practical questions about its application.

By Jovana Velickovic, Partner and Head of Dispute Resolution, and Vasilije Boskovic and Nikola Ivkovic, Associates, Gecic Law

As we promised a few weeks ago when we discussed all the interesting aspects of commercial offences as an integral part of Serbian penal law, we shall now take a closer look at the first-instance proceeding and some of the most important segments of domestic and foreign legal entities, as well as their responsible persons, should keep in mind in case they are subjected to a commercial offence proceeding.

General Principles of Commercial Offence Proceeding 

As an additional reminder to our readers, in Chapter 1, we have stated that the accusatory principle represents the dominant foundation when conducting the proceeding itself. This means that an independent state authority – Public Prosecutor, is authorized to prosecute commercial offenders and initiate the commercial offence proceeding before the competent court. Of course, even though it’s sometimes treated as an exclusive rule in court practice, it comes with an exception, but more of that can be found in our previous article. 

Another general principle of the commercial offences proceeding is provided under Article 42 of the Commercial Offences Act (Official Gazette of the SFRY, Nos. 4/77, 36/77 (corrected version), 14/85, 10/86 (revised text), 74/87, 57/89 and 3/90, Official Gazette of the FRY, Nos. 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), hereinafter: ‘’Law’’). It stipulates that only the competent court in the proceedings instituted and completed in accordance with the Law may impose a fine, a suspended sentence and security measures for the committed commercial offences. 

Moreover, it should be noted that Article 51 of the Law enables the so-called rule of the joint proceeding – meaning that a joint proceeding shall be initiated and implemented for the commercial offence of a legal entity and a responsible person. Furthermore, the initiation and conduct of proceedings only against a legal entity or only against a responsible person is possible if there are legal reasons for prosecuting only one of them, or if the responsible person is being prosecuted for a commercial offence that has features of commercial offence. 

Most legal practitioners would agree that the provision of Article 56 of the Law is the most important one in the section governing the proceeding itself. People of theory might disagree. However, this time, we must put our faith in practitioners given they will take active participation in accusation, defense, and judgment, and not the theorist. The aforementioned provision provides that unless otherwise stipulated by the Law, the following provisions of the Criminal Procedure Code (“Official Gazette of RS”, no. 72/2011, 101/2011, 121/2012, 32/2013, 45/2013, 55/2014, 35/2019, 27/2021 – Decision US and 62/2021 – Decision US), hereinafter: ,, Procedure Code’’) shall apply to commercial offence proceedings: provisions on the general principles, on the joinder and severance of proceedings, on the transfer of territorial jurisdiction, on the consequences of non-jurisdiction, on recusal, on the Public Prosecutor, on the injured party, on the defense counsel, on briefs and records, on time periods, on the costs of criminal proceedings, on claims for indemnification, on rendering and pronouncing decisions, on the service of documents and examination of files, on the meaning of legal terms and other provisions, on the summons and bringing in the defendant, on search, on the temporary confiscation of objects, on the examination of the defendant, on hearing witnesses, on on-site investigation, on expert analysis, on preparations for the main hearing, on the main hearing, on the judgement, on ordinary legal remedies, on the reopening of proceedings, on the motion for the protection of legality, on the proceedings for the enforcement of security measures, and the proceedings for issuing warrants and notices. 

Before we take a closer look at the initiation of the proceeding and its phases, Article 57 of Law strives to simplify the very text of Law thus simplifying its application by stipulating that the injured party shall be a person whose personal or property rights have been infringed upon by a commercial offence; the prosecutor shall be understood as the Public Prosecutor and the subsidiary prosecutor; – the party shall be understood as the prosecutor, the accused legal entity and the accused responsible person; – the term “defendant” is used as the general term for the accused legal entity and the accused responsible person.

Considering that we have already elaborated the court jurisdiction in the previous chapter, we think that it is time to ‘initiate the proceeding’ at last!

Preliminary proceeding – who can report the commercial offence and actions of a competent Public Prosecutor upon submitted report?

Despite the fact that most of the entities mentioned under Article 85 no longer exist and represent a relic of the socialist past, it is important to point out that in accordance with the mentioned article, all government bodies, organizations of associated labor, other self-management organizations and communities shall report commercial offences they have been informed about or they have learned about in some other way. All the mentioned subjects shall provide all the information about the commercial offence and the offender in their offence report, indicating evidence known to them, and shall take steps to preserve identity papers, business records, other documents, and traces of the commercial offence, as well as the objects on which or by means of which the commercial offence was committed and other evidence thereof. Moreover, the competent authorities shall also take into consideration offence reports filed by citizens.

A commercial offence report is submitted to the competent Public Prosecutor in writing or orally. Law provides different rules for both modifications of submitting and even prescribing the case of filing the report by phone when the official note must be made. 

As is the case in other criminal proceedings, the actions of the competent public prosecutor upon the submitted report depend on the content of the report itself: 

• The Public Prosecutor can dismiss an offence report if it indicates that the reported offence does not constitute a commercial offence, that the statute of limitations on prosecution has expired or that there are other legal grounds ruling out prosecution. In such an event, the Public Prosecutor shall notify the submitter of the report and the injured party of the grounds for its dismissal, within eight days of rendering a decision on dismissal. The submitter may file an objection to the directly higher prosecutor against the decision on dismissal of the report, as it usually happens in all penal proceedings in Serbia.
• If the Public Prosecutor believes that there are insufficient grounds in an offence report or in the collected information and data to file the indictment, it shall propose that the competent court take specific investigative actions. If the assigned judge agrees with this proposal, it shall take investigative actions and then submit all the files to the Public Prosecutor. Investigative actions shall be launched immediately and completed as quickly as possible. Once the Public Prosecutor receives the files/notification from the first-instance court, it shall either file the indictment to the court or render a decision on the dismissal of a commercial offence report.
• Finally, the Public Prosecutor can file the so-called “direct” indictment to the competent court (in accordance with the provisions of the Procedure Code, direct indictment represents a type of indictment act that was not preceded by the conduct of an investigation or investigative action in the case of commercial offences).

Given that the quality of the indictment in most cases depends on the quality of conducted investigative actions, the Law provides this segment of the previous proceeding the most “space” and through 10 extensive Articles stipulates all the rules of conduct, i.e., the rights and obligations of all participants at this stage of the proceeding. In case of initiating the investigative actions, all accused legal entities, their representatives and responsible persons should know that they, as a rule, can attend all investigative actions undertaken by a certain judge or the competent inspection authority.

Preliminary examination of the indictment, Summary Proceeding and the discontinuation of the proceeding

Upon the completion of investigative actions, further proceedings may be conducted only on the basis of the prosecutor’s indictment.

The court shall dismiss the indictment if the act the defendant is charged with does not represent a commercial offence, if the statute of limitations on prosecution has expired or if there are other legal grounds ruling out prosecution. If investigative actions have already been taken, the court shall dismiss the indictment if there is not sufficient evidence generating reasonable suspicion that the offender has committed the commercial offence it is charged with. 

The general rule is that the court shall schedule the main hearing forthwith if it determines that another court is not competent in the specific case, that it is not necessary to conduct additional investigative actions in accordance with the provisions of Article 104, and that there are no legal grounds for indictment’s dismissal. However, the exception comes in the form of the Summary Proceedings – a proceeding in the jurisdiction of a single judge where the decision on commercial offence might be rendered without scheduling the main hearing on the prosecution’s proposal.

Summary proceedings may be conducted only if the representative of the accused legal entity has already been heard and the accused responsible person has already been questioned during the investigative actions phase. In summary proceedings, a fine of up to RSD 100,000 may be imposed on the accused legal entity, whereas the accused responsible person may receive a fine of up to RSD 10,000.

Another important question of the first-instance proceedings is the discontinuation of proceedings. The court shall discontinue the proceedings against the accused responsible person if the accused responsible person is beyond the reach of government bodies or in the event that the accused responsible person has developed a temporary mental illness or a temporary mental disorder. Prior to the discontinuation of the proceedings, all available evidence of a commercial offence shall be collected. Once the obstacles leading to the discontinuation have been eliminated, the proceedings against the accused responsible person shall resume.

The main hearing and rendering of the decisions on commercial offences

The main hearing represents the phase of the proceeding consisting of the evidentiary proceeding, the parties’ closing arguments and the rendering of the decision. The main hearing commences with the publication of the indictment’s main content. Afterwards, the representative of the accused legal entity shall be heard, and the accused responsible person shall be questioned.

In the conviction, the court must state: the act for which the accused legal entity and the accused responsible person are pronounced liable, including the facts and circumstances constituting the elements of a commercial offence; all the regulations on the commercial offence that have been applied; the penalty to be imposed on the accused legal entity and the accused responsible person; the decision on acquittal; the decision on a suspended sentence; the decision on security measures; the decision on the confiscation of proceeds; the decision on the costs of proceedings and the claim for indemnification.

Final thoughts and further promises

Despite being simplified in comparison to a standard criminal procedure, a commercial offence proceeding still represents a field where 80% of defendants opt for formal defense due to the complexity of legislation and procedural rules. Both domestic and foreign legal entities and their responsible persons are aware of the fact that experienced attorneys can help them navigate through the process and provide services directed to the best possible outcomes which all represent the main reason for such a high percentage of formal defense in commercial offence proceedings.

In the upcoming period, our team of experts will give their thoughts on proceeding upon ordinary and extraordinary legal remedies, as well as for the three special proceedings governed by Law – for the Confiscation of Proceeds, for the Indemnification for Unjustifiable Conviction, for the Expungement of Conviction and Termination of Security Measures or Legal Consequences of Conviction, and Enforcement of the Decisions that will wrap everything up as a suitable finale to our ‘’trilogy’’.

By Milovan Bogdanovic, Senior Associate, JPM & Partners

This year, the internet has been captivated by a sensation known as “Barbenheimer,” a phenomenon that emerged just before the blockbuster film releases of “Barbie” and “Oppenheimer.” Having previously explored the Barbie intellectual property (IP) landscape, it’s astonishing to find yet another connection between these two cinematic sensations that stand at opposite ends of the IP spectrum.

Oppenheimer and the IP Landscape

When diving into the Oppenheimer film, a captivating narrative about J. Robert Oppenheimer and the atomic bomb, we find unexpected threads of intellectual property intricacies interwoven with the quest for nuclear energy. Unknown to many, the U.S. government covertly submitted a plethora of patent applications through various intermediaries. These covered the entire spectrum of atomic bomb development.

In hindsight, using patents to control atomic weapons might seem counterintuitive. One might wonder, what was the U.S. government’s endgame? To sue other nations for infringement? Demand royalties? But at the dawn of nuclear technology, these patents were crucial for administrators aiming to control this formidable invention in the postwar era.

Patent Law and National Security

Patent law usually grants inventors a temporary monopoly on their invention in exchange for disclosing how it functions. However, when it comes to top-secret weapons like atomic bombs, traditional patent laws pose a security risk. The U.S. has a mechanism to tackle this problem: secrecy. The patent application may be under wraps for inventions detrimental to national security. This prevents international patent filing and delays the patent approval until secrecy is lifted. This extended the patent’s life, as its enforceability countdown did not begin.

By 1947, the U.S. had scrutinized over 8,500 technical reports and 6,300 technical notebooks, resulting in approximately 2,100 approved patent applications. The volume of these numbers speaks to the monumental scale of the operation, covering everything “from the raw ore as mined to the atomic bomb.”

Barbenheimer and IP in the Western Balkans

The Barbenheimer phenomenon has also garnered attention in the Western Balkans. Although the Barbie franchise enjoys strong IP protection in this region, the situation changes significantly with Oppenheimer. IP laws here prohibit patents that contravene public order or morality, thus raising questions about patents on bombs. For instance, in Serbia, there have been no patents on bombs or similar devices.

Barbenheimer Sensitivities in Japan

The Barbenheimer phenomenon has had a contentious reception in Japan, where the Oppenheimer film has not launched yet. There was a significant backlash when the official Twitter account for the live-action Barbie film posted an insensitive image. It featured a nuclear explosion and a pun -“It will be a blast.” Given Japan’s unique history with atomic bombings, such insensitivity sparked outrage.

Conclusion

The Barbenheimer phenomenon captures the complex interplay between cinema, intellectual property, and societal values. While the IP landscape of Oppenheimer sheds light on the complexities and historical implications of patent law, the global embrace of Barbenheimer by countries like those in the Western Balkans reflects its worldwide impact. While the region protects Barbie’s IP rights, the discussion takes a thought-provoking turn when considering Oppenheimer’s subject matter and its potential implications on public order and morality. Lastly, the controversy in Japan serves as a reminder of the sensitivities we must honor in an increasingly interconnected world. As the curtain falls on the Barbenheimer phenomenon, it stands as a testament to the impact of cinema on a range of discussions from IP to cultural values, encapsulating its significance across borders.

By Milica Novakovic and Bojan Tutic, Associates, Gecic Law

Amendments and supplements to the Law on Planning and Construction (“Law”) were published in the Official Gazette no. 62/2023 from 27 July 2023 and entered into force on 4 August 2023, whereas certain provisions of the Law will enter into force in 2024 and 2026, respectively.

1. Amendments to the procedure of conversion of right to construction land

Conversion of the right to use into the ownership right over construction land was introduced into domestic legal system by the main text of the currently valid Law on Planning and Construction (Official Gazette no. 72/2009, in force since 11 September 2009). This instituted a departure from the multi-decade long practice where it was impossible to acquire the ownership right over a construction land (which remained in state ownership regime) but only certain minor rights (right to construction, right to use), and consequently a dual regime existed in relation to the land rights and the building rights on the same land.

Apart from ideological reasons and the reasons closely connected with the state organisation at that time, selection of this type of property relations relating to real estate did not have a solid foundation, nor was it sustainable from the aspect of legal theory. The user had and exercised all rights of an owner, except for the disposal right, hence the transaction of a land was conditioned by the approval of competent administration authority, while the owner i.e. state practically had nuda proprietas. It is clear that this form of property relations was not sustainable.

Abandoning this concept also implied the return to the principle of real estate unity, which dates back to the Roman Law and implies that a person i.e. persons have ownership right to a building and related land as a result of a specific unification which results from the construction activities on such land, which is necessarily reflected on the legal status of the two real estates.

Nevertheless, even 14 years later the effects of this ownership transition have not been fully achieved. Conversion without compensation, which was available to certain categories of holders of right to use, although set as a transaction performed by relevant cadastres ex officio and not upon client’s request by virtue of the Law on General Administrative Procedure, was only implemented in practice upon the request of right to use holders. It does not come as a surprise that even this “free” and certainly simpler version of conversion has not been fully implemented.

As a counterbalance to conversion without compensation, in 2008 conversion with compensation was introduced in an attempt to correct certain effects of privatisation post factum i.e. ownership transformation of former state-owned companies. Although the idea is not so complicated, there were many wanderings along the road, including, among other, several amendments to the law, changes of competences, adoption of special regulations of this matter (initially just the change of compensation amount and subsequently conversion with compensation in general), pronouncing the provisions of these regulations unconstitutional, non-resolution of the status of cases where the decisions of administrative authorities did not become final at the moment of changes, terminology changes (“conversion” became “transformation” in the meantime, but only within the wording of the law, as the term “conversion” continued to live in practice) etc.

In addition, some procedures of conversion with compensation were completed and the acquirers paid compensation fees to the competent authorities. That is why the most important amendment of the Law refers to the possibility for conversion of the right to use into the right of ownership of construction land without compensation in cases that used to be subject to compensation payment. Compared to the previously implemented conversion procedures, one can now reasonably consider the remark relating to possible discrimination of holders of the right to use according to the time of application for conversion and the validity of regulation (particularly having in mind recent statements of the line ministry that the conversion with compensation was a state’s omission). The legislator strived to resolve this matter through final provisions of the Law, albeit not sufficiently or constitutionally justified.

The obligation to pay conversion compensation has been abolished for a wider group of entities, namely:

• Entities who were or are companies privatised on basis of the law regulating privatisation, bankruptcy and enforcement procedure, as well as their statutory legal successors,
• Entities who acquired the right to use the land after 11 September 2009, by purchasing buildings with accompanying right to use the land, from entities privatised on basis of the law regulating privatisation, bankruptcy and enforcement procedure, and which are not their statutory legal successors,
• Entities – holders of the right to use the undeveloped building land in state ownership, which was acquired for the purpose of construction under the previous laws regulating construction land until 13 May 2003 or on the basis of decision of a competent authority, as entitieswhich, under this law, acquired the right to conversion of the right to use into the right of ownership of construction land, without compensation.

According to the Law, the holder of the right to use intending to convert such right into ownership right shall submit to the Agency for spatial planning and urbanism of the Republic of Serbia (“Agency”) a request for location information, whereas the Agency issues the information on location within eight days after the request had been filed along with a certificate which specifies the purpose of such cadastral lot/lots and possibility for registration of the right to use without compensation to the benefit of the applicant.

The Ministry of Construction, Transport and Infrastructure stated that, by the provisions of the amended Law i.e. by abolishing the special Law on Conversion of the Right to Use into the Right of Ownership of Construction Land with Compensation, nearly 5,000 construction locations will become available for construction i.e. around 15 million square meters, which may result in additional investments in the Republic of Serbia.

2. Other significant amendments to the Law

The Law proclaims the green construction principle and further elaborates the matters of energy efficiency and green construction, in the following manner:

• For the purpose of reducing the emission of greenhouse gases, the use of ecologically certified construction materials and equipment, reduced waste generation, use of renewable energy sources, for all new buildings exceeding 10,000 m² of gross surface developed construction area, green construction certificate needs to be obtained upon obtaining the use permit;
• The investor of building which has been granted green construction certificate shall be entitled to reduction of the accrued contribution for development of construction land in the amount of 10% of the total amount of contribution;
• Energy performance certificates for buildings shall be valid for ten years from the date of issuance through the Central register of energy passports (CREP) and they must be enclosed upon verification of a real estate purchase agreement or conclusion of alease agreement, making the integral part thereof;
• From the day of entry into force of the Law, all new buildings shall be designed, constructed and maintained in a manner which ensures that external units of heating and cooling devices are not visible and do not affect their immediate surroundings; in addition, transitional provisions stipulate the deadlines for adjustment of the existing buildings with these requirements;
• From the day of entry into force of the Law, all new buildings shall possess an energy performance certificate for the entire building or a special part thereof;
• Green infrastructure is a strategically planned network of functionally connected natural and semi-natural elements, whose design, construction, use and maintenance is performed so as to ensure ecological, economic and social benefits through natural, biodiversity-based solutions.

3. Final notes

The legislator regulated through individual articles of the Law a myriad of situations that may result from introduction of new procedures and bodies, and envisaged that the Agency for spatial planning and urbanism of the Republic of Serbia shall start to work no later than three months upon entry into force of the Law, while by-laws for implementation of the Law shall be adopted within sixty days upon entry into force of the Law.

The Law further clarifies the situation with procedures instituted before entry into force of the Law, and prescribes the following:

• Already instituted procedures for completion of request for issuance of approval for construction, location requirements, construction permit, use permit and other requests for acting upon individual rights and obligations filed until entry into force of the Law, shall be finalized according to the regulations under which they had been instituted.
• Procedures for conversion of the right to use into the right of ownership of construction land instituted under the provisions of the law regulating the conversion of the right to use into the ownership right with compensation shall be suspended on the day of entry into force of the Law.
• Holder of the right to use construction land who registered the right of ownership of construction land under the Law on Conversion of the Right to Use into the Right of Ownership of Construction Land with Compensation (“Official Gazette of RS”, no. 64/15 and 9/20), shall not be entitled to refund on this basis.

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 Sara Ostojic, Senior Associate, PR Legal

The Republic of Serbia applies different taxes to reimbursement payable to engaged individuals depending on their engagement type. Those engaged via employment agreement, are subject to salary tax and those engaged via service agreement are subject to tax on other income. Those engaged via temporary and periodical employment agreements are subject to either salary tax or tax on other income while those engaged on the basis of supplementary work are only subject to tax on other income.

Salary tax

In terms of Individual Income Tax Law (hereinafter referred to as: “Law”), salary tax is calculated upon employment agreement or temporary and periodical employment (except for individuals up to 26 years of age receiving education executed through youth or students’ co-operatives) i.e. on salary or contractual reimbursement and other incomes.

Salary can be determined and paid in pecuniary amounts, but also in bonds, securities, and other non-pecuniary forms including providing benefits.

The tax base for salary tax is gross salary, reduced to RSD 21,712 for individuals engaged on the basis of full-time employment contracts.

The tax rate for salary tax is 10%.

Tax on other income

In terms of the Law, tax on other income is calculated upon, inter alia, service agreement; supplementary work agreement; temporary and periodical employment agreement for individuals up to 26 years of age receiving education executed through youth or students’ co-operatives; and rewards and other similar payments over RSD 16,666 to individuals who are not employed with the employer.

The tax base for tax on other income is gross income reduced by statuary costs of 20%.

The tax rate for tax on other income is 20%.

Besides apparent differences between the two, in tax base and tax rate, additional contrast lies in the existence of tax incentives only in terms of salary tax, while there are no tax incentives for tax on other income.

II Tax incentives for salary tax

There are two types of incentives, one that provides relief in terms of the type of reimbursement and the other one that provides relief in terms of the engaged individual.

The Law stipulates the following reliefs for different individuals:

1. New employees – individuals engaged on the basis of employment agreement who were registered before the National Employment Agency for the period of 6 months prior to the employment.

The relief of 65% is applied for the remainder of the year for companies that employ at least one new employee; 70% is applied for the remainder of the year for companies that employ from 10 and up to 99 new employees; and 75% for companies that employ at least 100 new employees.

For small and micro companies, the partial relief of 75% is applied if they employ at least 2 new employees.

For newly incorporated companies that employ its owner, the relief is intended for the salary tax of the owner in the period of 12 months if the net salary does not exceed the total of RSD 37,000. 

For companies engaged in innovative activities (as defined in the Law) that employ its owner, the relief is intended for the salary tax of the owner in the period of 36 months if the net salary does not exceed the total of RSD 150,000. 

For employees employed between 1 March 2022 and 31 December 2022 who were not registered with social security funds as an employee, an entrepreneur, or a founder who is employed and whose monthly salary exceeds RSD 76,500, in partial relief of 70% up to 2024.

2. Employees with disabilities – individuals with medical documentation confirming disability. The relief is applied for the period of 3 years since the employment.
3. Employees engaged in research and development – Companies engaged in research and development activities have partial relief of 70% for the salaries of employees engaged in these activities.

According to the Law on Contributions for Mandatory Social Insurance, the same reliefs are applied in terms of social security contributions.

III Tax incentive analysis

Bearing in mind various tax incentives determined by the Republic of Serbia, we can confidently conclude that the Republic of Serbia has a clear intention to direct employers to engage individuals in employment agreements, rather than engagement outside of the employment agreement. Employers should be less reluctant to employ new individuals and extend their business, bearing in mind that the state is partially or fully releasing them from tax obligations. The engagement outside of the employment agreement does not necessarily lead to more permanent engagement of the individuals, therefore, no incentives are provided for such, usually short, engagement. For employees, the benefit of having a more permanent engagement is likely preferred, while employers can benefit from tax incentives determined solely for long-term engagement.

Setting aside various special categories e.g. innovative activities, disability, research and development, etc., as presented above, we will shift our focus to freshly developing companies and their employees.

From a new employer’s point of view, comprehension of tax incentives enables employers to optimally organize their business resources. New market participants face many challenges in the initial phase of starting a new business or entering a new market. Costs could be very high and demanding. For these reasons, new employers should be aware of all reliefs provided by the state in order to minimize expenses and sufficiently use available resources. For starters, it is necessary to get familiar with these tax regulations and do some basic math.

Firstly, an employer identifies which tax incentive may be applicable in regard to the size of the company (according to the Accounting Law) it intends to incorporate.

Examples

First employee – The relief of 65% is applied for the remainder of the year for companies that employ at least one new employee regardless of the company size.

2 employees – for small and micro companies, the relief increases to 75%, while for middle and large companies, the relief remains at 65%.

10 and up to 99 new employees – for middle and large companies intending to employ from 10 and up to 99 employees, the relief increases to 70%

at least 100 employees – the relief increases to 75%

Now, Math.

For the purpose of calculating, we will use median net income from May 2023 in the Republic of Serbia, in accordance with the latest available publication on incomes from the Statistical Office of the Republic of Serbia which amounts to RSD 66,244.

In order to understand the numbers, let’s say we are incorporating a company intending to engage employees with salaries equal to the median salary in the Republic of Serbia.

	no incentive	65%	70%	75%
Median net income in the Republic of Serbia	66,244
Gross income amount	91,402
salary tax	6,969	4,529.85	4,878.3	5,226.75
Contributions for employee	18,189	11,822.85	12,732.3	13,641.75
Contributions for employer	13,847	9,000.55	9,692.9	10,385.25
Total cost for the employer	105,249	79,895.75	77,945.5	75,995.25
Total relief per employee	0	25,353.25	27,303.5	29,253.75

 

Putting math to work

First employee – Our cost for the first employee would be RSD 79,895.75 regardless of the size of the company we chose to incorporate.

2 employees – if we lean towards small and micro companies, the relief increases to 75% for having two employees with an average cost of RSD 75,995.25 per employee, while for middle and large companies, we stay at 65% relief, i.e. RSD 79,895.75 per employee.

10 and up to 99 new employees –if we are still a small or a micro company, we stay at 75 % while for middle and large companies, the relief increases from 65% to 70% and the average cost of an employee amounts to RSD 77,945.5.

at least 100 employees – Lastly, if our company decides to employ at least 100 employees, the applicable relief totals 75%, and the average amount per employee is RSD 75,995.25.

If we go further into the calculation, we shall find that it causes less expense to the employer to employ 100 employees rather than 99. Furthermore, the total cost for 99 employees for our middle or large company would be RSD 7,716,604.5 while for 100 employees the total cost would amount to RSD 7,599,525. This means that if our company employs one additional employee – not only will it increase its workforce – it will also save money.

Conclusion

Our opinion is that even with well-shaped existing tax incentives, there are, however, still steps to be taken to further relieve employers and incentivize them to engage more employees.

Especially, the government could consider proposing smaller gaps between the number of employees needed for switching from one relief category to another. This shall stimulate “smaller companies” to employ a larger number of employees in order to move to another category and increase their benefits.

We are of the stand that 100 employees is a very large number for the capacities of the majority of the companies in the Republic of Serbia. According to the 2022 Yearly Report of the Business Registers Agency of the Republic of Serbia, there are 93,064 micro companies employing 227,237 employees (average 2.44); 13,172 small companies employing 333,356 employees (average 25.30); 2,092 middle companies employing 270,770 employees (average 129.43); and lastly, 528 large companies employing 450,049 employees (average 852.36). Micro companies represent 85,5% of all companies, meaning that micro companies are, by far, the most common size of companies.

Another thing that remains unclear concerns newly incorporated companies that employ their owners. It is obscure as to why this incentive only applies to net salaries that do not exceed the total of RSD 37,000. For what reasons a salary higher than the prescribed amount could not be subject to tax incentives intended for employees?

Another thought is that there should be more incentive categories that could be applicable for smaller increases in the number of employees. Or, preferably, a higher (percentage-wise) gap between existing categories. The difference between having 9 and 10 employees does not provide the same benefit as the difference between having 99 and 100 employees (according to the math above), therefore it still won’t be attractive to employers to employ extra employees. In the 9 to 10 gap, there is no extra relief for small and micro companies, while for middle and large companies, the incentive is not prescribed to sufficiently stimulate employers. Reverting to the median salary in the Republic of Serbia, the cost for an employer (middle/large company) to engage 9 individuals is RSD 719,055, while the cost for engaging 10 individuals is RSD 779,455. More precisely, it is still more expensive for the employer to employ an additional employee, therefore not much effort will be made in terms of engaging more persons in order to switch to another incentive category that provides bigger benefits.

Even though the incentives are intended to make a difference from the very first employee, our opinion is that creating additional categories between 1 and 100 will be beneficial to both employees and employers.

Whatever the direction the government decides to take, it remains indisputable that all future employers should get familiar with these tax regulations in order to maximize the use of benefits provided by the state. Good and efficient tax planning can save a lot of money!

By Nikola Djordjevic, Partner, and Stasa Kneselac, Associate, JPM

JPM & Partners has advised Slovenia’s Big Bang on its acquisition of Serbian online retailer BC Group. The Andric Law Office reportedly advised the sellers.

The transaction remains contingent on regulatory approval.

Big Bang is the largest Slovenian retailer of entertainment and consumer electronics.

According to JPM & Partners, “with this acquisition, the Big Bang Group continues its expansion in the region. After the takeover, the entire group will have nearly 700 employees, in a market with a total population of 16 million, with plans to generate over half a billion euros in revenue by 2028.”

The JPM & Partners team included Partners Jelena Stankovic Lukic and Nikola Poznanovic and Senior Associates Zivko Simijonovic and Janez Voncina.

Editor’s Note: After this article was published, Karanovic & Partners informed CEE Legal Matters that Ketler & Partners, a member of Karanovic, advised Big Bang and shareholder Bidigital on the Slovenian aspects of the acquisition. The firm’s team included Senior Associate Nina Krajnc and Junior Associate Luka Skledar.

On 26 July 2023, the Serbian National Assembly adopted amendments to the Law on financial support for families with children.

The key novelty of the amendments is that they expand on the financial benefit for pregnant mothers who are registered entrepreneurs and an additional basis for paid leave for the employed father of the child.

The amendments started to apply as of 1 August 2023.

Additional Grounds for Father’s Paid Leave in Case of Childbirth 

Employed fathers are entitled to paid leave for childcare and special childcare as well as salary compensation during the use of such leave if the mother of the child is a registered entrepreneur or has the status of an insured agricultural entrepreneur.

This right of paid leave can be used three months after the birth of the child.

The use of this paid leave right by the father means that the mother will lose the right to receive the so-called other remuneration.

Fathers can exercise this right for the remaining period up to one year of the child’s life (i.e. up to two years of the child’s life for the third and each subsequent child), but not before the mother became entitled to other remuneration.

The base for salary compensation for the father is determined based on the sum of the monthly salaries paid, for the last 18 months preceding the relevant moment for which the paid leave is used.

Decision on approving paid leave – employers are required to decide on the request received by the fathers in the previously mentioned cases and issue a resolution on approving paid leave if the necessary requirements are met.

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

By Milena Jaksic Papac, Partner, and Boris Radojcic, Senior Associate, Karanovic & Partners

August 25, 2023, marks a monumental shift as the Digital Services Act (“DSA“) takes center stage, impacting industry giants like Amazon, Google, Apple, and TikTok. With 19 platforms and search engines, each having a minimum of 45 million users, the DSA takes action to uphold data privacy, combat disinformation, and eliminate online hate speech. This dynamic legislation aims to give users, including minors, enhanced rights and control over their online presence, fostering a high level of privacy and security.

What’s the story?

Back on April 25, 2023, the first designation decisions were made, designating very large online platforms (“VLOPs“) and very large online search engines (“VLOSEs“). From that point, these designated entities were given four months to comply with the DSA. Now that this window is closed prepare for a fresh chapter as major online platforms gear up to identify, analyze, and mitigate an extensive spectrum of systemic risks.

Given the current developments, the European Commission (“EC“) requires VLOPs and VLOSEs to meet these obligations:

Risk Assessment

Every year, VLOPs and VLOSEs need to assess possible systemic risks that come from their services. They are required to address these identified risks by implementing appropriate and effective mitigation strategies that are tailored to the specific context. The evaluations must encompass the following aspects:

(i) The dissemination of illegal content through their services,

(ii) Safeguarding fundamental rights, including dignity, privacy, data protection, freedom of expression and information, non-discrimination, child rights, and consumer protection,

(iii) Countering adverse impacts on civic discourse, election process, and public security,

(iv) Managing effects on gender-based violence, public health, minors, and personal well-being.

Risk management and crisis response

During a crisis, the EC may require VLOPs and VLOSEs to take specific actions, which include:

(i) Assessing whether the functioning and use of their service significantly contribute to a serious threat;

(ii) Identifying and applying specific, effective, and proportionate measures to eliminate such contribution; and

(iii) Providing the EC with reports on these assessments. 

Transparency reporting

Providers of VLOPs or VLOSEs shall publish the reports on any content moderation they engaged in at least every six months. These reports must include information on the human resources dedicated to content moderation, the qualifications and linguistic expertise of the persons carrying out these activities, and the indicators of accuracy and related information in such reports.

Additional Online Advertising Transparency

The DSA also prescribes that VLOPs and VLOSEs displaying online ads must establish a public repository with key (minimum) details, including:

(i) ad content, product, service, or brand details,

(ii) presenting the person’s identity and the funder’s identity if distinct,

(iii) ad timeframe,

(iv) target audience info,

(v) published commercial communications,

(vi) total recipients reached.

The repository should be in a distinct section on the online interface. It must be easily searchable and reliable, allowing multiple criteria searches and accessible through application programming interfaces.

Data access

VLOPs and VLOSEs must provide access to the data necessary for monitoring their compliance with the DSA, as per the reasoned request of the relevant Digital Services Coordinator. Within 15 days of receiving the request, providers can propose changes to the request if they cannot grant access due to unavailable or security-sensitive data, in particular trade secrets. Thus, they should suggest alternate ways to access data or offer suitable alternatives that fulfill the request’s purpose.

External and independent auditing

VLOPs and VLOSEs are also subject to external independent audits to confirm their compliance with various obligations outlined in the DSA. In cases where the auditor’s opinion is unfavorable, the report will also provide operational recommendations on specific measures to attain compliance. Within one month of receiving such recommendations, VLOPS and VLOSEs must adopt an audit implementation report for remedial measures. 

Supervisory fee

Designated VLOPs and VLOSEs are required to pay an annual supervisory fee. The amount will be specified in an implementing act published by the EC. The EC will report annually to the European Parliament and the Council on the total amount of the individual fees charged in the preceding year.

The DSA holds substantial importance as it will heavily influence online platform operations. The EU’s efforts to safeguard online users through the DSA are commendable, but close observation of its practical implementation is vital to ensure its effectiveness in achieving its intended objectives. As such, we closely follow the DSA implementation process and its outcomes.

By Veljko Milutinovic, Of Counsel, Gecic Law