Category: Serbia

Bojanovic & Partners has successfully challenged a FIFA Dispute Resolution Chamber decision in a dispute before the Court of Arbitration for Sport between its client, Serbian football player Milos Jokic, and Greek football club PAS Lamia. 

Bojanovic & Partners has recently been involved in other cases on behalf of international footballers, including representing Slavko Perovic against Turkey’s Denizlispor football club before the FIFA Dispute Resolution Chamber (as reported by CEE Legal Matters on April 4, 2019), and representing Nemanja Nikolic in arbitration against Israeli club Hapoel Tel Aviv (as reported by CEE Legal Matters on March 5, 2021).

Bojanovic & Partners’ team representing Jokic was led by Partner Filip Blagojevic.

 

Ever since the United Kingdom (“UK”) announced its departure from the European Union (“EU”), there were a lot of speculations about which rights and obligations will remain applicable to its citizens upon (Br)exit. Naturally, as negotiations were ongoing since 2016 referendum, question of whether the General Data Protection Regulation (“GDPR”) will remain applicable was still left open, until recently.

Recognizing the potential problems that may arise out of clear-cut solution when it comes to applicability of GDPR, the UK-EU Trade and Cooperation Agreement, effective as of 1 January 2021, leaves a six-month transition period during which the transfer of personal data from the EU to the UK will be free. After that time period expires, the UK will be considered as a “third country” with regard to international data transfers, meaning that the transfer of personal data from the EU to the UK will not be free, unless certain safeguards are provided (e.g. Standard Contractual Clauses or Binding Corporate Rules). Nonetheless, the UK remains hopeful that the EU Commission will render an adequacy decision in the meantime, eliminating the scenario in which the UK transfers will require additional safeguards.

In all other aspects, GDPR is not applicable directly in the UK as of 1 January 2021 (safe for extraterritorial application). However, this is not a huge issue for the UK citizens as their personal data enjoy the same level of protection as before. The so-called “UK-GDPR”, the amended Data Protection Act from 2018, which embodies the core principles and safeguards provided by GDPR, will continue to apply as national law in the UK post-Brexit.

That being said, all UK-based companies would be wise to welcome expiration of the six-month transition period ready for every possible scenario and compliant with both UK-GDPR and EU-GDPR.

International transfers from the Serbian perspective

As far as the Serbian data protection regulations are concerned, the Personal Data Protection Act of the Republic of Serbia (“PDPA”) explicitly provides that personal data transfers may be performed freely to third countries and/or international organizations that are parties to the European Council Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data. Furthermore, the Serbian Government issued a Decision on the list of countries, a territory or one or more specified sectors within a third country, or an international organization which are considered to provide adequate levels of personal data protection (“Decision”), listing countries to which the free flow of personal data transfers is permitted. The Section I of the Decision enlists the UK by name.

Finally, the Serbian Commissioner for Information of Public Importance and Personal Data Protection issued a public announcement stating that the personal data transfers from Serbia to the UK remain free in accordance with the PDPA and the Decision.

Having said in mind, there is no doubt that Brexit had little to do with international personal data transfer from the perspective of Serbia and its regulations. In fact, nothing has changed in terms of international data transfers as a result. So, the UK based companies with local presence may rest assured. However, it will be interesting to see if the UK will reciprocate after finally seceding from the EU. 

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

By Milos Velimirovic, Partner, and Katarina Zivkovic, Senior Associate, Samardzic, Oreski & Grbovic

NKO Partners has advised CTP on the acquisition of 27.5 hectares of land close to Belgrade’s city center from the Roaming Group and Robne Kuce Beograd. Zdravkovic & Partners advised the sellers on the deal.

According to NKO Partners, the land is intended for a logistics and technology facility in Serbia with over 130,000 square meters of leasable area. 

NKO Partners’ team was led by Partner Djordje Nikolic. 

BDK Advokati’s sister company, Legaltech, has launched Draftomat, a new document-automation and knowledge-management solution.

Draftomat consists of three interconnected components that can be used together or independently: Draftomat Drafts, Draftomat Galaxy, and Draftomat Knows.

Draftomat Drafts allows users to create interactive and automated templates through a no-code process within Microsoft Word and produce documents from those templates following an intuitive Q&A process. Document production takes place either within Word or on a web-based portal. According to Legaltech, “the software feature that enables the customer to keep the entire document automation and production process within Word is unique and it allows organizations to remain compliant with internal procedures and security standards. The portal, which has a set of robust security and privileges features, empowers large business customers to easily deploy organization-wide automated templates and monitor their use.”

The second component – Draftomat Galaxy – is a web-based platform that “creates [a] secure space for the customer’s clients, who are given access to curated templates,” thus “enabling legal practitioners and other consultancies to upgrade their practice and create a template-as-a-service offering to their clients.”

Finally, in Draftomat Knows, “users create [a] know-how library where they store snippets from their legal memos, contracts, and other documents, including emails, with best practice clauses, legal advice, or other content that is expected to be reused in the future. The snippets can be tagged, which makes them easily retrievable and insertable into new documents to be shared within the organization or with the organization’s clients.”

Very similar to the Regulation on Fiscal Reliefs and Direct Payments and accompanying Conclusion from 2020 under which Serbian Government, among other forms of state aid, granted direct payments to commercial subjects in private sector (first for the trimester March-May 2020, and then additionally for the period June-July 2020), the new Regulation on Determining Programme of Direct Payments from the Budget of the Republic of Serbia to Commercial Subjects in Private Sector in order to Mitigate Economic Consequences caused by Epidemic of Covid 19 Disease caused by SARS COV-2 (the “Programme”) that came into force on 13 February 2021, grants commercial subjects with the right to obtain another cluster of direct payments, now for the accounting period February-April 2021.

The overview of the most important facts that each commercial subject should now in order to timely exercise its right to direct payments are presented here:

Q: Who is entitled to obtain direct payments?

A: All commercial subjects in private sector, i.e. all commercial subjects that are not encompassed under the List of Users of Public Funds on the last day of the month that precedes the month in which the specific direct payment is to be made. This includes legal persons and entrepreneurs – Serbian residents, as well as Serbian branches and/or representation offices of foreign commercial subjects.

Commercial subjects explicitly excluded in terms of right to direct payments under the Programme – banks, insurance (and reinsurance) companies, companies for managing pension funds and pension programmes, financial leasing providers, payment institutions and electronic currencies institutions.

Q: What are the conditions that qualify a specific commercial subject in private sector for direct payment?

A: 1) It has to be duly founded and registered with the competent public body (Serbian Business Registers Agency) at latest on the day of entrance of the Programme into force;

2) Tax Identification Number of the commercial subject cannot be temporarily ceased until the last day of the month that precedes the month in which direct payment is to be executed; and

3) In case of entrepreneurs, entrepreneurs in agriculture, and/or entrepreneurs taxed on the basis of flat rate principle, provided that they fulfil all other conditions set down in the Programme, may qualify for direct payments even if they have registered temporary cessation of business activities at earliest on the day when the Programme came into force (on 13 February 2021).

Q: How is the monthly amount of direct payments calculated?

A: On the basis of ½ of the minimal net salary for the month of January 2021, in accordance with the following equation:

(Number of full-time employees minus number of employees whose employment ended within the respective accounting period)

X

1/2 of the minimal net salary for the month of January 2021

Full-time employees represent the full-time employees for which the commercial subject filed the Individual Tax Application – PPP-PD form for the respective accounting period.

In case of entrepreneurs who are not employees/users of retirement pension, the number of employees is increased for one employee.

Q: For what period are direct payments granted

A: For accounting period from February to April 2021, payable in the period from April until June 2021.

Q: What is the purpose for which direct payments may be used?

A: For payment of salaries and/or salary compensations.

Q: What categories of employees are taken into account/not taken into account for the purpose of direct payments?

A: Besides the full-time employees, part-time employees are also taken into account – for each part-time employee the total number of employees (for the purpose of the above equation) is increased proportionally with agreed percentage of engagement of a part-time employee.

However, the total number of employees (for the purpose of the above equation) is deducted for the number of employees whose salaries/salary compensations are consequentially borne by a third party completely, e.g. employee who is on sick leave longer than 30 days due to sickness or injury that is not work related.

Q: Does commercial subject have to apply in order to obtain direct payments ?

A: Yes. A commercial subject has to apply by manner of providing a separate statement available at the e-tax online platform (srb. portal Poreske Uprave ePorezi).

Only exception – Commercial subject in private sector who do not submit the form PPP-PD, i.e. who do not have employees/are not entrepreneurs who opted for payment of personal salary. These subjects should receive direct payments without previously submitting any statement in that regard.

Q: Is it enough to apply only once?

A: No. The commercial subjects that need to apply/submit the statement in order to use the direct payments have to do so each month, i.e. for each direct payment separately.

Q: Until when must commercial subjects use up the direct payments they have acquired?

A: Until 30 July 2021. If not used until the end of this deadline (transferred to the accounts of employees), the funds are automatically transferred back to the account from which they were received.

Q: To which bank account are direct payments executed?

A: To a special purpose bank account automatically opened with the bank with which the commercial subject holds its regular bank accounts (so-called “Covid Account”). In case that a commercial subject holds accounts with multiple banks it is obliged to choose the bank with which its Covid Account shall be opened at latest until 25 March 2021.

Q: Does special purpose Covid-19 bank account have any specific benefits?

A: Yes – Covid Account cannot be charged with usual bank charges – account maintenance costs, costs of services related to execution of payments transaction or other services related to this bank account. Additionally, the funds available on Covid Account cannot be subject of enforcement proceedings, unless in case of enforcement proceedings for charging obligations related to the loss of right to direct payments.

Q: Is it possible to lose once granted right to direct payments?

A: Yes: (i) in case of payment of dividends in the period from entrance of the Programme into force until the end of the year 2021; or (ii) in case that number of employees is decreased for more than 10% in the period from entrance of the Programme into force until 3 months from the day of the last direct payment elapse (this does not include employees employed for a limited period of time that expired within this deadline).

The Programme does not explicitly regulate the case of misuse of funds received through direct payments (use for purposes other than payment of salaries/salary compensation), but such misuse should lead to the loss of this right, as well.

However, Programme explicitly allows correction of non-intentional mistakes for commercial subjects who transfer the funds to a wrong account(s) by mistake.

Q: What consequences are suffered by a commercial subject that lost its right to direct payment?

A: Commercial subject at hand has to return received direct payments with interest calculated for delay in payment of tax obligations.

By Nikola Djordjevic, Partner, and Marija Vukcevic, Senior Associate, JPM Jankovic Popovic Mitic

Karanovic & Partners, working with Advokatfirmaet Selmer, has advised the Fortaco Group on its acquisition of marine industry supplier Rapp Zastava.

The Fortaco Group is a producer of vehicle cabins and steel fabrications  and provider of vehicle assembly services. The company boasts 40 years of experience in steel fabrication and currently employs around 2,300 people. Rapp Zastava produces winches, net reels, pumps, and other marine equipment. The company currently employs 150 people and is located in Gruza, Serbia.

The Karanovic & Partners team included Partner Ivan Nonkovic and Senior Associate Marko Culafic. The firm did not reply to an inquiry about the deal.

Bojanovic & Partners has successfully represented football player Nemanja Nikolic in CAS arbitration between him and Israeli club Hapoel Tel Aviv. 

According to Bojanovic & Partners, in Israeli law “football clubs do not have legal capacity/subjectivity outside the realm of football and are therefore not registered in any registry except for the Israeli Football Association. Thus, the clubs are only ‘brand names’ owned by companies that possess ownership and managing rights over the clubs. In January 2017, a liquidation procedure was initiated before the state court in Israel, due to the financial hardship of the company that was owning said rights over Hapoel Tel Aviv. Soon afterward, the legal counsel appointed by the liquidators of the club’s owner unilaterally terminated the contract with Nikolic, deeming it an ‘onerous asset.’ In February 2017, the state court in Jaffa rendered a decision whereby Hapoel Tel Aviv was sold to new owners.”

According to the firm, “in March of 2018, Nikolic lodged a claim to the FIFA Dispute Resolution Chamber, [but] Hapoel Tel Aviv did not take part in the proceedings. Instead, the legal counsel appointed by the previous owner of the club objected to the DRC jurisdiction, invoking: (i) the clause which allowed the club to unilaterally terminate the contract under certain terms, and (ii) the insolvency as a just cause for termination under Israeli law and the FIFA RSTP. In May of 2019, the DRC rendered a decision in favor of Nikolic. During the CAS arbitration, Nikolic requested that the appeal be rejected since it was submitted by a third party and not Hapoel Tel Aviv. One of the main points made was related to the eventual enforcement of the CAS award – given that the players generally enforce the FIFA and CAS decisions through the sporting bodies (FIFA and national federations) and rarely through the state courts, the legal framework in which the Israeli clubs operate was irrelevant. Namely, should Hapoel Tel Aviv fail to comply with the decision, Nikolic would ask FIFA to impose a sporting sanction on the club, however, FIFA does not have the power to sanction the company that operates the club. At the latest stage of the appeal process, the club’s new owners issued a power of attorney to the same legal counsel, nevertheless, the CAS concluded that the current owner of Hapoel Tel Aviv does not suddenly become a party to the proceedings by issuing a power of attorney.”

The Bojanovic & Partners team was led by Partner Filip Blagojevic.

Law on Determining the Origin of Property and the Special Tax, the law which attracts a lot of public attention for two reasons, begins to apply on 12 March. General public attention is attracted given that this law was announced from time to time by various political parties which were in power during the last 20 years, while attention of competent public is attracted given the solutions provided for in the law.

The Law was adopted and entered into force in the beginning of 2020, but its application was postponed for one year. During this period, law was subject to critics of the competent public, and the Ministry of finance tried to remedy its deficiency through amendments which have been adopted by The National Assembly of the Republic of Serbia last week.

Main reason for the critics of this law is that it seems that intention of proponent was initially directed to regulate two similar and connected concepts, which still have differences. However, while drafting the law, the lawmaker has focused on only one of them, without consistently and completely excluding other concept from the solutions envisaged by the law.

First concept is establishing mechanisms for control whether material situation of a certain natural person corresponds to realized income of that person in the previous period taking into account submitted tax returns. Therefore, goal is to check whether some of income were not reported, i.e., whether tax evasion occurred.

Second concept is establishing mechanism through tax control of comparability of assets and reported income of a certain person, to obtain information and evidence for the need of conduction of eventual criminal procedure against that person, if it is established that such person realized income and acquired assets through illegal activities, i.e., by committing criminal offences.

Regarding the first concept, it should be noted that the Law on Tax Procedure and Tax Administration recognizes it for almost 20 years and in its Article 59 envisages the so-called “cross-assessment of the tax base”, and it is not clear why it was necessary to pass a special law that would regulate essentially the same issue, i.e., why it was not possible to regulate the same issue by amending the Law on Tax Procedure and Tax Administration. The only essential difference between this law and the Law on Determining the Origin of Property and the Special Tax is the special tax rate of 75% on reported income provided by the new law. In this regard, we can recall the Law on Extra Profit, which was rendered in 2001 with a similar goal – the collection of special tax, but whose results were evaluated as modest.

Answer to this question is more important from the reason that Law on Determining the Origin of Property and the Special Tax did not in detail define manner on establishing the value of the assets, income and expenditures for private needs, but by Article 11 it is prescribed that the Government should regulate these mechanisms, which was not done so far, although Article 26 prescribes deadline of six months from the entering into force to render bylaws. Having this in mind, questions arise when and how exactly this law will be applied.

Regarding the second concept, especially after amendments, law contains auxiliary provisions whose sense may be understood only through assumption that second concept has initially coexisted with the first as a reason for rendering the law. Additionally, inconsistent deleting of second concept through amendments of the law is better than to keep parts which lead to various doubts and illogicality. However, it seems that in this sense law even after amendments may be criticized again, given that such auxiliary, remaining provisions become additionally purposeless.

For example, although the term “illegally acquired property” has been replaced by the term “property subject to special tax”, this has not been done consistently throughout the legal text. Therefore, Articles 3 and 14 of the law still speak of the legality of acquiring of property, whereby, the fact that this term can be interpreted differently from the point of view of general legal norms, the law does not give a definition of what, in the sense of this law, would be considered as lawful acquiring of property. Even the name of the law no longer corresponds to its subject, having in mind that the origin of assets will not be determined on the basis of this law, but only whether the value of a person’s property indicates that such person earned income that he did not report and for which did not pay taxes.

The decision from the mentioned Article 3 is also disputable, according to which the Tax Administration bears the burden of proof that the increase of the assets of a natural person in relation to his reported income, while such natural person has the burden of proof that he legally acquired property in the part where increase thereof does not correlate with the reported income, whereby it remains undefined what exactly is meant by the legality of the acquiring of property. If this provision is interpreted in practice by the Tax Administration as obligation of a natural person to prove that his increased property does not originate from a criminal offense, this would be a drastic deviation from the constitutional guarantee of legal certainty in criminal law.

Apart from that, even after amendments the Articles 9 and 19 remain. Article 9 contains general provision that public prosecution and other competent bodies shall be notified if during procedure of application of this law is determined that facts indicate existence of basic suspicion that criminal offence is committed, which obligation Tax Administration, as a body of state administration, already has in the existing criminal legislation.

Special doubt causes absurd Article 19 of the law which contains order to criminal court that in the amount of material gain acquired by criminal offence, which amount is determined by final and binding verdict, calculate amount of special tax paid on this basis. It is completely unclear how lawmaker intends that final and binding verdict in any part, including the one determining material gain acquired by criminal offence, is amended or can be amended in any manner after verdict become final and binding.

The possibility of including a special tax in the amount of material gain acquired by criminal offence, even if this calculation is not envisaged as completely impossible and inapplicable as done in Article 19 of this law, is disputable and inconsistent with a numerous provisions of both criminal material and procedural law, especially with those relating to the return to the damaged party material gain which offender acquired by committing criminal offence to the detriment of that damaged party. However, comment on these inconsistencies is superfluous given the fact that such provision of Article 19 is completely inapplicable.

Having in mind that from second concept is given up, it is especially disputable that by amendments and supplements is not deleted possibility envisaged by Article 12 of the law that previous procedure for determining the base for determining special tax is initiated upon report of natural person or legal entity. Such solution opens possibility for classic denunciations, i.e., that one person files criminal complaint against another person from his personal, and not public interests.

Even the question of the meaning of Article 23 may be raised, since it is not entirely clear why special security checks of employees in the unit of the Tax Administration competent for the application of this law would be performed (special in terms of security checks of civil servants provided by other regulations), when the purpose of the law alone is to establish a special tax.

Finally, a particularly problematic issue is the solution from Article 18, which prescribes that in the procedure of application of this law, the Law on Tax Procedure and Tax Administration is applied in a subsidiary manner, except with regard to the provisions on statute of limitation. It is unclear what was intended to be achieved and whether this opens the possibility for a special tax to be determined for an unlimited period of time in past. This would be neither constitutional nor legal even if it is a matter of committing criminal acts, considering that the Criminal Law knows clear statute of limitation deadlines, both for conducting criminal proceedings and for executing criminal sanctions, and it certainly cannot be constitutional and legally for the simple collection of taxes, even those provided as special.

Taking into account all the above, already detected problematic solutions from the Law on Determining the Origin of Property and the Special Tax leave uncertainties in respect to the practical solution of these issues and whether the application of the law will contribute to fulfilment of its purpose and the goal set out the proponent as the reason for adoption of the law.

By Jelena Milinovic, Partner, Nikola Djordjevic, Partner, and Marko Mrdja, Senior Associate, JPM Jankovic Popovic Mitic

Back in September 2020, the Serbian Commission for Protection of Competition (the “Commission”), following an internal review of the market dynamics and dawn raids at key players, initiated a formal investigation against three major undertakings active in both wholesale and retail of consumer electronics – Roaming Electronics d.o.o., Tehnomanija d.o.o. and Comtrade Distribution d.o.o. The Commission had, per publicly available pricing information and upon review of comparative practice, cited concerns that the undertakings involved were acting in concert, as well by potentially enforcing a resale price maintenance policy.

The initial proceedings were triggered by Eurostat data for 2019, noting that the prices of consumer electronics in the Republic of Serbia were by 13 percent higher than the EU average. Following a further analysis of the wholesale and retail market for consumer electronics in the Republic of Serbia, the Commission found that reference products offered in retail outlets and online sales of the retailers may have been sold at very similar prices.

Now, the competition watchdog found there to be reasonable grounds to extend the investigation to retailers Gigatron eksport-import, Tehnomedia centar d.o.o., Emmezeta Srbija d.o.o., XLS d.o.o., and Tehnomanija d.o.o., as the major resellers active on the relevant market, in order to investigate whether these undertakings would have accepted a resale price maintenance policy by agreeing on their prices with the aforementioned importers and distributors.

Further information is still gathered with regards to the initiated proceedings.

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

By Bojan Vuckovic, Partner, and Veljko Smiljanic, Senior Associate, independent attorneys at law in cooperation with Karanovic & Partners

On January 15, 2021, CEE Legal Matters reported that BDK Advokati had advised Frontier Pharma and the Baystone investment group on the acquisition of Zdravlje Leskovac, a Serbian pharmaceutical company owned by Actavis, which is itself a subsidiary of Israel’s Teva. CEEIHM spoke with Kiren Naidoo, Co-Founder and Managing Director at Frontier Pharma, to learn more about the acquisition.

CEEIHM: To start, tell us a bit about Frontier Pharma.

Kiren: We are a UK-based, EMEA-focused pharma investment company with operational expertise spanning major pharma (e.g. GlaxoSmithKline), generic pharma (e.g. MN Pharma), and investment banking (e.g. Merrill Lynch). Our team has a track record in building high-quality international pharma companies and experience in manufacturing and selling pharmaceuticals to both emerging and developed markets, including the US.

CEEIHM: What was it about the target that you found particularly attractive? 

Kiren: There are multiple reasons. The quality of manufacturing is world-class – the company supplies approximately 40 countries around the world across Europe (Western & Eastern), Asia-Pacific, Southern Africa, and Latin America. The company supplies both Teva (its parent) and a range of other multinationals on a contract manufacturing basis. Employees are highly qualified, well-trained, and loyal. The company also has a high-value brand (Zdravlje, which means “Health”) which dates back to the 1950s and is synonymous with quality. This is an ideal spring-board to build a high-quality multinational pharmaceutical company.

CEEIHM: What are your plans for Zdravlje Leskovac in the near and mid future once the deal closes?

Kiren: Our first priority is to expand the company’s contract manufacturing offering as it offers a very attractive quality/price proposition to third parties looking for outsourced supply (which is a growing trend in the business). We have already secured new business in this regard. We would also look to build a commercial business with our own products (Zdravlje-branded) across prescription and consumer health (non-prescription). We would also like to leverage the existing international approvals to expand internationally (across CEE, Asia-Pacific, Middle East, Africa, etc.) to build a more international business. We have a robust organic strategy but will also use M&A / alliances / joint-ventures where it can accelerate our strategy.

CEEIHM: What would you say was the most complex aspect of the deal? 

Kiren: COVID-19 posed multiple logistics and administrative challenges. It also brought about a degree of uncertainty regarding supply chains and demand. There are other traditional complexities that are typical when carving out businesses from broader corporate structures but nothing the principals could not overcome.

CEEIHM: Why did you choose BDK as your advisor on this acquisition?

Kiren: We have worked with BDK before (including on a privatization project in 2016) and in those cases found them to be professional, commercial-minded, pragmatic, and very supportive.

Originally reported by CEE In-House Matters.