Category: Serbia

During the Covid-19 pandemic, in every industry where it was possible employers transferred their employees to work from home.

As the pandemic lasted almost two years, flexible work arrangements became a habit for both employers and employees. On the one hand, employers saw it as a chance to cut costs while incentivising their employees, especially in tech and other industries that compete fiercely for the best workers. On the other hand, employees have been working like this far too long to return to the office without consequences to their private lives, while some still have fears around Covid-19.

Thus, employers now face the dilemma of whether to let employees stay at home, order them to return to the office, or agree on a hybrid arrangement. When making this decision, employers should consider all the issues related to the implementation of flexible work arrangements in Serbia, where this type of work is underregulated.

Legal background

In principle, the Serbian Labour Act regulates remote work or work from home as a sui generis employment agreement only. Thus, under the Labour Act, work from home or any remote arrangement could be introduced only through a new employment agreement and not through an annex to the employment agreement. However, in view of the urgency of the Covid-19 outbreak, employers quickly transferred their employees to work from home by concluding annexes to existing employment agreements.

A little while later, once the government had adopted a regulation on work organisation during the state of emergency, employers continued to transfer employees to work from home unilaterally via a decision on transfer.

The Ministry of Labour then issued Guidelines on Occupational Health and Safety in the Event of Remote Work (the “Guidelines”), which again confirmed that work from home / remote work should be introduced by concluding annexes to the employment agreements with employees. Relying on the Guidelines, employers are now continuing to transfer their employees by concluding annexes to employment agreements, irrespective of the uncertainties of the Labour Act. Nevertheless, due to the lack of a sufficient legal framework, employers should focus more on creating their own internal rules for work from home.

Issues with flexible work arrangements

In practice, by concluding the necessary annexes to effectuate the transfer from office to home or other remote premises, the agreed place of work is being changed (from office to home or other premises).

However, if the employer wishes to end the remote work and order an employee to return to the office, another annex to the employment agreement needs to be concluded. Here the risk arises that the employee’s refusal to sign such an annex may not be a just cause for termination of employment, putting the employer in a deadlock.

Also, employers are often faced with problems of ensuring the discipline of employees working outside the office without overstepping privacy rights and data protection regulations. Therefore, most of them prefer to regulate work from home in such a way that they can order employees to return to the office if they violate discipline rules or are underperforming.

Ensuring occupational health and safety

Employers must ensure that employees are working in a healthy and safe environment and to do so there are many requirements they need to comply with. For instance, employers need to assess the occupational risk in premises where employees will work. This is very hard to ensure, as employees need to voluntarily allow the employer to visit their homes. Employers are therefore wondering how to comply with their occupational health and safety obligations without invading their employees’ privacy, and how to ensure that employees comply with health and safety procedures when working outside their reach.

Delivery of documents

When implementing work from home employers should also consider the potential problems associated with delivering certain documents to employees.

Given that the Serbian Labour Act is somewhat outdated with regard to the demands of a modern business environment, many work-related documents such as payslips and decisions on annual leave are still usually provided to employees in hard copy, although electronic delivery is possible.

Employers should therefore create internal rules for delivery of documents and for communicating any work-related messages to employees who are working remotely (e.g. invitation to come to the office for a meeting, annual performance appraisal, etc. and disciplinary measures if employees ignore these rules).

Health insurance and sick leave compensation for flexible work outside Serbia

The Serbian Labour Act fails to explicitly prescribe if only work within Serbia is encompassed in the definition of remote work or if employees can also work remotely outside Serbia. Nevertheless, considering the general definitions of the Serbian Labour Act, it may be concluded that only work within Serbia’s borders is included under remote work.

As in the case of flexible work, employers in principle do not have full control over employees, who may leave the country and continue to work abroad. Should such an employee fall ill, they will not be able to enjoy protection under mandatory health insurance in Serbia. Also, the employee will not be able to officially take sick leave in Serbia, unless they visit a doctor in Serbia and obtain a medical report from a Serbian official health institution (which likely will not be possible in most situations). Thus, if official sick leave is not taken, the local employer would have to completely finance the sick leave if it chooses to compensate the employee throughout their inability to work.

Conclusion

Faced with the new reality, employers are now trying to overcome local legal limitations on flexible work arrangements and associated occupational health and safety obligations.

To eliminate or at least mitigate some of these issues, employers should be creative when agreeing on the terms of flexible work arrangements and prepare appropriate internal rules and policies.

By Marija Vlajkovic (Zdravkovic), Local Partner in cooperation with Schoenherr

Radovanovic Stojanovic & Partners, working with Advant Beiten, has advised the shareholders of Hedwell Group Germany on the sale of the Hedwell Group to SAP Fioneer. Reportedly, Germany’s Poellath advised SAP Fioneer on the deal.

Headquartered in Germany, Hedwell is an international advisory and software development company that helps insurance groups and enterprises with digital and business transformation initiatives.

SAP Fioneer has emerged from SAP, an enterprise software company, and is headquartered in Germany.

RSP’s team included Partners Sasa Stojanovic and Nikola Cincovic, Attorneys Djordje Vicic and Luka Radojevic, and Associates Zivko Kovacevic and Irina Petrovic.

Advant Beiten’s team included Munich-based Partners Mario Weichel and Markus Ley.

Zivkovic Samardzic has advised both companies on the Titan Cementara Kosjeric merger with its affiliate Stari Silo Company.

According to Zivkovic Samardzic, “as a result of the merger, the Stari Silo Company ceased to exist and became part of Titan Cementara Kosjeric.”

The Titan Cement Group is an international cement and building materials producer with cement plants in ten countries, including the US, Greece, Albania, Bulgaria, North Macedonia, Kosovo, Serbia, Egypt, Turkey, and Brazil.

Titan Cement’s Serbian subsidiary Titan Cementara Kosjeric has been producing 750,000 tons of cement per year. Titan Cementara Kosjeric’s affiliated Stari Silo Company specialized in the development of building projects.

The Zivkovic Samardzic team was led by Partner Igor Zivkovski.

One of the questions that is often risen in practice is whether there is an obligation to conclude a contract with an individual who is registered as a legal representative, i.e., director of a company, and who does not establish an employment relationship in that company. In relation thereto, there are also inquiries whether it is mandatory to provide for a compensation for the work of a director who is not employed with the company, as well as what are the tax obligations of the company regarding the compensation that a director receives for performing the respective capacity.

We will endeavour to provide answers to the mentioned questions below.

What does the Labour Law prescribe?

Pursuant to the provisions of Article 48 of the Labour Law (Official Gazette of RS no. 24/2005, 61/2005, 54/2009, 32/2013, 75/2014, 13/2017 – decision of the CCS, 113/2017 and 95/2018 – authentic interpretation) (“Labour Law”), a director or other legal representative of the employer may establish an employment relationship for an indefinite or definite period. The employment is established by the employment agreement, whereby the employment relationship for a definite period can last until the expiry of director’s mandate, i.e., until his/her release from duty.

The mutual rights, obligations and responsibilities of a director who has not established an employment relationship and the employer are regulated by the contract. Such director is entitled to a remuneration for his/her work and other rights, obligations and responsibilities in accordance with this contract, which is executed on behalf of the employer by the competent authority established by the law or general enactment of the employer.

Remuneration for the work of non-employee directors

In accordance with the above, which was also confirmed by the Opinion of the Ministry of Labour, Employment, Veterans and Social Affairs no. 011-00-00416/2021-07 from 15/10/2021, a remuneration is a mandatory element of the contract on mutual rights, obligations and responsibilities of a director who has not established an employment relationship, as well as of the representation contract for a representative who has not established an employment relationship and is neither a founder nor a shareholder of the company.

Therefore, from the provisions of Article 48, paragraph 5 of the Labour Law, as well as from the previously mentioned opinion, it unequivocally follows that the remuneration is considered a mandatory element of the contract that regulates the mutual rights, obligations and responsibilities of a director who did not establish an employment relationship and the employer, whereby the above applies accordingly to other representatives of the company (who have not established the employment relationship in the company, and are not its founders or shareholders).

Tax treatment of the remuneration of non-employee directors

According to the Opinion of the Ministry of Finance no. 011-00-1137/2018-04 from 11/06/2018, when a natural person performs duties of a director based on the contract on the rights and obligations of director, without establishing an employment relationship in that company, there is an obligation to calculate and pay personal income tax on other income and related contributions for mandatory social insurance based on the agreed remuneration for such engagement, regardless of whether such natural person – director waives the contracted remuneration in favour of another person. Contributions for mandatory social insurance in this case include contributions for pension and disability insurance, as well as contributions for health insurance if the individual concerned is not insured on another basis. The basis of the contributions is the taxable income from the contracted remuneration, in accordance with the law governing the personal income tax.

In this regard, and according to the Opinion of the Ministry of Finance no. 011-00-151/2018-04 from 20/05/2019, the subject obligation also exists in case when the remuneration stipulated by the contract regulating the rights and obligations of a director without establishing an employment relationship is collected by a natural person – foreign citizen.

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

The Government of the Republic of Serbia rendered the new Ordinance on Conditions, Manner and Procedure for Awarding the State-owned Agricultural Land for Use for Non-agricultural Purpose, that came into force on 10 September 2022.

The new ordinance replaces the previous one, that regulated awarding of state-owned agricultural land for non-agricultural purposes – it introduces some novelties and modifies some of the existing solutions.

The main novelty relates to the purposes for which the state-owned agricultural land may be awarded, pursuant to the ordinance – one ground for awarding the state-owned agricultural land is eliminated, one new ground is introduced.

Pursuant to the new ordinance, it is not possible anymore to award the state-owned agricultural land for the purposes of activities connected to construction of facilities of interest for the Republic of Serbia (e.g. for parking lots for construction machinery) or, for the purposes of activities connected to construction of facilities of energy or utility infrastructure, telecommunications and/or protection against natural disasters. 

However, it is now possible to award the state-owned agricultural land for the purposes of conducting geological exploration works, i.e. for the purposes of exploitation of oil and/or natural gas.

This new ground for awarding of state-owned agricultural land is also subject to many exceptions regarding the procedure for awarding of the land – e.g. there is no limitation of class of agricultural land that may be awarded (while otherwise only lower classes – sixth, seventh and eighth class of arable agricultural land may be awarded), nor is there mandatory public bidding procedure for awarding the land for this purpose.

Other novelties of the new ordinance relate to the procedure and technical aspects of awarding the state-owned agricultural land for non-agricultural purposes.

Some of these novelties ease the procedure under which the interested parties may apply for awarding the land – the documentation submitted in the process of application is less demanding than before – some of the mandatory documents are now obtained by the competent local authorities, instead of being submitted by the interested parties (such as information on location, minutes of the agricultural inspector on the state of the land, and similar), while some are submitted in later phases – i.e. only by the party that is selected as the user of the subject land.

Namely, the project of recultivation, remediation, i.e. rehabilitation of the land, that was previously submitted by all interested parties when applying for bidding procedure, is now submitted by the party awarded with the right to use the land, upon execution of the contract on use of the land with the Ministry of Agriculture, i.e. within one year from the contract execution. The same applies for the certificate of balance reserves of minerals for exploitation of the land. However, until these documents are submitted – the land cannot be used for the (non-agricultural) purpose for which it is granted, and only preparatory works may be conducted by the user of the land.

Another technical novelty regards the manner of securing the costs of recultivations, remediation and/or rehabilitation of the agricultural land used for non-agricultural purposes, pursuant to the ordinance. While both previous and the new ordinance prescribe that these costs are borne by the user of the land, the manner of securing the funds for this purpose is modified – previously the user deposited 30% of the amount needed for recultivation/remediation/rehabilitation, which is determined by the project of recultivation/remediation/rehabilitation, prior to the execution of the contract on use of the land, signed  with the Ministry of Agriculture, while the remaining 70% were deposited at latest five years before the contract expiry. If the user would fail to deposit the remaining 70% of the funds needed for recultivation/remediation/rehabilitation, the contract would be terminated. If the user would fail to conduct recultivation/remediation/rehabilitation pursuant to the project and within deadlines set down thereof, the Ministry of Agriculture was authorized to keep the deposited amount.

Now, pursuant to the new ordinance, the instrument for securing the funds for recultivation/remediation/rehabilitation is not specified. However, regardless of the particular security instrument, the security instrument covering the entire amount needed for recultivation/remediation/rehabilitation (determined by the project) needs to be submitted within one year from the execution of contract on use of the land with the Ministry of Agriculture, and until it is submitted, the land cannot be used for the (non-agricultural) purpose for which it is granted. If the user conducts recultivation/remediation/rehabilitation of the land in accordance with the project of recultivation/remediation/rehabilitation and within the deadlines set down thereof, the security instrument is returned.

By Marija Vukcevic, Senior Associate, JPM Jankovic Popovic Mitic

According to the latest Position published by the Serbian Commission for the Protection of Competition, it is prescribed whether and in which cases the scope of one concentration can be several undertakings that are not considered interrelated.

Having in mind ever-increasing number of complex transactions on the market and that the Law on the Protection of Competition of RS (the „Law“) does not explicitly prescribes whether the scope of one concentration can be several undertakings that are not considered interrelated undertakings, on August 17, 2022 the Commission for the Protection of Competition (the „Commission“) published “The Position regarding the application of Article 17, paragraph 1 of the Law”.

There are several ways for the implementation of concentration between undertakings (merger of two or more undertakings, acquisition of control by one or more undertakings and joint ventures). Having this in mind, the Law makes it indisputable that the scope of acquisition in one concentration can be several undertakings which were previously interrelated. Although the Law does not prohibit, the legal gap in domestic legislation leaves room for different interpretations, when undertakings that are independent i.e., that have not been previously interrelated, are in the scope of acquisition.

By this Position, the Commission clarifies the conditions under which independent undertakings could be the subject of a single concentration, referring to the Council Regulation (EC) No 139/2004 of January 20, 2004, on the control of concentrations between undertakings (the „EU Merger Regulation“) and to the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004, on the control of concentrations between undertakings (2008/C 95/01) (the „ EU Jurisdictional Notice“).

Under Recital 20 of the EU Merger Regulation, it is stated that it is expedient that closely connected transactions should be treated as one concentration, if they are linked by a certain condition or take the form of a series of transactions in securities, which are realized in a short period of time.

The EU Jurisdictional Notice provides special rules regarding those conditions. When acting in such cases, it is necessary to identify the economic reality underlying the transactions i.e., to determine whether the transactions are mutually dependent i.e., connected in such a way that one without the other would not have been executed. Pursuant to the EU Jurisdictional Notice, even if they are interrelated by a condition, it is also necessary that control is eventually acquired by the same undertaking or same group of undertakings, in order for the transactions to be considered a single concentration.

However, if the transactions are not interrelated and not connected by condition, and if the undertakings in the concentration would continue to carry out one transaction, independently of the other, then each transaction should be considered solely, as separate concentrations.

Conditionality is usually shown if the transactions are linked de jure i.e., if their agreements are mutually conditional.

But, in response to the disputed question in the Law, if de facto conditionality can be proved, it will be sufficient to regard the transactions as a single concentration.

Furthermore, by this Position, the Commission recognizes two scenarios that have arisen in the past decisional practice – parallel acquisition and serial acquisition, in which several transactions are considered as one concentration, as the most common situations. Parallel acquisition of control is when, one undertaking (A) acquires control of two or more undertakings (B and C) in parallel from separate sellers on condition that A is not obliged to buy either, and neither the seller is obliged to sell, unless both transactions proceed. Another scenario is a serial acquisition of control i.e., undertaking A acquires control of undertaking B conditional on B’s prior or simultaneous acquisition of undertaking C.

In accordance with all of the above, the Commission, when acting, assesses in each case whether several transactions can be considered as one concentration, even if they are not interrelated de jure, and all this, in order to facilitate business in conditions made difficult by the pandemic of the COVID-19 virus and to an ever-increasing number of complex transactions on the market.

By Nikola Poznanovic, Partner, and Zivko Simijonovic, Associate, JPM Jankovic Popovic Mitic

Research of major global agencies show that the realization of profit is proportional to the degree of trust that customers have in retailers, regarding the processing of their personal data. Retailers that consider themselves socially responsible should know that investing in the protection of customers’ personal data is an added value for the company – this type of investment strengthens the trust of customers, contributes to strengthening the competitive position on the market and increases profit. Most importantly, retailers have to understand that the personal data they collect from citizens is not their property, and that the right to privacy is one of elementary rights of citizens, which they are obliged to process in accordance with legal regulations.

Nowadays, anyone who understands the nature of doing business in modern era, cannot imagine a world without advertising. The chain of online advertising (real-time bidding – RTB) includes online retailers, owners of e-commerce platforms, online platforms for offer and demand of ads, representatives of companies that offer advertising space and companies that want to advertise, data management platforms and platforms for automatic tracking of site visitors who follow ads and AdExchange platforms. The advertising system is set up in such a way that companies, which have the best tools for automated monitoring of citizens’ behavior on the Internet, will gain the upper hand at auctions “for selling profiles” (selling audience), that is, they will get the opportunity for advertising – sending personalized content. Companies which want to advertise their products sign contracts with companies which have the tools for tracking the behavior of citizens on the internet. When they create a profile of the user or visitor on an e-commerce platform or on a website of an online retailer, their behavior is monitored on other websites in order to create the best possible profile. Such a profile is matched on AdExchange platforms with profiles that auction houses already have about those same citizens – in the end, the artificial intelligence system automatically sends personalized content to citizens.

GDPR, the Law on Personal Data Protection and the Law on Electronic Communications recognize the need for online retailers to place their products on the market in the most efficient manner and to process citizens’ personal data to achieve this goal. On the other hand, the regulations governing the protection of personal data require that citizens have control over their personal data, because this right is inextricably linked to the right to privacy and dignity of citizens. Online retailers must inform the citizens in a simple and understandable manner, what they are doing with their personal data and to divide and regulate the responsibility for processing of personal data with partner organizations they hire to carry out personalized marketing.

Retailers usually do not understand that the use of cookies without collecting personal data of citizens, i.e. use of the so-called online identifiers – personal data that allow citizens to be identified and their behavior on the Internet to be monitored, is not possible. We base this position on the continuous cooperation of our team, which consists of attorneys at law and experts in information security and digital forensics, in the implementation of the GDPR and the Law on Personal Data Protection. The GDPR and the Law on Personal Data Protection explicitly define personal data as any data related to a natural person who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person. In support of our claims are the recent decisions of the European supervisory authorities regarding the transfer of data in the so-called third countries – that AdTech companies do not anonymize the IP addresses of citizens, but rather preform pseudo-anonymization, therefore the GDPR and the Law on Personal Data Protection are applied. When hiring partner organizations to profile the behavior of visitors and customers on their websites and platforms, online retailers must in a privacy notice inform citizens on how their personal data is processed, in a clear language and in accessible form. It is also necessary to inform data subject on which partner organizations they hire and in what capacity, as well as to define mutual rights and obligations with partner organizations – conclude data processing agreements. In order to profile the behavior of customers on their websites and e-commerce platforms, retailers, in most cases engage partner organizations in the capacity of processors, because these organizations perform certain processing actions on their behalf.

After the profiling is carried out, partner organizations conclude contracts with companies that manage AdExchange platforms to be able to participate in auctions and win advertising space. Those same partner organizations automatically further monitor the behavior of citizens they have already profiled on websites and e-commerce platforms at other websites. From the moment profiling on retailer’s websites and e-commerce platforms is carried out, online retailers and partner organizations act as joint controllers – they jointly determine the purpose and means of processing personal data – they reach an agreement that the partner organization will act on the AdExchange platforms to send personalized marketing messages to customers and visitors of e-commerce platforms and retailer’s websites. It is important for online retailers to separate responsibilities for processing of personal data clearly in the data processing agreement with partner organizations, because they have no influence on the processing of personal data by partner organizations – they do not have enough information about the artificial intelligence systems that these organizations and AdExchange platforms use and how they process data. According to the Law on Personal Data Protection, citizens can address both controllers for exercising the rights prescribed by the law, and the controllers will, in the data processing agreement, determine for which segment of processing they are responsible for.

In case of filing a lawsuit for damages due to the violation of rights of citizens prescribed by the law, retailers will be protected, because they will be able to prove before the court that they are not responsible for segments of processing they have no influence on. Online retailers will, in the privacy notice, in a clear language and in accessible form, inform citizens that they act as joint controllers with partner organizations, and instruct them which controller to contact for each segment of personal data processing. Distinction of responsibility is especially important because of the ongoing procedure against one of AdExchange platforms, for alleged violation of the provisions of the GDPR before the supervisory authority of Belgium.

Further more, it is necessary for consent for data processing via cookies to be obtained in the manner prescribed by the Law on Electronic Communications. Article 126 paragraph 3 of this law stipulates that the use of electronic communication networks and services for the purpose of storing or accessing data stored in the subscriber’s or user’s terminal equipment is permitted, if the subscriber or user is given a clear and complete notice of the purpose of data collection and processing, in accordance with the law governing the protection of personal data, as well as that he was given the opportunity to refuse such processing. Regarding the method of giving consent, the Law on Electronic Communications allows the use of the opt-out option, i.e., giving consent in the manner defined by EU Directive on Privacy in Electronic Communications before its amendment in 2009. We note that we have received the interpretation from the Commissioner that the Draft of the new Law on Electronic Communications prescribes a solution in accordance with the judgment of the European Court of Justice in case C‑673/17. Regarding the use of cookies of partner organizations – online retailers are obliged to obtain consent of citizens for each of the cookies and to provide information on the purpose of collection and processing of personal data. This is in accordance with the requirement from the Law on Personal Data Protection that the consent for data processing must be “granular”, i.e. detailed enough so that citizens can know which data processing they are consent to. It is not enough to give citizens the opportunity to refuse different categories of cookies, but it is necessary to explain to them to which category each cookie belongs to (marketing, advertising, third party) and for which purpose it is used – referring to complicated cookie policies can make it difficult for citizens to understand the purpose of processing and to choose to give consent for the processing of personal data.

Finally, when personal data is processed for the purpose of personalized marketing, retailers are obliged to carry out Data Protection Impact Assessment (DPIA) – assessment of the impact of processing activities on the rights and freedoms of citizens. This obligation is prescribed by the Commissioner’s Decision on the list of type of personal data processing operations for which an assessment of the impact on personal data protection must be carried out and the opinion of the Commissioner for Information of public Importance and Personal Data Protection must be asked for (“Official Gazette of RS”, no. 45/2019 and 112/2020). This decision stipulates that the assessment is carried out in case of: i) the use of new technologies or technological solutions for the processing of personal data or with the possibility of processing personal data that serve to analyze or predict the economic situation, health, preferences or interests, reliability or behavior, locations or movements of natural persons and ii) processing of personal data which includes tracking the location or behavior of an individual in systematic processing of communication data generated by the use of telephone, internet or other means of communication.

There is no doubt that in the case of engaging partner organizations with the use of artificial intelligence systems for profiling the behavior of citizens on the Internet and sending personalized content, a DPIA assessment is required. The focus of the assessment is to identify the risks for rights and freedoms of the citizens, the level of probability that such risks may occur in real time, and measures to mitigate the risk to an acceptable level.

The substance of the assessment is to what extent retailers can protect citizens’ personal data in a situation where they are unfamiliar with the artificial intelligence systems used by their partner organizations for the purpose of creating profiles and sending personalized content to citizens. Accordingly, the biggest challenge is the assessment of the risk, i.e. impact of algorithmic artificial intelligence systems, produced by third parties, on the rights and freedoms of citizens. Risk of the impact of artificial intelligence systems on the rights and freedoms of citizens, in RTB processes of automated processing of personal data, can arise in all phases of system’s life cycle. According to the available information in the scientific community, 96 different risk factors with different impact for the confidentiality, integrity and availability of personal data in the process of automated processing with profiling have been identified. Yet, universally applicable framework and tool for such an assessment is not publicly available. Therefore, to comply with the GDPR and the Law on Personal Data Protection, at least a more specific division of responsibilities of all participants in the RTB direct e-marketing system is required, with as much as possible clear and comprehensible information about the functionalities, methods of training the machine learning module and the types of algorithms applied in the artificial intelligence system.

By Ivan Milosevic, Partner, JPM Jankovic Popovic Mitic

Despite being one of the most turbulent periods in the history of the mankind, 20th century represents one of the brightest spots in the evolution of technology. Except for the general enthusiasm in all branches over the industry, the second half of the century has been fertile when it comes to executing some revolutionary ideas.

In the late 50s, an American scientist, a member of the team that worked on the development of the first nuclear bomb, has created something yet unseen, something that will be recognized as one of the fastest growing industries in the years to come.

In October 1958, physicist William Higinbotham created what is thought to be the first video game – ‘’Tennis for Two’’. It was a very simple tennis game where two people played the electronic tennis game with separate controllers that connected to an analog computer and used an oscilloscope for a screen. One could say this game was a distant relative of the ever-growing gaming world we know today, and a predecessor of an arcade machine created by a group of college students from the University of Utah and Stanford University in 1971. The game was called ‘’Computer Space’’, and it is considered to be the very first arcade video game. Built in a fiberglass case, the simplistic space shooter game was hailed a success and the first commercial arcade video game had been made.

Many years later, the gaming market was valued at approximately USD 198 billion in 2021, and it is expected to reach a value of far more with a not so rough estimation of USD 304 billion by 2027, thus, making it the most lucrative podium for all players exploring this, although virtual, but financially very real environment which impacts the markets worldwide. Gaming has become one of key-players within the so-called creative industry, among other members such as music, film, animation, TV show and it only awaits explosion of potential in near future.

Creative industries are a significant sector in the Serbian economy as well, with a share between 3.4% and 7.1% of GDP and are growing faster than the rest of the economy. This sector consists of over 30,000 registered economic entities, employing more than 115,000 workers, almost 70% of whom are between the ages of 25 and 44. In the gaming segment, the success of domestic participants in the gaming industry is undeniable, as confirmed by the recent acquisition in Serbia worth EUR 390 million, in addition to another one in the region, with a total value of as much as one billion euros.Although the Serbian law does not provide comprehensive and encompassing regulation for gaming industry separately, it is of crucial both legal and commercial impact to assess existing provisions of various acts regulating the basics of this industry, including its creation, production, transfer, assignment, distribution of rights and its financial exploitation.  Law on Copyright and Related rights (‘’IP Law’’) regulates the rights of authors over their work of authorship. The IP Law defines work of authorship as an original spiritual creation of the author, expressed in a certain form, regardless of its artistic, scientific or other value, its purpose, size, content and manner of expression, as well as the permissibility of public announcement of its content. An author is a natural person who created copyright work and is presumed as holder of rights over the work enjoying moral (non-transferable rights) and property (transferable) rights over his work of authorship from the moment of creation of the work pursuant to the Article 8 of the IP Law. However, apart from the author himself, the holder of rights can be other person or entity, if they acquired the copyright in accordance with the IP Law.

The Article 2 of IP Law stipulates that the following shall be deemed works of authorship, and in particular: i) written works (e.g. books, brochures, articles, translations, computer programs in any form of their expression, including their preparatory design material and other); ii) spoken works (lectures, speeches, orations, etc.); iii) dramatic, dramatic-musical, choreographic and pantomime works, as well as works originating from folklore; iv) works of music, with or without words; v) films (cinema and television); vi) fine art works (paintings, drawings, sketches, graphics, sculptures, etc.); vii) works of architecture, applied art and industrial design; viii) cartographic works (geographic and topographic maps); ix) drawings, sketches, dummies and photographs; x) direction of a theatre play.

Having in mind the provisions of the IP Law, it is an easy conclusion that the game itself is a work of authorship, given the existence of an appropriate software is a precondition for compiling a game. Moreover, the games are most often created as a product of teamwork with an individual contribution from several persons whereby the complex work of authorship is created. The IP Law defines co-author as a natural person who has created a work based on creative engagement with another person. Co-authors are joint holders of the copyright on a work of authorship, unless otherwise provided by the IP Law or by an agreement governing their mutual relations, meaning that the distribution rights therein can be regulated differently (for example by the agreement).

Several technical aspects should be considered essential and eligible for the game authorship, such as developing new algorithms and approaches, designing interfaces, writing and creating software, finding proper test cases for software with a known behavior, etc. Apart from technical, other creative contributions to the production of games can be no less significant, such as design, drawings, sketches, graphics, musical works and other spiritual creations necessary to create a complex author’s work.

Given the complexity of the game-creation process, it is of great importance to assess the legal standpoint and how the rights would be distributed between the creators of authorship, who would be deemed author and/or co-author of the creation, to what extent the co-authors have the exploitation rights and under what conditions, and so on. There are no exact guidelines on awarding authorship over individual’s contributions to the created game, and, as to which type of contributions can qualify for authorship at all and where to draw the line. Hence, the best possible legal way of creating the game is if rights are downright regulated especially when the creation is taking place within the employment relationship, where the holder of material copyright over software is the employer, unless otherwise provided in the employment contract or employer’s rules of procedure. Therefore, it is necessary to address many different legal aspects prior to creating games e.g., when drafting the agreement for video game development, publishing agreements, as well as with video game distribution agreements, in order to properly exploit its commercial value.

Setting the environment for games production is also crucial for industry where many different points of legal assessment need to be properly carried out, such as the general regulatory aspect and compliance, website Terms of Use, terms and conditions, Privacy Policies and Cookies. Moreover, and with an ever-rising popularity of online gaming, it is necessary to keep proper pace with regulation and maintain compliance from consumers’ standpoint, especially the children’s compliance, game merchandise’s regulation, eCommerce, data protection and GDPR, as well as the general IP protection when it comes to games branding (including the protection and enforcement of copyright, patents, trademarks, design protection and other intellectual property rights). Oftentimes, it is required to assess licensing of music and sound recordings rights when creating a specific game, as well as all other accompanied IP rights needed.

In conclusion, game-production process contains different creative, intellectual, legal and other aspects, but for those investing financially in gaming industry, the most vital element is commercial value of the game itself. Therefore, it is mandatory to set all in order when it comes to proper IP rights, distribution and potential exploitation, with a notion that a game represents a work of authorship, hence, is suitable for licensing, transfer/assignment and other commercial use, which should be regulated accurately with various agreements, given there isn’t specific law related to the gaming industry apart from the general legal acts such as the Law on copyright and related rights.

On the other hand, when perceiving the game industry in broader picture and as an innovation, it is worth mentioning the Law on Innovation Activity (“Law’’) which entered into force on 5 January 2022. The goal of the Law is to improve conditions for the development of innovation activities and integration of the innovation system of the Republic of Serbia into the European Research Area and the Innovation Union. The most important compartments brought by the Law, related to gaming industry, are innovation subjects (‘’startup’’ and ‘’spinoff’’) and investors in innovation activities (‘’business angels’’).

The Law defines innovative subject as a company, other legal entity, part of a legal entity, entrepreneur, natural person, or group of natural persons that develops innovations, i.e., places its own or other people’s innovations on the market or in use. Innovative subjects, among others are: i) startup – a newly founded company or entrepreneur developing an innovative product or service with a potential for rapid and large growth; ii) spinoff – a startup founded by an existing legal entity with the goal of developing and commercializing innovations; iii) business angel – investor in an innovation activity who invests financial resources in a startup. The Law also defines subjects of the innovation infrastructure as legal entities, whose key role is to create an environment for cooperation between science and economy, providing innovation subjects with professional, administrative, logistical and other support to develop, put into use and place their innovation on the market. Such support may be, for example, organization of support for startups – a company/entity whose predominant activity is implementation of support programs for startups, as well as making available business space, professional, administrative, technical and other services to startups, with the aim of developing innovative activities.

It was undeniable intention of the legislator to establish a suitable environment for attracting investments in startups, which are often the initial point in the development of games and other elements of the creative industry, which improves the environment for their later commercial exploitation and affects the entire market. However, the question remains whether the current legal framework is sufficient for the profitable development and exploitation of games. This is primarily due to the lack of specific regulations that would regulate the gaming industry in detail, and due to the complexity of the entire process, which among other things, requires a serious approach to the legal aspect by engaging experts from the appropriate legal fields (IP and IT law) to overcome possible negative consequences and difficulties on the way to achieving creative goals. For now, it seems that with professional legal support, the existing legal framework is more than enough for all participants to get the most out of everything that the creative industry has to offer. What is expected to follow is more detailed legal regulation as a response to everyday situations in practice, with the acquisition of knowledge and strengthening awareness of this profitable virtual world, which is continuously growing and pushing the (virtual) boundaries we know.

By Aleksandar Popovic, Partner, and Milos Maksimovic, Senior Associate, JPM Jankovic Popovic Mitic

As mentioned in one of our earlier articles, on 12 November 2021 the Regulation on Unique Technical and Technology Requirements and Procedures for Storage and Protection of Archival and Documentary Materials in Electronic Form (Official Gazette of RS no. 107/2021) (“the Regulation”) was published, governing the so-called electronic archiving, i.e., unique technical-technological requirements and procedures that should be fulfilled by creators and holders of archival and documentary materials during their storage and protection.

Postponed implementation of the Regulation

Pursuant to the Regulation on amendments to the Regulation, which was published in Official Gazette of RS no. 94/2022 from 25 August 2022, the Regulation shall apply from 1 January 2024, instead of 1 September 2022 as initially stipulated.

Content of the Regulation

The Regulation stipulates that creators and holder of documentary materials in electronic form shall be obliged to perform electronic archiving, until delivery of archival materials to the competent archive, in accordance with the Regulation on Conditions for Preparation of Documents for Reliable Electronic Storage and Document Forms Suitable for Long-term Storage (Official Gazette of RS no. 86/2018).

Electronic archiving is done by a software – information system for reliable electronic storage, while creator and holder prepare a list of categories of archival and documentary materials with retention periods and submit it in electronic form to the competent public archive (to “eArhiv”, through “eUprava” portal). If the archive establishes an irregularity while checking this list, it shall order its correction and the creator/holder shall be obliged to act immediately upon it.

The Regulation also prescribes that individual obligations of creators and holders of documentary materials with regards to the electronic archiving, prior to delivery to the competent archive – inter alia – include: enacting of internal rules of conducting with regards to the preparation of materials for reliable electronic storage, applying of measures for protection of the aforementioned software, classification of materials in accordance with the list of categories (along with designation of the retention period thereof), recording of prescribed data, keeping records of activities undertaken in the process of preparation for electronic storage and archiving, keeping archive books in electronic form etc.

Additionally, having selected the materials to be permanently kept from a software solution, creators and holders of documentary materials shall select documentary materials with expired retention period for destruction, and create a request to the competent public archive in electronic form in that regard (to “eArhiv”, through “eUprava” portal). As for the selection of electronic material to be permanently kept, upon expiry of 30 years after its creation, creators and holders of such material shall create a request in electronic form in the software and submit it to the competent public archive (to “eArhiv”), based on which request the archive shall adopt an act on establishing the archive material for cultural good, according to the law.

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

Employment law related matters are a fundamental part of every legal due diligence analysis of Serbian companies and their respective businesses. Following the enactment of the Law on Gender Equality (“Official Gazette of the Republic of Serbia“, no. 52/2021, “Law“), the scope of legal due diligence exercises should be extended to also include targets’ compliance with obligations set forth in the Law.

In accordance with the Law, Serbian companies with more than 50 employees and individuals engaged on an out-of-employment basis are obliged to prepare and deliver to the Serbian Ministry of Human and Minority Rights and Social Dialogue (“Ministry“) the following set of gender equality related documentation: 

• company’s records of achieving gender equality (“Records“), which shall be delivered to the Ministry by 15 January of a calendar year for the previous year;
• company’s annual report on achieving gender equality (“Annual Report“), which shall be delivered to the Ministry by 15 January of a calendar year for the previous year; and
• company’s annual plan of measures for achieving gender equality (“Annual Plan“), which shall be delivered to the Ministry within 15 calendar days following the date of its adoption in the respective calendar year.

Although the Law entered into force in 2021, companies were not able to fulfill their obligations with respect to the Records as the Ministry did not adopt bylaws prescribing the respective template forms. However, the Ministry has recently adopted the Rulebook on keeping records and reporting on achieving gender equality (“Official Gazette of the Republic of Serbia“, no. 67/2022, “Rulebook“), which prescribes necessary template forms of the Records and the new template form of the Annual Report, enabling Serbian companies to go forward with preparing the necessary Records and the Annual Report for 2022 and filing them with the Ministry by 15 January 2023.

As for the Annual Plan, this document shall contain several mandatory elements prescribed by the Law (e.g., short assessment of the current gender equality status, a list of special measures aimed to achieve gender equality, measures for implementing and supervising gender equality, etc.), but the Rulebook does not prescribe a compulsory template.

The failure to deliver any of the aforementioned documents to the Ministry constitutes a misdemeanor for which the respective company can be fined up to RSD 2,000,000 (approx. EUR 17,000), while the responsible person in the company can be fined up to RSD 150,000 (approx. EUR 1,280).

Even though it remains to be seen how stringently the Ministry will supervise the fulfillment of the abovementioned obligations and in which cases it will initiate misdemeanor proceedings, it seems that the Ministry will be able to conduct a strict supervision of compliance with the Law with relative ease.

Therefore, in the context of M&A transactions involving targets that fall within the scope of the Law, Serbian due diligence request lists should be updated going forward to adequately cover this matter and respective questions shall be raised during the Q&A process in order to analyze the target’s potential shortcomings in this respect. Based on the target’s feedback, an adequate seller’s warranty or seller’s indemnity (in case the target has not complied with any of the abovementioned obligations within the prescribed deadlines) shall be included in the respective share purchase agreement.

By Sasa Stojanovic, Partner, and Luka Radojevic, Attorney at Law, Radovanovic Stojanovic & Partners