Category: Serbia

Djurdjica Horvat and Filip Matkovic have been promoted to Partner at MPartners Legal.

Djurdjica Horvat, formerly a Senior Lawyer, is an employment law specialist who “will now spearhead our labor law team.” Prior to joining MPartners, Horvat spent over 12 years in-house with the Belgrade Nikola Tesla Airport preceded by over five years with the Law office of Milan Sukovic.

Filip Matkovic is a dispute resolution expert. Part of MPartner since the firm’s inception, Matkovic will from now on “be in charge of the dispute resolution department and its development.”

Serbian lawyer Aleksandra Simic has been appointed to the role of Head Ethics Risk and Compliance iCEE at Novartis, based in Switzerland.

Simic has been with the company since 2017 when she joined as Ethics, Risk and Compliance Head. Prior to that, she worked for Bausch Health Companies Inc. as a Legal Counsel between 2013 and 2017. Between 2011 and 2013, she was an Associate with Moravcevic Vojnovic i Partneri in cooperation with Schoenherr, including a secondment with Azvirt Ogranak Beograd and working as a Foreign Associate with Hengeler Mueller.

Originally reported by CEE In-House Matters.

The Republic Geodetic Authority (“RGA”) has recently, within implementation of the new real estate cadastre information system, launched a Cadastral Alarm, which serves to monitor the cases, i.e. changes relating to real estate.

The respective application has been created with a view to alarming the real estate owner or any other person with legal interest with regards to all changes in relation to real estate. In this manner, an interested party can obtain real time information if someone files for change of data concerning real estate (e.g. change of ownership, entry of notes and burdens, court dispute, correction of errors), as well as if someone undertakes any other action that may be relevant, which is particularly important in the event of actions that may jeopardize the holders of real estate rights, i.e. cause them damage.

System’s working method

In order for a user to be notified about changes on the respective real estate, it needs to register on the system, i.e. to file an electronic application for Cadastral Alarm services, with mandatory electronic signature of the applicant stamped on the application form, which can be found at the RGA’s website, along with other necessary instructions.

Upon registration, the application operates in such a manner that the interested person, i.e. user receives a notification by e-mail with summary of the case and registration number under which the case is enrolled with the RGA’s competent service. The application can be used both by natural persons and legal entities, while all information sent electronically will be available to the user for one year and free of charge.

Other benefits of the service

In addition to timely notifying of service users on instituted procedures for registration of changes on real estate, Cadastral Alarm service enables the monitoring of case status, i.e. resolution of submitted requests. By means of this application, the users can also be notified when change upon request has been implemented in the real estate cadastre, when a note has been deleted (e.g. that the decision is not final) etc.

Considering all of the above stated, it is expected that the Cadastral Alarm will significantly contribute to legal certainty in relation to real estate registered in the cadastre and prevention of abuses related thereto.

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, and Danica Nikitovic, Junior Associate, PR Legal

Cvjeticanin & Partners has advised Pirelli Tyre on the recognition and enforcement in Serbia of an arbitral decision of the Milano Arbitration Chamber.

According to Cvjeticanin & Partners, “this procedure followed the previously completed arbitration proceedings in which a three-member arbitral tribunal decided in favor of Pirelli. Pirelli Tyre initiated this procedure on recognition and enforced collection against one of its largest distributors, Coning Belgrade, which is also the largest retailer of car tires on the Serbian market, for the amount of EUR 115,000, as [Coning] gets insolvent.”

Cvjeticanin & Partners’ team was led by Senior Associate Ivana Mijajlovic.

While public perception in Serbia on joining the EU has generally been positive, according to Karanovic & Partners Senior Partner Dragan Karanovic, “recent research suggests that the overall enthusiasm of the public has taken a slight decrease, establishing a polarized, almost fifty-fifty view towards EU accession.”

Karanovic says that, since 2019, “the negotiations are somewhat stuck on geo-politics questions and the slow-moving judiciary, rule of law, and freedom of speech reforms.” The COVID-19 pandemic has further dampened the tempo, he says, “and created a stalemate on the Serbian path to European integration. Nevertheless, the strategic goal is still in place – Serbia remains committed to EU accession.” Out of a total of 35 chapters, 18 have been opened so far, and only two have been temporarily closed, according to Zivkovic Samardzic Partner Uros Djordjevic. He agrees that negotiations have slowed down of late, with “no new negotiation chapters opened in 2020.” He reports that in 2021 “Serbia switched to a new methodology by which the negotiating chapters are grouped into six clusters.” While Cluster 1, containing all previously opened chapters, was opened in 2021, “no new chapters have been opened in 2021 either,” according to Djordjevic.

He notes that, according to the October 19, 2021, Report of the European Commission, several key areas have been marked as requiring redoubled efforts: agriculture and rural development, the justice system and fundamental rights, freedom and security, the environment and climate change, and financial control.

Karanovic says that EU policy makers’ recommendations are generally well accepted in Serbia and the approach when addressing the relevant issues has shown some progress. “Where we go from here hinges on preparing adequate implementation strategies, with realistic goals and progress monitoring. The future political setting could also be a great or a poor catalyst for change.” Both Djordjevic and Karanovic agree that the current 2025 target for EU accession is more aspirational than anything. “Right now, this prediction serves more as an encouragement to fast track the existing issues, rather than a realistic deadline, Karanovic says. Djordjevic notes that, while a motion to change that goal to 2030 was not approved (during the October 2021 EU Western Balkan Summit), “taking into account what little progress has been made in closing the currently opened chapters, 2030 would be a more realistic date for the accession.”

Harmonization vs. Implementation

“Harmonization of laws predominantly occurred in previously unregulated areas,” according to Djordjevic, “with the passing of new laws modeled on EU legislation.” He highlights legislative progress in the following areas: protection of business secrets, patent law, the technical requirements for products and conformity assessment, organ transplantation, human cells and tissue, and gender equality, all in 2021; trademarks, digital goods, in 2020; export and import of dual-use goods, protection of users of financial services in distance contracting, both in 2019; maritime travel and confiscation of criminal property, both in 2018; and transfusion medicine and bio-medically assisted fertilization, in 2017. “However, the practical application of those harmonized laws is still lacking,” he says.

“Serbia had a steady tempo in EU-harmonized legislative activity in the past five years,” Karanovic says. According to him, harmonization was undertaken in two streams: “by implementing harmonized laws in areas for which chapters had been opened, and by anticipating weaknesses in legislation for still closed chapters, to get a jump start for those chapters, once unlocked.”

He highlights progress on anti-trust and anti-monopoly legislation, whereby the Serbian Commission for the Protection of Competition is active in harmonizing practices “by using EU institutions’ interpretative instruments.” Djordjevic agrees yet notes that Serbia “still has to ensure systematic compliance with notification and standstill obligations for all state aid measures as well as develop solid track records on the application of competition law and the Law on State Aid Control.”

Karanovic mentions a new consumer protection law, progress on data protection (with only the EU updates introduced after 2018 left to implement), and the “implemented provisions on access to information of public importance, in line with European standards, a great step towards a democratic and transparent society.”

He says “considerable progress can also be seen on green energy, sustainability, and climate legislation, with Serbia adopting a package of energy laws and a comprehensive climate law. The European Commission considers the opening benchmarks to have been met and recommended the opening of the respective accession cluster.” However, Djordjevic is concerned that the recent “efforts to harmonize the laws governing different aspects of environmental protection have been largely formal, without any practical effects.” He is more optimistic about the newly adopted Trade Law: “it was also one of the highlights of harmonization, where terms like e-shop and e-platform were found for the first time, and the most common forms of e-commerce were recognized and defined, including sales through platforms connecting consumers and merchants and dropshipping.”

Rising Standards

The European Commission’s opinion is that limited progress (of a purely formal nature) has been made in some key areas, Djordjevic says. “According to the EC, the essential effect or ‘track record’ is not yet visible when it comes to electoral conditions, the functioning of democratic institutions, the fight against corruption, organized crime, or freedom of expression,” he notes. “First on the legislative to-do list is the highly anticipated constitutional and judiciary law reform aimed at establishing and strengthening the independence of the judiciary,” Karanovic agrees. He says that crucial alignment work is also expected on capital movement, financial services, food and medicine safety, and healthcare – “as these seem to be the areas where adequate protective mechanisms lack the most.” He further lists copyright and related rights, consumer protection, state aid, whistle-blower, and border control legislation as some of the areas where careful harmonization will have to be undertaken.

“Public procurement is an important ongoing issue as well,” according to Karanovic, “with noticeable changes for the transparency and digitalization of the process. In 2021, the European Commission evaluated Serbia as moderately prepared.” While Djordjevic agrees, he says “Serbia still needs to ensure further alignment,” particularly on public-private partnerships and concessions, publicly funded projects, and intergovernmental agreements with third countries.

Finally, Karanovic also mentions that several EU-harmonized laws are in the National Assembly’s pipeline, regarding trade and company law, electronic media, and biocides, among others. As he sees it, the work may not slow down, “as EU policy is constantly expanding and making the to-do list longer every day. Thus, the standards are only rising higher for each aspiring EU membership candidate.”

Key Issues

“All these laws are important milestones and serve as stable routers in each of the respective areas,” according to Karanovic. He thinks the “most noticeable (and desirable) wind of change will likely be brought on by updates regarding the freedom of movement of people, capital, goods, and services.” He expects that such changes will introduce Serbia to the EU’s single market as an equal, opening vast growth possibilities. He concedes that “the true difficulties do not lie with the introduction of harmonized laws into Serbian legislation, but with their proper implementation.”

Chapter 27 on the environment and climate change is, according to Djordjevic, “certainly the most important area which requires harmonization, due to its sheer scale and the real-world impact it has on the daily lives of Serbian citizens.” He says the problems here are not purely legislative in nature, but rather practical and economical ones. He points out that, “currently, Serbia treats only 10% percent of its wastewater, with Belgrade and Novi Sad discharging wastewater directly into the Sava and Danube rivers. Only 7% of communal waste is currently being recycled, while the EU target for 2020 was 50%. Only 0.7% of GDP is invested in environmental protection, while most CEE countries invest around 2% of their GDP.”

“To appreciate the scope of the work required for complete harmonization, it is worth pointing out that an estimated EUR 15 billion will need to be invested before closing Chapter 27,” Djordjevic concludes.

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Due to its strategic position in the heart of Southeast Europe and it being part of three important European corridors, Serbia can boast excellent connections to both Western Europe and the Middle East, and has a huge potential for public and private investments alike.

Aware that investments in infrastructure can provide tangible impacts on economic growth, quality of life, and productivity, the Government of the Republic of Serbia has focused its strategic choices in the past years on infrastructure projects ownership and delivery modes. Addressing the longstanding problem of underfunding, it turned to various forms of grants, loans, donations, and state subsidies. As a result, construction activity in all fields, including infrastructure, maintained a dynamic and continued growth in 2020 and 2021 even though the COVID-19 pandemic indisputably slowed down the economy and increased the costs of construction materials, imported goods, workforce, and logistics.

This has been confirmed by a number of major ongoing infrastructure projects at a national level, including road, rail, air, and water developments, which continue to provide opportunities for investment-oriented firms from all over the world. With several countries, most notably, the USA, China, Turkey, Russia, France, Hungary, and Azerbaijan, Serbia has signed memorandums of understanding on cooperation in infrastructure development. At this point, such international agreements are the most frequently used modality in this field.

Some of the global leaders in the construction industry are thereby, by means of commercial contracts, engaged in implementing infrastructure projects of national significance. Key projects in the area of road transport include around 250 kilometers of new highways being built within the Belgrade Bypass, the Preljina-Pozega segment, and the Morava Corridor. The Sremska Raca-Kuzmin section, with a bridge over the Sava River, is part of the E-761 highway Belgrade-Sarajevo construction project. In addition, the construction of the Pozega-Kotroman section (approximately 60 kilometers long) is also planned. For these projects, the Republic of Serbia signed two Commercial Agreements with Turkish construction giant Tasyapi.

These are accompanied by several projects of exceptional strategic relevance in the area of railways and intermodal transport, such as the reconstruction and modernization of the railway section between Subotica-Horgos and the state border with Hungary (Szeged). The construction of the Belgrade-Budapest railway is in process, too, with the project’s worth at about EUR 2 billion in total, and works being partly performed by China Railways International and China Communications Construction Company.

The relevant legal framework has been amended and upgraded a few times in recent years to simplify the regulatory procedures concerning the implementation of infrastructure (re)construction projects, speed up their performance and finalization, and foster the usage of other delivery modalities, first and foremost, Public-Private Partnerships (PPPs). In addition to the Law on PPP and Concessions, adopted back in 2011 and amended in 2016, the 2018 amendments to the Law on Utility Services are also expected to draw private investment in this sector and facilitate PPP projects in Serbia. Namely, it prescribes that the procedure of performing communal activities whose financing is provided from the budget of the local self-government unit or by collecting fees from the users of communal services can be carried out exclusively through public-private partnerships.

Since the formation of a regulatory body in the form of the PPP Commission, over the past nine years, there have been almost 200 approved projects across all local municipalities in Serbia. Most of these projects have been in the previously underdeveloped wastewater processing, sewerage, water supply, and waste management sectors.

In addition, one of the most notable concessions that should tightly connect Serbia with the world is the concession of the Belgrade airport. In March 2018, Vinci Airports signed a 25-year concession contract with the Serbian government for the Nikola Tesla Airport. The concession agreement covers financing, development through construction and reconstruction, maintenance, and management of infrastructure. 

Regardless of the form and structure of infrastructural projects, however, there are numerous legal aspects for all stakeholders to consider in the context of construction and projects-related regulations in Serbia. After the main parties choose the adequate procurement arrangement, transaction structures, and corporate vehicles, and comply with the FIDIC contract forms (which are required if the main parties are international contractors), they also need to take into consideration the risk allocation, appointment, and payment of contractors, subcontractors, licensing and consents, as well as projects insurance, health and safety, environmental issues, and, finally, tax liabilities.

By Vladimir Milosevic, Partner, Milosevic Law Firm

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Offsetting of claims (compensation) is one of the ways of termination of obligations, regulated by the Law of Contract and Torts. Certain procedural and legal rules, referring to the offsetting objection and the compensatory counter-claim, are also contained in the Law on Civil Procedure. The institution of offsetting claims is especially important when one of the parties in the obligatory relationship is in bankruptcy, in which case the special bankruptcy rules are applied. The importance of this topic is further enhanced by the changed business conditions in the world after the COVID-19 pandemic, with economic entities being increasingly forced to settle their obligations with compensation for the time being, until new sources of growth yield positive effects on liquidity.

While bankruptcy proceedings conducted under previous Serbian regulations were always a matter of mandatory, legal compensation, the applicable Bankruptcy Law (BL) – in Article 82, introduces a new concept of legally permitted and limited offsetting. Similar solutions are provided in the legislation of other countries in the region.

The importance of offsetting in practice, especially for creditors, is great. It allows the creditor to fully collect their claim outside the bankruptcy payment lines and regardless of the amount of available funds in the bankruptcy estate. For reasons of fairness, offsetting deviates from collective settlement as the legally established goal of the bankruptcy procedure and from the principle of parity, i.e. from the proportional settlement of bankruptcy creditors.

Practically speaking, by using offsetting claims in bankruptcy proceedings, the creditor avoids the regular course of events where they would have to enter the value of their obligation in full into the bankruptcy estate – as fulfillment to the bankruptcy debtor – while only settling their claim against the bankruptcy debtor together with other bankruptcy creditors, in the appropriate payment order, appropriate proportion, and depending on the available means of settlement. In practice, there is rarely a situation in which all bankruptcy creditors collect their claims in full through bankruptcy proceedings. The advantages of the institution of offsetting mutual claims are clear, and of great benefit to creditors. Through offsetting, claims can be settled in full or at least up to the amount of the claim that the bankruptcy debtor has against the specific creditor.

In order to exercise the right to offset in bankruptcy proceedings, in addition to the general conditions concerning reciprocity, homogeneity, and maturity of claims, the BL requires fulfilling three special, cumulative conditions: (1) the acquisition of the right to offset before filing a petition to open bankruptcy, (2) filing of the entire claim, and (3) a statement on offsetting. The right to offset was not acquired if both mutual claims did not fall due before the submission of the petition to open bankruptcy. The right to offset is, however, considered to be acquired before such a submission if the debtor’s accounts were blocked at the time of maturity of the creditor’s claim. The BL does not set the liquidity of mutual claims – the indisputability in terms of their bases and amounts – as a condition for offset.

Regarding limitations, offsetting is not allowed if: (1) the bankruptcy creditor acquired the claim in the last six months before the day of filing the petition to open bankruptcy, and the bankruptcy creditor knew or should have known that the debtor was insolvent or over-indebted; (2) if the conditions for offsetting have been acquired through a legal transaction or other legal action that can be challenged in accordance with the provisions of the BL.

The use of the benefits of offsetting of claims in bankruptcy proceedings is related, in time and procedure, to the filing of claims in court. Creditors having the right to use this benefit have to submit the statement on offsetting to the court along with filing for the entire amount of their claim against the bankruptcy debtor, within the filing deadline. Otherwise, the right to offset is lost, and the creditor will be forced to fulfill their obligation to the bankruptcy debtor (the bankruptcy estate), while only being able to settle their own claim in the appropriate proportion, together with other creditors of the same bankruptcy payment order.

By Nemanja Aleksic, Managing Partner, Aleksic & Associates

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

There are specific foreign exchange (FX) restrictions set out in Serbian legislation. The FX rules envisage mandatory requirements with respect to cross-border loans, guarantees, assignment and set-off of cross-border claims and debt, the opening of bank accounts abroad, etc. As FX restrictions affect various aspects of transactions between Serbian residents and foreign parties, they are frequently a tumbling stone in cross-border transactions.

In a nutshell, Serbian residents are rather restricted in lending to foreign residents and providing guarantees for transactions between non-residents unless the foreign borrower is majority-owned by the Serbian guarantor, with the exception of transactions between non-residents incorporated in the EU member states in which case this requirement is removed. However, lending and guaranteeing by residents to non-residents under credit transactions are still subject to other requirements and limitations such as that the Serbian guarantor has to secure its recourse receivables through adequate collateral from abroad, with the main idea to limit any funds outflow from Serbia. As there are no guidelines under the FX rules on what should be regarded as adequate collateral here, this needs to be evaluated by the National Bank of Serbia as a regulator on a case-by-case basis within the mandatory reporting procedure (uncertain in its outcome due to lack of firm standards).

With respect to the reporting procedure, Serbian residents are required to deliver various documents to the regulator, among which are the originals of relevant finance documents and their certified Serbian translations. The regulator may request to be provided with supplement documents at its own discretion within the course of the procedure. When it comes to the cross-border facility agreements, the regulator may request that certain provisions of the facility are explicitly excluded from application toward Serbian residents or that are further amended to ensure compliance with the FX rules.

The major points which the regulator usually finds problematic in facilities with non-residents are clauses on joint and several guarantees, cross-default, set-off, and assignment. As the potential issues may not be fully predicted in advance, this list should not be regarded as exclusive.

The specific position of the regulator is that the cross-border guarantees may not be joint and several (i.e. they may be activated only if the original borrower is not capable to make the payment itself) and have to be explicit that the Serbian residents will have no payment obligations on behalf of any obligor other than pursuant to the security provided.

Cross-defaults are generally not permitted, banning the default of a Serbian borrower under a cross-border loan to be triggered based on a cross-default.

Cross-border set-off of claims is also subject to certain restrictions under the FX rules, whereby set-off is possible only for transactions explicitly prescribed by the law and following the prescribed procedure. All other types of set-off are deemed to be unpermitted under the FX rules.

Cross-border assignment and transfer of claims and debt are explicitly allowed under the FX rules only if related to the realized foreign trade of goods and services or cross-border loans and subject to certain formal requirements depending on the underlying transaction.

The policy of the regulator in this area is gradually being loosened up. In terms of legal changes, only the restriction of majority ownership for EU member states has been removed, but, through practical cases, the regulator kept adjusting its positions towards a more flexible approach. As a consequence, requirements relating to cross-border defaults and joint and several guarantees appear to have been liberalized in transactions where the resident cross-guarantees only for its direct or indirect shareholder. Undoubtedly, we will be seeing more liberalization driven by the practical situations as we witness an increase in cross-border financing and refinancing transactions. 

By Milica Popovic, Partner, and Ksenija Boreta, Senior Attorney, Petrikic & Partneri in cooperation with CMS Reich-Rohrwig Hainz

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The introduction of new e-services of the Serbian Business Registers Agency and the beginning of the application of online-based fiscalization are rapidly bringing the Serbian corporate environment to the corporate standards of developed countries.

Whilst the enhanced quality of the existing incorporation and registration services will be expanded to all types of legal entities that may be established in Serbia, including partnerships and joint-stock companies, Serbian corporations performing the retail of goods and services are preparing for the fast-approaching fiscalization that, without any doubt, will have a significant effect on the retail sector of small and medium retailers of goods and services, by reducing the possibility of illegal tax evasion trading.

e-Incorporation and e-Registration of Business Entities Is Picking Up Pace

According to official sources, the number of e-incorporations and e-registrations with the Serbian Business Registers Agency has increased significantly during the last 12 months. For the first nine months of this year, 8.1% of all incorporations of entrepreneurships and limited liability companies have been performed electronically.

The service of e-incorporation and registration has been available to entrepreneurships since 2018 and to limited liability companies since 2021. The same service for all other available forms of legal entities, including partnerships and joint-stock companies, will be introduced in 2022. With this expansion, the suite of the e-incorporation and registration services of the Business Registers Agency will be complete and will cover all forms of business entities.

It goes without saying that the COVID-19 pandemic breakout and the lockdowns that have followed have largely contributed to the multiplied number of users of e-incorporation and registration services in 2020 and the first nine months of 2021 (2,680 entrepreneurships and limited liability companies).

The e-incorporation and registration services are available by accessing the e-services portal of the Business Registers Agency. The whole process can be completed online – from the application to fee payment and the issuance of the electronic certificate of incorporation. To be able to submit the application, the applicant must have a qualified e-signature issued on the territory of the Republic of Serbia which can also be used for the purpose of e-filing of financial statements and communication with the tax administration. Several banks in Serbia are issuing an e-certificate for the payment of the founding capital and payment of filing fees may be performed online.

Preparations for the Application of the  New Law on Fiscalization

The new Law on Fiscalization becomes applicable from January 1, 2022, pursuant to which all retail and services companies will have to issue electronic fiscal receipts to customers and, concurrently in real-time, deliver the data in the receipt issued. Trade and retail encompass: 1) the sale of goods and services to natural persons, 2) the retail of goods and services in retail stores to both natural and legal entities, and 3) the trade performed by vending machines, webshops, e-commerce platforms, and drop shipping.

Taxi drivers, veterinarians, banks, and insurance companies, as well as law firms and lawyers, are exempted from the application of the new fiscalization rules.

All taxpayers must, by way of an electronic application, provide the tax authority with data on all business premises where the electronic fiscalization devices will be in usage. The tax authority will certify the eligible software and processors to be used in fiscalization devices.

By Nenad Popovic, Senior Partner, JPM Jankovic Popovic Mitic

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On October 11, 2021, CEE Legal Matters reported that Gecic Law had Launched a new ESG Practice, co-headed by Partner and Head of Corporate/M&A Ognjen Colic and Head of Operations Hristina Kosec. CEELM spoke with Gecic Law Founding Partner Bogdan Gecic and Colic to learn more about the new practice.

CEELM: What was the rationale behind your decision to launch the ESG practice?

Gecic: The transition to a stand-alone ESG practice was quite natural for us as it is a perfect fit for several of our core competencies. We combined our unparalleled expertise on the latest developments in EU law, such as the European Green Deal, with our know-how in trade policy, finance, environment, and labor to provide support in all aspects of this broad and diverse field. EU law is still the uncontested rule of the land in Europe, for both doing business applicable to the internal market and international trade in the case of Western Balkans. As ESG rose to the top of the agenda, we realized that we could offer comprehensive solutions and significant value in this area. We are proud to be the first independent law firm in the region to provide this service in a field that is already so important and will very soon become vital to all businesses. The naked truth is that businesses can no longer afford to remain oblivious to ESG standards. Stakeholders are no longer willing to accept corporate behavior which does not adhere to standards in these areas. This impacts enterprises in the Western Balkans even more than they realize. For companies that are not mindful of these areas, it will become increasingly more difficult to borrow money from creditors, attract investors, sell goods to customers, be competitive in exports, and attract the best employees, as they are all becoming more and more interested in their ESG standing and are acting on it. Therefore, this will undoubtedly affect their success in the market and their financial results.

Colic: Adding to Bogdan’s remarks, for a long time now, we have been addressing the various aspects of ESG partially, while understanding that the issues are so interconnected that fixing one area at a time does not solve the entire problem. Indeed, businesses often emphasize the importance of, for example, carbon neutrality, and neglect other important areas, especially corporate governance. We believe that the most beneficial way is to holistically approach the issue, treating all sides of the matter. By launching our ESG practice, we aim to address the totality of our clients’ needs in this increasingly important area. This is where we see the emerging opportunity and our competitive advantage.

CEELM: What were the recurring questions you’d be getting from clients that initially sparked the thought of setting up a dedicated practice?

Colic: Our clients are mostly well-informed that there are changes they will have to face as the EU accession process moves on. However, they are not always abreast with all changes that may affect their operations and the dynamics of this impact. Their main concern is how these processes may affect the vitality of their business and their bottom line. This is where we step in and start preparing our clients by first assessing and analyzing the risks they may be exposed to and then advising on how to best adapt, from a regulatory, strategic, financial, and operational standpoint. In the implementation, we prioritize between the must-have and the nice-to-have but we do provide a clear roadmap for each area. We aim to look at the big picture, but in practice, in most cases, we must often work gradually, always with an eye on the fundamentals of each business.

CEELM: How different are those implementations from company to company?

Gecic: Each business has a story of its own. So, the answers to the same questions can often be very different. We aim to provide solutions that are tailored to the specific needs and circumstances of each client. That is why, as Ognjen mentioned earlier, it is essential to go through a rigorous due diligence process together with the client to pinpoint the areas which require attention. Some businesses must undergo a fundamental transformation, while others are well ahead of the game. As advisors, we take pride in making sure we understand the core of our clients’ businesses very well and take a complete approach to the issues at hand. We strongly believe that companies should also look at ESG as an opportunity to improve their businesses in a meaningful way for the long term. They will benefit from incorporating ESG standards in their strategies and throughout their operations, not only as a quick fix but as a genuinely new way of thinking. Many businesses are still held back by a short-term approach, seeing change as an additional cost, avoiding and postponing action. Some still do not understand that failing to prepare may significantly affect their ability to compete in the market, sell their products, and have access to financing, which may spell the beginning of the end for them. As a business in our own right, we are thrilled to be part of this process, as we also take on board ESG standards. Wouldn’t it be completely inauthentic if we did not adhere to what we preach?

CEELM: The ESG practice will be co-headed by Colic and Kosec. Why did this pairing make sense?

Gecic: We cannot say enough about the importance of understanding our clients’ businesses thoroughly, especially in ESG. This conviction, along with an innovative and solution-oriented approach in everything we do, is the essence of the value we provide. To look at ESG from a purely legal standpoint would just not suffice. Demonstrating this commitment, we activated our top senior talent, both with a strong corporate legal and operational business background, to head our new practice area.

Colic: I think it is wonderful that we’ve adopted this approach. Although it’s so obvious, it is still quite rare in our region and clients truly appreciate our dedication to their business needs. We make a point of including this approach in our work with clients, at every stage of our relationship, and we feel this is our unique proposition in the market. Legal advice needs to take into account wider implications on the business itself.

CEELM: And what’s the composition of the rest of the team and how is it structured?

Colic: The team comprises seasoned experts in various fields. Our experience and knowledge in EU law are unrivaled and very well known in the market and play a significant part in our new ESG practice. Through the years we have also amassed a depth of expertise in the field of energy, working on some of the most groundbreaking projects in the Western Balkans, both in conventional and renewable energy. Our environmental practice also went from strength to strength as the business world moves towards the goals of net-zero emissions, enhanced recycling practices, and improved waste management. Meanwhile, our corporate practice has tackled many fundamental issues, ranging from labor practices and anti-discriminatory policies to achieving more transparency in corporate governance. So, our team, supported by our business arm which leads our CSR efforts and human capital policies, is a unique force to be reckoned with in our region.

CEELM: How do you see the ESG practice developing? What do you expect will be the drivers behind its growth?

Gecic: The opportunities are immense. The time will come when everyone will either be a part of the problem or the solution. We often hear that businesses in our region have more pressing concerns now, but I will say it again: if they fail to prepare, they may become obsolete soon. Regulators, investors, creditors, customers, and other key stakeholders will insist on responsible business conduct. The increasingly mandatory EU rules on ESG will define international trade in the years to come, impacting exporters and entire supply chains in the Western Balkans and beyond. Everyone and everything is connected, meaning that one non-complier can cause disruption. Running a business outside an EU member state won’t be enough to avoid EU rules and regulations on responsible business policies. To survive in the global economy, businesses need to see ESG as a must.

CEELM: Do you expect more firms to announce similar practices in the market? If yes, what do you believe will make yours stand out over others?

Gecic: We have already seen movement in this area and given the high demand for ESG services, we are not surprised. We are confident in our unique approach which has always been business-oriented, multidisciplinary, and focused on the latest trends in EU law. We believe that our drive for innovation, our strategic method, and our dedication to impeccable client service will be key differentiators for our firm in this and other areas. We are one of the fastest-growing firms in the region. However, we strive to always remain sharp, flexible, and responsive to the needs of our clients. We have an amazing team of seasoned professionals with a can-do attitude which excels at anything we do.

This Article was originally published in Issue 8.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.