CEE Legal Matters

Category: Serbia

  • Serbian Competition Authority Imposes EUR 460,000 Fine for Formation of a Consortium

    The Commission for Protection of Competition of the Republic of Serbia (“Commission”) recently imposed a EUR 460,000 fine on companies in the hazardous waste management market for forming a consortium to participate in a public procurement procedure.

    Investigation and conclusions of the Commission

    Five companies – MITECO Kneževac, Yunirisk, Modekolo, Brem and Kemeko – formed a consortium in order to submit a joint offer in the public procurement procedure announced by the Ministry of the Environment for the disposal of hazardous waste produced by Magnohrom d.o.o. The investigation was launched ex officio, and the Commission conducted a dawn raid and seized and copied electronic correspondence and other documentation related to the formation of the consortium.

    The Commission found that the consortium restricted competition, because the members could form two, instead of one, groups of bidders. A key piece of evidence showing that a restrictive agreement existed is that the members divided the profit into five equal parts, even though not all members had the same costs related to the implementation of the public procurement contract. According to the decision, two participants did not incur any expenses and did not participate in the implementation of the public procurement contract, thus, their participation in the consortium was not necessary.

    The Commission did not accept the consortium members’ claims that they could not submit an offer independently and that is was necessary to form a consortium, nor their arguments that the consortium did not lead to negative effects (e.g. consortium members pointed out that the offered price was 17 % lower than the planned budget for the service in question). The Commission stated that it did not examine whether each member of the consortium could have participated independently, but whether two competing groups of bidders could have been formed from the existing consortium. The Commission took the position that this consortium represents a cartel agreement, i.e. the most serious form of competition infringement, and that its effects do not need to be analysed.

    Rules for assessing a consortium in terms of the application of competition rules

    In the Opinion from 2021, the Commission provided guidance on when a joint offer can be considered a restrictive agreement. According to the Opinion, a consortium will not constitute a restrictive agreement if:

    • the members of the consortium are not competitors;
    • the members of the consortium belong to the same group of companies (affiliated companies); and
    • the members of the consortium are competitors, provided that none of the participants could participate independently in accordance with the conditions of the tender documentation or that none of the participants in the agreement could participate in the procurement procedure by submitting a special joint offer.

    In addition to the above, there are also rules regarding the exchange of data and non-compete provisions, which the members of the consortium are obliged to respect.

    If the above conditions are not met, the consortium constitutes a prohibited agreement and, as stated in the Opinion, the only way to “legalise” it is to apply to the Commission for an individual exemption.

    How to reduce the risk that participation in the consortium will be sanctioned

    Companies in Serbia should bear in mind that the formation of a consortium carries the risk of a potential investigation by the Commission and high fines if it is found that the consortium constitutes a restrictive agreement. To reduce the risk, it is necessary to establish clear internal rules on when companies can participate in a consortium and how they will negotiate and implement the joint bid. In view of the Commission’s Opinion and its practice, the following aspects should be addressed in the internal guidelines for the formation of a consortium:

    • assessment of the company’s capacity: whether it can submit an independent offer (for the entire procurement or for individual lots) and whether there is a realistic possibility for additional investments in order to reach the required level of capacity for an independent offer;
    • how communication and negotiations are conducted with potential partners in the consortium, as well as the scope of information exchanged;
    • assessment of the appropriate number of members of the consortium;
    • exchange of information with members of the consortium for the purposes of preparing the offer and during the execution of the contract;
    • preparation and storage of documentation/correspondence arising in connection with the preparation of the joint offer.

    If the internal analysis cannot assess with certainty whether the consortium would violate competition law, the members of the consortium can submit a request to the Commission for the exemption of the consortium agreement, which would ensure legal certainty and remove potential risk.

    It should be noted that the rules on the protection of competition regarding the formation of a consortium apply not only in the case of a joint bid, but also in the case of a bid with a subcontractor. Also, the setting up of tenders and the formation of a consortium can represent a competition violation in the implementation of procurement by contracting authorities who are not obliged to apply the Public Procurement Act.

    This Commission’s decision indicates that a joint offer, i.e. a consortium, an institute that is allowed by the Public Procurement Act, can represent the most serious violation of competition – a cartel agreement. Therefore, any negotiation and conclusion of such a contract must be fully aligned with the rules on the protection of competition.

    By Zoran Soljaga, Attorney at Law, Schoenherr

  • Harrisons Advises EBRD on EUR 15 Million Loan to Banca Intesa Beograd

    Harrisons has advised the EBRD on its EUR 15 million loan to Banca Intesa Beograd.

    According to Harrisons, the loan is a part of EBRD’s newly launched program Youth in Business in the Western Balkans. “Young entrepreneurs face obstacles in accessing credit lines and expertise to grow their businesses, so this newly launched program aims to address the market gaps by providing a comprehensive package of financial and technical assistance for youth-led micro, small, and medium-sized enterprises,” the firm informed.

    According to the firm, the advisory support is backed by the governments of Sweden, through the Swedish International Development Cooperation Agency, and Italy, through the Central European Initiative.

    Earlier this year, Harrisons also advised the EBRD on a EUR 20 million loan to Banca Intesa Beograd (as reported by CEE Legal Matters on November 3, 2020).

    The Harrisons team was led by Principal Mark Harrison and Consultant Ines Matijevic-Papulin and included Associate Mina Markovic.

  • Petar Orlic Moves to Serbia To Join NKO Partners

    Former London-based JMW Solicitors Real Estate Partner Petar Orlic has joined NKO Partners in Belgrade as a Partner.

    In his new role, Orlic will be responsible for international business development, according to the firm. 

    Prior to his move, Orlic worked with JMW Solicitors between 2021 and 2022. Before that, he was a Real Estate Partner with Watson Farley & Williams, between 2019 and 2021, and a Partner with Reed Smith, between 2017 and 2019. Between 2015 and 2017, he served as the Head of London Real Estate with Faegre Baker Daniels. Earlier still, he worked with McGuireWoods, first as a Senior Counsel between 2009 and 2013 and later as a Partner between 2014 and 2015. Orlic’s experience includes working as an Associate for Paul Hastings, between 2006 and 2009, and for Orrick Herrington & Sutcliffe, between 2004 and 2006.

    “Being a key figure at firms such as Paul Hastings, Reed Smith, and Watson Farley Williams, Petar brings a wealth of experience to the firm, especially on deals with an international flavor,” commented NKO Partners Partner Djordje Nikolic. “He will be the interface between NKO and its international clients and partners.”

    “As NKO continues with its expansion drive both in terms of quality transactions and fee earners, Petar will also draw on his vast experience to help manage this process,” added NKO Partners Partner Djuro Otasevic.

  • Serbia: Criminal Acts and Arbitration Proceedings – A Challenge to Arbitration or Not

    Commercial disputes, especially complex commercial cases, are increasingly present in modern regional and Serbian arbitration practices. There are more and more international and local business contracts in which the contracting parties fully trust international and domestic arbitrations to resolve all disputes arising from such contracts.

    Often, the parties to a dispute, through their lawyers, use various arguments and interpretations of evidence with the aim of making the arbitration award as favorable as possible. The arsenal of legal means to fight is diverse.

    If in arbitration disputes the parties emphasize assertions claiming that a criminal offense was committed within the scope of the business that is the subject of the dispute, the question arises whether such assertions represent a challenge to arbitration, as well as whether arbitrations within their jurisdiction can deal with such assertions, especially bearing in mind that the parties have, by the arbitration agreement or clause concluded, entrusted all disputed issues from their contractual relationship to the jurisdiction of the specific arbitration. 

    In practice, before Serbian arbitration institutions (but also Serbian courts) or in cases where Serbian companies appear before foreign courts and arbitration institutions, the most likely are assertions of claims about the alleged existence of a criminal offense within a dispute (regardless of whether such an offense has taken place in Serbia or abroad). One example is when a party to the dispute only indicates that a certain business activity that is subject to arbitration constitutes a criminal offense. Another example is when a party to the dispute points out that an investigative or criminal proceeding is being conducted by a certain competent authority regarding a certain business activity that is subject to arbitration, against either the parties to the arbitration dispute or their current or former employees or representatives and, for that reason, asks for the suspension of the arbitral proceedings in order for the arbitration to take into consideration the outcome or certain details of such criminal or investigative proceedings.

    What should be the response to such claims? Are these challenges to arbitration? Can it be interpreted that, since the parties entrusted all disputed issues from one contractual relationship to arbitration, they have also entrusted the arbitration to check the existence of a criminal offense within the arbitration procedure – whether a certain act or omission constitutes a criminal offense?

    First of all, arbitration is not a court, but it represents a legally permitted out of court method for resolving certain types of disputes. These can only be disputes that are eligible to be settled before arbitration (i.e., objective arbitrability).

    The legislation of every country (and Serbia is no exception by any means) regulates which types of disputes the contracting parties can entrust to arbitration. Without going into details here, we can summarize that these are commercial or business disputes, except for the disputes for which the courts have exclusive jurisdiction. Hence, when the contracting parties conclude an arbitration agreement or an arbitration clause, they must be aware that they refer to the disputed commercial or business relations which are eligible to be resolved by arbitration, and which do not fall within the exclusive jurisdiction of the court.

    This already makes it clear that the arbitration can never be competent to undertake any type of criminal prosecution, and it does not deal with the criminal law analysis of whether a specific action meets all the criminal law elements required to qualify such an action as a criminal offense. On the contrary, all this is in the exclusive competence of the authorities that are competent for criminal prosecution (e.g., the public prosecutor) and of the courts that are exclusively competent for deciding in criminal proceedings.

    To summarize, arbitration proceedings (whether conducted before local Serbian or foreign institutions) are simply not the forum for any type of criminal prosecution nor is it the forum for any type of criminal law analysis.

    The analysis in the arbitration award will refer to all issues that are within the competence of arbitration, namely, all disputed issues that are suitable for decision by arbitration. Therefore, asserting the existence of a criminal offense does not or should not constitute an additional challenge to arbitration or a condition for rendering its award.

    The efficiency of resolving disputes through arbitration is an important feature that parties often consider when contracting arbitration, and the above-mentioned assertions do not essentially limit the actions of arbitrators, within their jurisdiction.

    By Nedeljko Velisavljevic, CEE Partner and Head of Dispute Resolution, and Nenad Kovacevic, Senior Attorney, Petrikic & Partneri AOD in cooperation with CMS Reich-Rohrwig Hainz

    This Article was originally published in Issue 9.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Andrejic & Partners Advises Eyemaxx on Serbian Subsidiaries Wind-Up

    Andrejic & Partners has advised Eyemaxx Real Estate and Eyemaxx International Holding & Consulting on the wind-up procedures for their Serbian subsidiaries Log Center, Bega ING, and Logmaxx.

    According to Andrejic & Partners, Eyemaxx International Holding & Consulting GmbH and its parent company, Eyemaxx Real Estate AG, are currently going through a liquidation procedure on a group level. “The group operated in the real estate development market. Their core markets were Austria and Germany.”

    Eyemaxx Real Estate AG has been listed on the Frankfurt Stock Exchange since 2011 and has had a secondary listing on the Vienna Stock Exchange started in January 2019. According to Andrejic & Partners, “the liabilities on the group level amount to approximately EUR 220 million, of which approximately EUR 140 million are likely to be attributable to bondholders.”

    Andrejic & Partners’ team included Managing Partner Aleksandar Andrejic and Associates Marko Stojanovic and Luka Ratic.

  • Publishing Personal Data without Consent of a Data Subject

    The Spanish personal data protection authority has recently fined a natural person with EUR 10,000.00 for publishing personal data of a third person without the latter’s consent on an online blog.

    Facts

    Acting upon a complaint of the person whose personal data were published, the respective authority established that the person against whom the subject complaint was filed published for a certain period on their online blog the name and video of the character, and otherwise implicitly indicated the personality of the complainant, which practice was not suspended even after the receipt of request from the complainant or court order.

    Holding

    The competent authority therefore held that, in this particular case, provision 6(1) of the GDPR was infringed, considering that personal data processing was conducted without consent and any other legal basis.

    In order to determine the amount of fine, the authority considered several circumstances, in particular the nature and severity of the infringement, degree of damage done to the person whose data had been unfoundedly published and the fact that the person concerned was simultaneously accused of immoral and unlawful behaviour, as well as intentional character of the subject infringement.

    Legal basis for personal data processing in domestic law

    According to the provisions of Article 12 of the Law on Personal Data Protection (Off. Gazette of the RS no. 87/2018) (“the Law”), processing (of personal data) is only lawful providing that one of the following requirements is fulfilled:

    • the data subject consented to processing of their personal data for one or more specifically designated purposes;
    • processing is necessary for exercising the agreement concluded with the data subject or for undertaking the activities, upon the request of the data subject, prior to conclusion of the agreement;
    • processing is necessary for the purpose of adhering to the legal obligations of the controller;
    • processing is necessary for the purpose of protecting vital interests of the data subject or another natural person;
    • processing is necessary for the purpose of performing the activities in public interest or executing the controller’s legally prescribed authorities;
    • processing is necessary for the purpose of fulfilling legitimate interests of controller or a third party, unless such interests are prevailed by the interests or fundamental rights and freedoms of the data subjects which require personal data protection, notably if the data subject is a minor.

    Consent as a basis for personal data processing

    If processing is based on consent, the controller needs to be in capacity to prove that the data subject consented to the processing of their data.

    If consent of the data subject is given within a written statement referring to other issues as well, the request for consent needs to be presented in such manner that it stands out from other issues, in eligible and easily accessible form, with the use of simple and clear expressions. The part of statement that is in contravention of the Law has no legal effect.

    The data subject shall be entitled to withdraw the subject consent at any time. The withdrawal of consent shall not affect the admissibility of processing done on the basis of that consent prior to its withdrawal. Prior to giving the consent, the data subject needs to be informed about the right to withdrawal, as well as the effects of withdrawal. Withdrawal of consent needs to be simple alike the giving of consent.

    When establishing whether the consent for personal data processing was freely given, one needs to particularly ensure that the enforcement of the agreement, including service rendering, is not conditioned by giving consent which is not necessary for its enforcement.

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

    By Lara Maksimovic, Senior Associate, PR Legal

  • BD2P Advises CWP Global on Development of 680-Megawatt Portfolio of Renewables in Serbia

    Bojovic Draskovic Popovic & Partners has advised CWP Global on three new renewable energy projects in Serbia with 680 megawatts in total electricity generation capacity. 

    According to BD2P, “one project is the first hybrid power plant in Serbia, Lederata Energy, to be built in Pozarevac and Veliko Gradiste, worth EUR 200 million. It will consist of a 50-megawatt solar park, a 100-megawatt wind farm, and an energy storage system of 20 megawatts.” Another project is 80-megawatt photovoltaic power plant “Equinox Power, to be built in Kula, worth EUR 80 million. The third project is the future biggest wind power plant in Serbia, Vetrogon, a wind project of 450 megawatts in capacity, worth EUR 600 million. It will be built in Vojvodina, in the municipalities of Srbobran and Becej.”

    BD2P’s team included Partner Uros Popovic and Senior Associates Milica Pesteric and Mario Kijanovic.

  • Harrisons Advises EBRD on EUR 25 Million Loan to OTP Bank Serbia

    Harrisons has advised the EBRD on a EUR 25 million loan to OTP Bank Serbia for on-lending to small and medium-sized enterprises.

    According to Harrisons, “the proceeds of the loan will be used to contribute expansion of lending to private businesses through working capital lines and investment loans to small and medium-sized enterprises, including enterprises operating in economically less-developed regions of the country. Furthermore, the transaction supports OTP’s growth strategy and diversification of its funding sources.”

    In December 2021, Harrisons advised the EBRD on a RSD 2.3 billion loan to OTP Bank Serbia, to be used for the same purposes. 

    Harrisons’ team was led by Principal Mark Harrison and Consultant Ines Matijevic-Papulin and included Associate Mina Markovic.

  • Incentives for Employment of New Residents in Serbia

    On 18 June 2022, the Regulation on Criteria for Awarding Incentives to Employers who Employ New Residents in the Republic of Serbia, published in the Off. Gazette of RS no. 67/2022 (“the Regulation”), entered into force.

    Content of the Regulation

    According to its title, the Regulation prescribes the criteria for awarding incentives to employers who employ new residents in the Republic of Serbia for whom there is a need that cannot be easily fulfilled in domestic labour market.

    By virtue of the Regulation, the employer is a domestic or foreign natural person or legal entity, or an entrepreneur registered for performing its business activity in the Republic of Serbia, as well as a branch or a representative office of a foreign employer registered in the Republic of Serbia, while the new resident for whom there is a need that cannot be easily fulfilled in domestic labour market is a natural person who has not, in a period of 24 months prior to the conclusion of the employment agreement with the employer, stayed in the territory of the Republic of Serbia for more than 180 days and with whom the employer concluded a full-time employment agreement for an indefinite period of time, for a base monthly salary amounting to at least RSD 300.000,00.

    Conditions for awarding incentives

    The right to incentives shall be enjoyed by the employer whose number of full-time employees engaged for indefinite time on the day of applying for incentives is equal or larger than the number of full-time employees engaged for indefinite time on the day of entry into force of this Regulation, increased by the number of employed new residents encompassed by the application. The right to incentives shall be enjoyed by the employer at most for a number of new residents employed which, along with the number of full-time employees engaged for indefinite time which cannot be considered the employed new residents on the day of filing the application, is higher than the number of full-time employees engaged for indefinite time on the day of entry into force of this Regulation.

    The right to incentives for new resident employed shall be exercised if the new resident is continuously employed with the employer in the period between the day of filing the application and 31 December of in which the application was filed, whereby the right to incentives shall only be exercised for new residents employed by the employer up and until 31 December 2023.

    The Regulation prescribes the special requirements regarding the employers that are registered for performing their business activity in the Republic of Serbia following the entry into force of the Regulation, as well as with respect to the applications filed starting from 2024.

    The right to incentives shall not be granted to employers who:

    • in the period as of submission of the initial application and up and until the end of the calendar year when the final incentives payment is received, pay dividend or acquired profit, except for the dividend or profit paid from the part of the profit that exceeds the amount received as the incentive;
    • is a state aid beneficiary in relation to which it is obliged to employ, except for subjects who already fulfilled such obligation until 1 July 2022; and
    • for the employed new resident with respect to whom it exercises the incentives under the Regulation uses or has used the right to reduce the base in accordance with Article 15v of the Law on Personal Income Tax and Article 15a of the Law on Contributions for Mandatory Social Insurance.

    Incentives

    The incentives are paid in the amount of 70% of calculated and paid income tax for one or several employed new residents, in terms of the regulation on personal income tax, and 100% of calculated and paid contributions for mandatory pension and disability insurance, in terms of the regulations on mandatory social insurance, for the payments made with respect to the employed new resident in the period of maximum 60 months, starting from 1 July 2022 until 31 December 2028.

    Application

    Employer shall once a year apply to the Ministry of Economy, i.e., up to eight times at most, in the period from 15 September and 30 September for payment of the incentives referring to the salaries of new residents paid from 1 July 2022 to 31 December 2028, inclusive, whereby each application shall be filed for the salaries paid in the period prior to the application of not more than 12 months. The application shall be filed on a form printed along with the Regulation, which represents an integral part thereof.

    Provision of temporary protection to persons displaced from Ukraine

    In the context of current situation and in accordance with the Decision on Provision of Temporary Protection in the Republic of Serbia for Displaced Persons from Ukraine (Off. Gazette of RS no. 36/2022), which was enacted by the Government of the Republic of Serbia and which has been in force since 19 March 2022 (and shall be valid until 19 March 2023) (“the Decision”), temporary protection in the Republic of Serbia shall be granted to displaced persons from Ukraine, i.e., to the persons who were forced to leave Ukraine as their country of origin or habitual residence or were evacuated in Ukraine and may not return to permanent and safe living conditions due to the current situation in that country.

    Displaced persons, in terms of the Decision, shall mean:

    • citizens of Ukraine and members of their families who stayed in Ukraine;
    • asylum-seekers, persons without citizenship and foreign citizens, who were granted asylum in Ukraine or equivalent national protection and members of their families who were granted residence in Ukraine;
    • foreign citizens who had been granted permanent or temporary residence in Ukraine and who cannot return to their country of origin under permanent and long-lasting circumstances.

    Temporary protection is also granted to citizens of Ukraine and their family members who legally stayed in the Republic of Serbia at the time of adoption of the Decision, but whose right to stay expired before the cancellation of the decision on temporary protection, while the family members shall be deemed persons considered as family members under the Law on Asylum and Temporary Protection.

    The Decision further stipulates that the Ministry of Interior shall, under the provisions of the Law on Asylum and Temporary Protection, register the persons granted temporary protection and for each person individually it shall pass a decision granting temporary protection, while the persons granted temporary protection shall have the access to all rights under Article 76 of the Law on Asylum and Temporary Protection, the enforcement whereof shall be ensured by the relevant authorities under the law. The person granted temporary protection shall be entitled to:

    • stay in the period of validity of temporary protection;
    • document proving their status and right to stay;
    • health protection, under the regulations on health protection of foreign citizens;
    • access to the labour market during the validity of temporary protection, in accordance with the regulations on employment of foreign citizens;
    • free elementary and secondary education in public schools, in accordance with special regulations;
    • legal aid under the terms prescribed for asylum-seekers;
    • freedom of religion under the same terms as the citizens of the Republic of Serbia;
    • collective accommodation in facilities designated for such purposes;
    • relevant accommodation in cases of persons that require special acceptance guarantees in accordance with Article 17 of this law; and
    • right to claim asylum.

    As indicated above, temporary protection shall last one year after the day of entry into force of the Decision.

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

    By Lara Maksimovic, Senior Associate, PR Legal

  • BDK Advokati Advises Hodler Asset Management on Acquisition of 45% Stake in Superior Foods

    BDK Advokati has advised Hodler Asset Management on the acquisition of a 45% stake in Superior Foods. The N Law Office reportedly advised Milica Gacic on the sale.

    Hodler Asset Management is a Hungarian private equity fund primarily involved in the agricultural and food industry.

    Superior Foods is a Serbian company active in poultry meat processing.

    BDK Advokati’s team included Senior Partner Vladimir Dasic, Senior Associates Jelena Zelenbaba and Djordje Zejak, and Junior Associates Milan Popovic and Milan Vulevic.