Vulic Law has advised Swiss hotel owner Cofis SA on the establishment of a new operator to manage a hotel in Belgrade.
According to Vulic Law, the 123-room hotel is located in downtown Belgrade.
The Vulic Law team was led by Managing Partner Milos Vulic and included Associate Lawyer Bosko Dimitrijevic.
The SOG Law Firm has advised PowerChina Resources on its acquisition of a 51% stake in the Vetrozelena wind farm project from CWP Europe. Moravcevic Vojnovic and Partners in cooperation with Schoenherr reportedly advised the seller.
“PowerChina Resources is going to become the majority owner through the recently signed share purchase agreement, while the remaining 49% share will be owned by CWP Europe,” SOG informed.
The 297.6-megawatt Vetrozelena wind farm project is located in Pancevo, in the autonomous province of Vojvodina in the northern quarter of Serbia. “The wind farm is going to have 48 wind generators,” the firm reported. “Upon completion of construction and reaching the targeted commercial operation date in 2025, the Vetrozelena wind farm will be the largest wind farm project in the country.”
PowerChina is a wholly state-owned company that offers engineering, procurement, and construction services to hydropower, waterworks, thermal power, energy, and transmission and distribution projects.
CWP is a renewable energy development company active in Europe and Australia.
The SOG team included Partner Radovan Grbovic, Senior Associate Aleksa Bosnjovic, and Junior Associate Jelisaveta Folic.
Migration is a phenomenon as old as humanity itself. In modern times, a good life today means a good job.
Since industrialization and globalization, it has become increasingly more accessible and more efficient for people to move around and satisfy the needs for labor in different parts of the world. Today, due to demographic and economic trends, in addition to the growing demand for jobs in digital and technology, there is also a need for more traditional occupations. Numerous, mainly developed countries, have already taken measures to ease the conditions for the employment of foreign nationals.
Serbia is increasingly becoming a destination for foreign nationals as the country is increasingly facing the problem of a lack of available domestic labor force, and the list of occupations with a labor shortage is getting longer. According to some estimates, Serbia could lose up to one-fifth of its domestic workforce in the next 30 years.
The Open Balkans initiative could be part of the solution, enabling a seamless flow of labor across the member countries. The latest news is that soon the abolition of work permits is expected within the framework of the Open Balkans, which is one of the fundamental aspects of cooperation between the member countries.
After going through public consultations, changes to the Foreigners Act and the Foreigners Employment Act were announced to open the doors of the labor market to a wide range of occupations.
In terms of changes that will significantly facilitate the position of foreign citizens in the Republic of Serbia and enable more accessible employment, which will allow Serbia to respond to the growing need for additional labor generated by the growth of the domestic economy, the following stand out in particular:
Introduction of a single work permit
The most significant change concerns the introduction of the electronic submission of requests for temporary residence and work permits, which the Ministry of Internal Affairs of the Republic of Serbia would be obliged to decide within 15 days. This procedure, where the requests for temporary residence and work permits would be combined, entails that the Ministry of Interior issue a single permit for temporary residence and work to foreign citizens.
The amendment to the act intends to combine the approval of temporary residence and issuing a work permit into a single procedure that would be conducted entirely before the MUP, making the process much more straightforward and shorter.
Changes in temporary residency
Amendments to the act extend the maximum duration of temporary residency for foreign citizens on all grounds to a period of up to three years, with the possibility of extending it to the same period instead of the previous year, with the possibility of extending it for the same period. The proposed changes also provide a more effortless procedure for specific categories of foreigners who apply for approval of temporary residency in Serbia in that proof of means of support and evidence of health insurance during the planned stay in Serbia are not required for foreigners who seek temporary residency based on employment.
The possibility of employment, even without a permit
With the proposed changes, certain categories of foreigners are allowed to work even without a work permit, eliminating doubts regarding the existence of such a possibility that arose with the current act. The new amendments stipulate that foreign citizens may work in the Republic of Serbia if granted temporary residence based on real estate ownership in Serbia. A foreign national is granted temporary residency based on family reunification with a citizen of Serbia. The same right is enjoyed by foreigners with approved temporary residency based on studies, scientific research, studies, and international exchange of students.
Easier conditions for approval of permanent residency
The draft proposes that permanent residency may be granted to a foreign citizen after three years of continuous residency on the territory of the Republic of Serbia (instead of the previous five years). In addition, a new basis for approval of permanent residency is introduced: the Serbian origin of a foreign citizen, based on which a foreigner can be granted permanent residency without the requirement to fulfill the conditions regarding the period of stay on the territory of Serbia. Finally, foreign citizens with approved permanent residency in Serbia can work freely in Serbia, without needing a personal work permit.
Simplified procedure for foreigners with D visa (long-stay visa)
With the adoption of the proposed changes, foreign nationals who need a visa D to enter, stay and work in the territory of the Republic of Serbia the same visa will be the basis for residency and work for its duration (180 days), without the need to go through a double procedure that has existed until now. Foreigners could then legally work in Serbia by obtaining a D visa upon arrival without the need to apply for a work permit separately.
Introduction of a biometric document
Another novelty is introducing a special biometric document containing the issued single work permit and approval for temporary residency instead of stamping a temporary residence sticker in the travel document of a foreign citizen. This is also significant because of the introduction of the possibility of using administrative services through the e-Government portal for foreign citizens, such as an electronic signature.
By Milos Petakovic, Senior Associate and Luka Duric, Associate, Gecic Law
On 6 January 2023, the new Law on Capital Market started to apply in Serbia (except for certain provisions delayed further until the accession of Serbia to the EU). This law is adopted as a part of a comprehensive reform of the capital market legal framework in Serbia and introduces a completely new set of rules in line with the relevant EU regulations governing markets in financial instruments (MiFID I and MiFID II), prospectus, investor-compensation schemes, transparency, securities settlement, and market abuse.
In addition, a set of secondary regulations for the implementation of the new Law on Capital Market adopted by the Securities Exchange Commission (SEC) started to apply as of 6 January 2023. Belgrade Stock Exchange has also aligned its internal acts with the new Law on Capital Market with effect from 9 January 2023. The harmonisation of the acts of the Central Securities Depository and Clearing House is pending yet (it was due by 5 October 2022).
Broker-dealer companies and authorised banks had a deadline until 5 January 2023 to harmonise their internal acts with the new Law on Capital Market. Importantly, credit institutions which have provided ancillary services under the previous Law on Capital Markets without a license for an authorised bank (investment company) were obliged to obtain the license from the SEC until 6 January 2023 in order to continue to perform ancillary activities.
This includes, among other ancillary services, safekeeping and administration of financial instruments for the account of clients (custody services) and related services, such as cash/collateral management. If the credit institution failed to obtain such a licence from the SEC, it had to inform the SEC thereof but may continue to provide the following ancillary services: granting credits or loans to an investor for carrying out a transaction with one or more financial instruments, where the lender is involved in the transaction; and foreign currency conversion services connected to the provision of investment services. Provision of other ancillary services by the credit institution that has not obtained the relevant license from the SEC would be deemed the unlicensed provision of investment services, which is sanctioned as a criminal act.
The new law brings a number of other novelties in the legislative framework which market participants should consider going forward.
By Maja Jovancević Setka, Partner and Tijana Arsenijevic, Senior Associate, Karanovic & Partners
The Ministry of Finance published, at the end of -March 2023, its eleventh Regulation on interest rates which are considered to be in line with the “arm’s length” principle. The Ministry of Finance, i.e. the Minister issues this Regulation every year and it pertains to the interest rates for that year.
As a reminder, the Corporate Income Tax Law gives the Minister the right to prescribe interest rates that are considered to be in line with the “arm’s length” principle. The law also gives the taxpayer the right to apply general rules for calculating the price of a transaction in accordance with the “arm’s length” principle, instead of the interest rates prescribed by the Minister. If the taxpayer exercises this right, it must apply the general rules to all loans or credits with related parties, and the tax administration in that case is not bound by the interest rates specified in the Minister’s regulation during the tax control procedure.
Therefore, if the Minister exercises his right and issues a regulation, as it has been done every year since 2013, the interest rates prescribed by the regulation are primarily binding for everyone, but the taxpayers have the right to apply the appropriate method prescribed by the law for determining the “arm’s length” price instead of those interest rates. A classic example would be a taxpayer who takes loans from both banks and related parties and uses the rate it has in a comparable loan with banks to determine the “arm’s length” rate for loans with related parties.
Let us now look at the movement of interest rates prescribed by regulations in the last five years and put them in relation to changes in the reference interest rate of the National Bank of Serbia (“NBS”).
As stated on the NBS website, the reference interest rate has a role of signaling the monetary policy stance, as well as the role of benchmark interest rate because the level of money market interest rates i.e. interest rate corridor, is set with reference to this rate. Therefore, this rate cannot be an “arm’s length” rate, but these interest rates would have to be higher than the reference interest rate. And that was indeed the case until the Regulation for the year 2023, as can be seen from the chart below:
Short-term credits/loans in RSD
2019 – 4.98%
2020 – 4.71%
2021 – 3.69%
2022- 3.12%
2023 – 3.88%
Long-term credits/loans in RSD
2019 – 5.69%
2020 – 5.55%
2021 – 3.9%
2022 – 3.39%‚
2023 – 4.74%
Short-term credits/loans in EUR
2019 – 2.71%
2020 – 2.64%
2021 – 2.32%
2022 – 2.25%
2023 – 2.98%
Long-term credits/loans in EUR
2019 – 2.90%‚
2020 – 2.87%
2021 – 2.83%
2022 – 2.73%
2023 – 3.22%
Change in the ref. interest rate
of the NBS (Jan-Dec)
2019 – 3%-2.25%
2020 – 2.25%-1%
2021 – 1%
2022 – 1%-5%
2023 – 5.25%-6%
The chart leads us to two conclusions. The first is that administratively prescribed “arm’s length” interest rates that are applicable for a whole year penalize those who enter into a loan agreement with a related party after an abrupt increase in the reference interest rate in the year in which abrupt increase of the reference interest rate occurs, as well as those who enter into a loan agreement before a significant decrease in this interest rate in the year in which a significant decrease of this rate occurs.
This means that a taxpayer in the year 2020 could have treated as an “arm’s length” interest rate the rate of 4.7% even if the contract was executed at the moment when the reference interest rate had dropped from 2.25% to 1%. Likewise, in the year 2022, the taxpayer could still treat only 3.12% as an “arm’s length” interest rate even though it was impossible to obtain such a low rate from the bank, given that the reference rate was already at 5%.
The second conclusion is that in the year 2023, the ministry has deviated, for the first time, from the principle that “arm’s length” interest rates are higher than the reference interest rate. The same applies to EUR interest rates, although the table does not show the rates of the European Central Bank. Such deviation is not justified, as the transfer pricing rules should only help with determining the “arm’s length” prices, and “arm’s length” prices are the ones that can be achieved in a transaction between unrelated parties, whichever such prices are. Instead, this solution puts those who do business with their related parties in a less favorable position, in terms of applicable interest rates, than in the case of doing business with unrelated parties, which is not the purpose of the “arm’s length” principle.
By Nikola Poznanovic, Partner, and Marija Vukcevic, Senior Associate, JPM Jakovic Popovic Mitic
Dogs are becoming an increasingly significant part of our lives. Regardless of the owner’s age – we can acknowledge that almost everybody enjoys their time patting a dog. Moreover, many people are addressing their dogs as babies, recognizing them as a part of the family.
Nevertheless – can we go that far and say that our pet’s, i.e., dog’s name can identify us?
This question has been raised in the UK by Avon and Somerset Constabulary regarding a not-so-heartwarming event. Namely, the incident occurred during an operation to shut down an illegal rave on the periphery of Bristol when a woman was attacked by a police dog, leaving her with life-changing injuries. The victim was hospitalized and required skin and muscle grafts and reconstructive surgery. Consequently, the woman took legal action against the Police. Likewise, Avon and Somerset Constabulary have referred the incident to the Independent Office for Police Conduct in the UK.
What calls for special attention is that when the request was made on disclosing the dog’s name, Police argued that doing such would indirectly identify the dog handler, and therefore such information falls within the definition of personal data. Precisely, the woman’s request included at least the following:
1) What is the name of the dog;
2) What is the name and number of the police dog handler;
3) Which officer gave the order to attend with dogs?
Furthermore, the Data Protection Commissioner in the UK also concluded that the dog’s name could identify the handler indirectly, meaning it is personal data. Namely, the Data Protection Commissioner took the stand that the abovementioned parts of the request asked for information on the dog handler and their dog. Their focus is clearly on knowing information about the handler (their identity, training, qualifications, and overall aptitude). Furthermore, the Data Protection Commissioner accepted that the name and badge number of the handler is information that will directly identify them.
In this regard, Avon and Somerset Constabulary refused to disclose the requested information, citing the following non-disclosure exemptions of the Freedom of Information Act:
• section 30(1)(a)(b)(c) – Investigations and proceedings conducted by public authorities;
• section 40(2) – Personal information.
This kind of decision contributed to the significance of defining personal data.
UK Data Protection Act defines personal data as “any information relating to an identified or identifiable living individual.” Let’s take a closer look at that one. Evidently, for any data to be considered personal, two conditions must be fulfilled:
1. data must relate to a living person and
2. the living person must be, at least, indefinable.
It is the second condition that gives us a not-so-clear view of what personal data is. Having said that – how can we identify a person? The first thing that comes to our mind is the person’s name, and after that, probably the phone number or the address of the domicile. But how long would the count take before we call to mind – the dog’s name? So, not only does the second condition make plenty of room for discretion, but the phrase “any information” is not helping the situation. In this respect, we may as well say that one must assume that the term “personal data” should be as broadly interpreted as possible. The case law of the European Court of Justice supports those mentioned above. Namely, they consider even less explicit information than the dog’s name – such as recordings of work times, which include information about when an employee begins and ends his work day, as well as breaks or times that do not fall in work time, as personal data. This means that the only proper way to determine personal data is on a case-by-case basis.
By Katarina Zivkovic, Senior Associate, and Mina Milakovic, Associate, Samardzic, Oreski & Grbovic
The SOG Law Firm, working with DLA Piper’s office in France, has advised the Renault Group on the divestment program for its import and distribution subsidiaries in six jurisdictions. Wolf Theiss reportedly advised the Emil Frey Group on acquiring the operations. Sabev & Partners reportedly advised the Renault Group as well.
According to SOG, “the Renault Group sold the subsidiaries specialized in importing and distributing Renault, Dacia, Nissan, and/or Alpine vehicles across six jurisdictions, including the sale of the Serbian subsidiary to the Emil Frey Group.”
SOG’s team included Partner Milan Samardzic, Senior Associate Aleksa Bosnjovic, and Junior Associate Katarina Kracun.
The Future Is Here! And it is here to stay. What we could only imagine some years ago is now part of our reality, and AI has become an ever-present topic. AI is everywhere, from banking and healthcare to transportation and entertainment.
Learning more about the impact of these innovations makes us ask ourselves how this will alter our habits, make our everyday activities less cumbersome and affect our fundamental rights. So, let’s talk about AI’s pros(perity) and cons(istency) in protecting rights.
Pioneering AI. The European Union (“EU” or “Union“) has set the first global comprehensive regulatory framework to apply to anyone who develops, deploys, or uses AI systems in the EU, including entities and individuals from third countries that provide AI products or services in the EU. A new proposal for a regulation (“AI Act“), published by the European Commission (“Commission“), aims to ensure that AI systems in Union are safe and are aligned with fundamental rights and Union values and find methods of effective enforcement. It covers numerous AI technologies, including voice assistants, self-driving cars, chatbots, and military drones. The AI Act should provide legal certainty to facilitate investment and innovation in AI. At the same time, the development of AI in the internal market must not result in its fragmentation.
Handling Risks. The AI Act practically recognizes four categories of AI systems based on their risk level.
Unacceptable risk in AI. It refers to unethical and harmful practices banned outright, such as sending subliminal messages or exploiting the vulnerabilities of certain groups based on age or any disability. Another example is the social scoring of persons, the evaluation of their trustworthiness based on their social behavior or personality characteristics, and the use of ‘real-time’ remote biometric identification systems in public spaces. The latter may be permitted only exceptionally when searching for victims of crimes, preventing imminent threats, or combating terrorist attacks.
High risk in AI. These practices are directly related to health, safety, and human rights, the list of which is not exhaustive but will be updated by the Commission regularly. AI tools used in infrastructure, law enforcement, transport, medical procedures, recruitment, financial services, and identity verification may be considered high risk. Due to their importance, they entail an abundance of obligations primarily for providers of AI, including ensuring: (i) adequate risk assessment procedures and mitigation systems, (ii) quality training and management systems, (iii) human oversight, (iv) detailed logs of AI-generated data, (v) technical documentation, (vi) clear and adequate information to the user and (vii) conformity of their AI systems with the law. In addition, other participants’ obligations are not circumvented, such as to importers, distributors, or users. Users will, for instance, be bound to careful and diligent following of the instructions of use accompanying these systems.
Limited risk in AI. Designated in the AI Act as practices that require transparency obligations, the idea is to ensure individuals are aware of the use of AI and can make informed decisions. Therefore, providers are bound to inform individuals that they are communicating with an AI, as in the case of chatbots. Additionally, for AI systems that manipulate visual images, audio, or video content that would falsely appear to a person to be authentic or truthful, known as ‘deep fake’ technologies, providers must disclose that the content has been artificially generated or manipulated.
Minimal or no risk in AI. These applications are unlikely to cause harm to individuals or society and, therefore, can be used freely without specific regulatory requirements. The Commission determines the vast majority of currently used AI systems in the EU as such (spam filters, translation software, video games, etc.).
To Comply or Not to Comply? According to the proposal, companies in the worst forms of breach of the AI Act could be fined up to EUR 30 million or 6% of their global turnover, whatever is higher. So, this could amount to many billions in fines for the most prominent players if they violate the rules.
Looking Good? Or Not? Yet, as AI becomes more widespread and advanced, concerns about its possible adverse impacts on society have been raised, such as discrimination, job displacement, and privacy violation.
Despite the evident effort of the Union to address the mechanisms to protect fundamental rights in general, one may imagine situations of collective harm to racial, gender, or ethnic groups. One example of collective harm would be racially biased face recognition systems.
On the other hand, social harm is harm suffered by the general population. Fake news and deep fake are already threats to democracy, and with AI, their impact could reach other levels.
Scaring AI Away? By regulating the field, is the EU becoming less competitive? The EU is often criticized as a heavy regulator, and the EU AI Act may become a part of this perception. AI businesses may be tempted to migrate from the EU to more relaxed jurisdictions to develop their AI products/services more comfortably. Aiming to regulate, the EU could lose out on the AI boom and continue to lag behind other competing markets.
By Ivana Stojanović Raisic, Counsel, Nemanja Sladakovic, Senior Associate, Bojan Tutic, Associate, Vasilije Boskovic, Associate, Gecic Law
Zivkovic Samardzic has advised Fifth Quarter Ventures on the legal process for becoming an alternative investment fund in Serbia.
According to Zivkovic Samardzic, “on April 21, 2023, the Securities Commission brought a decision to grant a permit to Fifth Quarter Ventures, which enables Fifth Quarter Ventures to transform into an alternative investment fund management company, allowing it to step into the final procedural phase before the Securities Commission for obtaining the vital permit to establish an alternative investment fund in Serbia.”
“Fifth Quarter Ventures is founded with the idea to be an early-stage venture capital fund focused on investing in top start-ups from the Western Balkans,” the firm informed. “Also, with its experienced founders and proven business model, Fifth Quarter Ventures will help start-ups that currently outgrow local investors and introduce them to the top foreign venture capitals. Finally, Fifth Quarter Ventures’ strategy is also directed to the start-ups run by Serbian and Croatian founders in the diaspora, which can benefit from Fifth Quarter Ventures’ connections, and to the elite US and Canadian start-ups which have a Balkan presence that seeks help with product-building and faster execution.”
The Zivkovic Samardzic team included Partners Igor Zivkovski and Sava Pavlovic and Associate Ana Grebo.
On 24 March 2023, the Commission for the Protection of the Competition (“Commission”) initiated an investigation against the Hotelsko, Ugostiteljsko i Turisticko preduzece Moskva doo (“Moskva”) for possible gun-jumping.
The commission has determined that Moskva is the owner of both Hotel “Moskva” in Belgrade and Hotel “Club A” in Kopaonik, while the ultimate beneficial owner of Moskva is a natural person, Mr. Mile Dragic, from the Republic of Serbia, also controls few other business enterprises in the Republic of Serbia as well as abroad.
The commission has initiated the case in hand against Moskva regarding the acquisition of the business activities of the Hotel “Tonanti” in Vrnjačka Banja (“Tonanti”). Both Moskva and Tonanti are present in the market for the provision of hotel accommodation services in the Republic of Serbia.
The Commission has determined that the turnovers of the concentration participants (group of companies controlled by Mr. Mile Dragić and Tonanti), both collectively and individually, exceed the thresholds prescribed by the Law on the Protection of Competition of the Republic of Serbia.
It is important to note that the Commission collected information about this acquisition through published printed and television media, LinkedIn accounts, YouTube channels as well as Facebook accounts, which definitely shows a modern and, above all, the Commission’s decisive approach in the fight against gun-jumping cases which occur in the Republic of Serbia. This Commission’s approach also represents continuous enforcement activity from 2022.
Considering this case, as well as all previous cases from 2022, we can certainly assume that this represents a clear sign of the Commission’s intent to investigate and sanction all gun-jumping cases. This also means that all market participants must pay extra attention to all transactions that potentially need to be reported to the Commission for approval. We shall continue to monitor all Commission’s activity in the future.
By Nikola Poznanovic, Partner, and Luka Hajdukovic, Associate, JPM Jakovic Popovic Mitic